reglab/statecodes huggingface dataset:
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.205. Derivative Use Plan

Sec. 424.205.  DERIVATIVE USE PLAN.  (a)  Before an insurer enters into a derivative transaction, the insurer's board of directors must approve a derivative use plan as part of the insurer's investment plan otherwise required by law.
(b)  The derivative use plan must:
(1)  describe investment objectives and risk constraints, such as counterparty exposure amounts;
(2)  define permissible transactions, identifying the risks to be hedged and the assets or liabilities being replicated; and
(3)  require compliance with the insurer's internal control procedures established under Section 424.206.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.206. Internal Control Procedures

Sec. 424.206.  INTERNAL CONTROL PROCEDURES.  An insurer that enters into a derivative transaction shall establish written internal control procedures that require:
(1)  a quarterly report to the board of directors that reviews:
(A)  each derivative transaction entered into, outstanding, or closed out;
(B)  the results and effectiveness of the derivatives program; and
(C)  the credit risk exposure to each counterparty for over-the-counter derivative transactions based on the counterparty exposure amount;
(2)  a system for determining whether hedging or replication strategies used by the insurer have been effective;
(3)  a system of reports, at least as frequent as monthly, to the insurer's management, that include:
(A)  a description of each derivative transaction entered into, outstanding, or closed out during the period since the last report;
(B)  the purpose of each outstanding derivative transaction;
(C)  a performance review of the derivative instrument program; and
(D)  the counterparty exposure amount for each over-the-counter derivative transaction;
(4)  a written authorization that identifies the responsibilities and limitations of authority of each person authorized to effect and maintain derivative transactions; and
(5)  appropriate documentation for each transaction, including:
(A)  the purpose of the transaction;
(B)  the assets or liabilities to which the transaction relates;
(C)  the specific derivative instrument used in the transaction;
(D)  for an over-the-counter derivative transaction, the name of the counterparty and the counterparty exposure amount; and
(E)  for an exchange-traded derivative instrument, the name of the exchange and the name of the firm that handled the transaction.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.207. Ability to Demonstrate Hedging Characteristics and Effectiveness

Sec. 424.207.  ABILITY TO DEMONSTRATE HEDGING CHARACTERISTICS AND EFFECTIVENESS.  An insurer must be able to demonstrate to the commissioner on request the intended hedging characteristics and continuing effectiveness of a derivative transaction or combination of transactions through:
(1)  cash flow testing;
(2)  duration analysis; or
(3)  other appropriate analysis.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.208. Offsetting Transactions

Sec. 424.208.  OFFSETTING TRANSACTIONS.  (a)  Subject to this section, an insurer may purchase or sell one or more derivative instruments to wholly or partly offset a derivative instrument previously purchased or sold, without regard to the quantitative limitations of this subchapter.
(b)  An offsetting transaction under this section must use the same type of derivative instrument as the derivative instrument being offset.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.209. Inclusion of Counterparty Exposure Amounts

Sec. 424.209.  INCLUSION OF COUNTERPARTY EXPOSURE AMOUNTS.  The insurer shall include all counterparty exposure amounts in determining compliance with the limitations of this subchapter.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.210. Oversight by Commissioner

Sec. 424.210.  OVERSIGHT BY COMMISSIONER.  (a)  Not later than the 10th day before the date an insurer is scheduled to enter into an initial hedging transaction, the insurer shall notify the commissioner in writing that:
(1)  the insurer's board of directors has adopted an investment plan that authorizes hedging transactions; and
(2)  each hedging transaction will comply with this subchapter.
(b)  If a hedging transaction does not comply with this subchapter or if continuing the transaction may create a hazardous financial condition for the insurer that affects the insurer's policyholders or creditors or the public, the commissioner may, after notice and an opportunity for a hearing, order the insurer to take action that the commissioner determines is reasonably necessary to:
(1)  remedy a hazardous financial condition; or
(2)  prevent an impending hazardous financial condition from occurring.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.211. Authority to Enter Into Hedging Transaction

