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Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-425-reserves-and-investments-for-life-insurance-companies-and-related-entities

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE INSURANCE

COMPANIES AND RELATED ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 425.001. SECURITIES IN AMOUNT OF RESERVES REQUIRED. The

commissioner, after determining the amount of the reserves

required on all of a life insurance company's policies in force,

shall ensure that the company has at least that amount in

securities of the class and character required by the law of this

state, after all debts and claims against the company and the

minimum capital required by Chapter 841 or 982, as applicable,

have been provided for.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.002. CERTAIN INSURERS: DEPOSIT OF SECURITIES, MONEY,

OR PROPERTY IN AMOUNT OF LEGAL RESERVES. (a) Except as provided

by Subsection (b), a life insurance company incorporated under

the laws of this state may deposit with the department, for the

common benefit of all the holders of the company's policies and

annuity contracts and in an amount equal to the legal reserve on

all the company's outstanding policies and contracts in force,

securities of the character in which the law of this state

permits the company to invest, or against which the law of this

state permits the company to loan, the company's capital,

surplus, or reserves.

(b) A life insurance company may not make a new deposit of

securities after August 28, 1961, except to the extent expressly

required by Section 425.003.

(c) For purposes of this section, securities may be physically

delivered to the department without being accompanied by a

written transfer of a lien securing the securities. A life

insurance company may deposit registered or unregistered United

States government securities under this section.

(d) A life insurance company may deposit lawful money of the

United States instead of all or part of the securities described

by Subsection (a). A company may, for the purposes of the

deposit described by Subsection (a), convey to the department in

trust the real property in which any part of the company's

reserve is lawfully invested. If the company conveys the

property, the department shall hold the title to the property in

trust until the company deposits with the department securities

to take the place of the property, at which time the department

shall reconvey the property to the company.

(e) The department may have any securities or real property

appraised and valued before the securities or real property may

be deposited with or conveyed to the department under this

section. The life insurance company shall pay the reasonable

expense of the appraisal or valuation.

(f) For purposes of state, county, and municipal taxation, the

situs of the deposited securities is the municipality and county

in which the life insurance company's charter requires the

principal business office of the company making the deposit to be

located.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.003. CERTAIN INSURERS: REQUIRED DEPOSITS OF

SECURITIES; ADDITIONAL DEPOSITS AND WITHDRAWALS. (a) A life

insurance company that, before August 28, 1961, issued or assumed

the obligations of policies or annuity contracts that were

registered as provided by Article 3.18, as that article existed

before August 28, 1961, shall have on deposit with the department

securities of the character described by Section 425.002 in an

amount equal to or greater than the aggregate net value of the

company's outstanding registered policies and annuity contracts

in force.

(b) To comply with Subsection (a), a life insurance company

shall periodically make additional deposits of securities in

amounts of not less than $5,000. A company whose deposits exceed

the aggregate net value of the company's outstanding registered

policies and annuity contracts in force may periodically withdraw

the excess in amounts of not less than $5,000. A company may at

any time withdraw any of the company's deposited securities by

depositing in their place securities of equal value to the

securities replaced and of a character authorized by this

chapter.

(c) A life insurance company may at any time collect the

interest, rents, and other income from the company's securities

on deposit.

(d) The net value of each policy or annuity contract subject to

this section is the policy's or contract's value according to the

standard prescribed by state law when the first premium on the

policy or contract is paid, minus the amount of any liens the

life insurance company has against the policy or contract not to

exceed the policy's or contract's value.

(e) The department shall hold a life insurance company's

securities on deposit with the department under this section in

trust for the benefit of all holders of the company's outstanding

policies and annuity contracts that were registered as provided

by Article 3.18, as that article existed before August 28, 1961.

(f) A life insurance company that has outstanding registered

policies or annuity contracts in force may not reinsure all or

any part of that outstanding business, other than in a company

authorized to engage in business in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.004. RECORDS OF SECURITIES DEPOSITED WITH DEPARTMENT;

REPORT OF VALUE. Each life insurance company that is required by

Section 425.003 to have securities on deposit with the department

shall:

(1) keep records of:

(A) all of the company's outstanding registered policies and

annuity contracts in force; and

(B) the net value of those policies and contracts; and

(2) not later than the 15th day after the last day of each

calendar month, file with the department a report stating whether

the value of the company's securities on deposit is equal to or

greater than the aggregate net value of the company's registered

policies and annuity contracts outstanding and in force at the

end of the preceding calendar month.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.005. DEPARTMENT DUTIES REGARDING DEPOSITED SECURITIES;

INSURANCE COMPANY ACCESS. (a) The department shall keep

securities deposited by a life insurance company under Sections

425.002 and 425.003 in a secure safe-deposit, fireproof box or

vault in the municipality of, or a municipality near the location

of, the company's home office.

(b) The life insurance company's officers may, in accordance

with reasonable rules adopted by the commissioner, have access to

the securities to detach interest coupons, credit payment, and

exchange securities as provided by Section 425.003.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.006. ADDITIONAL RESERVES REQUIRED: SUBSTANDARD OR

EXTRA HAZARDOUS POLICIES. (a) If a life insurance company

engaged in business under the laws of this state has written or

assumed risks that are substandard or extra hazardous and has

charged more for the policies under which those risks are written

or assumed than the company's published premium rates, the

commissioner shall, in valuing those policies, compute and charge

extra reserves on the policies as necessary because of the extra

hazard assumed and the extra premium charged.

(b) If the commissioner determines, after notice and hearing,

that a particular risk or class of risks is substandard or extra

hazardous, a life insurance company may not, after the

determination is made, write or assume the particular risk or

class of risks unless the company charges an extra premium as

necessary because of the extra hazard assumed.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.007. SUBSCRIPTION TO OR UNDERWRITING PURCHASE OR SALE

OF SECURITIES OR PROPERTY PROHIBITED; CONTROL OF DISPOSITION OF

PROPERTY. (a) A life insurance company organized under the laws

of this state may not:

(1) subscribe to, or participate in, any underwriting of the

purchase or sale of securities or property;

(2) enter into a transaction described by Subdivision (1) for a

purpose described by Subdivision (1);

(3) sell on account of the company jointly with any other

person, firm, or corporation; or

(4) enter into any agreement to withhold from sale any of the

company's property.

(b) The disposition of the life insurance company's property

must be at all times within the control of the company's board of

directors.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.008. AUTHORIZED INVESTMENTS FOR FOREIGN COMPANIES. A

foreign company shall invest the company's assets in:

(1) securities or property of the same classes in which the law

of this state permits a domestic insurance company to invest; or

(2) securities permitted by other law of this state and approved

by the commissioner as being of substantially the same grade as

securities or property in which a domestic insurance company is

permitted to invest.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.009. STUDENT LOANS. A foreign or domestic life

insurance company may make loans to a student enrolled in an

institution of higher education if the principal amount of the

loan is insured by:

(1) the federal government under the Higher Education Act of

1965 (Pub. L. No. 89-329), as amended; or

(2) the Texas Guaranteed Student Loan Corporation under Chapter

57, Education Code.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. STANDARD VALUATION LAW

Sec. 425.051. SHORT TITLE. This subchapter may be cited as the

Standard Valuation Law.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.052. DEFINITIONS. (a) In this subchapter, "reserves"

means reserve liabilities.

(b) As used in this subchapter:

(1) an "issue year basis" of valuation means a valuation basis

under which the interest rate used to determine the minimum

valuation standard for the entire duration of the annuity or

guaranteed interest contract is the calendar year valuation

interest rate for the year of issue or year of purchase of the

annuity or guaranteed interest contract; and

(2) a "change in fund basis" of valuation means a valuation

basis under which the interest rate used to determine the minimum

valuation standard applicable to each change in the fund held

under the annuity or guaranteed interest contract is the calendar

year valuation interest rate for the year of the change in the

fund.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.053. ANNUAL VALUATION OF RESERVES. (a) The department

shall annually value or have valued the reserves for all

outstanding life insurance policies and annuity and pure

endowment contracts of each life insurance company engaged in

business in this state. The department may certify the amount of

those reserves, specifying the mortality table or tables, rate or

rates of interest, and methods, including the net level premium

method or another method, used in computing those reserves.

(b) In computing reserves under Subsection (a), the department

may use group methods and approximate averages for fractions of a

year or otherwise.

(c) Instead of valuing the reserves as required by Subsection

(a) for a foreign or alien company, the department may accept any

valuation made by or for the insurance supervisory official of

another state or jurisdiction if:

(1) the valuation complies with the minimum standard provided by

this subchapter; and

(2) the official accepts as sufficient and valid for all legal

purposes a certificate of valuation made by the department that

states the valuation was made in a specified manner according to

which the aggregate reserves would be at least as large as they

would be if computed in the manner prescribed by the law of that

state or jurisdiction.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.054. ACTUARIAL OPINION REQUIRED. (a) For purposes of

this section, "qualified actuary" means:

(1) a qualified actuary, as that term is defined by Section

802.002; or

(2) a person who, before September 1, 1993, satisfied the

requirements of the former State Board of Insurance to submit an

opinion under former Section 2A(a)(1), Article 3.28.

(b) In conjunction with the annual statement and in addition to

other information required by this subchapter, each life

insurance company engaged in business in this state shall

annually submit to the department the opinion of a qualified

actuary as to whether the reserves and related actuarial items

held in support of the policies and contracts specified by

commissioner rule:

(1) are computed appropriately;

(2) are based on assumptions that satisfy contractual

provisions;

(3) are consistent with prior reported amounts; and

(4) comply with applicable laws of this state.

(c) The commissioner by rule shall specify the requirements of

an actuarial opinion under Subsection (b), including any matters

considered necessary to the opinion's scope.

(d) The opinion required by this section must:

(1) apply to all of the life insurance company's business in

force, including individual and group health insurance plans; and

(2) be in the form and contain the substance specified by

commissioner rule and be acceptable to the commissioner.

(e) The commissioner may accept as an opinion required to be

submitted under Subsection (b) by a foreign or alien company the

opinion filed by that company with the insurance supervisory

official of another state if the commissioner determines that the

opinion filed in the other state reasonably meets the

requirements applicable to a company domiciled in this state.

(f) Except as exempted by or as otherwise provided by

commissioner rule, a life insurance company shall include in the

opinion required by Subsection (b) an opinion that states whether

the reserves and related actuarial items held in support of the

policies and contracts specified by commissioner rule adequately

provide for the company's obligations under the policies and

contracts, including the benefits under and expenses associated

with the policies and contracts.

(g) In making the opinion under Subsection (f), the reserves and

related actuarial items are considered in light of the assets

held by the life insurance company with respect to the reserves

and related actuarial items, including:

(1) the investment earnings on the assets; and

(2) the considerations anticipated to be received and retained

under the policies and contracts.

(h) The person who certifies the opinion required by Subsection

(b) must make the opinion required by Subsection (f).

(i) Rules adopted under this section may exempt life insurance

companies that would be exempt from the requirements of this

section under the most recently adopted regulation by the

National Association of Insurance Commissioners entitled "Model

Actuarial Opinion and Memorandum Regulation," or a successor to

that regulation, if the commissioner considers the exemption

appropriate.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.055. SUPPORTING MEMORANDUM FOR ACTUARIAL OPINION. (a)

A memorandum that, in form and substance, complies with the

commissioner's rules shall be prepared to support each actuarial

opinion required by Section 425.054.

(b) The commissioner may engage an actuary or other financial

specialist as defined by commissioner rule if:

(1) a life insurance company does not provide a supporting

memorandum at the request of the commissioner in the time

specified by rule; or

(2) the company provides a supporting memorandum, but the

commissioner determines that the supporting memorandum does not

meet the standards prescribed by rule or is otherwise

unacceptable to the commissioner.

(c) The actuary or other financial specialist under Subsection

(b) shall:

(1) review the actuarial opinion and the basis for the opinion;

and

(2) prepare the supporting memorandum.

(d) A life insurance company is responsible for the expense of

the actuary or other financial specialist under Subsection (b).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.056. LIMITATION ON LIABILITY FOR ACTUARIAL OPINION.

(a) Except in cases of fraud or wilful misconduct or as provided

by Subsection (b), a person who certifies an opinion under

Section 425.054 is not liable for damages to a person, other than

the life insurance company covered by the opinion, for an act,

error, omission, decision, or other conduct with respect to the

person's opinion.

(b) Subsection (a) does not apply to an administrative penalty

imposed under Chapter 84.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON CERTIFYING

OPINION. A company or person that certifies an opinion under

Section 425.054 and that violates Section 425.054 or 425.055 or

rules adopted under those sections is subject to disciplinary

action under Chapter 82.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.058. VALUATION OF POLICY OR CONTRACT: GENERAL RULE.

(a) Except as otherwise provided by Section 425.059, 425.060,

425.061, 425.062, or 425.063, the minimum standard for the

valuation of an outstanding life insurance policy or annuity or

pure endowment contract issued by a life insurance company on or

after the date on which Chapter 1105 applies to policies issued

by the company, as determined under Section 1105.002(a) or (b),

is the commissioners reserve valuation method described by

Sections 425.064, 425.065, and 425.068, computed using the table

prescribed by this section and with interest at 3-1/2 percent or

at the following rate, if applicable:

(1) in the case of a policy or contract issued on or after June

14, 1973, and before August 29, 1977, other than an annuity or

pure endowment contract, four percent;

(2) in the case of a single premium life insurance policy issued

on or after August 29, 1977, 5-1/2 percent; or

(3) in the case of a life insurance policy issued on or after

August 29, 1977, other than a single premium life insurance

policy, 4-1/2 percent.

(b) Except as provided by Subsection (c), for an ordinary life

insurance policy issued on the standard basis, excluding any

disability or accidental death benefits in the policy, the

applicable table is the Commissioners 1941 Standard Ordinary

Mortality Table, if the policy was issued before the date on

which Section 1105.152 would apply to the policy, as determined

under Section 1105.152(a) or (b), or the Commissioners 1958

Standard Ordinary Mortality Table, if Section 1105.152 applies to

the policy. For a policy that is issued to insure a female risk:

(1) a modified net premium or present value for a policy issued

before August 29, 1977, may be computed according to an age not

more than three years younger than the insured's actual age; and

(2) a modified net premium or present value for a policy issued

on or after August 29, 1977, may be computed according to an age

not more than six years younger than the insured's actual age.

(c) For an ordinary life insurance policy issued on the standard

basis, excluding any disability or accidental death benefits in

the policy, and to which Subchapter B, Chapter 1105, applies, the

applicable table is:

(1) the Commissioners 1980 Standard Ordinary Mortality Table;

(2) at the insurer's option for one or more specified life

insurance plans, the Commissioners 1980 Standard Ordinary

Mortality Table with Ten-Year Select Mortality Factors; or

(3) any ordinary mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

valuation for a policy to which this subdivision applies.

(d) For an industrial life insurance policy issued on the

standard basis, excluding any disability or accidental death

benefits in the policy, the applicable table is:

(1) the 1941 Standard Industrial Mortality Table, if the policy

was issued before the date on which Section 1105.153 would apply

to the policy as determined under Section 1105.153(a) or (b); or

(2) if Section 1105.153 applies to the policy:

(A) the Commissioners 1961 Standard Industrial Mortality Table;

or

(B) any industrial mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

of valuation for a policy to which this subdivision applies.

(e) For an individual annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

policy, the applicable table is the 1937 Standard Annuity

Mortality Table, or at the insurer's option, the Annuity

Mortality Table for 1949, Ultimate, or a modification of either

table that is approved by the commissioner.

(f) For a group annuity or pure endowment contract, excluding

any disability or accidental death benefits in the policy, the

applicable table is:

(1) the Group Annuity Mortality Table for 1951;

(2) a modification of that table approved by the commissioner;

or

(3) at the insurance company's option, a table or a modification

of a table prescribed for an individual annuity or pure endowment

contract by Subsection (e).

