Technical Notes#

Status: Draft, 2026-08-03 (all cited sources accessed 2026-08-03).

Scope note: these notes standardize a liability cash flow projection model for the representative GUL product defined in product-spec.md (same directory). They use the same representative parameter values as the specification. Tags: [S#]/[R#] cite _research/guaranteed-ul.md; [REG-R#] cites the cross-product reference library references/regulatory-and-actuarial-references.md (research provenance: _research/regulatory-actuarial.md, same R-numbering); std marks standardizations introduced for the reference implementation; unverified flags facts the research file could not verify from a retrieved document.

Model scope and conventions#

Product: flexible-premium UL, level death benefit only, single shadow-account secondary guarantee (AG 38 8E Policy Design #1 R1; VM-01 shadow-account definition R2). The cumulative-premium-test variation is handled by a documented swap (see “Cumulative-premium variation”).
Base chassis: the monthiversary processing order and the NAAR discount convention (DB discounted one month at the guaranteed rate, floored at zero) follow the universal-life reference notes (products/universal_life/technical-notes.md); the shadow account runs the same recursion with its own parameter set. Documented deviation std: these notes measure the account value for the NAAR after the expense charges but before COI (the UL base measures AV before the entire monthly deduction) — immaterial at the modeled charge levels, but kept explicit for reconciliation.
Projection frequency: monthly, on policy monthiversaries, from issue (or in-force date) to attained age 121, at which point charges and premiums cease and coverage continues S7. Maximum projection length: (121 − issue age) × 12 months.
Timing std: monthiversary (BOM) processing — premium receipt, expense charges, COI deduction in that order at the start of the policy month; interest credited over the month; decrements (death, lapse/surrender, ROP exercise) at end of month (EOM) after interest. Deaths are processed before lapses at EOM.
Age basis: age nearest birthday (ANB) std — chosen because the sourced products underwrite on ANB S2], [S4], [S6 and the 2017 CSO / 2015 VBT are published in ANB variants REG-R17], [REG-R18. Attained age advances on policy anniversaries.
Model points: single-policy model points; results are expected (probability- weighted) cash flows per policy in force at projection start. No stochastic decrement simulation in the base model std.
Rate conversions std: annual effective interest i → monthly factor (1+i)^(1/12). Contractual COI: monthly rate per $1,000 = annual q per $1,000 / 12 (simple-twelfth; see “Pitfalls”). Experience decrements: monthly rate = 1 − (1 − annual rate)^(1/12).
Currency/rounding: USD; internal calculations unrounded, cash flows reported to the cent std.

Model point attributes#

Attribute	Type	Example (used throughout these notes)
`policy_id`	str	“GUL-000001”
`issue_age`	int (ANB)	60
`sex`	enum {M, F}	M
`risk_class`	enum (4 NT + 2 T classes S4)	NT Standard
`face_amount`	float (≥ 100,000 S4], [S6)	500,000
`guarantee_age`	int in [90, 121] S1], [S2], [S9	121 (lifetime)
`premium_pattern`	enum {level, single_pay, ten_pay} std	level
`annual_premium`	float — solved no-lapse premium P* for level pattern	10,800.00 std (illustrative solve output)
`premium_mode`	enum {A, S, Q, M-EFT} S2	A
`duration_months`	int — elapsed policy months at projection start	300
`av_init`	float — base account value at projection start	2,400.00
`sg_init`	float — shadow account value at projection start	118,000.00
`loan_init`	float	0.00
`rop_elected`	bool (built-in endorsement S1)	True

Premium pattern is a first-class model point attribute because funding pattern drives both MEC status R5 and observed lapse behavior (higher lapses for level-pay, lower for single-pay R8; premium persistency study basis REG-R21).