Sec. 424.211.  AUTHORITY TO ENTER INTO HEDGING TRANSACTION.  After providing notice under Section 424.210, an insurer may enter into a hedging transaction under this subchapter if as a result of and after making the transaction:
(1)  the aggregate statement value of all outstanding caps, floors, options, swaptions, and warrants not attached to another financial instrument purchased by the insurer under this subchapter, other than a collar, does not exceed 7.5 percent of the insurer's assets;
(2)  the aggregate statement value of all outstanding caps, floors, options, swaptions, and warrants written by the insurer under this subchapter, other than a collar, does not exceed three percent of the insurer's assets; and
(3)  the aggregate potential exposure of all outstanding collars, forwards, futures, and swaps entered into or acquired by the insurer under this subchapter does not exceed 6.5 percent of the insurer's assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.212. Authority to Enter Into Income Generation Transaction

Sec. 424.212.  AUTHORITY TO ENTER INTO INCOME GENERATION TRANSACTION.  An insurer may enter into an income generation transaction only if:
(1)  as a result of and after making the transaction, the sum of the following amounts does not exceed 10 percent of the insurer's assets:
(A)  the aggregate statement value of admitted assets that at the time of the transaction are subject to call or that generate the cash flows for payments the insurer is required to make under caps and floors sold by the insurer and that at the time of the transaction are outstanding under this subchapter;
(B)  the statement value of admitted assets underlying derivative instruments that at the time of the transaction are subject to calls sold by the insurer and outstanding under this subchapter; and
(C)  the purchase price of assets subject to puts that at the time of the transaction are outstanding under this subchapter; and
(2)  the transaction is a sale of:
(A)  a call option on assets that meets the requirements of Section 424.213;
(B)  a put option on assets that meets the requirements of Section 424.214;
(C)  a call option on a derivative instrument, including a swaption, that meets the requirements of Section 424.215;  or
(D)  a cap or floor that meets the requirements of Section 424.216.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.213. Limitation on Sale of Call Option on Assets

Sec. 424.213.  LIMITATION ON SALE OF CALL OPTION ON ASSETS.  If an income generation transaction is a sale of a call option on assets, the insurer must, during the entire period the option is outstanding, hold, or have a currently exercisable right to acquire, the underlying assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.214. Limitation on Sale of Put Option on Assets

Sec. 424.214.  LIMITATION ON SALE OF PUT OPTION ON ASSETS.  (a)  If an income generation transaction is a sale of a put option on assets, the insurer must:
(1)  during the entire period the option is outstanding, hold sufficient cash, cash equivalents, or interests in a short-term investment pool to purchase the underlying assets on exercise of the option; and
(2)  have the ability to hold the underlying assets in the insurer's portfolio.
(b)  If during the entire period the put option is outstanding the total market value of all put options sold by the insurer exceeds two percent of the insurer's assets, the insurer shall set aside, under a custodial or escrow agreement, cash or cash equivalents that have a market value equal to the amount of the insurer's put option obligations in excess of two percent of the insurer's assets.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.215. Limitation on Sale of Call Option on Derivative Instrument

Sec. 424.215.  LIMITATION ON SALE OF CALL OPTION ON DERIVATIVE INSTRUMENT.  If an income generation transaction is a sale of a call option on a derivative instrument, including a swaption, the insurer must:
(1)  during the entire period the call option is outstanding, hold, or have a currently exercisable right to acquire, assets generating the cash flow necessary to make any payment for which the insurer is liable under the underlying derivative instrument; and
(2)  have the ability to enter into the underlying derivative transaction for the insurer's portfolio.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.216. Limitation on Sale of Cap or Floor

Sec. 424.216.  LIMITATION ON SALE OF CAP OR FLOOR.  If an income generation transaction is a sale of a cap or a floor, the insurer must, during the entire period the cap or floor is outstanding, hold, or have a currently exercisable right to acquire, assets generating the cash flow necessary to make any payment for which the insurer is liable under the cap or floor.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.217. Authority to Enter Replication Transaction

Sec. 424.217.  AUTHORITY TO ENTER REPLICATION TRANSACTION.  (a)  An insurer may enter into a replication transaction only with the prior written approval of the commissioner.
(b)  To be eligible for approval by the commissioner:
(1)  the insurer must be otherwise authorized to invest the insurer's funds under this chapter in the asset being replicated;  and
(2)  the asset being replicated must be subject to all the provisions of this subchapter relating to the making of the transaction by the insurer with respect to that kind of asset as if the transaction constituted a direct investment by the insurer in the replicated asset.
(c)  The commissioner may adopt rules regarding replication transactions as necessary to implement this section.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
2023 Texas Statutes › Insurance Code › Title 4 - Regulation of Solvency › Subtitle B - Reserves and Investments › Chapter 424 - Investments for Certain Insurers › Subchapter E. Risk Control Transactions › Section 424.218. Rules