(g) For total and permanent disability benefits in or

supplementary to an ordinary policy or contract, the applicable

tables are:

(1) for a policy or contract issued on or after January 1, 1966:

(A) the tables of Period 2 disablement rates and the 1930 to

1950 termination rates of the 1952 Disability Study of the

Society of Actuaries, with due regard to the type of benefit; or

(B) any table of disablement rates and termination rates adopted

after 1980 by the National Association of Insurance Commissioners

that are approved by commissioner rule for use in determining the

minimum standard of valuation for a policy to which this

subdivision applies;

(2) for a policy or contract issued on or after January 1, 1961,

and before January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Class (3) Disability

Table (1926); or

(3) for a policy issued before January 1, 1961, the Class (3)

Disability Table (1926).

(h) A table described by Subsection (g) must, for an active

life, be combined with a mortality table permitted for computing

the reserves for a life insurance policy.

(i) For accidental death benefits in or supplementary to a

policy, the applicable table is:

(1) for a policy issued on or after January 1, 1966:

(A) the 1959 Accidental Death Benefits Table; or

(B) any accidental death benefits table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by commissioner rule for use in determining the minimum

standard of valuation for a policy to which this subdivision

applies;

(2) for a policy issued on or after January 1, 1961, and before

January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Inter-Company Double

Indemnity Mortality Table; or

(3) for a policy issued before January 1, 1961, the

Inter-Company Double Indemnity Mortality Table.

(j) A table described by Subsection (i) must be combined with a

mortality table permitted for computing the reserves for a life

insurance policy.

(k) For group life insurance, life insurance issued on the

substandard basis and other special benefits, the applicable

table is a table approved by the commissioner.

(l)(1) Notwithstanding any other law, the minimum reserve

requirements applicable to a credit life policy issued under

Chapter 1153 before January 1, 2009, are met if, in the

aggregate, the reserves are maintained at 100 percent of the 1980

Commissioner's Standard Ordinary Mortality Table, with interest

that does not exceed 5.5 percent.

(2) For credit life policy reserves on contracts issued to be

effective on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 2001 CSO Male Composite Ultimate Mortality Table for

male and female insureds; or

(B) another CSO Mortality Table approved by the National

Association of Insurance Commissioners on or after January 1,

2009, for use on credit life policy reserves.

(3) For a single premium credit accident and health contract

issued on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 1985 Commissioners Individual Disability Table A

(85CIDA); or

(B) another Commissioner's Disability Table approved by the

National Association of Insurance Commissioners on or after

January 1, 2009, for use on credit accident and health policy

reserves.

(4) For all credit insurance contracts, if the net premium

refund liability exceeds the aggregate recorded contract reserve,

the insurer shall establish an additional reserve liability that

is equal to the excess of the net refund liability over the

contract reserve recorded. The net refund liability may include

consideration of commission, premium tax, and other expenses

recoverable.

(5) In addition to the rules required to be adopted under this

subsection, the commissioner may adopt other rules to implement

this subsection.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

399, Sec. 1, eff. June 19, 2009.

Sec. 425.059. VALUATION OF CERTAIN ANNUITIES AND PURE ENDOWMENT

CONTRACTS. (a) This section applies to an individual annuity or

pure endowment contract issued on or after January 1, 1979, and

an annuity or pure endowment purchased on or after January 1,

1979, under a group annuity or pure endowment contract. This

section also applies to an annuity or pure endowment contract

issued by an insurer after the date specified in a written

notice:

(1) that was filed with the State Board of Insurance after June

14, 1973, but before January 1, 1979; and

(2) under which the insurance company filing the notice elected

to comply before January 1, 1979, with former Section 4, Article

3.28, with respect to individual or group annuities and pure

endowment contracts as specified by the company in the notice.

(b) Except as provided by Section 425.060, 425.061, 425.062, or

425.063, the minimum standard for the valuation of an individual

or group annuity or pure endowment contract, excluding any

disability or accidental death benefits in the contract, is the

commissioners reserve valuation method described by Sections

425.064 and 425.065, computed using the table prescribed by this

section and with interest at the following interest rate, as

applicable:

(1) for an individual annuity or pure endowment contract issued

before August 29, 1977, other than an individual single premium

immediate annuity contract, four percent;

(2) for an individual single premium immediate annuity contract

issued before August 29, 1977, six percent;

(3) for an individual annuity or pure endowment contract issued

on or after August 29, 1977, other than an individual single

premium immediate annuity contract or an individual single

premium deferred annuity or pure endowment contract, 4-1/2

percent;

(4) for an individual single premium immediate annuity contract

issued on or after August 29, 1977, 7-1/2 percent;

(5) for an individual single premium deferred annuity or pure

endowment contract issued on or after August 29, 1977, 5-1/2

percent;

(6) for an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, six

percent; or

(7) for an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, 7-1/2 percent.

(c) For an individual annuity or pure endowment contract issued

before August 29, 1977, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(d) For an individual annuity or pure endowment contract issued

on or after August 29, 1977, including an individual single

premium immediate annuity contract, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table;

(2) an individual annuity mortality table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by the commissioner by rule for use in determining the

minimum standard of valuation for a specified type of contract to

which this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

(e) For an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, the

applicable table is:

(1) the 1971 Group Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(f) For an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, the applicable table is:

(1) the 1971 Group Annuity Mortality Table;

(2) a group annuity mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by the commissioner by rule for use in determining the minimum

standard of valuation for an annuity or pure endowment to which

this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.060. APPLICABILITY OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATES. The calendar year statutory valuation interest

rates as defined by Sections 425.061, 425.062, and 425.063 are

the interest rates used in determining the minimum standard for

the valuation of:

(1) a life insurance policy to which Subchapter B, Chapter 1105,

applies;

(2) an individual annuity or pure endowment contract issued on

or after January 1, 1982;

(3) an annuity or pure endowment purchased on or after January

1, 1982, under a group annuity or pure endowment contract; or

(4) the net increase, if any, in a calendar year after January

1, 1982, in amounts held under a guaranteed interest contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.061. COMPUTATION OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATE: GENERAL RULE. (a) For purposes of Subsection

(b):

(1) R1 is the lesser of R or.09;

(2) R2 is the greater of R or.09;

(3) R is the reference interest rate determined under Section

425.063; and

(4) W is the weighting factor determined under Section 425.062.

(b) The calendar year statutory valuation interest rate ("I") is

determined as provided by this section, with the results rounded

to the nearest one-quarter of one percent:

(1) for life insurance:

I =.03 + W(R1 -.03) + (W/2)(R2 -.09); and

(2) for a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option, or for an annuity or guaranteed

interest contract without a cash settlement option, or for an

annuity or guaranteed interest contract with a cash settlement

option that is valued on a change in fund basis:

I =.03 + W(R -.03).

(c) For an annuity or guaranteed interest contract with a cash

settlement option that is valued on an issue year basis, other

than an annuity or contract described by Subsection (b)(2):

(1) the formula prescribed by Subsection (b)(1) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) greater than 10 years; and

(2) the formula prescribed by Subsection (b)(2) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) of 10 years or less.

(d) Notwithstanding Subsections (b) and (c), if the calendar

year statutory valuation interest rate for a life insurance

policy issued in a calendar year as determined under Subsection

(b) or (c), as applicable, would differ from the corresponding

actual rate for similar policies issued in the preceding calendar

year by less than one-half of one percent, the calendar year

statutory valuation interest rate for the policy is the

corresponding actual rate for the preceding calendar year. For

purposes of this subsection, the calendar year statutory

valuation interest rate for a life insurance policy issued in a

calendar year is determined for 1980 using the reference interest

rate defined for 1979, and is determined for each subsequent

calendar year regardless of whether Subchapter B, Chapter 1105,

applies to the policy.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.062. WEIGHTING FACTORS. (a) This section prescribes

the weighting factors referred to in the formulas prescribed by

Section 425.061.

(b) The weighting factor for a life insurance policy is

determined by the following table:

Guarantee Duration (Years)

Weighting Factor

10 or less

.50

More than 10, but not more than 20

.45

More than 20

.35

(c) For purposes of Subsection (b), the guarantee duration is

the maximum number of years the life insurance can remain in

force on a basis guaranteed in the policy or under options to

convert to life insurance plans with premium rates or

nonforfeiture values, or both, that are guaranteed in the

original policy.

(d) The weighting factor for a single premium immediate annuity

or for annuity benefits involving life contingencies arising from

another annuity with a cash settlement option or from a

guaranteed interest contract with a cash settlement option is.80.

(e) The weighting factor for an annuity or a guaranteed interest

contract, other than an annuity or contract to which Subsection

(d) applies, is determined by the following tables:

(1) For an annuity or guaranteed interest contract that is

valued on an issue year basis:

Guarantee Duration (Years)

Weighting Factor for Plan Type

A

B

C

5 or less:

.80

.60

.50

More than 5, but not more

than 10:

.75

.60

.50

More than 10, but not more

than 20:

.65

.50

.45

More than 20:

.45

.35

.35

(2) For an annuity or guaranteed interest contract that is

valued on a change in fund basis, the factors prescribed by

Subdivision (1) increased by:

Plan Type

A B C

.15 .25 .05

(3) For an annuity or guaranteed interest contract that is

valued on an issue year basis that does not guarantee interest on

considerations received more than one year after issue or

purchase, other than an annuity or contract that does not have a

cash settlement option, or an annuity or guaranteed interest

contract that is valued on a change in fund basis that does not

guarantee interest rates on considerations received more than 12

months after the valuation date, the factors prescribed by

Subdivision (1) or determined under Subdivision (2), as

appropriate, increased by:

Plan Type

A B C

.05 .05 .05

(f) For purposes of Subsection (e):

(1) for an annuity or guaranteed interest contract with a cash

settlement option, the guarantee duration is the number of years

for which the contract guarantees interest rates greater than the

calendar year statutory valuation interest rate for life

insurance policies with guarantee duration greater than 20 years;

and

(2) for an annuity or guaranteed interest contract without a

cash settlement option, the guarantee duration is the number of

years from the issue or purchase date to the date annuity

benefits are scheduled to begin.

(g) For purposes of Subsection (e):

(1) a policy is a "Plan Type A" policy if:

(A) the policyholder may withdraw funds at any time, but only:

(i) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds;

(ii) without an adjustment described by Subparagraph (i),

provided that the withdrawal is in installments over five years

or more; or

(iii) as an immediate life annuity; or

(B) the policyholder is not permitted to withdraw funds at any

time;

(2) a policy is a "Plan Type B" policy if:

(A) before the expiration of the interest rate guarantee:

(i) the policyholder may withdraw funds, but only:

(a) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds; or

(b) without an adjustment described by Subsubparagraph (a),

provided that the withdrawal is in installments over five years

or more; or

(ii) the policyholder is not permitted to withdraw funds; and

(B) on the expiration of the interest rate guarantee, the

policyholder may withdraw funds in a single sum or in

installments over less than five years, without an adjustment

described by Paragraph (A)(i); and

(3) a policy is a "Plan Type C" policy if the policyholder may

withdraw funds before the expiration of the interest rate

guarantee in a single sum or in installments over less than five

years:

(A) without an adjustment to reflect changes in interest rates

or asset values after the insurance company receives the funds;

or

(B) subject only to a fixed surrender charge that is a

percentage of the fund stipulated in the contract.

(h) An insurance company may elect to value an annuity or

guaranteed interest contract with a cash settlement option on an

issue year basis or on a change in fund basis. A company must

value an annuity or guaranteed interest contract without a cash

settlement option on an issue year basis.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.063. REFERENCE INTEREST RATE. (a) In this section,

"Moody's Corporate Bond Yield Average" means the Moody's

Corporate Bond Yield Average--Monthly Average Corporates, as

published by Moody's Investors Service, Inc.

(b) Except as provided by Subsection (g), the reference interest

rate for purposes of Section 425.061 is determined as provided by

Subsections (c)-(f).

(c) The reference interest rate for a life insurance policy is

the lesser of the average over a period of 36 months or the

average over a period of 12 months, ending on June 30 of the

calendar year preceding the year of issue, of the Moody's

Corporate Bond Yield Average.

(d) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of issue or

year of purchase, of the Moody's Corporate Bond Yield Average

for:

(1) a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option;

(2) an annuity or guaranteed interest contract with a cash

settlement option, other than an annuity or contract described by

Subdivision (1), that is valued on an issue year basis and has a

guarantee duration as determined under Section 425.062(f) of 10

years or less; or

(3) an annuity or guaranteed interest contract without a cash

settlement option.

(e) The reference interest rate is the lesser of the average

over a period of 36 months or the average over a period of 12

months, ending on June 30 of the calendar year of issue or

purchase, of the Moody's Corporate Bond Yield Average for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on an issue year basis and has a guarantee

duration as determined under Section 425.062(f) greater than 10

years.

(f) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of the change

in the fund, of the Moody's Corporate Bond Yield Average, for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on a change in fund basis.

(g) At least annually, the commissioner shall:

(1) determine whether the reference interest rates prescribed by

Subsections (c), (d), (e), and (f) continue to be a reasonably

accurate approximation of the average yield achieved from

purchases in the United States in publicly quoted markets of

investment grade fixed term and fixed interest corporate

obligations for the periods referenced in Subsection (c), (d),

(e), or (f), as applicable; and

(2) if the commissioner determines that a reference interest

rate prescribed by Subsection (c), (d), (e), or (f) is not a

reasonably accurate approximation of the average yield described

by Subdivision (1), adopt rules in the manner prescribed by

Chapters 2001 and 2002, Government Code, to prescribe an

alternative method of determining a reference interest rate, as

appropriate, that is a reasonably accurate approximation of that

average yield.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD. (a)

Except as otherwise provided by Sections 425.065 and 425.068 and

subject to Subsection (b), for the life insurance and endowment

benefits of a policy that provides for a uniform amount of

insurance and that requires the payment of uniform premiums, the

reserve according to the commissioners reserve valuation method

is the difference, if greater than zero, of the present value on

the date of valuation of those future guaranteed benefits, minus

the present value on that date of any future modified net

premiums for a policy described by this subsection. The modified

net premiums for a policy described by this subsection are a

uniform percentage of the respective contract premiums for those

benefits, so that the present value on the policy's issue date of

all the modified net premiums is equal to the sum of:

(1) the present value on that date of those benefits; and

(2) the difference, if greater than zero, between:

(A) a net level annual premium equal to the present value on the

policy's issue date of the benefits provided for after the first

policy year, divided by the present value on the policy's issue

date of an annuity of one per year, payable on the first policy

anniversary and on each subsequent policy anniversary on which a

premium becomes due; and

(B) a net one-year term premium for the benefits provided for in

the first policy year.

(b) A net level annual premium under Subsection (a)(2)(A) may

not exceed the net level annual premium on the 19-year premium

whole life plan for insurance of the same amount at an age that

is one year older than the age on the policy's issue date.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the contract

premium for the first policy year exceeds the contract premium

for the second year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For purposes of this

subsection, the "assumed ending date" is the first policy

anniversary on which the sum of any endowment benefit and any

cash surrender value available on that date is greater than the

excess premium. The reserve according to the commissioners

reserve valuation method for a policy to which this subsection

applies as of any policy anniversary occurring on or before the

assumed ending date is, except as otherwise provided by Section

425.068, the greater of:

(1) the reserve as of the policy anniversary computed as

prescribed by Subsection (a); or

(2) the reserve as of the policy anniversary computed as

prescribed by Subsection (a) but with:

(A) the value prescribed by Subsection (a)(2)(A) reduced by 15

percent of the amount of the excess first-year premium;

(B) each present value of a benefit or premium determined

without reference to a premium or benefit provided under the

policy after the assumed ending date;

(C) the policy assumed to mature on the assumed ending date as

an endowment; and

(D) the cash surrender value provided on the assumed ending date

considered to be an endowment benefit.

(d) In making the comparison required by Subsection (c), the

mortality tables and interest bases described by Sections

425.058, 425.061, 425.062, and 425.063 must be used.