State variables#

Variable	Meaning	Initial value
`t`	policy month index (1, 2, …)	`duration_months` + 1
`AV_t`	base account value, EOM, floored at 0	`av_init`
`SG_t`	shadow account value, EOM, NOT floored (negative = catch-up shortfall)	`sg_init`
`L_t`	loan balance including accrued interest	`loan_init`
`DB_t`	death benefit = max(F, κ(x_t)·AV_t) S2, S4; R4 corridor	—
`l_t`	in-force probability (survivorship from all decrements)	1.0
`g_t`	grace-period counter, months (0 = not in grace) S7	0
`D_t`	monthly deduction forgone because AV = 0 under active guarantee	0
`CumPrem_t`	cumulative premiums paid (drives ROP refund S1 and MEC testing R5)	per model point
`SC_t`	surrender charge = 18/1000 · F · max(0, (180 − t)/180) std	—
`C_t`	catch-up premium required to restore guarantee = max(0, −(SG_t − L_t))/(1 − π^g) std	0

Assumption inputs#

The model distinguishes three assumption classes. Class (a) is contractual and fixed; class (b) is a snapshot of insurer-declared scales; class (c) is behavioral/experience and belongs to the assumption-governance layer (see REG-R25 for governance patterns; ASOP 2 governs insurer NGE determination itself REG-R26).

(a) Contractual / guaranteed elements (from the specification)#

Element	Value	Basis
Base premium load π	25%	S3, S7
Base per-policy charge	$5.50/month to age 121	S3, S7
Base per-unit charge	$0.20 per $1,000 initial face /month	std (spec note)
Guaranteed max COI	2017 CSO sex/smoker-distinct ANB, monthly = annual/12	std structure; R3 (stated maxima required); REG-R17
Guaranteed credited rate	2.0% annual effective	S3, S5, S7
Shadow premium load π^g	8%	std
Shadow credited rate i^g	5.5% annual effective (guaranteed)	std; AG 38 8E cap context R1
Shadow COI	55% of 2017 CSO maximum	std
Shadow per-unit charge	$0.05 per $1,000 initial face /month; no per-policy charge	std
Loan rates	5.0% charged in arrears / 3.0% credited on loaned AV, guaranteed	S4
Surrender charge	15-year linear schedule, $18/$1,000 initial level	std (spec note)
ROP endorsement	50% of CumPrem at anniversary 20, 100% at 25; cap 40% of face; 60-day windows	S1; S3, S4 (windows)
Grace period	61 days	S7

(b) Current non-guaranteed scales (insurer-declared snapshot)#

Element	Value	Basis
Current COI scale	65% of guaranteed maximum, all durations	std (spec note; scales not published — research Gaps)
Current credited rate i^c	3.5% annual effective	std (spec note)
Current loan credited rate	3.0% (= guaranteed S4)	S4

The base model holds current scales level for the projection std; re-rating logic (current scales moving within guaranteed bounds) is out of scope but the guaranteed bounds above define the admissible envelope R3; REG-R26.

(c) Behavioral / experience assumptions#

Assumption	Recommended public basis	Reference model values
Best-estimate mortality	2015 VBT primary tables (sex/smoker-distinct, ANB) REG-R18, with company A/E positioning informed by the ILEC 2012–2019 study REG-R19	100% of 2015 VBT std
Mortality improvement	—	1.0%/yr to attained age 85, grading linearly to 0% at 95, applied for max 20 years std
Base lapse (annual)	SOA/LIMRA UL lapse studies: 2009–2013 persistency update REG-R20; 2015–2021 UL lapse/surrender study (R7; REG-R21)	Duration 1: 4.0%; 2: 3.0%; 3: 2.5%; 4–5: 2.0%; 6–10: 1.5%; 11–20: 1.0%; 21+: 0.75% std
Lifetime-guarantee lapse multiplier	Lifetime-SG lapse rates are 45% lower than non-lifetime-SG rates (count and amount bases, 2015–2021) R7	0.55 × base at all durations when `guarantee_age` = 121 std (level derived from the R7 finding; duration shape std)
Dynamic lapse	63% of surveyed ULSG writers use dynamic lapse; lapse and tail investment returns rated the most critical ULSG assumptions R8	formulas below, std
Premium persistency	2015–2021 UL premium persistency study REG-R21; premium-pattern-dependent lapse R8	level-pay: scheduled premium paid with 98% annual probability, missed premiums not made up std; single-pay/ten-pay: as scheduled
ROP exercise	no public study in research file	5% of eligible in-force exercise in the year-20 window; 10% in the year-25 window std
Loan/withdrawal utilization	—	0 in the base model point std (sensitivity only)
Maintenance expense	—	$75/policy/year, inflated 2.5%/yr std
Acquisition expense	—	year 1: $300/policy + 90% of first-year premium (commissions + issue) std
Claim expense	—	$300 per death std