Sec. 424.218.  RULES.  The commissioner may adopt rules consistent with this subchapter that prescribe reasonable limits, standards, and guidelines for:
(1)  the risk control transactions authorized under this subchapter; and
(2)  plans related to those transactions.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.001. Securities in Amount of Reserves Required

Sec. 425.001.  SECURITIES IN AMOUNT OF RESERVES REQUIRED.  The commissioner, after determining the amount of the reserves required on all of a life insurance company's policies in force, shall ensure that the company has at least that amount in securities of the class and character required by the law of this state, after all debts and claims against the company and the minimum capital required by Chapter 841 or 982, as applicable, have been provided for.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.002. Certain Insurers: Deposit of Securities, Money, or Property in Amount of Legal Reserves

Sec. 425.002.  CERTAIN INSURERS:  DEPOSIT OF SECURITIES, MONEY, OR PROPERTY IN AMOUNT OF LEGAL RESERVES.  (a)  Except as provided by Subsection (b), a life insurance company incorporated under the laws of this state may deposit with the department, for the common benefit of all the holders of the company's policies and annuity contracts and in an amount equal to the legal reserve on all the company's outstanding policies and contracts in force, securities of the character in which the law of this state permits the company to invest, or against which the law of this state permits the company to loan, the company's capital, surplus, or reserves.
(b)  A life insurance company may not make a new deposit of securities after August 28, 1961, except to the extent expressly required by Section 425.003.
(c)  For purposes of this section, securities may be physically delivered to the department without being accompanied by a written transfer of a lien securing the securities.  A life insurance company may deposit registered or unregistered United States government securities under this section.
(d)  A life insurance company may deposit lawful money of the United States instead of all or part of the securities described by Subsection (a).  A company may, for the purposes of the deposit described by Subsection (a), convey to the department in trust the real property in which any part of the company's reserve is lawfully invested.  If the company conveys the property, the department shall hold the title to the property in trust until the company deposits with the department securities to take the place of the property, at which time the department shall reconvey the property to the company.
(e)  The department may have any securities or real property appraised and valued before the securities or real property may be deposited with or conveyed to the department under this section.  The life insurance company shall pay the reasonable expense of the appraisal or valuation.
(f)  For purposes of state, county, and municipal taxation, the situs of the deposited securities is the municipality and county in which the life insurance company's charter requires the principal business office of the company making the deposit to be located.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.003. Certain Insurers: Required Deposits of Securities; Additional Deposits and Withdrawals

Sec. 425.003.  CERTAIN INSURERS:  REQUIRED DEPOSITS OF SECURITIES; ADDITIONAL DEPOSITS AND WITHDRAWALS.  (a)  A life insurance company that, before August 28, 1961, issued or assumed the obligations of policies or annuity contracts that were registered as provided by Article 3.18, as that article existed before August 28, 1961, shall have on deposit with the department securities of the character described by Section 425.002 in an amount equal to or greater than the aggregate net value of the company's outstanding registered policies and annuity contracts in force.
(b)  To comply with Subsection (a), a life insurance company shall periodically make additional deposits of securities in amounts of not less than $5,000.  A company whose deposits exceed the aggregate net value of the company's outstanding registered policies and annuity contracts in force may periodically withdraw the excess in amounts of not less than $5,000.  A company may at any time withdraw any of the company's deposited securities by depositing in their place securities of equal value to the securities replaced and of a character authorized by this chapter.
(c)  A life insurance company may at any time collect the interest, rents, and other income from the company's securities on deposit.
(d)  The net value of each policy or annuity contract subject to this section is the policy's or contract's value according to the standard prescribed by state law when the first premium on the policy or contract is paid, minus the amount of any liens the life insurance company has against the policy or contract not to exceed the policy's or contract's value.
(e)  The department shall hold a life insurance company's securities on deposit with the department under this section in trust for the benefit of all holders of the company's outstanding policies and annuity contracts that were registered as provided by Article 3.18, as that article existed before August 28, 1961.
(f)  A life insurance company that has outstanding registered policies or annuity contracts in force may not reinsure all or any part of that outstanding business, other than in a company authorized to engage in business in this state.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.004. Records of Securities Deposited With Department; Report of Value

