Current through Reg. 50, No. 13; March 28, 2025
(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.
(c) For
flexible premium contracts, reserve liabilities for any guaranteed minimum
death benefit must be maintained in the general account of the insurer and may
not be less than the aggregate total of the term costs, if any, covering the
period provided for in the guarantee not otherwise provided for by the reserves
held in the separate account assuming an immediate one-third depreciation in
the current value of the assets of the separate account followed by a net
investment return equal to the valuation interest rate. The valuation interest
rate and mortality table used in computing this additional reserve, if any,
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.
(d) Reserve liabilities
for all fixed incidental insurance benefits and any guarantees associated with
variable incidental insurance benefits must be maintained in the general
account, and reserve liabilities for all variable aspects of the variable
incidental insurance benefits must be maintained in a separate account, in
amounts determined in accordance with the actuarial procedures appropriate to
such benefit.