2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 425 - Reserves and Investments for Life Insurance Companies and Related Entities › Subchapter B. Standard Valuation Law › Section 425.062. Weighting Factors

Sec. 425.062.  WEIGHTING FACTORS.  (a)  This section prescribes the weighting factors referred to in the formulas prescribed by Section 425.061.
(b)  The weighting factor for a life insurance policy is determined by the following table:
Guarantee Duration (Years)
Weighting Factor
10 or less
.50
More than 10, but not more than 20
.45
More than 20
.35
(c)  For purposes of Subsection (b), the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to life insurance plans with premium rates or nonforfeiture values, or both, that are guaranteed in the original policy.
(d)  The weighting factor for a single premium immediate annuity or for annuity benefits involving life contingencies arising from another annuity with a cash settlement option or from a guaranteed interest contract with a cash settlement option is.80.
(e)  The weighting factor for an annuity or a guaranteed interest contract, other than an annuity or contract to which Subsection (d) applies, is determined by the following tables:
(1)  For an annuity or guaranteed interest contract that is valued on an issue year basis:
Guarantee Duration (Years)
Weighting Factor for Plan Type
A
B
C
5 or less:
.80
.60
.50
More than 5, but not more
than 10:
.75
.60
.50
More than 10, but not more
than 20:
.65
.50
.45
More than 20:
.45
.35
.35
(2)  For an annuity or guaranteed interest contract that is valued on a change in fund basis, the factors prescribed by Subdivision (1) increased by:
Plan Type
A     B     C
.15   .25   .05
(3)  For an annuity or guaranteed interest contract that is valued on an issue year basis that does not guarantee interest on considerations received more than one year after issue or purchase, other than an annuity or contract that does not have a cash settlement option, or an annuity or guaranteed interest contract that is valued on a change in fund basis that does not guarantee interest rates on considerations received more than 12 months after the valuation date, the factors prescribed by Subdivision (1) or determined under Subdivision (2), as appropriate, increased by:
Plan Type
A     B     C
.05   .05   .05
(f)  For purposes of Subsection (e):
(1)  for an annuity or guaranteed interest contract with a cash settlement option, the guarantee duration is the number of years for which the contract guarantees interest rates greater than the calendar year statutory valuation interest rate for life insurance policies with guarantee duration greater than 20 years; and
(2)  for an annuity or guaranteed interest contract without a cash settlement option, the guarantee duration is the number of years from the issue or purchase date to the date annuity benefits are scheduled to begin.
(g)  For purposes of Subsection (e):
(1)  a policy is a "Plan Type A" policy if:
(A)  the policyholder may withdraw funds at any time, but only:
(i)  with an adjustment to reflect changes in interest rates or asset values after the insurance company receives the funds;
(ii)  without an adjustment described by Subparagraph (i), provided that the withdrawal is in installments over five years or more; or
(iii)  as an immediate life annuity; or
(B)  the policyholder is not permitted to withdraw funds at any time;
(2)  a policy is a "Plan Type B" policy if:
(A)  before the expiration of the interest rate guarantee:
(i)  the policyholder may withdraw funds, but only:
(a)  with an adjustment to reflect changes in interest rates or asset values after the insurance company receives the funds; or
(b)  without an adjustment described by Subsubparagraph (a), provided that the withdrawal is in installments over five years or more; or
(ii)  the policyholder is not permitted to withdraw funds; and
(B)  on the expiration of the interest rate guarantee, the policyholder may withdraw funds in a single sum or in installments over less than five years, without an adjustment described by Paragraph (A)(i); and
(3)  a policy is a "Plan Type C" policy if the policyholder may withdraw funds before the expiration of the interest rate guarantee in a single sum or in installments over less than five years:
(A)  without an adjustment to reflect changes in interest rates or asset values after the insurance company receives the funds; or
(B)  subject only to a fixed surrender charge that is a percentage of the fund stipulated in the contract.
(h)  An insurance company may elect to value an annuity or guaranteed interest contract with a cash settlement option on an issue year basis or on a change in fund basis.  A company must value an annuity or guaranteed interest contract without a cash settlement option on an issue year basis.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.