Sec. 425.004.  RECORDS OF SECURITIES DEPOSITED WITH DEPARTMENT; REPORT OF VALUE.  Each life insurance company that is required by Section 425.003 to have securities on deposit with the department shall:
(1)  keep records of:
(A)  all of the company's outstanding registered policies and annuity contracts in force; and
(B)  the net value of those policies and contracts; and
(2)  not later than the 15th day after the last day of each calendar month, file with the department a report stating whether the value of the company's securities on deposit is equal to or greater than the aggregate net value of the company's registered policies and annuity contracts outstanding and in force at the end of the preceding calendar month.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.005. Department Duties Regarding Deposited Securities; Insurance Company Access

Sec. 425.005.  DEPARTMENT DUTIES REGARDING DEPOSITED SECURITIES; INSURANCE COMPANY ACCESS.  (a)  The department shall keep securities deposited by a life insurance company under Sections 425.002 and 425.003 in a secure safe-deposit, fireproof box or vault in the municipality of, or a municipality near the location of, the company's home office.
(b)  The life insurance company's officers may, in accordance with reasonable rules adopted by the commissioner, have access to the securities to detach interest coupons, credit payment, and exchange securities as provided by Section 425.003.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.006. Additional Reserves Required: Substandard or Extra Hazardous Policies

Sec. 425.006.  ADDITIONAL RESERVES REQUIRED:  SUBSTANDARD OR EXTRA HAZARDOUS POLICIES.  (a)  If a life insurance company engaged in business under the laws of this state has written or assumed risks that are substandard or extra hazardous and has charged more for the policies under which those risks are written or assumed than the company's published premium rates, the commissioner shall, in valuing those policies, compute and charge extra reserves on the policies as necessary because of the extra hazard assumed and the extra premium charged.
(b)  If the commissioner determines, after notice and hearing, that a particular risk or class of risks is substandard or extra hazardous, a life insurance company may not, after the determination is made, write or assume the particular risk or class of risks unless the company charges an extra premium as necessary because of the extra hazard assumed.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.007. Subscription to or Underwriting Purchase or Sale of Securities or Property Prohibited; Control of Disposition of Property

Sec. 425.007.  SUBSCRIPTION TO OR UNDERWRITING PURCHASE OR SALE OF SECURITIES OR PROPERTY PROHIBITED; CONTROL OF DISPOSITION OF PROPERTY.  (a)  A life insurance company organized under the laws of this state may not:
(1)  subscribe to, or participate in, any underwriting of the purchase or sale of securities or property;
(2)  enter into a transaction described by Subdivision (1) for a purpose described by Subdivision (1);
(3)  sell on account of the company jointly with any other person, firm, or corporation; or
(4)  enter into any agreement to withhold from sale any of the company's property.
(b)  The disposition of the life insurance company's property must be at all times within the control of the company's board of directors.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.008. Authorized Investments for Foreign Companies

Sec. 425.008.  AUTHORIZED INVESTMENTS FOR FOREIGN COMPANIES.  A foreign company shall invest the company's assets in:
(1)  securities or property of the same classes in which the law of this state permits a domestic insurance company to invest; or
(2)  securities permitted by other law of this state and approved by the commissioner as being of substantially the same grade as securities or property in which a domestic insurance company is permitted to invest.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 A. General Provisions › Section 425.009. Student Loans

Sec. 425.009.  STUDENT LOANS.  A foreign or domestic life insurance company may make loans to a student enrolled in an institution of higher education if the principal amount of the loan is insured by:
(1)  the federal government under the Higher Education Act of 1965  (Pub. L. No. 89-329), as amended; or
(2)  the Texas Guaranteed Student Loan Corporation under Chapter 57, Education Code.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.051. Short Title

Sec. 425.051.  SHORT TITLE.  This subchapter may be cited as the Standard Valuation Law.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.053. Annual Valuation of Reserves for Policies and Contracts Issued Before Operative Date of Valuation Manual