(e) Reserves according to the commissioners reserve valuation

method for the following policies, contracts, and benefits must

be computed by a method consistent with the principles of this

section:

(1) a life insurance policy that provides for a varying amount

of insurance or that requires the payment of varying premiums;

(2) a group annuity or pure endowment contract purchased under a

retirement or deferred compensation plan established or

maintained by an employer, including a partnership or sole

proprietorship, by an employee organization, or by both, other

than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments;

(3) disability or accidental death benefits in a policy or

contract; and

(4) all other benefits, other than life insurance and endowment

benefits in a life insurance policy or benefits provided by any

other annuity or pure endowment contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION METHOD.

(a) This section applies to an annuity or pure endowment

contract other than a group annuity or pure endowment contract

purchased under a retirement or deferred compensation plan

established or maintained by an employer, including a partnership

or sole proprietorship, by an employee organization, or by both,

other than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments.

(b) Reserves according to the commissioners annuity reserve

method for benefits under an annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

contract, are the greatest of the respective excesses of the

present values on the valuation date of the future guaranteed

benefits under the contract at the end of each respective

contract year, including guaranteed nonforfeiture benefits, minus

the present value on the valuation date of any future valuation

considerations derived from future gross considerations that are

required by the contract terms and that become payable before the

end of the respective contract year. The future guaranteed

benefits must be determined by using the mortality table, if any,

and the interest rate or rates specified in the contract for

determining guaranteed benefits. The valuation considerations

are the portions of the respective gross considerations applied

under the contract terms to determine nonforfeiture values.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.066. MINIMUM AGGREGATE RESERVES. (a) An insurance

company's aggregate reserves for all life insurance policies,

excluding disability or accidental death benefits, issued by the

company on or after the date on which Chapter 1105 applies to

policies issued by the company, as determined under Section

1105.002(a) or (b), may not be less than the aggregate reserves

computed in accordance with the methods prescribed by Sections

425.064, 425.065, 425.068, and 425.069 and the mortality table or

tables and interest rate or rates used in computing nonforfeiture

benefits for those policies.

(b) The aggregate reserves of an insurance company to which this

section applies for all policies, contracts, and benefits may not

be less than the aggregate reserves determined to be necessary to

issue a favorable opinion under Section 425.054.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.067. OPTIONAL RESERVE COMPUTATIONS. (a) Reserves for

a policy or contract issued by a life insurance company before

the date on which Chapter 1105 would apply to the policy or

contract, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for all those policies and

contracts than the minimum reserves required by the laws

applicable to those policies and contracts immediately before

that date.

(b) Reserves for any category, as established by the

commissioner, of policies, contracts, or benefits issued by a

life insurance company on or after the date on which Chapter 1105

applies to policies, contracts, or benefits issued by the

company, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for the category than the

minimum aggregate reserves computed according to the standard

provided by this subchapter, but the interest rate or rates used

for those policies and contracts, other than annuity and pure

endowment contracts, may not be higher than the corresponding

interest rate or rates used in computing any nonforfeiture

benefits provided in those policies or contracts.

(c) An insurance company that has adopted a standard of

valuation that produces greater minimum aggregate reserves than

the aggregate reserves computed according to the standard

provided by this subchapter may, with the commissioner's

approval, adopt any lower standard of valuation that produces

aggregate reserves at least equal to the minimum aggregate

reserves computed according to the standard provided by this

subchapter.

(d) For purposes of this section, the holding of additional

reserves previously determined to be necessary to issue a

favorable opinion under Section 425.054 may not be considered to

be the adoption of a higher standard of valuation.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.068. RESERVE COMPUTATION: GROSS PREMIUM CHARGED LESS

THAN VALUATION NET PREMIUM. (a) If in a contract year the gross

premium charged by a life insurance company on a policy or

contract is less than the valuation net premium for the policy or

contract computed by the method used in computing the reserve on

the policy or contract but using the minimum valuation mortality

standards and interest rate, the minimum reserve required for the

policy or contract is the greater of:

(1) the reserve computed according to the mortality table,

interest rate, and method actually used for the policy or

contract; or

(2) the reserve computed by the method actually used for the

policy or contract but using the minimum valuation mortality

standards and interest rate and replacing the valuation net

premium with the actual gross premium in each contract year for

which the valuation net premium exceeds the actual gross premium.

(b) The minimum valuation mortality standards and interest rate

under Subsection (a) are the standards and rate provided by

Sections 425.058, 425.061, 425.062, and 425.063.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the gross premium

for the first policy year exceeds the gross premium for the

second policy year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For a policy to which

this subsection applies, Subsections (a) and (b) shall be applied

as if the method actually used in computing the reserve for the

policy were the method described in Section 425.064, ignoring

Section 425.064(c). The minimum reserve at each policy

anniversary is the greater of:

(1) the minimum reserve computed in accordance with Section

425.064, including Section 425.064(c); or

(2) the minimum reserve computed in accordance with this

section.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.069. RESERVE COMPUTATION: INDETERMINATE PREMIUM PLANS

AND CERTAIN OTHER PLANS. (a) For a life insurance plan that

provides for future premium determination, the amounts of which

are to be determined by the insurance company based on estimates

of future experience, or a life insurance plan or annuity for

which the minimum reserves cannot be determined by the methods

described by Sections 425.064, 425.065, and 425.068, the reserves

held must:

(1) be appropriate in relation to the benefits and the pattern

of premiums for the plan; and

(2) be computed by a method that is consistent with the

principles of this subchapter, as determined by commissioner

rule.

(b) Notwithstanding any other provision of state law, the

commissioner must affirmatively approve a policy, contract, or

certificate that provides life insurance under a plan described

by Subsection (a) before the policy, contract, or certificate may

be marketed, issued, delivered, or used in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.070. COMPUTATION OF RESERVE FOR CERTAIN POLICIES BY

CALENDAR YEAR OF ISSUE. (a) The reserve for a policy or

contract issued by a life insurance company before the date on

which Chapter 1105 would apply to the policy or contract, as

determined under Section 1105.002(a) or (b), must be computed in

accordance with the terms of the policy or contract and this

section.

(b) For a policy issued before January 1, 1910, the computation

must be based on the American Experience Table of Mortality and

4-1/2 percent annual interest.

(c) For a policy issued on or after January 1, 1910, and before

January 1, 1948, the computation must be based on:

(1) the Actuaries or Combined Experience Table of Mortality and

four percent annual interest, if the interest rate guaranteed in

the policy is four percent annually or higher; or

(2) the American Experience Table of Mortality and the lower

rate specified in the policy, if the policy was issued on a

reserve basis of an interest rate lower than four percent

annually.

(d) For a policy issued on or after January 1, 1948, the

computation must be based on the mortality table and interest

rate specified in the policy, provided that:

(1) the specified interest rate may not exceed 3-1/2 percent

annually;

(2) the specified table for a policy, other than an industrial

life insurance policy, is the American Experience Table of

Mortality, the American Men Ultimate Table of Mortality, the

Commissioners 1941 Standard Ordinary Mortality Table, or, for a

policy issued after December 31, 1959, the Commissioners 1958

Standard Ordinary Mortality Table; and

(3) the specified table for an industrial life insurance policy

is the American Experience Table of Mortality, the Standard

Industrial Mortality Table, the Sub-Standard Industrial Mortality

Table, the 1941 Standard Industrial Mortality Table, or the 1941

Sub-Standard Industrial Mortality Table, or, for a policy issued

after December 31, 1963, the Commissioners 1961 Standard

Industrial Mortality Table.

(e) For a policy, other than an industrial life insurance

policy, issued after December 31, 1959, to insure a female risk,

the computation must be based on any mortality table and interest

rate permitted under Subsection (d) and specified in the policy

but may, at the insurance company's option, be based on an age

not more than three years younger than the insured's actual age.

(f) Except as otherwise provided by Section 425.059 for coverage

purchased under a group annuity or pure endowment contract to

which that section applies, for a policy issued on a substandard

risk, an annuity contract, or a contract or policy for disability

benefits or accidental death benefits, the computation must be

based on the standards and methods adopted by the insurance

company and approved by the commissioner.

(g) For a group insurance policy issued before May 15, 1947, the

computation must be based on the American Men Ultimate Table of

Mortality with interest at the rate of three percent or 3-1/2

percent annually as provided by the policy. The reserve value of

a group insurance policy issued on or after May 15, 1947, and

before January 1, 1961, must be computed on the basis of either

the American Men Ultimate Table of Mortality or the Commissioners

1941 Standard Ordinary Mortality Table with interest at a rate

not to exceed 3-1/2 percent annually as provided by the policy.

For a group insurance policy issued on or after January 1, 1961,

the computation must be based on an interest rate not to exceed

3-1/2 percent annually and the mortality table adopted by the

insurance company with the commissioner's approval.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.071. LAPSE RATES IN MINIMUM STANDARD OF VALUATION. (a)

The minimum standard of valuation under this subchapter may

include lapse rates in the calculation of reserves for a

secondary guarantee in universal life contracts issued after

December 31, 2006.

(b) For purposes of this section, a secondary guarantee refers

to specified conditions in a universal life contract that, if

satisfied, provide for death benefits to remain in effect

regardless of the accumulation value in the contract.

(c) Lapse rates authorized by this section may not exceed two

percent per year.

(d) The commissioner is authorized to adopt rules to implement

this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

681, Sec. 1, eff. June 15, 2007.

SUBCHAPTER C. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL

STOCK LIFE, HEALTH, AND ACCIDENT INSURERS

Sec. 425.101. DEFINITIONS. In this subchapter:

(1) "Assets" means the statutory accounting admitted assets of

an insurance company. The term includes lawful money of the

United States, whether in the form of cash or demand deposits in

solvent banks, savings and loan associations, credit unions, and

branches of those entities, organized under the laws of the

United States or a state of the United States, if held in

accordance with the laws or regulations applicable to those

entities. The term does not include the company's separate

accounts that are subject to Chapter 1152.

(2) "Securities valuation office" means the Securities Valuation

Office of the National Association of Insurance Commissioners.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.102. INAPPLICABILITY OF CERTAIN LAW. The definition of

"state" assigned by Section 311.005, Government Code, does not

apply to this s

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-425-reserves-and-investments-for-life-insurance-companies-and-related-entities

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE INSURANCE

COMPANIES AND RELATED ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 425.001. SECURITIES IN AMOUNT OF RESERVES REQUIRED. The

commissioner, after determining the amount of the reserves

required on all of a life insurance company's policies in force,

shall ensure that the company has at least that amount in

securities of the class and character required by the law of this

state, after all debts and claims against the company and the

minimum capital required by Chapter 841 or 982, as applicable,

have been provided for.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.002. CERTAIN INSURERS: DEPOSIT OF SECURITIES, MONEY,

OR PROPERTY IN AMOUNT OF LEGAL RESERVES. (a) Except as provided

by Subsection (b), a life insurance company incorporated under

the laws of this state may deposit with the department, for the

common benefit of all the holders of the company's policies and

annuity contracts and in an amount equal to the legal reserve on

all the company's outstanding policies and contracts in force,

securities of the character in which the law of this state

permits the company to invest, or against which the law of this

state permits the company to loan, the company's capital,

surplus, or reserves.

(b) A life insurance company may not make a new deposit of

securities after August 28, 1961, except to the extent expressly

required by Section 425.003.

(c) For purposes of this section, securities may be physically

delivered to the department without being accompanied by a

written transfer of a lien securing the securities. A life

insurance company may deposit registered or unregistered United

States government securities under this section.

(d) A life insurance company may deposit lawful money of the

United States instead of all or part of the securities described

by Subsection (a). A company may, for the purposes of the

deposit described by Subsection (a), convey to the department in

trust the real property in which any part of the company's

reserve is lawfully invested. If the company conveys the

property, the department shall hold the title to the property in

trust until the company deposits with the department securities

to take the place of the property, at which time the department

shall reconvey the property to the company.

(e) The department may have any securities or real property

appraised and valued before the securities or real property may

be deposited with or conveyed to the department under this

section. The life insurance company shall pay the reasonable

expense of the appraisal or valuation.

(f) For purposes of state, county, and municipal taxation, the

situs of the deposited securities is the municipality and county

in which the life insurance company's charter requires the

principal business office of the company making the deposit to be

located.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.003. CERTAIN INSURERS: REQUIRED DEPOSITS OF

SECURITIES; ADDITIONAL DEPOSITS AND WITHDRAWALS. (a) A life

insurance company that, before August 28, 1961, issued or assumed

the obligations of policies or annuity contracts that were

registered as provided by Article 3.18, as that article existed

before August 28, 1961, shall have on deposit with the department

securities of the character described by Section 425.002 in an

amount equal to or greater than the aggregate net value of the

company's outstanding registered policies and annuity contracts

in force.

(b) To comply with Subsection (a), a life insurance company

shall periodically make additional deposits of securities in

amounts of not less than $5,000. A company whose deposits exceed

the aggregate net value of the company's outstanding registered

policies and annuity contracts in force may periodically withdraw

the excess in amounts of not less than $5,000. A company may at

any time withdraw any of the company's deposited securities by

depositing in their place securities of equal value to the

securities replaced and of a character authorized by this

chapter.

(c) A life insurance company may at any time collect the

interest, rents, and other income from the company's securities

on deposit.

(d) The net value of each policy or annuity contract subject to

this section is the policy's or contract's value according to the

standard prescribed by state law when the first premium on the

policy or contract is paid, minus the amount of any liens the

life insurance company has against the policy or contract not to

exceed the policy's or contract's value.

(e) The department shall hold a life insurance company's

securities on deposit with the department under this section in

trust for the benefit of all holders of the company's outstanding

policies and annuity contracts that were registered as provided

by Article 3.18, as that article existed before August 28, 1961.

(f) A life insurance company that has outstanding registered

policies or annuity contracts in force may not reinsure all or

any part of that outstanding business, other than in a company

authorized to engage in business in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.004. RECORDS OF SECURITIES DEPOSITED WITH DEPARTMENT;

REPORT OF VALUE. Each life insurance company that is required by

Section 425.003 to have securities on deposit with the department

shall:

(1) keep records of:

(A) all of the company's outstanding registered policies and

annuity contracts in force; and

(B) the net value of those policies and contracts; and

(2) not later than the 15th day after the last day of each

calendar month, file with the department a report stating whether

the value of the company's securities on deposit is equal to or

greater than the aggregate net value of the company's registered

policies and annuity contracts outstanding and in force at the

end of the preceding calendar month.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.005. DEPARTMENT DUTIES REGARDING DEPOSITED SECURITIES;

INSURANCE COMPANY ACCESS. (a) The department shall keep

securities deposited by a life insurance company under Sections

425.002 and 425.003 in a secure safe-deposit, fireproof box or

vault in the municipality of, or a municipality near the location

of, the company's home office.

(b) The life insurance company's officers may, in accordance

with reasonable rules adopted by the commissioner, have access to

the securities to detach interest coupons, credit payment, and

exchange securities as provided by Section 425.003.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.006. ADDITIONAL RESERVES REQUIRED: SUBSTANDARD OR

EXTRA HAZARDOUS POLICIES. (a) If a life insurance company

engaged in business under the laws of this state has written or

assumed risks that are substandard or extra hazardous and has

charged more for the policies under which those risks are written

or assumed than the company's published premium rates, the

commissioner shall, in valuing those policies, compute and charge

extra reserves on the policies as necessary because of the extra

hazard assumed and the extra premium charged.

(b) If the commissioner determines, after notice and hearing,

that a particular risk or class of risks is substandard or extra

hazardous, a life insurance company may not, after the

determination is made, write or assume the particular risk or

class of risks unless the company charges an extra premium as

necessary because of the extra hazard assumed.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.007. SUBSCRIPTION TO OR UNDERWRITING PURCHASE OR SALE

OF SECURITIES OR PROPERTY PROHIBITED; CONTROL OF DISPOSITION OF

PROPERTY. (a) A life insurance company organized under the laws

of this state may not:

(1) subscribe to, or participate in, any underwriting of the

purchase or sale of securities or property;

(2) enter into a transaction described by Subdivision (1) for a

purpose described by Subdivision (1);

(3) sell on account of the company jointly with any other

person, firm, or corporation; or

(4) enter into any agreement to withhold from sale any of the

company's property.

