Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 4 - LIFE AND ANNUITY › Subchapter BB - LIFE AND ANNUITY RESERVES › Division 3 - VALUATION OF LIFE INSURANCE POLICIES › Section 4.2824 - Definitions

Current through Reg. 49, No. 28; July 12, 2024
The following words and terms, when used in this
						subchapter, have the following meanings unless the context clearly indicates
						otherwise.
(1) Basic
					 reserves--Reserves calculated in accordance with the principles of Insurance
					 Code §
											425.064, concerning
					 Commissioners Reserve Valuation Method for Life Insurance and Endowment
					 Benefits.
(2) Contract segmentation
					 method--The method of dividing the period from issue to mandatory expiration of
					 a policy into successive segments, with the length of each segment being
					 defined as the period from the end of the prior segment (from policy inception,
					 for the first segment) to the end of the latest policy year as determined
					 below. All calculations are made using the 1980 CSO valuation tables, as
					 defined in this section, (or any other valuation mortality table adopted by the
					 NAIC after the effective date of this subchapter and promulgated by regulation
					 by the commissioner for this purpose), and, if elected, the optional minimum
					 mortality standard for deficiency reserves stipulated in §
											4.2825(b) of this
					 title (relating to General Calculation Requirements for Basic Reserves and
					 Premium Deficiency Reserves).
Attached Graphic
(3) Deficiency reserves--The
					 excess, if greater than zero, of the minimum reserves calculated in accordance
					 with the principles of Insurance Code §
											425.068, concerning
					 Reserve Computation: Gross Premium Charged Less Than Valuation Net Premium,
					 over the basic reserves.
(4)
					 Guaranteed gross premiums--The premiums under a policy of life insurance that
					 are guaranteed and determined at issue.
(5) Maximum valuation interest rates--The
					 interest rates defined in Insurance Code §
											425.061, concerning
					 Computation of Calendar Year Statutory Valuation Interest Rate: General Rule,
					 that are to be used in determining the minimum standard for the valuation of
					 life insurance policies.
(6)
					 NAIC--National Association of Insurance Commissioners.
(7) 1980 CSO valuation tables--The
					 Commissioners' 1980 Standard Ordinary Mortality Table (1980 CSO Table) without
					 ten-year selection factors, incorporated into the 1980 amendments to the NAIC
					 Standard Valuation Law, and variations of the 1980 CSO Table approved by the
					 NAIC, such as the smoker and nonsmoker versions approved in December
					 1983.
(8) Scheduled gross
					 premium--The smallest illustrated gross premium at issue for other than
					 universal life insurance policies. For universal life insurance policies,
					 scheduled gross premium means the smallest specified premium described in
					 §
											4.2827(a)(3) of
					 this title (relating to Calculation of Minimum Valuation Standard for Flexible
					 Premium and Fixed Premium Universal Life Insurance Policies That Contain
					 Provisions Resulting in the Ability of a Policyowner to Keep a Policy in Force
					 Over a Secondary Guarantee Period) if any, or else the minimum premium
					 described in §
											4.2827(a)(4) of
					 this title.
(9) Segmented
					 reserves--Reserves, calculated using segments produced by the contract
					 segmentation method, equal to the present value of all future guaranteed
					 benefits less the present value of all future net premiums to the mandatory
					 expiration of a policy, where the net premiums within each segment are a
					 uniform percentage of the respective guaranteed gross premiums within the
					 segment. The length of each segment is determined by the "contract segmentation
					 method," as defined in this section. The interest rates used in the present
					 value calculations for any policy may not exceed the maximum valuation interest
					 rate, determined with a guarantee duration equal to the sum of the lengths of
					 all segments of the policy. For both basic reserves and deficiency reserves
					 computed by the segmented method, present values must include future benefits
					 and net premiums in the current segment and in all subsequent segments. The
					 uniform percentage for each segment is such that, at the beginning of the
					 segment, the present value of the net premiums within the segment equals:
(A) the present value of the death benefits
					 and endowment benefits within the segment, plus
(B) the present value of any unusual
					 guaranteed cash value (see §
												4.2826(d) of this
					 title (relating to Calculation of Minimum Valuation Standard for Policies with
					 Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel Benefits (Other than
					 Universal Life Policies))) occurring at the end of the segment, less
(C) any unusual guaranteed cash value
					 occurring at the start of the segment, plus
(D) for the first segment only, the excess of
					 clause (i) of this paragraph over clause (ii) of this paragraph, as follows.
(i) A net level annual premium equal to the
					 present value, at the date of issue, of the benefits provided for in the first
					 segment after the first policy year, divided by the present value, at the date
					 of issue, of an annuity of one per year payable on the first and each
					 subsequent anniversary within the first segment on which a premium falls due.
					 However, the net level annual premium may not exceed the net level annual
					 premium on the nineteen-year premium whole life plan of insurance of the same
					 renewal year equivalent level amount at an age one year higher than the age at
					 issue of the policy.
(ii) A net
					 one-year term premium for the benefits provided for in the first policy
					 year.