Sec. 425.053.  ANNUAL VALUATION OF RESERVES FOR POLICIES AND CONTRACTS ISSUED BEFORE OPERATIVE DATE OF VALUATION MANUAL.  (a)  The department shall annually value or cause to be valued the reserves for all outstanding life insurance policies and annuity and pure endowment contracts of each life insurance company engaged in business in this state issued before the operative date of the valuation manual.
(b)  In computing reserves under Subsection (a), the department may use group methods and approximate averages for fractions of a year or otherwise.
(c)  Instead of valuing the reserves as required by Subsection (a) for a foreign or alien company, the department may accept any valuation made by or for the insurance supervisory official of another state or jurisdiction if the valuation complies with the minimum standard provided by this subchapter.
(d)  Except as otherwise provided by this subchapter, policies and contracts issued on or after the operative date of the valuation manual are governed by Section 425.0535.
(e)  The minimum standards for the valuation of policies and contracts issued before the operative date of the valuation manual are as provided by Sections 425.058 through 425.071 and Section 425.072(b), as applicable. Sections 425.072(a), 425.073, and 425.074 do not apply to a policy or contract described by this subsection.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 2, eff. September 1, 2015.
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 3, eff. September 1, 2015.
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 425.0535. Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual

Sec. 425.0535.  ANNUAL VALUATION OF RESERVES FOR POLICIES AND CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF VALUATION MANUAL.  (a)  The commissioner shall annually value, or cause to be valued, the reserves for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of each company issued on or after the operative date of the valuation manual.
(b)  In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of another state if the valuation complies with the minimum standard provided by this subchapter.
(c)  Sections 425.072(a), 425.073, and 425.074 apply to all policies and contracts issued on or after the operative date of the valuation manual.
Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 4, eff. September 1, 2015.
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 425.0545. Actuarial Opinion of Reserves After Operative Date of Valuation Manual

Sec. 425.0545.  ACTUARIAL OPINION OF RESERVES AFTER OPERATIVE DATE OF VALUATION MANUAL.  (a)  A company that has outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and is subject to regulation by the department shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and are in compliance with applicable laws of this state.  An opinion under this section must comply with provisions of the valuation manual, including in regard to any items necessary to its scope.
(b)  Unless exempted by the valuation manual, a company described by Subsection (a) shall include with the opinion required by that subsection an opinion of the same appointed actuary concerning whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including investment earnings on the assets and considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including benefits under and expenses associated with the policies and contracts.
(c)  Each opinion required by this section must:
(1)  be in the form and contain the substance that is specified by the valuation manual and is acceptable to the commissioner;
(2)  be submitted with the annual statement reflecting the valuation of reserves for each year ending on or after the operative date of the valuation manual;
(3)  apply to all policies and contracts subject to this section, plus other actuarial liabilities specified by the valuation manual; and
(4)  be based on standards adopted from time to time by the Actuarial Standards Board or its successor, and on any additional standards prescribed by the valuation manual.
(d)  In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by the company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 7, eff. September 1, 2015.
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 425.055. Supporting Memorandum for Actuarial Opinion

Sec. 425.055.  SUPPORTING MEMORANDUM FOR ACTUARIAL OPINION.  (a)  A memorandum shall be prepared to support each actuarial opinion required by Section 425.054 or 425.0545.  The form and substance of each supporting memorandum must comply with the commissioner's rules for memorandums subject to Section 425.054, or the valuation manual for memorandums subject to Section 425.0545.
(b)  The commissioner may engage an actuary or other financial specialist as defined by commissioner rule if:
(1)  a life insurance company does not provide a supporting memorandum at the request of the commissioner in the time specified by rule; or
(2)  the company provides a supporting memorandum, but the commissioner determines that the supporting memorandum does not meet the standards prescribed by rule or is otherwise unacceptable to the commissioner.
(c)  The actuary or other financial specialist under Subsection (b) shall:
(1)  review the actuarial opinion and the basis for the opinion; and
(2)  prepare the supporting memorandum.
(d)  A life insurance company is responsible for the expense of the actuary or other financial specialist under Subsection (b).
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 8, eff. September 1, 2015.
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 425.056. Limitation on Liability for Actuarial Opinion

