Rev. Rul. 68-441

An insurance company engaged solely in the business of reinsuring credit life insurance contracts computes its life insurance reserves on basis of gross premiums. With respect to these contracts, the amount set aside as life insurance reserves is 50 percent of the gross premiums earned each month.

An insurance company engaged solely in the business of reinsuring credit life insurance contracts has been held to qualify as a life insurance company, as defined in section 801(a) of the Internal Revenue Code of 1954, provided its life insurance reserves (as defined in section 801(b) of the Code) comprise more than 50 percent of its total reserves. See Alinco Life Insurance Company v. United States, 373 F. 2d 336 (1967).

Section 801(b) of the Code defines "life insurance reserves," in part, as amounts which are computed or estimated on the basis of recognized mortality or morbidity tables and assumed rates of interest, and which are set aside to mature or liquidate future unaccrued claims arising from life insurance contracts involving life contingencies at the time with respect to which the reserve is computed.

Held, the reserves held by the insurance company do not satisfy the requirements of section 801(b) of the Code since such reserves are not actuarially computed.r