The detailed duration-by-duration ULSG lapse tables sit in the paid SOA/LIMRA Standard Data Package R7; all lapse levels above are therefore std shapes anchored to the public highlights findings.

Cash flow components and recursions#

Notation (defined once, used throughout)#

Symbol	Meaning
`F`	face amount
`P_t`	premium received at BOM of month t (0 in non-premium months)
`π`, `π^g`	base (0.25) and shadow (0.08) premium loads
`e_pol`	per-policy charge, $5.50/month
`e_u`, `e_u^g`	per-unit charges: 0.20 and 0.05 per $1,000 initial face /month
`m_t^max`	guaranteed max monthly COI rate per $1,000 (2017 CSO annual/12)
`m_t = 0.65·m_t^max`	current monthly COI rate per $1,000
`m_t^g = 0.55·m_t^max`	shadow monthly COI rate per $1,000
`j_c, j_g, j^g`	monthly factors − 1 for current 3.5%, guaranteed 2.0%, shadow 5.5%: 0.0028709, 0.0016516, 0.0044717
`NAAR_t`	base net amount at risk
`AV_t', AV_t''`	base AV after premium+expenses; after COI
`SG_t', SG_t''`	shadow analogues
`W_t`	withdrawal amount (plus $25 fee)
`q_t^d, w_t`	monthly best-estimate death and lapse rates (converted from annual)
`l_t`	in-force probability at BOM of month t
`κ(x)`	GPT corridor factor at attained age x R4; REG-R13

