Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES › Subchapter K - MAXIMUM GUARANTEED INTEREST RATES FOR ANNUITIES, PURE ENDOWMENT CONTRACTS, AND MISCELLANEOUS FUNDS › Section 3.1006 - Early Warning Requirements

Current through Reg. 49, No. 28; July 12, 2024
The commissioner may, at the commissioner's discretion,
					 require the data specified in this section from any insurance companies which
					 are subject to this subchapter. These requirements apply to individual
					 annuities, group annuities, and any supplemental provisions of riders attached
					 to an individual life insurance policy or a group life insurance policy
					 whenever on any valuation date contracts of the nature described are in force
					 which guarantee interest rates in excess of the applicable maximum reserve
					 valuation interest rate as defined by the Standard Valuation Law for that type
					 of annuity or pure endowment contract to future premiums or other deposits of
					 unspecified amounts or timing for or at any period of time subsequent to the
					 valuation date. (Foreign companies will be required to furnish this data only
					 with respect to their Texas issues.) Required data:
(1) number of individuals covered under such
				  contracts;
(2) the actual premium
				  received under such contracts during the 12 months preceding the applicable
				  valuation date;
(3) the reserves
				  held on such contracts on the valuation date; and
(4) an evaluation of the potential liability
				  with respect to premiums or other deposits which may be received subsequent to
				  the valuation date calculated in the following manner. Potential liability is
				  the excess, if any, of the present value of the future cash value generated by
				  "assumed future premiums" at the end of the last period of interest guarantees
				  higher than the maximum reserve valuation rate as defined by the Standard
				  Valuation Law for that type of annuity or pure endowment contract over the
				  present value of "assumed future premiums" all valued at the maximum reserve
				  valuation rate as defined by the Standard Valuation Law for that type of
				  annuity or pure endowment contract. (If interest rate guarantees higher than
				  the applicable maximum reserve valuation interest rate as defined by the
				  Standard Valuation Law for that type of annuity or pure endowment contract
				  extend beyond attained age 70 of the applicable individual, then the present
				  value of future cash values may be calculated at the 10th anniversary of the
				  contract or on the anniversary nearest age 70, whichever is later.)
(A) "Assumed annual future premiums" must be
				  level and equal in amount to the average annual premium received over the
				  duration of the contract, counting any contract which is less than one year old
				  as being a full year old.
(B) The
				  assumed future payment period terminates on the earliest of the following:
(i) the end of the period during which
				  guarantees are made regarding future premiums or deposits;
(ii) the end of the continuous period from
				  date of valuation during which interest rates greater than the applicable
				  maximum reserve valuation interest rate as defined in the Standard Valuation
				  Law for that type of annuity or pure endowment contract;
(iii) the maturity date or retirement date
				  specified in the contract; or
(iv)
				  the later to occur of the 10th contract anniversary or the contract anniversary
				  nearest age 65 of the prospective annuitant under the contract.
(C) Premium payments may be
				  assumed to occur, at the choice of the company:
(i) annually on each July 1 succeeding the
				  valuation date;
(ii) annually on
				  the contract anniversary; or
(iii)
				  monthly in the amount of 1/12th of the annual assumed premium, on a day of the
				  month to be chosen by the company.
(D) If the probability of death is introduced
				  into the above calculation, a statement of methods of application, including
				  any subsequent changes, must be filed with the Texas Department of Insurance
				  along with a certification by a qualified actuary that introduction of such
				  probability is appropriate to the contracts to which it is to be
				  applied.
(E) Group methods and
				  approximations which yield substantially the same potential liability valuation
				  may be used.