Texas Insurance Code - Section 425.064. Commissioners Reserve Valuation Method
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§ 425.064. COMMISSIONERS RESERVE VALUATION METHOD. (a)
Except as otherwise provided by Sections 425.065 and 425.068 and
subject to Subsection (b), for the life insurance and endowment
benefits of a policy that provides for a uniform amount of insurance
and that requires the payment of uniform premiums, the reserve
according to the commissioners reserve valuation method is the
difference, if greater than zero, of the present value on the date
of valuation of those future guaranteed benefits, minus the present
value on that date of any future modified net premiums for a policy
described by this subsection. The modified net premiums for a
policy described by this subsection are a uniform percentage of the
respective contract premiums for those benefits, so that the
present value on the policy's issue date of all the modified net
premiums is equal to the sum of:
(1) the present value on that date of those benefits;
and
(2) the difference, if greater than zero, between:
(A) a net level annual premium equal to the
present value on the policy's issue date of the benefits provided
for after the first policy year, divided by the present value on the
policy's issue date of an annuity of one per year, payable on the
first policy anniversary and on each subsequent policy anniversary
on which a premium becomes due; and
(B) a net one-year term premium for the benefits
provided for in the first policy year.
(b) A net level annual premium under Subsection (a)(2)(A)
may not exceed the net level annual premium on the 19-year premium
whole life plan for insurance of the same amount at an age that is
one year older than the age on the policy's issue date.
(c) This subsection applies only to a life insurance policy
issued on or after January 1, 1985, for which the contract premium
for the first policy year exceeds the contract premium for the
second year, for which a comparable additional benefit is not
provided in the first year for the excess premium, and that provides
an endowment benefit, a cash surrender value, or a combination of an
endowment benefit and cash surrender value, in an amount greater
than the excess premium. For purposes of this subsection, the
"assumed ending date" is the first policy anniversary on which the
sum of any endowment benefit and any cash surrender value available
on that date is greater than the excess premium. The reserve
according to the commissioners reserve valuation method for a
policy to which this subsection applies as of any policy
anniversary occurring on or before the assumed ending date is,
except as otherwise provided by Section 425.068, the greater of:
(1) the reserve as of the policy anniversary computed
as prescribed by Subsection (a); or
(2) the reserve as of the policy anniversary computed
as prescribed by Subsection (a) but with:
(A) the value prescribed by Subsection (a)(2)(A)
reduced by 15 percent of the amount of the excess first-year
premium;
(B) each present value of a benefit or premium
determined without reference to a premium or benefit provided under
the policy after the assumed ending date;
(C) the policy assumed to mature on the assumed
ending date as an endowment; and
(D) the cash surrender value provided on the
assumed ending date considered to be an endowment benefit.
(d) In making the comparison required by Subsection (c), the
mortality tables and interest bases described by Sections 425.058,
425.061, 425.062, and 425.063 must be used.
(e) Reserves according to the commissioners reserve
valuation method for the following policies, contracts, and
benefits must be computed by a method consistent with the
principles of this section:
(1) a life insurance policy that provides for a
varying amount of insurance or that requires the payment of varying
premiums;
(2) a group annuity or pure endowment contract
purchased under a retirement or deferred compensation plan
established or maintained by an employer, including a partnership
or sole proprietorship, by an employee organization, or by both,
other than a plan providing individual retirement accounts or
individual retirement annuities under Section 408, Internal
Revenue Code of 1986, and that section's subsequent amendments;
(3) disability or accidental death benefits in a
policy or contract; and
(4) all other benefits, other than life insurance and
endowment benefits in a life insurance policy or benefits provided
by any other annuity or pure endowment contract.
Added by Acts 2005, 79th Leg., ch. 727, § 1, eff. April 1, 2007.
Section: 425.057 425.058 425.059 425.060 425.061 425.062 425.063 425.064 425.065 425.066 425.067 425.068 425.069 425.070 425.101
Last modified: August 11, 2007
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