(b) The disposition of the life insurance company's property

must be at all times within the control of the company's board of

directors.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.008. AUTHORIZED INVESTMENTS FOR FOREIGN COMPANIES. A

foreign company shall invest the company's assets in:

(1) securities or property of the same classes in which the law

of this state permits a domestic insurance company to invest; or

(2) securities permitted by other law of this state and approved

by the commissioner as being of substantially the same grade as

securities or property in which a domestic insurance company is

permitted to invest.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.009. STUDENT LOANS. A foreign or domestic life

insurance company may make loans to a student enrolled in an

institution of higher education if the principal amount of the

loan is insured by:

(1) the federal government under the Higher Education Act of

1965 (Pub. L. No. 89-329), as amended; or

(2) the Texas Guaranteed Student Loan Corporation under Chapter

57, Education Code.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. STANDARD VALUATION LAW

Sec. 425.051. SHORT TITLE. This subchapter may be cited as the

Standard Valuation Law.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.052. DEFINITIONS. (a) In this subchapter, "reserves"

means reserve liabilities.

(b) As used in this subchapter:

(1) an "issue year basis" of valuation means a valuation basis

under which the interest rate used to determine the minimum

valuation standard for the entire duration of the annuity or

guaranteed interest contract is the calendar year valuation

interest rate for the year of issue or year of purchase of the

annuity or guaranteed interest contract; and

(2) a "change in fund basis" of valuation means a valuation

basis under which the interest rate used to determine the minimum

valuation standard applicable to each change in the fund held

under the annuity or guaranteed interest contract is the calendar

year valuation interest rate for the year of the change in the

fund.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.053. ANNUAL VALUATION OF RESERVES. (a) The department

shall annually value or have valued the reserves for all

outstanding life insurance policies and annuity and pure

endowment contracts of each life insurance company engaged in

business in this state. The department may certify the amount of

those reserves, specifying the mortality table or tables, rate or

rates of interest, and methods, including the net level premium

method or another method, used in computing those reserves.

(b) In computing reserves under Subsection (a), the department

may use group methods and approximate averages for fractions of a

year or otherwise.

(c) Instead of valuing the reserves as required by Subsection

(a) for a foreign or alien company, the department may accept any

valuation made by or for the insurance supervisory official of

another state or jurisdiction if:

(1) the valuation complies with the minimum standard provided by

this subchapter; and

(2) the official accepts as sufficient and valid for all legal

purposes a certificate of valuation made by the department that

states the valuation was made in a specified manner according to

which the aggregate reserves would be at least as large as they

would be if computed in the manner prescribed by the law of that

state or jurisdiction.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.054. ACTUARIAL OPINION REQUIRED. (a) For purposes of

this section, "qualified actuary" means:

(1) a qualified actuary, as that term is defined by Section

802.002; or

(2) a person who, before September 1, 1993, satisfied the

requirements of the former State Board of Insurance to submit an

opinion under former Section 2A(a)(1), Article 3.28.

(b) In conjunction with the annual statement and in addition to

other information required by this subchapter, each life

insurance company engaged in business in this state shall

annually submit to the department the opinion of a qualified

actuary as to whether the reserves and related actuarial items

held in support of the policies and contracts specified by

commissioner rule:

(1) are computed appropriately;

(2) are based on assumptions that satisfy contractual

provisions;

(3) are consistent with prior reported amounts; and

(4) comply with applicable laws of this state.

(c) The commissioner by rule shall specify the requirements of

an actuarial opinion under Subsection (b), including any matters

considered necessary to the opinion's scope.

(d) The opinion required by this section must:

(1) apply to all of the life insurance company's business in

force, including individual and group health insurance plans; and

(2) be in the form and contain the substance specified by

commissioner rule and be acceptable to the commissioner.

(e) The commissioner may accept as an opinion required to be

submitted under Subsection (b) by a foreign or alien company the

opinion filed by that company with the insurance supervisory

official of another state if the commissioner determines that the

opinion filed in the other state reasonably meets the

requirements applicable to a company domiciled in this state.

(f) Except as exempted by or as otherwise provided by

commissioner rule, a life insurance company shall include in the

opinion required by Subsection (b) an opinion that states whether

the reserves and related actuarial items held in support of the

policies and contracts specified by commissioner rule adequately

provide for the company's obligations under the policies and

contracts, including the benefits under and expenses associated

with the policies and contracts.

(g) In making the opinion under Subsection (f), the reserves and

related actuarial items are considered in light of the assets

held by the life insurance company with respect to the reserves

and related actuarial items, including:

(1) the investment earnings on the assets; and

(2) the considerations anticipated to be received and retained

under the policies and contracts.

(h) The person who certifies the opinion required by Subsection

(b) must make the opinion required by Subsection (f).

(i) Rules adopted under this section may exempt life insurance

companies that would be exempt from the requirements of this

section under the most recently adopted regulation by the

National Association of Insurance Commissioners entitled "Model

Actuarial Opinion and Memorandum Regulation," or a successor to

that regulation, if the commissioner considers the exemption

appropriate.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.055. SUPPORTING MEMORANDUM FOR ACTUARIAL OPINION. (a)

A memorandum that, in form and substance, complies with the

commissioner's rules shall be prepared to support each actuarial

opinion required by Section 425.054.

(b) The commissioner may engage an actuary or other financial

specialist as defined by commissioner rule if:

(1) a life insurance company does not provide a supporting

memorandum at the request of the commissioner in the time

specified by rule; or

(2) the company provides a supporting memorandum, but the

commissioner determines that the supporting memorandum does not

meet the standards prescribed by rule or is otherwise

unacceptable to the commissioner.

(c) The actuary or other financial specialist under Subsection

(b) shall:

(1) review the actuarial opinion and the basis for the opinion;

and

(2) prepare the supporting memorandum.

(d) A life insurance company is responsible for the expense of

the actuary or other financial specialist under Subsection (b).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.056. LIMITATION ON LIABILITY FOR ACTUARIAL OPINION.

(a) Except in cases of fraud or wilful misconduct or as provided

by Subsection (b), a person who certifies an opinion under

Section 425.054 is not liable for damages to a person, other than

the life insurance company covered by the opinion, for an act,

error, omission, decision, or other conduct with respect to the

person's opinion.

(b) Subsection (a) does not apply to an administrative penalty

imposed under Chapter 84.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON CERTIFYING

OPINION. A company or person that certifies an opinion under

Section 425.054 and that violates Section 425.054 or 425.055 or

rules adopted under those sections is subject to disciplinary

action under Chapter 82.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.058. VALUATION OF POLICY OR CONTRACT: GENERAL RULE.

(a) Except as otherwise provided by Section 425.059, 425.060,

425.061, 425.062, or 425.063, the minimum standard for the

valuation of an outstanding life insurance policy or annuity or

pure endowment contract issued by a life insurance company on or

after the date on which Chapter 1105 applies to policies issued

by the company, as determined under Section 1105.002(a) or (b),

is the commissioners reserve valuation method described by

Sections 425.064, 425.065, and 425.068, computed using the table

prescribed by this section and with interest at 3-1/2 percent or

at the following rate, if applicable:

(1) in the case of a policy or contract issued on or after June

14, 1973, and before August 29, 1977, other than an annuity or

pure endowment contract, four percent;

(2) in the case of a single premium life insurance policy issued

on or after August 29, 1977, 5-1/2 percent; or

(3) in the case of a life insurance policy issued on or after

August 29, 1977, other than a single premium life insurance

policy, 4-1/2 percent.

(b) Except as provided by Subsection (c), for an ordinary life

insurance policy issued on the standard basis, excluding any

disability or accidental death benefits in the policy, the

applicable table is the Commissioners 1941 Standard Ordinary

Mortality Table, if the policy was issued before the date on

which Section 1105.152 would apply to the policy, as determined

under Section 1105.152(a) or (b), or the Commissioners 1958

Standard Ordinary Mortality Table, if Section 1105.152 applies to

the policy. For a policy that is issued to insure a female risk:

(1) a modified net premium or present value for a policy issued

before August 29, 1977, may be computed according to an age not

more than three years younger than the insured's actual age; and

(2) a modified net premium or present value for a policy issued

on or after August 29, 1977, may be computed according to an age

not more than six years younger than the insured's actual age.

(c) For an ordinary life insurance policy issued on the standard

basis, excluding any disability or accidental death benefits in

the policy, and to which Subchapter B, Chapter 1105, applies, the

applicable table is:

(1) the Commissioners 1980 Standard Ordinary Mortality Table;

(2) at the insurer's option for one or more specified life

insurance plans, the Commissioners 1980 Standard Ordinary

Mortality Table with Ten-Year Select Mortality Factors; or

(3) any ordinary mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

valuation for a policy to which this subdivision applies.

(d) For an industrial life insurance policy issued on the

standard basis, excluding any disability or accidental death

benefits in the policy, the applicable table is:

(1) the 1941 Standard Industrial Mortality Table, if the policy

was issued before the date on which Section 1105.153 would apply

to the policy as determined under Section 1105.153(a) or (b); or

(2) if Section 1105.153 applies to the policy:

(A) the Commissioners 1961 Standard Industrial Mortality Table;

or

(B) any industrial mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

of valuation for a policy to which this subdivision applies.

(e) For an individual annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

policy, the applicable table is the 1937 Standard Annuity

Mortality Table, or at the insurer's option, the Annuity

Mortality Table for 1949, Ultimate, or a modification of either

table that is approved by the commissioner.

(f) For a group annuity or pure endowment contract, excluding

any disability or accidental death benefits in the policy, the

applicable table is:

(1) the Group Annuity Mortality Table for 1951;

(2) a modification of that table approved by the commissioner;

or

(3) at the insurance company's option, a table or a modification

of a table prescribed for an individual annuity or pure endowment

contract by Subsection (e).

(g) For total and permanent disability benefits in or

supplementary to an ordinary policy or contract, the applicable

tables are:

(1) for a policy or contract issued on or after January 1, 1966:

(A) the tables of Period 2 disablement rates and the 1930 to

1950 termination rates of the 1952 Disability Study of the

Society of Actuaries, with due regard to the type of benefit; or

(B) any table of disablement rates and termination rates adopted

after 1980 by the National Association of Insurance Commissioners

that are approved by commissioner rule for use in determining the

minimum standard of valuation for a policy to which this

subdivision applies;

(2) for a policy or contract issued on or after January 1, 1961,

and before January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Class (3) Disability

Table (1926); or

(3) for a policy issued before January 1, 1961, the Class (3)

Disability Table (1926).

(h) A table described by Subsection (g) must, for an active

life, be combined with a mortality table permitted for computing

the reserves for a life insurance policy.

(i) For accidental death benefits in or supplementary to a

policy, the applicable table is:

(1) for a policy issued on or after January 1, 1966:

(A) the 1959 Accidental Death Benefits Table; or

(B) any accidental death benefits table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by commissioner rule for use in determining the minimum

standard of valuation for a policy to which this subdivision

applies;

(2) for a policy issued on or after January 1, 1961, and before

January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Inter-Company Double

Indemnity Mortality Table; or

(3) for a policy issued before January 1, 1961, the

Inter-Company Double Indemnity Mortality Table.

(j) A table described by Subsection (i) must be combined with a

mortality table permitted for computing the reserves for a life

insurance policy.

(k) For group life insurance, life insurance issued on the

substandard basis and other special benefits, the applicable

table is a table approved by the commissioner.

(l)(1) Notwithstanding any other law, the minimum reserve

requirements applicable to a credit life policy issued under

Chapter 1153 before January 1, 2009, are met if, in the

aggregate, the reserves are maintained at 100 percent of the 1980

Commissioner's Standard Ordinary Mortality Table, with interest

that does not exceed 5.5 percent.

(2) For credit life policy reserves on contracts issued to be

effective on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 2001 CSO Male Composite Ultimate Mortality Table for

male and female insureds; or

(B) another CSO Mortality Table approved by the National

Association of Insurance Commissioners on or after January 1,

2009, for use on credit life policy reserves.

(3) For a single premium credit accident and health contract

issued on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 1985 Commissioners Individual Disability Table A

(85CIDA); or

(B) another Commissioner's Disability Table approved by the

National Association of Insurance Commissioners on or after

January 1, 2009, for use on credit accident and health policy

reserves.

(4) For all credit insurance contracts, if the net premium

refund liability exceeds the aggregate recorded contract reserve,

the insurer shall establish an additional reserve liability that

is equal to the excess of the net refund liability over the

contract reserve recorded. The net refund liability may include

consideration of commission, premium tax, and other expenses

recoverable.

(5) In addition to the rules required to be adopted under this

subsection, the commissioner may adopt other rules to implement

this subsection.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

399, Sec. 1, eff. June 19, 2009.

Sec. 425.059. VALUATION OF CERTAIN ANNUITIES AND PURE ENDOWMENT

CONTRACTS. (a) This section applies to an individual annuity or

pure endowment contract issued on or after January 1, 1979, and

an annuity or pure endowment purchased on or after January 1,

1979, under a group annuity or pure endowment contract. This

section also applies to an annuity or pure endowment contract

issued by an insurer after the date specified in a written

notice:

(1) that was filed with the State Board of Insurance after June

14, 1973, but before January 1, 1979; and

(2) under which the insurance company filing the notice elected

to comply before January 1, 1979, with former Section 4, Article

3.28, with respect to individual or group annuities and pure

endowment contracts as specified by the company in the notice.

(b) Except as provided by Section 425.060, 425.061, 425.062, or

425.063, the minimum standard for the valuation of an individual

or group annuity or pure endowment contract, excluding any

disability or accidental death benefits in the contract, is the

commissioners reserve valuation method described by Sections

425.064 and 425.065, computed using the table prescribed by this

section and with interest at the following interest rate, as

applicable:

(1) for an individual annuity or pure endowment contract issued

before August 29, 1977, other than an individual single premium

immediate annuity contract, four percent;

(2) for an individual single premium immediate annuity contract

issued before August 29, 1977, six percent;

(3) for an individual annuity or pure endowment contract issued

on or after August 29, 1977, other than an individual single

premium immediate annuity contract or an individual single

premium deferred annuity or pure endowment contract, 4-1/2

percent;

(4) for an individual single premium immediate annuity contract

issued on or after August 29, 1977, 7-1/2 percent;

(5) for an individual single premium deferred annuity or pure

endowment contract issued on or after August 29, 1977, 5-1/2

percent;

(6) for an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, six

percent; or

(7) for an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, 7-1/2 percent.

(c) For an individual annuity or pure endowment contract issued

before August 29, 1977, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(d) For an individual annuity or pure endowment contract issued

on or after August 29, 1977, including an individual single

premium immediate annuity contract, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table;

(2) an individual annuity mortality table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by the commissioner by rule for use in determining the

minimum standard of valuation for a specified type of contract to

which this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

(e) For an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, the

applicable table is:

(1) the 1971 Group Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(f) For an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, the applicable table is:

(1) the 1971 Group Annuity Mortality Table;

(2) a group annuity mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by the commissioner by rule for use in determining the minimum

standard of valuation for an annuity or pure endowment to which

this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.060. APPLICABILITY OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATES. The calendar year statutory valuation interest

rates as defined by Sections 425.061, 425.062, and 425.063 are

the interest rates used in determining the minimum standard for

the valuation of:

(1) a life insurance policy to which Subchapter B, Chapter 1105,

applies;

(2) an individual annuity or pure endowment contract issued on

or after January 1, 1982;

(3) an annuity or pure endowment purchased on or after January

1, 1982, under a group annuity or pure endowment contract; or

(4) the net increase, if any, in a calendar year after January

1, 1982, in amounts held under a guaranteed interest contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.061. COMPUTATION OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATE: GENERAL RULE. (a) For purposes of Subsection

(b):

(1) R1 is the lesser of R or.09;

(2) R2 is the greater of R or.09;

(3) R is the reference interest rate determined under Section

425.063; and

(4) W is the weighting factor determined under Section 425.062.

