Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES › Subchapter EE - VALUATION OF LIFE INSURANCE POLICIES › Section 3.4504 - Definitions

Current through Reg. 49, No. 28; July 12, 2024
The following words and terms, when used in this
					 subchapter, shall have the following meanings, unless the context clearly
					 indicates otherwise.
(1) Basic
				  reserves--reserves calculated in accordance with the principles of the
				  Insurance Code §
										425.064.
(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 §
										3.4505(b)
				  of this subchapter (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 the Insurance Code §
										425.068
				  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 the Insurance Code §
										425.061,
				  Computation of Minimum Standard by Calendar Year of Issue, 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
				  §
										3.4507(a)(3)
				  of this subchapter (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 §
										3.4507(a)(4)
				  of this subchapter.
(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 §
											3.4506(d)
				  of this subchapter (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 shall 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.