Monthly processing order std#

Status check. If g_{t−1} > 0 (in grace) and cumulative grace ≥ 61 days without the required payment, the policy lapses at BOM with no value (CSV ≤ 0 in grace by construction) S7.
Premium. CumPrem_t = CumPrem_{t−1} + P_t. Base credit (1 − π)·P_t; shadow credit (1 − π^g)·P_t. (Catch-up premiums route identically std.)
Expense charges. AV_t' = AV_{t−1} + (1−π)P_t − e_pol − e_u·F/1000 − W_t − 25·1{W_t>0} SG_t' = SG_{t−1} + (1−π^g)P_t − e_u^g·F/1000 − W_t (withdrawal reduces shadow dollar-for-dollar std, spec note).
Death benefit and NAAR. DB_t = max(F, κ(x_t)·max(AV_t',0)); NAAR_t = max(DB_t/(1+j_g) − max(AV_t', 0), 0); NAAR_t^g = max(DB_t/(1+j^g) − max(SG_t', 0), 0) std (discount convention; the account inputs are floored at zero so that a deficit — AV in the guarantee-support regime, SG in catch-up territory — never inflates NAAR above the discounted DB).
COI. COI_t = m_t · NAAR_t/1000; COI_t^g = m_t^g · NAAR_t^g/1000. AV_t'' = AV_t' − COI_t; SG_t'' = SG_t' − COI_t^g.
Insufficiency handling (the low-AV regime). If AV_t'' < 0:
- if the guarantee is active (SG_t'' − L_{t−1} > 0): set D_t = −AV_t'', AV_t'' = 0. The forgone deduction D_t is NOT a receivable — the insurer funds the negative “account” economics; coverage continues with AV = 0 and NAAR ≈ DB [S2, S3, S9 guarantee behavior; accounting treatment std](#uslib-guaranteed_ul-s2).
- else: enter/continue grace, g_t = g_{t−1} + 1; required grace payment = amount curing the deduction shortfall std.
Interest. Unloaned base AV grows at j_c (floor j_g); loaned AV at the loaned credited monthly rate (3.0% annual S4): AV_t = AV_t''·(1+j_c) (split loaned/unloaned when L > 0). SG_t = SG_t''·(1+j^g) — no floor at zero.
Loan interest. L_t = L_{t−1}·(1 + (1.05)^{1/12} − 1) (5% in arrears S4, accrued monthly std).
In-force test. Guarantee active iff SG_t − L_t > 0 S4; S2, S9. The policy is in force iff (base account can cover deductions, i.e., not in expired grace) OR the guarantee is active. Lapse occurs ONLY if all three hold: (i) base AV net of charges failed (step 6 else-branch), (ii) SG_t − L_t ≤ 0, (iii) the 61-day grace expires without cure [S7; S2, S9 mechanics; conjunction std](#uslib-guaranteed_ul-s7).
Catch-up requirement. C_t = max(0, −(SG_t − L_t))/(1 − π^g) std; paying C_t restores SG − L to 0⁺ and the guarantee with it S7; R1 ex. 7.
Decrements (EOM), deaths first. With monthly rates q_t^d then w_t applied to l_t:
- death CF: l_t·q_t^d·(DB_t − L_t) + claim expense
- surrender CF: l_t·(1−q_t^d)·w_t·CSV_t, CSV_t = max(AV_t − SC_t − L_t, 0)
- ROP exercise (window months only): rate w^ROP std, benefit min(ρ·CumPrem_t, 0.40·F) − L_t, ρ ∈ {50%, 100%} S1; exercise is a full surrender S1], [S3.
- l_{t+1} = l_t·(1−q_t^d)·(1−w_t)·(1−w_t^ROP)
Age/duration update; at attained age 121 all charges and premiums cease, recursion continues with COI = expenses = P = 0 and interest only S7.

Cash flow outputs (per month, expected per initial policy)#

Premium income: l_t·φ_t·P_t where φ_t = premium persistency probability (class (c)).
Death claims: as step 11 (net of loan repayment from proceeds — standard UL treatment std; see spec, “Loans”).
Surrender/ROP benefits: as step 11.
Expenses: acquisition (month 1), maintenance /12 monthly, claim expense.
Loan cash flows (drawdown/repayment): 0 in base model point std.
Internal transfers (loads, COI, expense charges, interest credits, shadow-account entries) are NOT external cash flows; they drive AV, CSV and the in-force test only. This is the gross-liability convention of the library std.

Funding-premium solve (level no-lapse premium P*)#

Objective: the smallest level annual premium such that the guarantee never fails before the elected guarantee age:

g(P) = min over t in [1, (guarantee_age − issue_age)·12] of (SG_t(P) − L_t)
P*   = min { P : g(P) > 0 }

SG_t(P) is monotone non-decreasing in P (every premium enters the shadow account at (1 − π^g) and accumulates at i^g net of charges that do not increase with P while DB = F; at extreme funding levels a corridor-driven DB increase would raise shadow COI, so cap the search domain at the guideline premium limitation R4, inside which the corridor does not bind for this thin-AV design), so g is monotone and bisection is safe on that domain std:

Bracket: P_lo = 0 (g < 0 for any nontrivial guarantee), P_hi = the premium that funds the guarantee as a single-pay net single premium on shadow parameters (guaranteed sufficient); double P_hi until g(P_hi) > 0.
Bisect on g(P) > 0 to tolerance $0.01 of annual premium std; ~40 iterations. A secant step on g accelerates convergence near the root; fall back to bisection when the secant iterate leaves the bracket std.
Full-projection evaluation of g per iterate (steps 1–12 with decrements off — the solve is contractual, not behavioral std).