(b) The calendar year statutory valuation interest rate ("I") is

determined as provided by this section, with the results rounded

to the nearest one-quarter of one percent:

(1) for life insurance:

I =.03 + W(R1 -.03) + (W/2)(R2 -.09); and

(2) for a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option, or for an annuity or guaranteed

interest contract without a cash settlement option, or for an

annuity or guaranteed interest contract with a cash settlement

option that is valued on a change in fund basis:

I =.03 + W(R -.03).

(c) For an annuity or guaranteed interest contract with a cash

settlement option that is valued on an issue year basis, other

than an annuity or contract described by Subsection (b)(2):

(1) the formula prescribed by Subsection (b)(1) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) greater than 10 years; and

(2) the formula prescribed by Subsection (b)(2) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) of 10 years or less.

(d) Notwithstanding Subsections (b) and (c), if the calendar

year statutory valuation interest rate for a life insurance

policy issued in a calendar year as determined under Subsection

(b) or (c), as applicable, would differ from the corresponding

actual rate for similar policies issued in the preceding calendar

year by less than one-half of one percent, the calendar year

statutory valuation interest rate for the policy is the

corresponding actual rate for the preceding calendar year. For

purposes of this subsection, the calendar year statutory

valuation interest rate for a life insurance policy issued in a

calendar year is determined for 1980 using the reference interest

rate defined for 1979, and is determined for each subsequent

calendar year regardless of whether Subchapter B, Chapter 1105,

applies to the policy.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.062. WEIGHTING FACTORS. (a) This section prescribes

the weighting factors referred to in the formulas prescribed by

Section 425.061.

(b) The weighting factor for a life insurance policy is

determined by the following table:

Guarantee Duration (Years)

Weighting Factor

10 or less

.50

More than 10, but not more than 20

.45

More than 20

.35

(c) For purposes of Subsection (b), the guarantee duration is

the maximum number of years the life insurance can remain in

force on a basis guaranteed in the policy or under options to

convert to life insurance plans with premium rates or

nonforfeiture values, or both, that are guaranteed in the

original policy.

(d) The weighting factor for a single premium immediate annuity

or for annuity benefits involving life contingencies arising from

another annuity with a cash settlement option or from a

guaranteed interest contract with a cash settlement option is.80.

(e) The weighting factor for an annuity or a guaranteed interest

contract, other than an annuity or contract to which Subsection

(d) applies, is determined by the following tables:

(1) For an annuity or guaranteed interest contract that is

valued on an issue year basis:

Guarantee Duration (Years)

Weighting Factor for Plan Type

A

B

C

5 or less:

.80

.60

.50

More than 5, but not more

than 10:

.75

.60

.50

More than 10, but not more

than 20:

.65

.50

.45

More than 20:

.45

.35

.35

(2) For an annuity or guaranteed interest contract that is

valued on a change in fund basis, the factors prescribed by

Subdivision (1) increased by:

Plan Type

A B C

.15 .25 .05

(3) For an annuity or guaranteed interest contract that is

valued on an issue year basis that does not guarantee interest on

considerations received more than one year after issue or

purchase, other than an annuity or contract that does not have a

cash settlement option, or an annuity or guaranteed interest

contract that is valued on a change in fund basis that does not

guarantee interest rates on considerations received more than 12

months after the valuation date, the factors prescribed by

Subdivision (1) or determined under Subdivision (2), as

appropriate, increased by:

Plan Type

A B C

.05 .05 .05

(f) For purposes of Subsection (e):

(1) for an annuity or guaranteed interest contract with a cash

settlement option, the guarantee duration is the number of years

for which the contract guarantees interest rates greater than the

calendar year statutory valuation interest rate for life

insurance policies with guarantee duration greater than 20 years;

and

(2) for an annuity or guaranteed interest contract without a

cash settlement option, the guarantee duration is the number of

years from the issue or purchase date to the date annuity

benefits are scheduled to begin.

(g) For purposes of Subsection (e):

(1) a policy is a "Plan Type A" policy if:

(A) the policyholder may withdraw funds at any time, but only:

(i) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds;

(ii) without an adjustment described by Subparagraph (i),

provided that the withdrawal is in installments over five years

or more; or

(iii) as an immediate life annuity; or

(B) the policyholder is not permitted to withdraw funds at any

time;

(2) a policy is a "Plan Type B" policy if:

(A) before the expiration of the interest rate guarantee:

(i) the policyholder may withdraw funds, but only:

(a) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds; or

(b) without an adjustment described by Subsubparagraph (a),

provided that the withdrawal is in installments over five years

or more; or

(ii) the policyholder is not permitted to withdraw funds; and

(B) on the expiration of the interest rate guarantee, the

policyholder may withdraw funds in a single sum or in

installments over less than five years, without an adjustment

described by Paragraph (A)(i); and

(3) a policy is a "Plan Type C" policy if the policyholder may

withdraw funds before the expiration of the interest rate

guarantee in a single sum or in installments over less than five

years:

(A) without an adjustment to reflect changes in interest rates

or asset values after the insurance company receives the funds;

or

(B) subject only to a fixed surrender charge that is a

percentage of the fund stipulated in the contract.

(h) An insurance company may elect to value an annuity or

guaranteed interest contract with a cash settlement option on an

issue year basis or on a change in fund basis. A company must

value an annuity or guaranteed interest contract without a cash

settlement option on an issue year basis.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.063. REFERENCE INTEREST RATE. (a) In this section,

"Moody's Corporate Bond Yield Average" means the Moody's

Corporate Bond Yield Average--Monthly Average Corporates, as

published by Moody's Investors Service, Inc.

(b) Except as provided by Subsection (g), the reference interest

rate for purposes of Section 425.061 is determined as provided by

Subsections (c)-(f).

(c) The reference interest rate for a life insurance policy is

the lesser of the average over a period of 36 months or the

average over a period of 12 months, ending on June 30 of the

calendar year preceding the year of issue, of the Moody's

Corporate Bond Yield Average.

(d) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of issue or

year of purchase, of the Moody's Corporate Bond Yield Average

for:

(1) a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option;

(2) an annuity or guaranteed interest contract with a cash

settlement option, other than an annuity or contract described by

Subdivision (1), that is valued on an issue year basis and has a

guarantee duration as determined under Section 425.062(f) of 10

years or less; or

(3) an annuity or guaranteed interest contract without a cash

settlement option.

(e) The reference interest rate is the lesser of the average

over a period of 36 months or the average over a period of 12

months, ending on June 30 of the calendar year of issue or

purchase, of the Moody's Corporate Bond Yield Average for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on an issue year basis and has a guarantee

duration as determined under Section 425.062(f) greater than 10

years.

(f) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of the change

in the fund, of the Moody's Corporate Bond Yield Average, for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on a change in fund basis.

(g) At least annually, the commissioner shall:

(1) determine whether the reference interest rates prescribed by

Subsections (c), (d), (e), and (f) continue to be a reasonably

accurate approximation of the average yield achieved from

purchases in the United States in publicly quoted markets of

investment grade fixed term and fixed interest corporate

obligations for the periods referenced in Subsection (c), (d),

(e), or (f), as applicable; and

(2) if the commissioner determines that a reference interest

rate prescribed by Subsection (c), (d), (e), or (f) is not a

reasonably accurate approximation of the average yield described

by Subdivision (1), adopt rules in the manner prescribed by

Chapters 2001 and 2002, Government Code, to prescribe an

alternative method of determining a reference interest rate, as

appropriate, that is a reasonably accurate approximation of that

average yield.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD. (a)

Except as otherwise provided by Sections 425.065 and 425.068 and

subject to Subsection (b), for the life insurance and endowment

benefits of a policy that provides for a uniform amount of

insurance and that requires the payment of uniform premiums, the

reserve according to the commissioners reserve valuation method

is the difference, if greater than zero, of the present value on

the date of valuation of those future guaranteed benefits, minus

the present value on that date of any future modified net

premiums for a policy described by this subsection. The modified

net premiums for a policy described by this subsection are a

uniform percentage of the respective contract premiums for those

benefits, so that the present value on the policy's issue date of

all the modified net premiums is equal to the sum of:

(1) the present value on that date of those benefits; and

(2) the difference, if greater than zero, between:

(A) a net level annual premium equal to the present value on the

policy's issue date of the benefits provided for after the first

policy year, divided by the present value on the policy's issue

date of an annuity of one per year, payable on the first policy

anniversary and on each subsequent policy anniversary on which a

premium becomes due; and

(B) a net one-year term premium for the benefits provided for in

the first policy year.

(b) A net level annual premium under Subsection (a)(2)(A) may

not exceed the net level annual premium on the 19-year premium

whole life plan for insurance of the same amount at an age that

is one year older than the age on the policy's issue date.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the contract

premium for the first policy year exceeds the contract premium

for the second year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For purposes of this

subsection, the "assumed ending date" is the first policy

anniversary on which the sum of any endowment benefit and any

cash surrender value available on that date is greater than the

excess premium. The reserve according to the commissioners

reserve valuation method for a policy to which this subsection

applies as of any policy anniversary occurring on or before the

assumed ending date is, except as otherwise provided by Section

425.068, the greater of:

(1) the reserve as of the policy anniversary computed as

prescribed by Subsection (a); or

(2) the reserve as of the policy anniversary computed as

prescribed by Subsection (a) but with:

(A) the value prescribed by Subsection (a)(2)(A) reduced by 15

percent of the amount of the excess first-year premium;

(B) each present value of a benefit or premium determined

without reference to a premium or benefit provided under the

policy after the assumed ending date;

(C) the policy assumed to mature on the assumed ending date as

an endowment; and

(D) the cash surrender value provided on the assumed ending date

considered to be an endowment benefit.

(d) In making the comparison required by Subsection (c), the

mortality tables and interest bases described by Sections

425.058, 425.061, 425.062, and 425.063 must be used.

(e) Reserves according to the commissioners reserve valuation

method for the following policies, contracts, and benefits must

be computed by a method consistent with the principles of this

section:

(1) a life insurance policy that provides for a varying amount

of insurance or that requires the payment of varying premiums;

(2) a group annuity or pure endowment contract purchased under a

retirement or deferred compensation plan established or

maintained by an employer, including a partnership or sole

proprietorship, by an employee organization, or by both, other

than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments;

(3) disability or accidental death benefits in a policy or

contract; and

(4) all other benefits, other than life insurance and endowment

benefits in a life insurance policy or benefits provided by any

other annuity or pure endowment contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION METHOD.

(a) This section applies to an annuity or pure endowment

contract other than a group annuity or pure endowment contract

purchased under a retirement or deferred compensation plan

established or maintained by an employer, including a partnership

or sole proprietorship, by an employee organization, or by both,

other than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments.

(b) Reserves according to the commissioners annuity reserve

method for benefits under an annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

contract, are the greatest of the respective excesses of the

present values on the valuation date of the future guaranteed

benefits under the contract at the end of each respective

contract year, including guaranteed nonforfeiture benefits, minus

the present value on the valuation date of any future valuation

considerations derived from future gross considerations that are

required by the contract terms and that become payable before the

end of the respective contract year. The future guaranteed

benefits must be determined by using the mortality table, if any,

and the interest rate or rates specified in the contract for

determining guaranteed benefits. The valuation considerations

are the portions of the respective gross considerations applied

under the contract terms to determine nonforfeiture values.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.066. MINIMUM AGGREGATE RESERVES. (a) An insurance

company's aggregate reserves for all life insurance policies,

excluding disability or accidental death benefits, issued by the

company on or after the date on which Chapter 1105 applies to

policies issued by the company, as determined under Section

1105.002(a) or (b), may not be less than the aggregate reserves

computed in accordance with the methods prescribed by Sections

425.064, 425.065, 425.068, and 425.069 and the mortality table or

tables and interest rate or rates used in computing nonforfeiture

benefits for those policies.

(b) The aggregate reserves of an insurance company to which this

section applies for all policies, contracts, and benefits may not

be less than the aggregate reserves determined to be necessary to

issue a favorable opinion under Section 425.054.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.067. OPTIONAL RESERVE COMPUTATIONS. (a) Reserves for

a policy or contract issued by a life insurance company before

the date on which Chapter 1105 would apply to the policy or

contract, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for all those policies and

contracts than the minimum reserves required by the laws

applicable to those policies and contracts immediately before

that date.

(b) Reserves for any category, as established by the

commissioner, of policies, contracts, or benefits issued by a

life insurance company on or after the date on which Chapter 1105

applies to policies, contracts, or benefits issued by the

company, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for the category than the

minimum aggregate reserves computed according to the standard

provided by this subchapter, but the interest rate or rates used

for those policies and contracts, other than annuity and pure

endowment contracts, may not be higher than the corresponding

interest rate or rates used in computing any nonforfeiture

benefits provided in those policies or contracts.

(c) An insurance company that has adopted a standard of

valuation that produces greater minimum aggregate reserves than

the aggregate reserves computed according to the standard

provided by this subchapter may, with the commissioner's

approval, adopt any lower standard of valuation that produces

aggregate reserves at least equal to the minimum aggregate

reserves computed according to the standard provided by this

subchapter.

(d) For purposes of this section, the holding of additional

reserves previously determined to be necessary to issue a

favorable opinion under Section 425.054 may not be considered to

be the adoption of a higher standard of valuation.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.068. RESERVE COMPUTATION: GROSS PREMIUM CHARGED LESS

THAN VALUATION NET PREMIUM. (a) If in a contract year the gross

premium charged by a life insurance company on a policy or

contract is less than the valuation net premium for the policy or

contract computed by the method used in computing the reserve on

the policy or contract but using the minimum valuation mortality

standards and interest rate, the minimum reserve required for the

policy or contract is the greater of:

(1) the reserve computed according to the mortality table,

interest rate, and method actually used for the policy or

contract; or

(2) the reserve computed by the method actually used for the

policy or contract but using the minimum valuation mortality

standards and interest rate and replacing the valuation net

premium with the actual gross premium in each contract year for

which the valuation net premium exceeds the actual gross premium.

(b) The minimum valuation mortality standards and interest rate

under Subsection (a) are the standards and rate provided by

Sections 425.058, 425.061, 425.062, and 425.063.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the gross premium

for the first policy year exceeds the gross premium for the

second policy year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For a policy to which

this subsection applies, Subsections (a) and (b) shall be applied

as if the method actually used in computing the reserve for the

policy were the method described in Section 425.064, ignoring

Section 425.064(c). The minimum reserve at each policy

anniversary is the greater of:

(1) the minimum reserve computed in accordance with Section

425.064, including Section 425.064(c); or

(2) the minimum reserve computed in accordance with this

section.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.069. RESERVE COMPUTATION: INDETERMINATE PREMIUM PLANS

AND CERTAIN OTHER PLANS. (a) For a life insurance plan that

provides for future premium determination, the amounts of which

are to be determined by the insurance company based on estimates

of future experience, or a life insurance plan or annuity for

which the minimum reserves cannot be determined by the methods

described by Sections 425.064, 425.065, and 425.068, the reserves

held must:

(1) be appropriate in relation to the benefits and the pattern

of premiums for the plan; and

(2) be computed by a method that is consistent with the

principles of this subchapter, as determined by commissioner

rule.

(b) Notwithstanding any other provision of state law, the

commissioner must affirmatively approve a policy, contract, or

certificate that provides life insurance under a plan described

by Subsection (a) before the policy, contract, or certificate may

be marketed, issued, delivered, or used in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.070. COMPUTATION OF RESERVE FOR CERTAIN POLICIES BY

CALENDAR YEAR OF ISSUE. (a) The reserve for a policy or

contract issued by a life insurance company before the date on

which Chapter 1105 would apply to the policy or contract, as

determined under Section 1105.002(a) or (b), must be computed in

accordance with the terms of the policy or contract and this

section.

(b) For a policy issued before January 1, 1910, the computation

must be based on the American Experience Table of Mortality and

4-1/2 percent annual interest.

(c) For a policy issued on or after January 1, 1910, and before

January 1, 1948, the computation must be based on:

(1) the Actuaries or Combined Experience Table of Mortality and

four percent annual interest, if the interest rate guaranteed in

the policy is four percent annually or higher; or

(2) the American Experience Table of Mortality and the lower

rate specified in the policy, if the policy was issued on a

reserve basis of an interest rate lower than four percent

annually.