Sec. 425.056.  LIMITATION ON LIABILITY FOR ACTUARIAL OPINION.  (a)  Except in cases of fraud or wilful misconduct or as provided by Subsection (b), a person who certifies an opinion under Section 425.054 or 425.0545 is not liable for damages to a person, other than the life insurance company covered by the opinion, for an act, error, omission, decision, or other conduct with respect to the person's opinion.
(b)  Subsection (a)  does not apply to an administrative penalty imposed under Chapter 84.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 9, eff. September 1, 2015.
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 425.057. Disciplinary Action: Company or Person Certifying Opinion

Sec. 425.057.  DISCIPLINARY ACTION: COMPANY OR PERSON CERTIFYING OPINION.  A company or person that certifies an opinion under Section 425.054 or 425.0545 and that violates Section 425.054, 425.0545, or 425.055 or rules adopted under those sections is subject to disciplinary action under Chapter 82.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 10, eff. September 1, 2015.
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 425.060. Applicability of Calendar Year Statutory Valuation Interest Rates

Sec. 425.060.  APPLICABILITY OF CALENDAR YEAR STATUTORY VALUATION INTEREST RATES.  The calendar year statutory valuation interest rates as defined by Sections 425.061, 425.062, and 425.063 are the interest rates used in determining the minimum standard for the valuation of:
(1)  a life insurance policy to which Subchapter B, Chapter 1105, applies;
(2)  an individual annuity or pure endowment contract issued on or after January 1, 1982;
(3)  an annuity or pure endowment purchased on or after January 1, 1982, under a group annuity or pure endowment contract; or
(4)  the net increase, if any, in a calendar year after January 1, 1982, in amounts held under a guaranteed interest contract.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.061. Computation of Calendar Year Statutory Valuation Interest Rate: General Rule

Sec. 425.061.  COMPUTATION OF CALENDAR YEAR STATUTORY VALUATION INTEREST RATE:  GENERAL RULE.  (a)  For purposes of Subsection (b):
(1)  R1 is the lesser of R or.09;
(2)  R2 is the greater of R or.09;
(3)  R is the reference interest rate determined under Section 425.063; and
(4)  W is the weighting factor determined under Section 425.062.
(b)  The calendar year statutory valuation interest rate ("I") is determined as provided by this section, with the results rounded to the nearest one-quarter  of one percent:
(1)  for life insurance:
I =.03 + W(R1 -.03) + (W/2)(R2 -.09); and
(2)  for a single premium immediate annuity or 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, or for an annuity or guaranteed interest contract without a cash settlement option, or for an annuity or guaranteed interest contract with a cash settlement option that is valued on a change in fund basis:
I =.03 + W(R -.03).
(c)  For an annuity or guaranteed interest contract with a cash settlement option that is valued on an issue year basis, other than an annuity or contract described by Subsection (b)(2):
(1)  the formula prescribed by Subsection (b)(1) applies to an annuity or guaranteed interest contract with a guarantee duration determined under Section 425.062(f) greater than 10 years; and
(2)  the formula prescribed by Subsection (b)(2) applies to an annuity or guaranteed interest contract with a guarantee duration determined under Section 425.062(f) of 10 years or less.
(d)  Notwithstanding Subsections (b) and (c), if the calendar year statutory valuation interest rate for a life insurance policy issued in a calendar year as determined under Subsection (b) or (c), as applicable, would differ  from the corresponding actual rate for similar policies issued in the preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for the policy is the corresponding actual rate for the preceding calendar year.  For purposes of this subsection, the calendar year statutory valuation interest rate for a life insurance policy issued in a calendar year is determined for 1980 using the reference interest rate defined for 1979, and is determined for each subsequent calendar year regardless of whether Subchapter B, Chapter 1105, applies to the policy.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.065. Commissioners Annuity Reserve Valuation Method for Annuity and Pure Endowment Benefits