Shorter guarantee ages solve the same way with the earlier stopping time; single-pay and n-pay premiums solve identically over their premium vectors.

Calibration std#

No public document discloses shadow-account parameters (research Gaps). The std shadow parametrization (π^g = 8%, i^g = 5.5%, COI^g = 55% CSO, $0.05/unit) is calibrated so that solved level lifetime premiums fall in the range of observed market premiums for lifetime GUL. The research file records competitive positioning but no premium tables S2; the calibration target is therefore itself a standardization, and implementations should re-calibrate against current market quotes before using outputs comparatively. The illustrative solve output used in these notes (P* = $10,800 for male 60 NT Standard, $500,000, lifetime) is std.

Cumulative-premium variation (main design alternative)#

To model the cumulative-premium-test design R1 8E Design #2; S4 initial NLG; S5: replace SG_t with the pair (CumPrem_t^net, ReqPrem_t), where CumPrem_t^net = Σ premiums − Σ withdrawals − L_t S4 and ReqPrem_t is the contractual required accumulated premium schedule; guarantee active iff CumPrem_t^net ≥ ReqPrem_t S4], [S5. All other machinery (grace, catch-up = the schedule shortfall, solve on the required schedule) is unchanged. Note the harsher observed loan treatment in this family: one design voids the guarantee entirely on any loan S5.

Policyholder behavior modeling#

All dynamic formulas are std; the empirical anchors are R7 (lifetime-SG lapse 45% lower), R8 (dynamic lapse used by 63% of writers; premium-pattern dependence; median 40% of policies assumed sustained by the guarantee after 31 years in tail scenarios) and REG-R20/REG-R21 (public study bases).

Total monthly lapse: w_t = min(0.5, b(d) · G · Φ(pattern) · Ψ_t) /12-converted, where b(d) is the base annual table (class (c)), and:

G (guarantee-duration factor): 0.55 if guarantee_age = 121 [R7-anchored], 1.0 otherwise std.
Φ (premium pattern): single-pay 0.6; ten-pay 0.8; level 1.0 std (direction per R8: higher lapses for level-pay, lower for single-pay).
Ψ_t (funding-status dynamic factor) std:
- guarantee active and AV > 0: 1.0
- guarantee active and AV = 0 (pure guarantee support): 0.6 — the policy is deep in the money to the policyholder; empirical anchor: sustained-by-guarantee fractions in tail scenarios R8
- guarantee terminated (SG − L ≤ 0) and policy surviving on AV: 2.0 (shock)
- annual floor after the dynamic factor: 0.3% std
ROP windows: additional exercise rates 5% (year-20 window) / 10% (year-25 window) std applied as full surrenders at the window months; rationale: the 100% refund dominates CSV for a thin-AV product, but exercising forfeits a now-cheap guarantee, so observed exercise should stay modest. No public exercise study was found (research file has none).
Premium persistency: level-pay premiums paid with annual probability 98% std; a missed premium permanently reduces SG trajectory (no automatic catch-up); catch-up behavior is not modeled in the base run std.

Anti-selective interaction: mortality of lapsers vs. persisters is NOT adjusted in the base model std (no selective-lapse load); this understates claims if healthy lives disproportionately lapse or exercise ROP — flagged under model risks.

Worked example std (all figures illustrative)#

Model point: male 60 ANB NT Standard, F = $500,000, lifetime guarantee, level P* = $10,800 paid annually; projection months 301–305 (policy year 26, attained age 85, anniversary premium in month 301). Illustrative COI rates at age 85: guaranteed max monthly m^max = 8.615 per $1,000 std; current m = 5.60 (65%); shadow m^g = 4.74 (55%). Monthly interest factors: base current 1.0028709; shadow 1.0044717. Opening: AV = 2,400.00; SG = 118,000.00; L = 0. Deductions column = expenses + COI. Decrements are suppressed for clarity (contract-mechanics view).