(d) For a policy issued on or after January 1, 1948, the

computation must be based on the mortality table and interest

rate specified in the policy, provided that:

(1) the specified interest rate may not exceed 3-1/2 percent

annually;

(2) the specified table for a policy, other than an industrial

life insurance policy, is the American Experience Table of

Mortality, the American Men Ultimate Table of Mortality, the

Commissioners 1941 Standard Ordinary Mortality Table, or, for a

policy issued after December 31, 1959, the Commissioners 1958

Standard Ordinary Mortality Table; and

(3) the specified table for an industrial life insurance policy

is the American Experience Table of Mortality, the Standard

Industrial Mortality Table, the Sub-Standard Industrial Mortality

Table, the 1941 Standard Industrial Mortality Table, or the 1941

Sub-Standard Industrial Mortality Table, or, for a policy issued

after December 31, 1963, the Commissioners 1961 Standard

Industrial Mortality Table.

(e) For a policy, other than an industrial life insurance

policy, issued after December 31, 1959, to insure a female risk,

the computation must be based on any mortality table and interest

rate permitted under Subsection (d) and specified in the policy

but may, at the insurance company's option, be based on an age

not more than three years younger than the insured's actual age.

(f) Except as otherwise provided by Section 425.059 for coverage

purchased under a group annuity or pure endowment contract to

which that section applies, for a policy issued on a substandard

risk, an annuity contract, or a contract or policy for disability

benefits or accidental death benefits, the computation must be

based on the standards and methods adopted by the insurance

company and approved by the commissioner.

(g) For a group insurance policy issued before May 15, 1947, the

computation must be based on the American Men Ultimate Table of

Mortality with interest at the rate of three percent or 3-1/2

percent annually as provided by the policy. The reserve value of

a group insurance policy issued on or after May 15, 1947, and

before January 1, 1961, must be computed on the basis of either

the American Men Ultimate Table of Mortality or the Commissioners

1941 Standard Ordinary Mortality Table with interest at a rate

not to exceed 3-1/2 percent annually as provided by the policy.

For a group insurance policy issued on or after January 1, 1961,

the computation must be based on an interest rate not to exceed

3-1/2 percent annually and the mortality table adopted by the

insurance company with the commissioner's approval.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.071. LAPSE RATES IN MINIMUM STANDARD OF VALUATION. (a)

The minimum standard of valuation under this subchapter may

include lapse rates in the calculation of reserves for a

secondary guarantee in universal life contracts issued after

December 31, 2006.

(b) For purposes of this section, a secondary guarantee refers

to specified conditions in a universal life contract that, if

satisfied, provide for death benefits to remain in effect

regardless of the accumulation value in the contract.

(c) Lapse rates authorized by this section may not exceed two

percent per year.

(d) The commissioner is authorized to adopt rules to implement

this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

681, Sec. 1, eff. June 15, 2007.

SUBCHAPTER C. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL

STOCK LIFE, HEALTH, AND ACCIDENT INSURERS

Sec. 425.101. DEFINITIONS. In this subchapter:

(1) "Assets" means the statutory accounting admitted assets of

an insurance company. The term includes lawful money of the

United States, whether in the form of cash or demand deposits in

solvent banks, savings and loan associations, credit unions, and

branches of those entities, organized under the laws of the

United States or a state of the United States, if held in

accordance with the laws or regulations applicable to those

entities. The term does not include the company's separate

accounts that are subject to Chapter 1152.

(2) "Securities valuation office" means the Securities Valuation

Office of the National Association of Insurance Commissioners.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.102. INAPPLICABILITY OF CERTAIN LAW. The definition of

"state" assigned by Section 311.005, Government Code, does not

apply to this s


State Codes and Statutes

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-4-regulation-of-solvency > Chapter-425-reserves-and-investments-for-life-insurance-companies-and-related-entities

INSURANCE CODE

TITLE 4. REGULATION OF SOLVENCY

SUBTITLE B. RESERVES AND INVESTMENTS

CHAPTER 425. RESERVES AND INVESTMENTS FOR LIFE INSURANCE

COMPANIES AND RELATED ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 425.001. SECURITIES IN AMOUNT OF RESERVES REQUIRED. The

commissioner, after determining the amount of the reserves

required on all of a life insurance company's policies in force,

shall ensure that the company has at least that amount in

securities of the class and character required by the law of this

state, after all debts and claims against the company and the

minimum capital required by Chapter 841 or 982, as applicable,

have been provided for.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.002. CERTAIN INSURERS: DEPOSIT OF SECURITIES, MONEY,

OR PROPERTY IN AMOUNT OF LEGAL RESERVES. (a) Except as provided

by Subsection (b), a life insurance company incorporated under

the laws of this state may deposit with the department, for the

common benefit of all the holders of the company's policies and

annuity contracts and in an amount equal to the legal reserve on

all the company's outstanding policies and contracts in force,

securities of the character in which the law of this state

permits the company to invest, or against which the law of this

state permits the company to loan, the company's capital,

surplus, or reserves.

(b) A life insurance company may not make a new deposit of

securities after August 28, 1961, except to the extent expressly

required by Section 425.003.

(c) For purposes of this section, securities may be physically

delivered to the department without being accompanied by a

written transfer of a lien securing the securities. A life

insurance company may deposit registered or unregistered United

States government securities under this section.

(d) A life insurance company may deposit lawful money of the

United States instead of all or part of the securities described

by Subsection (a). A company may, for the purposes of the

deposit described by Subsection (a), convey to the department in

trust the real property in which any part of the company's

reserve is lawfully invested. If the company conveys the

property, the department shall hold the title to the property in

trust until the company deposits with the department securities

to take the place of the property, at which time the department

shall reconvey the property to the company.

(e) The department may have any securities or real property

appraised and valued before the securities or real property may

be deposited with or conveyed to the department under this

section. The life insurance company shall pay the reasonable

expense of the appraisal or valuation.

(f) For purposes of state, county, and municipal taxation, the

situs of the deposited securities is the municipality and county

in which the life insurance company's charter requires the

principal business office of the company making the deposit to be

located.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.003. CERTAIN INSURERS: REQUIRED DEPOSITS OF

SECURITIES; ADDITIONAL DEPOSITS AND WITHDRAWALS. (a) A life

insurance company that, before August 28, 1961, issued or assumed

the obligations of policies or annuity contracts that were

registered as provided by Article 3.18, as that article existed

before August 28, 1961, shall have on deposit with the department

securities of the character described by Section 425.002 in an

amount equal to or greater than the aggregate net value of the

company's outstanding registered policies and annuity contracts

in force.

(b) To comply with Subsection (a), a life insurance company

shall periodically make additional deposits of securities in

amounts of not less than $5,000. A company whose deposits exceed

the aggregate net value of the company's outstanding registered

policies and annuity contracts in force may periodically withdraw

the excess in amounts of not less than $5,000. A company may at

any time withdraw any of the company's deposited securities by

depositing in their place securities of equal value to the

securities replaced and of a character authorized by this

chapter.

(c) A life insurance company may at any time collect the

interest, rents, and other income from the company's securities

on deposit.

(d) The net value of each policy or annuity contract subject to

this section is the policy's or contract's value according to the

standard prescribed by state law when the first premium on the

policy or contract is paid, minus the amount of any liens the

life insurance company has against the policy or contract not to

exceed the policy's or contract's value.

(e) The department shall hold a life insurance company's

securities on deposit with the department under this section in

trust for the benefit of all holders of the company's outstanding

policies and annuity contracts that were registered as provided

by Article 3.18, as that article existed before August 28, 1961.

(f) A life insurance company that has outstanding registered

policies or annuity contracts in force may not reinsure all or

any part of that outstanding business, other than in a company

authorized to engage in business in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.004. RECORDS OF SECURITIES DEPOSITED WITH DEPARTMENT;

REPORT OF VALUE. Each life insurance company that is required by

Section 425.003 to have securities on deposit with the department

shall:

(1) keep records of:

(A) all of the company's outstanding registered policies and

annuity contracts in force; and

(B) the net value of those policies and contracts; and

(2) not later than the 15th day after the last day of each

calendar month, file with the department a report stating whether

the value of the company's securities on deposit is equal to or

greater than the aggregate net value of the company's registered

policies and annuity contracts outstanding and in force at the

end of the preceding calendar month.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.005. DEPARTMENT DUTIES REGARDING DEPOSITED SECURITIES;

INSURANCE COMPANY ACCESS. (a) The department shall keep

securities deposited by a life insurance company under Sections

425.002 and 425.003 in a secure safe-deposit, fireproof box or

vault in the municipality of, or a municipality near the location

of, the company's home office.

(b) The life insurance company's officers may, in accordance

with reasonable rules adopted by the commissioner, have access to

the securities to detach interest coupons, credit payment, and

exchange securities as provided by Section 425.003.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.006. ADDITIONAL RESERVES REQUIRED: SUBSTANDARD OR

EXTRA HAZARDOUS POLICIES. (a) If a life insurance company

engaged in business under the laws of this state has written or

assumed risks that are substandard or extra hazardous and has

charged more for the policies under which those risks are written

or assumed than the company's published premium rates, the

commissioner shall, in valuing those policies, compute and charge

extra reserves on the policies as necessary because of the extra

hazard assumed and the extra premium charged.

(b) If the commissioner determines, after notice and hearing,

that a particular risk or class of risks is substandard or extra

hazardous, a life insurance company may not, after the

determination is made, write or assume the particular risk or

class of risks unless the company charges an extra premium as

necessary because of the extra hazard assumed.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.007. SUBSCRIPTION TO OR UNDERWRITING PURCHASE OR SALE

OF SECURITIES OR PROPERTY PROHIBITED; CONTROL OF DISPOSITION OF

PROPERTY. (a) A life insurance company organized under the laws

of this state may not:

(1) subscribe to, or participate in, any underwriting of the

purchase or sale of securities or property;

(2) enter into a transaction described by Subdivision (1) for a

purpose described by Subdivision (1);

(3) sell on account of the company jointly with any other

person, firm, or corporation; or

(4) enter into any agreement to withhold from sale any of the

company's property.

(b) The disposition of the life insurance company's property

must be at all times within the control of the company's board of

directors.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.008. AUTHORIZED INVESTMENTS FOR FOREIGN COMPANIES. A

foreign company shall invest the company's assets in:

(1) securities or property of the same classes in which the law

of this state permits a domestic insurance company to invest; or

(2) securities permitted by other law of this state and approved

by the commissioner as being of substantially the same grade as

securities or property in which a domestic insurance company is

permitted to invest.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.009. STUDENT LOANS. A foreign or domestic life

insurance company may make loans to a student enrolled in an

institution of higher education if the principal amount of the

loan is insured by:

(1) the federal government under the Higher Education Act of

1965 (Pub. L. No. 89-329), as amended; or

(2) the Texas Guaranteed Student Loan Corporation under Chapter

57, Education Code.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

SUBCHAPTER B. STANDARD VALUATION LAW

Sec. 425.051. SHORT TITLE. This subchapter may be cited as the

Standard Valuation Law.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.052. DEFINITIONS. (a) In this subchapter, "reserves"

means reserve liabilities.

(b) As used in this subchapter:

(1) an "issue year basis" of valuation means a valuation basis

under which the interest rate used to determine the minimum

valuation standard for the entire duration of the annuity or

guaranteed interest contract is the calendar year valuation

interest rate for the year of issue or year of purchase of the

annuity or guaranteed interest contract; and

(2) a "change in fund basis" of valuation means a valuation

basis under which the interest rate used to determine the minimum

valuation standard applicable to each change in the fund held

under the annuity or guaranteed interest contract is the calendar

year valuation interest rate for the year of the change in the

fund.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.053. ANNUAL VALUATION OF RESERVES. (a) The department

shall annually value or have valued the reserves for all

outstanding life insurance policies and annuity and pure

endowment contracts of each life insurance company engaged in

business in this state. The department may certify the amount of

those reserves, specifying the mortality table or tables, rate or

rates of interest, and methods, including the net level premium

method or another method, used in computing those reserves.

(b) In computing reserves under Subsection (a), the department

may use group methods and approximate averages for fractions of a

year or otherwise.

(c) Instead of valuing the reserves as required by Subsection

(a) for a foreign or alien company, the department may accept any

valuation made by or for the insurance supervisory official of

another state or jurisdiction if:

(1) the valuation complies with the minimum standard provided by

this subchapter; and

(2) the official accepts as sufficient and valid for all legal

purposes a certificate of valuation made by the department that

states the valuation was made in a specified manner according to

which the aggregate reserves would be at least as large as they

would be if computed in the manner prescribed by the law of that

state or jurisdiction.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.054. ACTUARIAL OPINION REQUIRED. (a) For purposes of

this section, "qualified actuary" means:

(1) a qualified actuary, as that term is defined by Section

802.002; or

(2) a person who, before September 1, 1993, satisfied the

requirements of the former State Board of Insurance to submit an

opinion under former Section 2A(a)(1), Article 3.28.

(b) In conjunction with the annual statement and in addition to

other information required by this subchapter, each life

insurance company engaged in business in this state shall

annually submit to the department the opinion of a qualified

actuary as to whether the reserves and related actuarial items

held in support of the policies and contracts specified by

commissioner rule:

(1) are computed appropriately;

(2) are based on assumptions that satisfy contractual

provisions;

(3) are consistent with prior reported amounts; and

(4) comply with applicable laws of this state.

(c) The commissioner by rule shall specify the requirements of

an actuarial opinion under Subsection (b), including any matters

considered necessary to the opinion's scope.

(d) The opinion required by this section must:

(1) apply to all of the life insurance company's business in

force, including individual and group health insurance plans; and

(2) be in the form and contain the substance specified by

commissioner rule and be acceptable to the commissioner.

(e) The commissioner may accept as an opinion required to be

submitted under Subsection (b) by a foreign or alien company the

opinion filed by that company with the insurance supervisory

official of another state if the commissioner determines that the

opinion filed in the other state reasonably meets the

requirements applicable to a company domiciled in this state.

(f) Except as exempted by or as otherwise provided by

commissioner rule, a life insurance company shall include in the

opinion required by Subsection (b) an opinion that states whether

the reserves and related actuarial items held in support of the

policies and contracts specified by commissioner rule adequately

provide for the company's obligations under the policies and

contracts, including the benefits under and expenses associated

with the policies and contracts.

(g) In making the opinion under Subsection (f), the reserves and

related actuarial items are considered in light of the assets

held by the life insurance company with respect to the reserves

and related actuarial items, including:

(1) the investment earnings on the assets; and

(2) the considerations anticipated to be received and retained

under the policies and contracts.

(h) The person who certifies the opinion required by Subsection

(b) must make the opinion required by Subsection (f).

(i) Rules adopted under this section may exempt life insurance

companies that would be exempt from the requirements of this

section under the most recently adopted regulation by the

National Association of Insurance Commissioners entitled "Model

Actuarial Opinion and Memorandum Regulation," or a successor to

that regulation, if the commissioner considers the exemption

appropriate.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.055. SUPPORTING MEMORANDUM FOR ACTUARIAL OPINION. (a)

A memorandum that, in form and substance, complies with the

commissioner's rules shall be prepared to support each actuarial

opinion required by Section 425.054.

(b) The commissioner may engage an actuary or other financial

specialist as defined by commissioner rule if:

(1) a life insurance company does not provide a supporting

memorandum at the request of the commissioner in the time

specified by rule; or

(2) the company provides a supporting memorandum, but the

commissioner determines that the supporting memorandum does not

meet the standards prescribed by rule or is otherwise

unacceptable to the commissioner.

(c) The actuary or other financial specialist under Subsection

(b) shall:

(1) review the actuarial opinion and the basis for the opinion;

and

(2) prepare the supporting memorandum.

(d) A life insurance company is responsible for the expense of

the actuary or other financial specialist under Subsection (b).

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.056. LIMITATION ON LIABILITY FOR ACTUARIAL OPINION.

(a) Except in cases of fraud or wilful misconduct or as provided

by Subsection (b), a person who certifies an opinion under

Section 425.054 is not liable for damages to a person, other than

the life insurance company covered by the opinion, for an act,

error, omission, decision, or other conduct with respect to the

person's opinion.

