Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 4 - LIFE AND ANNUITY › Subchapter O - VARIABLE LIFE INSURANCE › Section 4.1505 - 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, concerning Standard Valuation Law, 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 that 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.