Mo.	Prem	Base net prem	Base deductions	Base int.	AV (EOM)	Shdw net prem	Shdw deductions	Shdw int.	SG (EOM)	Status
301	10,800.00	8,100.00	2,842.68	21.98	7,679.30	9,936.00	1,778.15	564.13	126,721.98	in force
302	0	0	2,858.47	13.84	4,834.67	0	1,783.90	558.66	125,496.74	in force
303	0	0	2,874.40	5.63	1,965.90	0	1,789.71	553.16	124,260.19	in force
304	0	0	2,890.47 → 1,965.90 taken; 924.57 forgone	0.00	0.00	0	1,795.57	547.62	123,012.24	in force — guarantee
305	0	0	2,900.89 forgone (AV = 0)	0.00	0.00	0	1,801.49	542.01	121,752.76	in force — guarantee

Reading the table: the base account exhausts in month 304 — monthly deductions (~$2,900, dominated by COI on a ~$497K NAAR) exceed the annual net premium spread over the year, and the residual $924.57 of month-304 deductions is forgone by the insurer (D_304), not carried as a receivable. The policy does NOT enter grace: the shadow account, charged at the lighter std shadow parameter set and credited at 5.5%, stands at ~$123K, so the in-force test SG − L > 0 holds and coverage continues with NAAR ≈ DB = $500,000. From month 305 onward the insurer is funding the full mortality cost of the guarantee — the “negative account economics” regime that dominates late-duration GUL liability cash flows. Arithmetic: net premium = P × (1 − load); deductions = per-policy 5.50 + per-unit 100.00 + COI m·NAAR/1000 (base; shadow analogues 0/25.00/m^g·NAAR^g/1000); NAAR = 499,176 − max(AV′, 0) (base — the floor binds in month 305, where AV′ = −105.50 but COI is charged on the full 499,176 NAAR), 497,774 − SG′ (shadow; SG′ > 0 throughout); interest = balance after deductions × monthly factor − 1. Independent recomputation may differ by cents due to rounding.

Valuation and reserve pointers#

This library projects gross liability cash flows; reserve layers consume those cash flows and are cited, not reproduced:

VM-20 (PBR, post-2017 issues): ULSG is its own reserving category; reserve = NPR floor plus excesses of deterministic (DR) and stochastic (SR) reserves. The ULSG NPR during the SG period is the greater of a non-SG amount and min(ASG/FFSG, 1)·NSP − E with the amortized expense allowance (x1 = level gross premium; y2–5 = 10% of it; z1 = $2.50/$1,000) and the prescribed funding-ratio-driven lapse L = R·1% + (1−R)·0.5%·r R2. Note the model’s SG_t IS the “actual secondary guarantee” (ASG) input, and the fully-funded value FFSG is a backward solve on the same shadow recursion R2. See also the Academy practice note R9; REG-R23 and the Valuation Manual itself REG-R3. Material-SG business cannot use the life PBR exemption R2; R9.
AG 38 / A-830 (pre-PBR issues and in-force): the formulaic layer underneath AG 38 is now sourced at first hand. A-830 ¶¶29–32 — not “Section 7”; the AP&P print is a flat ¶¶1–32 with no Sections — makes the basic reserve the segmented reserve over the secondary guarantee period computed on specified (else minimum) premiums with no unitary leg, the ¶22 deficiency on the same substitution, and a floor at the greater of that sum and an unnamed “other appendices governing universal life plans” limb; several unexpired guarantees are valued stand-alone and the greatest taken REG-R154 ¶¶29–32. A-830’s own basic reserves, deficiency comparator and maximum valuation interest rates are cross-references into A-820 ¶¶11–13, ¶¶19–20 and ¶¶7–10 REG-R153. On top of that, AG 38 supplies what A-830 contains nothing of: funding-ratio interpolation between basic+deficiency reserves and the net single premium for the guarantee, prescribed lapse caps and surrender-charge offsets; Section 8E Method I defines minimum gross premiums off this very shadow recursion R1; REG-R6; REG-R7.
Reserve financing: Model 787 / AG 48 Primary Security requirements are VM-20-based (greater of DR and NPR; greatest of DR/SR/NPR if the stochastic exclusion fails) R6; REG-R11; REG-R12.
Tax reserves: greater of net surrender value and 92.81% of the NAIC-method reserve, capped at statutory REG-R16.
Professional standards: ASOP 52 (PBR work) R10; REG-R31; ASOP 7 (cash flow analysis) REG-R27; ASOP 56 (model governance — applies to this reference implementation itself) REG-R32.