(b) Subsection (a) does not apply to an administrative penalty

imposed under Chapter 84.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.057. DISCIPLINARY ACTION: COMPANY OR PERSON CERTIFYING

OPINION. A company or person that certifies an opinion under

Section 425.054 and that violates Section 425.054 or 425.055 or

rules adopted under those sections is subject to disciplinary

action under Chapter 82.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.058. VALUATION OF POLICY OR CONTRACT: GENERAL RULE.

(a) Except as otherwise provided by Section 425.059, 425.060,

425.061, 425.062, or 425.063, the minimum standard for the

valuation of an outstanding life insurance policy or annuity or

pure endowment contract issued by a life insurance company on or

after the date on which Chapter 1105 applies to policies issued

by the company, as determined under Section 1105.002(a) or (b),

is the commissioners reserve valuation method described by

Sections 425.064, 425.065, and 425.068, computed using the table

prescribed by this section and with interest at 3-1/2 percent or

at the following rate, if applicable:

(1) in the case of a policy or contract issued on or after June

14, 1973, and before August 29, 1977, other than an annuity or

pure endowment contract, four percent;

(2) in the case of a single premium life insurance policy issued

on or after August 29, 1977, 5-1/2 percent; or

(3) in the case of a life insurance policy issued on or after

August 29, 1977, other than a single premium life insurance

policy, 4-1/2 percent.

(b) Except as provided by Subsection (c), for an ordinary life

insurance policy issued on the standard basis, excluding any

disability or accidental death benefits in the policy, the

applicable table is the Commissioners 1941 Standard Ordinary

Mortality Table, if the policy was issued before the date on

which Section 1105.152 would apply to the policy, as determined

under Section 1105.152(a) or (b), or the Commissioners 1958

Standard Ordinary Mortality Table, if Section 1105.152 applies to

the policy. For a policy that is issued to insure a female risk:

(1) a modified net premium or present value for a policy issued

before August 29, 1977, may be computed according to an age not

more than three years younger than the insured's actual age; and

(2) a modified net premium or present value for a policy issued

on or after August 29, 1977, may be computed according to an age

not more than six years younger than the insured's actual age.

(c) For an ordinary life insurance policy issued on the standard

basis, excluding any disability or accidental death benefits in

the policy, and to which Subchapter B, Chapter 1105, applies, the

applicable table is:

(1) the Commissioners 1980 Standard Ordinary Mortality Table;

(2) at the insurer's option for one or more specified life

insurance plans, the Commissioners 1980 Standard Ordinary

Mortality Table with Ten-Year Select Mortality Factors; or

(3) any ordinary mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

valuation for a policy to which this subdivision applies.

(d) For an industrial life insurance policy issued on the

standard basis, excluding any disability or accidental death

benefits in the policy, the applicable table is:

(1) the 1941 Standard Industrial Mortality Table, if the policy

was issued before the date on which Section 1105.153 would apply

to the policy as determined under Section 1105.153(a) or (b); or

(2) if Section 1105.153 applies to the policy:

(A) the Commissioners 1961 Standard Industrial Mortality Table;

or

(B) any industrial mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by commissioner rule for use in determining the minimum standard

of valuation for a policy to which this subdivision applies.

(e) For an individual annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

policy, the applicable table is the 1937 Standard Annuity

Mortality Table, or at the insurer's option, the Annuity

Mortality Table for 1949, Ultimate, or a modification of either

table that is approved by the commissioner.

(f) For a group annuity or pure endowment contract, excluding

any disability or accidental death benefits in the policy, the

applicable table is:

(1) the Group Annuity Mortality Table for 1951;

(2) a modification of that table approved by the commissioner;

or

(3) at the insurance company's option, a table or a modification

of a table prescribed for an individual annuity or pure endowment

contract by Subsection (e).

(g) For total and permanent disability benefits in or

supplementary to an ordinary policy or contract, the applicable

tables are:

(1) for a policy or contract issued on or after January 1, 1966:

(A) the tables of Period 2 disablement rates and the 1930 to

1950 termination rates of the 1952 Disability Study of the

Society of Actuaries, with due regard to the type of benefit; or

(B) any table of disablement rates and termination rates adopted

after 1980 by the National Association of Insurance Commissioners

that are approved by commissioner rule for use in determining the

minimum standard of valuation for a policy to which this

subdivision applies;

(2) for a policy or contract issued on or after January 1, 1961,

and before January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Class (3) Disability

Table (1926); or

(3) for a policy issued before January 1, 1961, the Class (3)

Disability Table (1926).

(h) A table described by Subsection (g) must, for an active

life, be combined with a mortality table permitted for computing

the reserves for a life insurance policy.

(i) For accidental death benefits in or supplementary to a

policy, the applicable table is:

(1) for a policy issued on or after January 1, 1966:

(A) the 1959 Accidental Death Benefits Table; or

(B) any accidental death benefits table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by commissioner rule for use in determining the minimum

standard of valuation for a policy to which this subdivision

applies;

(2) for a policy issued on or after January 1, 1961, and before

January 1, 1966:

(A) a table described by Subdivision (1); or

(B) at the insurance company's option, the Inter-Company Double

Indemnity Mortality Table; or

(3) for a policy issued before January 1, 1961, the

Inter-Company Double Indemnity Mortality Table.

(j) A table described by Subsection (i) must be combined with a

mortality table permitted for computing the reserves for a life

insurance policy.

(k) For group life insurance, life insurance issued on the

substandard basis and other special benefits, the applicable

table is a table approved by the commissioner.

(l)(1) Notwithstanding any other law, the minimum reserve

requirements applicable to a credit life policy issued under

Chapter 1153 before January 1, 2009, are met if, in the

aggregate, the reserves are maintained at 100 percent of the 1980

Commissioner's Standard Ordinary Mortality Table, with interest

that does not exceed 5.5 percent.

(2) For credit life policy reserves on contracts issued to be

effective on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 2001 CSO Male Composite Ultimate Mortality Table for

male and female insureds; or

(B) another CSO Mortality Table approved by the National

Association of Insurance Commissioners on or after January 1,

2009, for use on credit life policy reserves.

(3) For a single premium credit accident and health contract

issued on or after January 1, 2009, the reserve requirements

shall be based on minimum reserve standards established by the

commissioner by rule. The commissioner shall adopt the rules

based on either:

(A) the 1985 Commissioners Individual Disability Table A

(85CIDA); or

(B) another Commissioner's Disability Table approved by the

National Association of Insurance Commissioners on or after

January 1, 2009, for use on credit accident and health policy

reserves.

(4) For all credit insurance contracts, if the net premium

refund liability exceeds the aggregate recorded contract reserve,

the insurer shall establish an additional reserve liability that

is equal to the excess of the net refund liability over the

contract reserve recorded. The net refund liability may include

consideration of commission, premium tax, and other expenses

recoverable.

(5) In addition to the rules required to be adopted under this

subsection, the commissioner may adopt other rules to implement

this subsection.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

399, Sec. 1, eff. June 19, 2009.

Sec. 425.059. VALUATION OF CERTAIN ANNUITIES AND PURE ENDOWMENT

CONTRACTS. (a) This section applies to an individual annuity or

pure endowment contract issued on or after January 1, 1979, and

an annuity or pure endowment purchased on or after January 1,

1979, under a group annuity or pure endowment contract. This

section also applies to an annuity or pure endowment contract

issued by an insurer after the date specified in a written

notice:

(1) that was filed with the State Board of Insurance after June

14, 1973, but before January 1, 1979; and

(2) under which the insurance company filing the notice elected

to comply before January 1, 1979, with former Section 4, Article

3.28, with respect to individual or group annuities and pure

endowment contracts as specified by the company in the notice.

(b) Except as provided by Section 425.060, 425.061, 425.062, or

425.063, the minimum standard for the valuation of an individual

or group annuity or pure endowment contract, excluding any

disability or accidental death benefits in the contract, is the

commissioners reserve valuation method described by Sections

425.064 and 425.065, computed using the table prescribed by this

section and with interest at the following interest rate, as

applicable:

(1) for an individual annuity or pure endowment contract issued

before August 29, 1977, other than an individual single premium

immediate annuity contract, four percent;

(2) for an individual single premium immediate annuity contract

issued before August 29, 1977, six percent;

(3) for an individual annuity or pure endowment contract issued

on or after August 29, 1977, other than an individual single

premium immediate annuity contract or an individual single

premium deferred annuity or pure endowment contract, 4-1/2

percent;

(4) for an individual single premium immediate annuity contract

issued on or after August 29, 1977, 7-1/2 percent;

(5) for an individual single premium deferred annuity or pure

endowment contract issued on or after August 29, 1977, 5-1/2

percent;

(6) for an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, six

percent; or

(7) for an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, 7-1/2 percent.

(c) For an individual annuity or pure endowment contract issued

before August 29, 1977, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(d) For an individual annuity or pure endowment contract issued

on or after August 29, 1977, including an individual single

premium immediate annuity contract, the applicable table is:

(1) the 1971 Individual Annuity Mortality Table;

(2) an individual annuity mortality table adopted after 1980 by

the National Association of Insurance Commissioners that is

approved by the commissioner by rule for use in determining the

minimum standard of valuation for a specified type of contract to

which this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

(e) For an annuity or pure endowment purchased before August 29,

1977, under a group annuity or pure endowment contract, the

applicable table is:

(1) the 1971 Group Annuity Mortality Table; or

(2) a modification of that table approved by the commissioner.

(f) For an annuity or pure endowment purchased on or after

August 29, 1977, under a group annuity or pure endowment

contract, the applicable table is:

(1) the 1971 Group Annuity Mortality Table;

(2) a group annuity mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by the commissioner by rule for use in determining the minimum

standard of valuation for an annuity or pure endowment to which

this subsection applies; or

(3) a modification of one of those tables approved by the

commissioner.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.060. APPLICABILITY OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATES. The calendar year statutory valuation interest

rates as defined by Sections 425.061, 425.062, and 425.063 are

the interest rates used in determining the minimum standard for

the valuation of:

(1) a life insurance policy to which Subchapter B, Chapter 1105,

applies;

(2) an individual annuity or pure endowment contract issued on

or after January 1, 1982;

(3) an annuity or pure endowment purchased on or after January

1, 1982, under a group annuity or pure endowment contract; or

(4) the net increase, if any, in a calendar year after January

1, 1982, in amounts held under a guaranteed interest contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.061. COMPUTATION OF CALENDAR YEAR STATUTORY VALUATION

INTEREST RATE: GENERAL RULE. (a) For purposes of Subsection

(b):

(1) R1 is the lesser of R or.09;

(2) R2 is the greater of R or.09;

(3) R is the reference interest rate determined under Section

425.063; and

(4) W is the weighting factor determined under Section 425.062.

(b) The calendar year statutory valuation interest rate ("I") is

determined as provided by this section, with the results rounded

to the nearest one-quarter of one percent:

(1) for life insurance:

I =.03 + W(R1 -.03) + (W/2)(R2 -.09); and

(2) for a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option, or for an annuity or guaranteed

interest contract without a cash settlement option, or for an

annuity or guaranteed interest contract with a cash settlement

option that is valued on a change in fund basis:

I =.03 + W(R -.03).

(c) For an annuity or guaranteed interest contract with a cash

settlement option that is valued on an issue year basis, other

than an annuity or contract described by Subsection (b)(2):

(1) the formula prescribed by Subsection (b)(1) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) greater than 10 years; and

(2) the formula prescribed by Subsection (b)(2) applies to an

annuity or guaranteed interest contract with a guarantee duration

determined under Section 425.062(f) of 10 years or less.

(d) Notwithstanding Subsections (b) and (c), if the calendar

year statutory valuation interest rate for a life insurance

policy issued in a calendar year as determined under Subsection

(b) or (c), as applicable, would differ from the corresponding

actual rate for similar policies issued in the preceding calendar

year by less than one-half of one percent, the calendar year

statutory valuation interest rate for the policy is the

corresponding actual rate for the preceding calendar year. For

purposes of this subsection, the calendar year statutory

valuation interest rate for a life insurance policy issued in a

calendar year is determined for 1980 using the reference interest

rate defined for 1979, and is determined for each subsequent

calendar year regardless of whether Subchapter B, Chapter 1105,

applies to the policy.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.062. WEIGHTING FACTORS. (a) This section prescribes

the weighting factors referred to in the formulas prescribed by

Section 425.061.

(b) The weighting factor for a life insurance policy is

determined by the following table:

Guarantee Duration (Years)

Weighting Factor

10 or less

.50

More than 10, but not more than 20

.45

More than 20

.35

(c) For purposes of Subsection (b), the guarantee duration is

the maximum number of years the life insurance can remain in

force on a basis guaranteed in the policy or under options to

convert to life insurance plans with premium rates or

nonforfeiture values, or both, that are guaranteed in the

original policy.

(d) The weighting factor for a single premium immediate annuity

or for annuity benefits involving life contingencies arising from

another annuity with a cash settlement option or from a

guaranteed interest contract with a cash settlement option is.80.

(e) The weighting factor for an annuity or a guaranteed interest

contract, other than an annuity or contract to which Subsection

(d) applies, is determined by the following tables:

(1) For an annuity or guaranteed interest contract that is

valued on an issue year basis:

Guarantee Duration (Years)

Weighting Factor for Plan Type

A

B

C

5 or less:

.80

.60

.50

More than 5, but not more

than 10:

.75

.60

.50

More than 10, but not more

than 20:

.65

.50

.45

More than 20:

.45

.35

.35

(2) For an annuity or guaranteed interest contract that is

valued on a change in fund basis, the factors prescribed by

Subdivision (1) increased by:

Plan Type

A B C

.15 .25 .05

(3) For an annuity or guaranteed interest contract that is

valued on an issue year basis that does not guarantee interest on

considerations received more than one year after issue or

purchase, other than an annuity or contract that does not have a

cash settlement option, or an annuity or guaranteed interest

contract that is valued on a change in fund basis that does not

guarantee interest rates on considerations received more than 12

months after the valuation date, the factors prescribed by

Subdivision (1) or determined under Subdivision (2), as

appropriate, increased by:

Plan Type

A B C

.05 .05 .05

(f) For purposes of Subsection (e):

(1) for an annuity or guaranteed interest contract with a cash

settlement option, the guarantee duration is the number of years

for which the contract guarantees interest rates greater than the

calendar year statutory valuation interest rate for life

insurance policies with guarantee duration greater than 20 years;

and

(2) for an annuity or guaranteed interest contract without a

cash settlement option, the guarantee duration is the number of

years from the issue or purchase date to the date annuity

benefits are scheduled to begin.

(g) For purposes of Subsection (e):

(1) a policy is a "Plan Type A" policy if:

(A) the policyholder may withdraw funds at any time, but only:

(i) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds;

(ii) without an adjustment described by Subparagraph (i),

provided that the withdrawal is in installments over five years

or more; or

(iii) as an immediate life annuity; or

(B) the policyholder is not permitted to withdraw funds at any

time;

(2) a policy is a "Plan Type B" policy if:

(A) before the expiration of the interest rate guarantee:

(i) the policyholder may withdraw funds, but only:

(a) with an adjustment to reflect changes in interest rates or

asset values after the insurance company receives the funds; or

(b) without an adjustment described by Subsubparagraph (a),

provided that the withdrawal is in installments over five years

or more; or

(ii) the policyholder is not permitted to withdraw funds; and

(B) on the expiration of the interest rate guarantee, the

policyholder may withdraw funds in a single sum or in

installments over less than five years, without an adjustment

described by Paragraph (A)(i); and

(3) a policy is a "Plan Type C" policy if the policyholder may

withdraw funds before the expiration of the interest rate

guarantee in a single sum or in installments over less than five

years:

(A) without an adjustment to reflect changes in interest rates

or asset values after the insurance company receives the funds;

or

(B) subject only to a fixed surrender charge that is a

percentage of the fund stipulated in the contract.

