Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES › Subchapter I - VARIABLE LIFE INSURANCE › Section 3.805 - Reserve Liabilities for Variable Life Insurance

Current through Reg. 49, No. 28; July 12, 2024
(a) Reserve liabilities for variable life
				  insurance contracts must be established under Insurance Code Chapter 425,
				  Subchapter B, in accordance with actuarial procedures that recognize the
				  variable nature of the benefits provided and any mortality
				  guarantees.
(b) For scheduled
				  premiums contracts, reserve liabilities for the guaranteed minimum death
				  benefit must be the reserve needed to provide for the contingency of death
				  occurring when the guaranteed minimum death benefit exceeds the death benefit
				  that would be paid in the absence of the guarantee, and be maintained in the
				  general account of the insurer and must not be less than the greater of the
				  following minimum reserve:
(1) the aggregate
				  total of the term costs, if any, covering a period of one full year from the
				  valuation date, of the guarantee on each variable life contract, assuming an
				  immediate one-third depreciation in the current value of the assets in the
				  separate account followed by a net investment return equal to the assumed
				  investment rate; or
(2) the
				  aggregate total of the "attained age level" reserves on each variable life
				  insurance contract. The "attained age level" reserve on each variable life
				  insurance contract must not be less than zero and must equal the "residue," as
				  described in subparagraph (A) of this paragraph, of the prior year's "attained
				  age level" reserve in the contract, with any such "residue," increased or
				  decreased by a payment computed on an attained-age basis as described in
				  subparagraph (B) of this paragraph.
(A) The
				  "residue" of the prior year's "attained age level" reserve on each variable
				  life insurance contract may not be less than zero and must be determined by
				  adding interest at the valuation interest rate to such prior year's reserve,
				  deducting the tabular claims based on the "excess," if any, of the guaranteed
				  minimum death benefit over the death benefit that would be payable in the
				  absence of such guarantee, and dividing the net result by the tabular
				  probability of survival. The "excess" referred to in the preceding sentence
				  must be based in the actual level of death benefits that would have been in
				  effect during the preceding year in the absence of the guarantee, taking
				  appropriate account of the reserve assumptions regarding the distribution of
				  death claim payments over the year.
(B) The payment referred to in this paragraph
				  must be computed so that the present value of a level of that amount each year
				  over the future premium paying period of the contract is equal to (i) minus
				  (iii), where:
(i) is the present value of the
				  future guaranteed minimum death benefits;
(ii) is the present value of the future death
				  benefits that would be payable in the absence of such guarantee; and
(iii) is any "residue," as described in
				  subparagraph (A) of this paragraph, of the prior year's "attained age level"
				  reserve on such variable life insurance contract. If the contract is paid up,
				  the payment must equal (i) minus (ii) minus (iii). The amounts of the future
				  death benefits referred to in clause (ii) of this paragraph must be computed
				  assuming a net investment return of the separate account which may differ from
				  the assumed investment rate and/or the valuation interest but in no event may
				  exceed the maximum interest rate permitted for the valuation of life
				  contracts.
(3) The valuation interest rate and mortality
				  table used in computing the two minimum reserves described in paragraph (2)(A)
				  and (B) of this subsection must conform to permissible standards for the
				  valuation of life insurance contracts. In determining such minimum reserve, the
				  insurer may employ suitable approximations and estimates, including, but not
				  limited to, groupings and averages.