Key sensitivities and model risks#

Dominant assumptions (in order):

Lapse. First-order by a wide margin: GUL is lapse-supported. Every lapse of a funded guarantee releases the insurer from a deeply in-the-money claim; lifetime-SG experience already runs 45% below non-lifetime SG R7, insurers rate lapse among the two most critical tail assumptions, and the median tail assumption keeps 40% of policies in force purely on the guarantee after 31 years R8. PV of claims is convex in the ultimate lapse rate near zero — sensitivity runs must include ultimate lapse 0% std recommendation.
Mortality level and improvement at high attained ages. With NAAR ≈ DB for decades in the guarantee-support regime, claims PV moves nearly linearly with 85+ mortality; improvement assumptions compound REG-R18, REG-R19 bases.
Premium persistency / funding pattern mix. Single-pay vs. level-pay changes both the guarantee trajectory and lapse behavior R8; REG-R21; a 98% vs. 100% payment probability materially shifts guarantee failure times for exactly-funded level payers std observation.
ROP exercise. Exercise at the 100% window is an option against the insurer whose cost depends on cumulative premiums vs. reserve released; mis-set exercise rates distort years 20–26 cash flows [S1 design; rates std](#uslib-guaranteed_ul-s1).

Known modeling pitfalls:

NAAR discount convention. DB/(1+j_g) vs. DB un-discounted changes COI by ~0.17% per month at 2%; be consistent between base and shadow accounts and against any carrier illustration being matched std convention here.
Monthly COI conversion. annual/12 vs. 1−(1−q)^(1/12) differs materially at ages 85+ (q > 0.10); this model fixes annual/12 std — do not mix.
Flooring. AV floors at 0 only while the guarantee is active; SG never floors (its negative part is the catch-up requirement). Flooring SG at 0 destroys the catch-up computation and misprices restoration R1 ex. 7 logic.
Forgone deductions are not receivables. D_t must not accrue against future premiums or AV recoveries std; treating it as a receivable understates the guarantee cost.
Order of tests. Run the guarantee test AFTER the full monthly deduction attempt; testing before deductions lets a policy lapse a month early (or late) and shifts claim timing at exactly the durations where NAAR ≈ DB.
ANB/ALB mismatch. 2017 CSO and 2015 VBT each exist in ANB and ALB variants REG-R17], [REG-R18; this model is ANB throughout std — a mixed basis shifts COI and expected claims by up to half a year of mortality.
Guarantee-age grid. The solve target SG > 0 strictly; a ≥ 0 target with monthly grids can leave the guarantee failing on the final monthiversary.
Shadow parameters are standardized. All shadow-account parameters are std calibrations, not observed contract values (research Gaps: no specimen policy form retrieved; no carrier publishes shadow parameters). Conclusions that depend on the shadow parametrization (funding ratios, catch-up costs, VM-20 ASG/FFSG inputs) carry that calibration risk.
Out-of-model features. 7702/7702A testing (GPT premium limits, MEC status R4], [R5), terminal-illness acceleration (treated as CF-neutral std), selective-lapse mortality adjustment, and NGE re-rating are not modeled in the base run; each is a documented extension point.