(h) An insurance company may elect to value an annuity or

guaranteed interest contract with a cash settlement option on an

issue year basis or on a change in fund basis. A company must

value an annuity or guaranteed interest contract without a cash

settlement option on an issue year basis.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.063. REFERENCE INTEREST RATE. (a) In this section,

"Moody's Corporate Bond Yield Average" means the Moody's

Corporate Bond Yield Average--Monthly Average Corporates, as

published by Moody's Investors Service, Inc.

(b) Except as provided by Subsection (g), the reference interest

rate for purposes of Section 425.061 is determined as provided by

Subsections (c)-(f).

(c) The reference interest rate for a life insurance policy is

the lesser of the average over a period of 36 months or the

average over a period of 12 months, ending on June 30 of the

calendar year preceding the year of issue, of the Moody's

Corporate Bond Yield Average.

(d) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of issue or

year of purchase, of the Moody's Corporate Bond Yield Average

for:

(1) a single premium immediate annuity or annuity benefits

involving life contingencies arising from another annuity with a

cash settlement option or from a guaranteed interest contract

with a cash settlement option;

(2) an annuity or guaranteed interest contract with a cash

settlement option, other than an annuity or contract described by

Subdivision (1), that is valued on an issue year basis and has a

guarantee duration as determined under Section 425.062(f) of 10

years or less; or

(3) an annuity or guaranteed interest contract without a cash

settlement option.

(e) The reference interest rate is the lesser of the average

over a period of 36 months or the average over a period of 12

months, ending on June 30 of the calendar year of issue or

purchase, of the Moody's Corporate Bond Yield Average for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on an issue year basis and has a guarantee

duration as determined under Section 425.062(f) greater than 10

years.

(f) The reference interest rate is the average over a period of

12 months, ending on June 30 of the calendar year of the change

in the fund, of the Moody's Corporate Bond Yield Average, for an

annuity or guaranteed interest contract with a cash settlement

option, other than an annuity or contract described by Subsection

(d)(1), that is valued on a change in fund basis.

(g) At least annually, the commissioner shall:

(1) determine whether the reference interest rates prescribed by

Subsections (c), (d), (e), and (f) continue to be a reasonably

accurate approximation of the average yield achieved from

purchases in the United States in publicly quoted markets of

investment grade fixed term and fixed interest corporate

obligations for the periods referenced in Subsection (c), (d),

(e), or (f), as applicable; and

(2) if the commissioner determines that a reference interest

rate prescribed by Subsection (c), (d), (e), or (f) is not a

reasonably accurate approximation of the average yield described

by Subdivision (1), adopt rules in the manner prescribed by

Chapters 2001 and 2002, Government Code, to prescribe an

alternative method of determining a reference interest rate, as

appropriate, that is a reasonably accurate approximation of that

average yield.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.064. COMMISSIONERS RESERVE VALUATION METHOD. (a)

Except as otherwise provided by Sections 425.065 and 425.068 and

subject to Subsection (b), for the life insurance and endowment

benefits of a policy that provides for a uniform amount of

insurance and that requires the payment of uniform premiums, the

reserve according to the commissioners reserve valuation method

is the difference, if greater than zero, of the present value on

the date of valuation of those future guaranteed benefits, minus

the present value on that date of any future modified net

premiums for a policy described by this subsection. The modified

net premiums for a policy described by this subsection are a

uniform percentage of the respective contract premiums for those

benefits, so that the present value on the policy's issue date of

all the modified net premiums is equal to the sum of:

(1) the present value on that date of those benefits; and

(2) the difference, if greater than zero, between:

(A) a net level annual premium equal to the present value on the

policy's issue date of the benefits provided for after the first

policy year, divided by the present value on the policy's issue

date of an annuity of one per year, payable on the first policy

anniversary and on each subsequent policy anniversary on which a

premium becomes due; and

(B) a net one-year term premium for the benefits provided for in

the first policy year.

(b) A net level annual premium under Subsection (a)(2)(A) may

not exceed the net level annual premium on the 19-year premium

whole life plan for insurance of the same amount at an age that

is one year older than the age on the policy's issue date.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the contract

premium for the first policy year exceeds the contract premium

for the second year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For purposes of this

subsection, the "assumed ending date" is the first policy

anniversary on which the sum of any endowment benefit and any

cash surrender value available on that date is greater than the

excess premium. The reserve according to the commissioners

reserve valuation method for a policy to which this subsection

applies as of any policy anniversary occurring on or before the

assumed ending date is, except as otherwise provided by Section

425.068, the greater of:

(1) the reserve as of the policy anniversary computed as

prescribed by Subsection (a); or

(2) the reserve as of the policy anniversary computed as

prescribed by Subsection (a) but with:

(A) the value prescribed by Subsection (a)(2)(A) reduced by 15

percent of the amount of the excess first-year premium;

(B) each present value of a benefit or premium determined

without reference to a premium or benefit provided under the

policy after the assumed ending date;

(C) the policy assumed to mature on the assumed ending date as

an endowment; and

(D) the cash surrender value provided on the assumed ending date

considered to be an endowment benefit.

(d) In making the comparison required by Subsection (c), the

mortality tables and interest bases described by Sections

425.058, 425.061, 425.062, and 425.063 must be used.

(e) Reserves according to the commissioners reserve valuation

method for the following policies, contracts, and benefits must

be computed by a method consistent with the principles of this

section:

(1) a life insurance policy that provides for a varying amount

of insurance or that requires the payment of varying premiums;

(2) a group annuity or pure endowment contract purchased under a

retirement or deferred compensation plan established or

maintained by an employer, including a partnership or sole

proprietorship, by an employee organization, or by both, other

than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments;

(3) disability or accidental death benefits in a policy or

contract; and

(4) all other benefits, other than life insurance and endowment

benefits in a life insurance policy or benefits provided by any

other annuity or pure endowment contract.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.065. COMMISSIONERS ANNUITY RESERVE VALUATION METHOD.

(a) This section applies to an annuity or pure endowment

contract other than a group annuity or pure endowment contract

purchased under a retirement or deferred compensation plan

established or maintained by an employer, including a partnership

or sole proprietorship, by an employee organization, or by both,

other than a plan providing individual retirement accounts or

individual retirement annuities under Section 408, Internal

Revenue Code of 1986, and that section's subsequent amendments.

(b) Reserves according to the commissioners annuity reserve

method for benefits under an annuity or pure endowment contract,

excluding any disability or accidental death benefits in the

contract, are the greatest of the respective excesses of the

present values on the valuation date of the future guaranteed

benefits under the contract at the end of each respective

contract year, including guaranteed nonforfeiture benefits, minus

the present value on the valuation date of any future valuation

considerations derived from future gross considerations that are

required by the contract terms and that become payable before the

end of the respective contract year. The future guaranteed

benefits must be determined by using the mortality table, if any,

and the interest rate or rates specified in the contract for

determining guaranteed benefits. The valuation considerations

are the portions of the respective gross considerations applied

under the contract terms to determine nonforfeiture values.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.066. MINIMUM AGGREGATE RESERVES. (a) An insurance

company's aggregate reserves for all life insurance policies,

excluding disability or accidental death benefits, issued by the

company on or after the date on which Chapter 1105 applies to

policies issued by the company, as determined under Section

1105.002(a) or (b), may not be less than the aggregate reserves

computed in accordance with the methods prescribed by Sections

425.064, 425.065, 425.068, and 425.069 and the mortality table or

tables and interest rate or rates used in computing nonforfeiture

benefits for those policies.

(b) The aggregate reserves of an insurance company to which this

section applies for all policies, contracts, and benefits may not

be less than the aggregate reserves determined to be necessary to

issue a favorable opinion under Section 425.054.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.067. OPTIONAL RESERVE COMPUTATIONS. (a) Reserves for

a policy or contract issued by a life insurance company before

the date on which Chapter 1105 would apply to the policy or

contract, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for all those policies and

contracts than the minimum reserves required by the laws

applicable to those policies and contracts immediately before

that date.

(b) Reserves for any category, as established by the

commissioner, of policies, contracts, or benefits issued by a

life insurance company on or after the date on which Chapter 1105

applies to policies, contracts, or benefits issued by the

company, as determined under Section 1105.002(a) or (b), may be

computed, at the company's option, according to any standard that

produces greater aggregate reserves for the category than the

minimum aggregate reserves computed according to the standard

provided by this subchapter, but the interest rate or rates used

for those policies and contracts, other than annuity and pure

endowment contracts, may not be higher than the corresponding

interest rate or rates used in computing any nonforfeiture

benefits provided in those policies or contracts.

(c) An insurance company that has adopted a standard of

valuation that produces greater minimum aggregate reserves than

the aggregate reserves computed according to the standard

provided by this subchapter may, with the commissioner's

approval, adopt any lower standard of valuation that produces

aggregate reserves at least equal to the minimum aggregate

reserves computed according to the standard provided by this

subchapter.

(d) For purposes of this section, the holding of additional

reserves previously determined to be necessary to issue a

favorable opinion under Section 425.054 may not be considered to

be the adoption of a higher standard of valuation.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.068. RESERVE COMPUTATION: GROSS PREMIUM CHARGED LESS

THAN VALUATION NET PREMIUM. (a) If in a contract year the gross

premium charged by a life insurance company on a policy or

contract is less than the valuation net premium for the policy or

contract computed by the method used in computing the reserve on

the policy or contract but using the minimum valuation mortality

standards and interest rate, the minimum reserve required for the

policy or contract is the greater of:

(1) the reserve computed according to the mortality table,

interest rate, and method actually used for the policy or

contract; or

(2) the reserve computed by the method actually used for the

policy or contract but using the minimum valuation mortality

standards and interest rate and replacing the valuation net

premium with the actual gross premium in each contract year for

which the valuation net premium exceeds the actual gross premium.

(b) The minimum valuation mortality standards and interest rate

under Subsection (a) are the standards and rate provided by

Sections 425.058, 425.061, 425.062, and 425.063.

(c) This subsection applies only to a life insurance policy

issued on or after January 1, 1985, for which the gross premium

for the first policy year exceeds the gross premium for the

second policy year, for which a comparable additional benefit is

not provided in the first year for the excess premium, and that

provides an endowment benefit, a cash surrender value, or a

combination of an endowment benefit and cash surrender value, in

an amount greater than the excess premium. For a policy to which

this subsection applies, Subsections (a) and (b) shall be applied

as if the method actually used in computing the reserve for the

policy were the method described in Section 425.064, ignoring

Section 425.064(c). The minimum reserve at each policy

anniversary is the greater of:

(1) the minimum reserve computed in accordance with Section

425.064, including Section 425.064(c); or

(2) the minimum reserve computed in accordance with this

section.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.069. RESERVE COMPUTATION: INDETERMINATE PREMIUM PLANS

AND CERTAIN OTHER PLANS. (a) For a life insurance plan that

provides for future premium determination, the amounts of which

are to be determined by the insurance company based on estimates

of future experience, or a life insurance plan or annuity for

which the minimum reserves cannot be determined by the methods

described by Sections 425.064, 425.065, and 425.068, the reserves

held must:

(1) be appropriate in relation to the benefits and the pattern

of premiums for the plan; and

(2) be computed by a method that is consistent with the

principles of this subchapter, as determined by commissioner

rule.

(b) Notwithstanding any other provision of state law, the

commissioner must affirmatively approve a policy, contract, or

certificate that provides life insurance under a plan described

by Subsection (a) before the policy, contract, or certificate may

be marketed, issued, delivered, or used in this state.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.070. COMPUTATION OF RESERVE FOR CERTAIN POLICIES BY

CALENDAR YEAR OF ISSUE. (a) The reserve for a policy or

contract issued by a life insurance company before the date on

which Chapter 1105 would apply to the policy or contract, as

determined under Section 1105.002(a) or (b), must be computed in

accordance with the terms of the policy or contract and this

section.

(b) For a policy issued before January 1, 1910, the computation

must be based on the American Experience Table of Mortality and

4-1/2 percent annual interest.

(c) For a policy issued on or after January 1, 1910, and before

January 1, 1948, the computation must be based on:

(1) the Actuaries or Combined Experience Table of Mortality and

four percent annual interest, if the interest rate guaranteed in

the policy is four percent annually or higher; or

(2) the American Experience Table of Mortality and the lower

rate specified in the policy, if the policy was issued on a

reserve basis of an interest rate lower than four percent

annually.

(d) For a policy issued on or after January 1, 1948, the

computation must be based on the mortality table and interest

rate specified in the policy, provided that:

(1) the specified interest rate may not exceed 3-1/2 percent

annually;

(2) the specified table for a policy, other than an industrial

life insurance policy, is the American Experience Table of

Mortality, the American Men Ultimate Table of Mortality, the

Commissioners 1941 Standard Ordinary Mortality Table, or, for a

policy issued after December 31, 1959, the Commissioners 1958

Standard Ordinary Mortality Table; and

(3) the specified table for an industrial life insurance policy

is the American Experience Table of Mortality, the Standard

Industrial Mortality Table, the Sub-Standard Industrial Mortality

Table, the 1941 Standard Industrial Mortality Table, or the 1941

Sub-Standard Industrial Mortality Table, or, for a policy issued

after December 31, 1963, the Commissioners 1961 Standard

Industrial Mortality Table.

(e) For a policy, other than an industrial life insurance

policy, issued after December 31, 1959, to insure a female risk,

the computation must be based on any mortality table and interest

rate permitted under Subsection (d) and specified in the policy

but may, at the insurance company's option, be based on an age

not more than three years younger than the insured's actual age.

(f) Except as otherwise provided by Section 425.059 for coverage

purchased under a group annuity or pure endowment contract to

which that section applies, for a policy issued on a substandard

risk, an annuity contract, or a contract or policy for disability

benefits or accidental death benefits, the computation must be

based on the standards and methods adopted by the insurance

company and approved by the commissioner.

(g) For a group insurance policy issued before May 15, 1947, the

computation must be based on the American Men Ultimate Table of

Mortality with interest at the rate of three percent or 3-1/2

percent annually as provided by the policy. The reserve value of

a group insurance policy issued on or after May 15, 1947, and

before January 1, 1961, must be computed on the basis of either

the American Men Ultimate Table of Mortality or the Commissioners

1941 Standard Ordinary Mortality Table with interest at a rate

not to exceed 3-1/2 percent annually as provided by the policy.

For a group insurance policy issued on or after January 1, 1961,

the computation must be based on an interest rate not to exceed

3-1/2 percent annually and the mortality table adopted by the

insurance company with the commissioner's approval.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.071. LAPSE RATES IN MINIMUM STANDARD OF VALUATION. (a)

The minimum standard of valuation under this subchapter may

include lapse rates in the calculation of reserves for a

secondary guarantee in universal life contracts issued after

December 31, 2006.

(b) For purposes of this section, a secondary guarantee refers

to specified conditions in a universal life contract that, if

satisfied, provide for death benefits to remain in effect

regardless of the accumulation value in the contract.

(c) Lapse rates authorized by this section may not exceed two

percent per year.

(d) The commissioner is authorized to adopt rules to implement

this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

681, Sec. 1, eff. June 15, 2007.

SUBCHAPTER C. AUTHORIZED INVESTMENTS AND TRANSACTIONS FOR CAPITAL

STOCK LIFE, HEALTH, AND ACCIDENT INSURERS

Sec. 425.101. DEFINITIONS. In this subchapter:

(1) "Assets" means the statutory accounting admitted assets of

an insurance company. The term includes lawful money of the

United States, whether in the form of cash or demand deposits in

solvent banks, savings and loan associations, credit unions, and

branches of those entities, organized under the laws of the

United States or a state of the United States, if held in

accordance with the laws or regulations applicable to those

entities. The term does not include the company's separate

accounts that are subject to Chapter 1152.

(2) "Securities valuation office" means the Securities Valuation

Office of the National Association of Insurance Commissioners.

Added by Acts 2005, 79th Leg., Ch.

727, Sec. 1, eff. April 1, 2007.

Sec. 425.102. INAPPLICABILITY OF CERTAIN LAW. The definition of

"state" assigned by Section 311.005, Government Code, does not

apply to this s