Sec. 425.065.  COMMISSIONERS ANNUITY RESERVE VALUATION METHOD FOR ANNUITY AND PURE ENDOWMENT BENEFITS.  (a)  This section applies to an annuity or pure endowment contract other than 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.
(b)  Reserves according to the commissioners annuity reserve method for benefits under an annuity or pure endowment contract, excluding any disability or accidental death benefits in the contract, are the greatest of the respective excesses of the present values on the valuation date of the future guaranteed benefits under the contract at the end of each respective contract year, including guaranteed nonforfeiture benefits, minus the present value on the valuation date of any future valuation considerations derived from future gross considerations that are required by the contract terms and that become payable before the end of the respective contract year.  The future guaranteed benefits must be determined by using the mortality table, if any, and the interest rate or rates specified in the contract for determining guaranteed benefits.  The valuation considerations are the portions of the respective gross considerations applied under the contract terms to determine nonforfeiture values.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
Amended by:
Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 14, eff. September 1, 2015.
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 425.066. Minimum Aggregate Reserves

Sec. 425.066.  MINIMUM AGGREGATE RESERVES.  (a)  An insurance company's aggregate reserves for all life insurance policies, excluding disability or accidental death benefits, issued by the company on or after the date on which Chapter 1105 applies to policies issued by the company, as determined under Section 1105.002(a) or (b), may not be less than the aggregate reserves computed in accordance with the methods prescribed by Sections 425.064, 425.065, 425.068, and 425.069 and the mortality table or tables and interest rate or rates used in computing nonforfeiture benefits for those policies.
(b)  The aggregate reserves of an insurance company to which this section applies for all policies, contracts, and benefits may not be less than the aggregate reserves determined to be necessary to issue a favorable opinion under Section 425.054.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.067. Optional Reserve Computations

Sec. 425.067.  OPTIONAL RESERVE COMPUTATIONS.  (a)  Reserves for a policy or contract issued by a life insurance company before the date on which Chapter 1105 would apply to the policy or contract, as determined under Section 1105.002(a) or (b), may be computed, at the company's option, according to any standard that produces greater aggregate reserves for all those policies and contracts than the minimum reserves required by the laws applicable to those policies and contracts immediately before that date.
(b)  Reserves for any category, as established by the commissioner, of policies, contracts, or benefits issued by a life insurance company on or after the date on which Chapter 1105 applies to policies, contracts, or benefits issued by the company, as determined under Section 1105.002(a) or (b), may be computed, at the company's option, according to any standard that produces greater aggregate reserves for the category than the minimum aggregate reserves computed according to the standard provided by this subchapter, but the interest rate or rates used for those policies and contracts, other than annuity and pure endowment contracts, may not be higher than the corresponding interest rate or rates used in computing any nonforfeiture benefits provided in those policies or contracts.
(c)  An insurance company that has adopted a standard of valuation that produces greater minimum aggregate reserves than the aggregate reserves computed according to the standard provided by this subchapter may, with the commissioner's approval, adopt any lower standard of valuation that produces aggregate reserves at least equal to the minimum aggregate reserves computed according to the standard provided by this subchapter.
(d)  For purposes of this section, the holding of additional reserves previously determined to be necessary to issue a favorable opinion under Section 425.054 may not be considered to be the adoption of a higher standard of valuation.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.
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 425.068. Reserve Computation: Gross Premium Charged Less Than Valuation Net Premium

Sec. 425.068.  RESERVE COMPUTATION: GROSS PREMIUM CHARGED LESS THAN VALUATION NET PREMIUM.  (a)  If in a contract year the gross premium charged by a life insurance company on a policy or contract is less than the valuation net premium for the policy or contract computed by the method used in computing the reserve on the policy or contract but using the minimum valuation mortality standards and interest rate, the minimum reserve required for the policy or contract is the greater of:
(1)  the reserve computed according to the mortality table, interest rate, and method actually used for the policy or contract; or
(2)  the reserve computed by the method actually used for the policy or contract but using the minimum valuation mortality standards and interest rate and replacing the valuation net premium with the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium.
(b)  The minimum valuation mortality standards and interest rate under Subsection (a) are the standards and rate provided by Sections 425.058, 425.061, 425.062, and 425.063.
(c)  This subsection applies only to a life insurance policy issued on or after January 1, 1985, for which the gross premium for the first policy year exceeds the gross premium for the second policy 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 a policy to which this subsection applies, Subsections (a) and (b) shall be applied as if the method actually used in computing the reserve for the policy were the method described in Section 425.064, ignoring Section 425.064(c).  The minimum reserve at each policy anniversary is the greater of:
(1)  the minimum reserve computed in accordance with Section 425.064, including Section 425.064(c); or
(2)  the minimum reserve computed in accordance with this section.
Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007.