28 Tex. Admin. Code § 3.4504 - Definitions
The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Basic
reserves--reserves calculated in accordance with the principles of the
Insurance Code §
425.064.
(2) Contract segmentation method--the method
of dividing the period from issue to mandatory expiration of a policy into
successive segments, with the length of each segment being defined as the
period from the end of the prior segment (from policy inception, for the first
segment) to the end of the latest policy year as determined below. All
calculations are made using the 1980 CSO valuation tables, as defined in this
section, (or any other valuation mortality table adopted by the NAIC after the
effective date of this subchapter and promulgated by regulation by the
commissioner for this purpose), and, if elected, the optional minimum mortality
standard for deficiency reserves stipulated in §
3.4505(b) of
this subchapter (relating to General Calculation Requirements for Basic
Reserves and Premium Deficiency Reserves).
(3)
Deficiency reserves--the excess, if greater than zero, of the minimum reserves
calculated in accordance with the principles of the Insurance Code §
425.068 over the basic
reserves.
(4) Guaranteed gross
premiums--the premiums under a policy of life insurance that are guaranteed and
determined at issue.
(5) Maximum
valuation interest rates--the interest rates defined in the Insurance Code §
425.061, Computation
of Minimum Standard by Calendar Year of Issue, that are to be used in
determining the minimum standard for the valuation of life insurance
policies.
(6) NAIC--National
Association of Insurance Commissioners.
(7) 1980 CSO valuation tables--the
Commissioners' 1980 Standard Ordinary Mortality Table (1980 CSO Table) without
ten-year selection factors, incorporated into the 1980 amendments to the NAIC
Standard Valuation Law, and variations of the 1980 CSO Table approved by the
NAIC, such as the smoker and nonsmoker versions approved in December
1983.
(8) Scheduled gross
premium--the smallest illustrated gross premium at issue for other than
universal life insurance policies. For universal life insurance policies,
scheduled gross premium means the smallest specified premium described in §
3.4507(a)(3) of
this subchapter (relating to Calculation of Minimum Valuation Standard for
Flexible Premium and Fixed Premium Universal Life Insurance Policies That
Contain Provisions Resulting in the Ability of a Policyowner to Keep a Policy
in Force Over a Secondary Guarantee Period) if any, or else the minimum premium
described in §
3.4507(a)(4) of
this subchapter.
(9) Segmented
reserves--reserves, calculated using segments produced by the contract
segmentation method, equal to the present value of all future guaranteed
benefits less the present value of all future net premiums to the mandatory
expiration of a policy, where the net premiums within each segment are a
uniform percentage of the respective guaranteed gross premiums within the
segment. The length of each segment is determined by the "contract segmentation
method," as defined in this section. The interest rates used in the present
value calculations for any policy may not exceed the maximum valuation interest
rate, determined with a guarantee duration equal to the sum of the lengths of
all segments of the policy. For both basic reserves and deficiency reserves
computed by the segmented method, present values must include future benefits
and net premiums in the current segment and in all subsequent segments. The
uniform percentage for each segment is such that, at the beginning of the
segment, the present value of the net premiums within the segment equals:
(A) the present value of the death benefits
and endowment benefits within the segment, plus
(B) the present value of any unusual
guaranteed cash value (see §
3.4506(d) of
this subchapter (relating to Calculation of Minimum Valuation Standard for
Policies with Guaranteed Nonlevel Gross Premiums or Guaranteed Nonlevel
Benefits (Other than Universal Life Policies)) occurring at the end of the
segment, less
(C) any unusual
guaranteed cash value occurring at the start of the segment, plus
(D) for the first segment only, the excess of
clause (i) of this paragraph over clause (ii) of this paragraph, as follows:
(i) a net level annual premium equal to the
present value, at the date of issue, of the benefits provided for in the first
segment after the first policy year, divided by the present value, at the date
of issue, of an annuity of one per year payable on the first and each
subsequent anniversary within the first segment on which a premium falls due.
However, the net level annual premium shall not exceed the net level annual
premium on the nineteen-year premium whole life plan of insurance of the same
renewal year equivalent level amount at an age one year higher than the age at
issue of the policy.
(ii) a net one
year term premium for the benefits provided for in the first policy
year.
(10)
Tabular cost of insurance--the net single premium at the beginning of a policy
year for one-year term insurance in the amount of the guaranteed death benefit
in that policy year.
(11) Ten-year
select factors--the select factors in the Insurance Code Chapter 425,
Subchapter B, The Standard Valuation Law.
(12) Unitary reserves--the present value of
all future guaranteed benefits less the present value of all future modified
net premiums, where:
(A) guaranteed benefits
and modified net premiums are considered to the mandatory expiration of the
policy; and
(B) modified net
premiums are a uniform percentage of the respective guaranteed gross premiums,
where the uniform percentage is such that, at issue, the present value of the
net premiums equals the present value of all death benefits and pure
endowments, plus the excess of clause (i) of this subparagraph over clause (ii)
of this subparagraph, as follows:
(i) a net
level annual premium equal to the present value, at the date of issue, of the
benefits provided for after the first policy year, divided by the present
value, at the date of issue, of an annuity of one per year payable on the first
and each subsequent anniversary of the policy on which a premium falls due.
However, the net level annual premium shall not exceed the net level annual
premium on the nineteen-year premium whole life plan of insurance of the same
renewal year equivalent level amount at an age one year higher than the age at
issue of the policy.
(ii) a net one
year term premium for the benefits provided for in the first policy
year.
(C) The interest
rates used in the present value calculations for any policy may not exceed the
maximum valuation interest rate, determined with a guarantee duration equal to
the length from issue to the mandatory expiration of the policy.
(13) Universal life insurance
policy--any individual life insurance policy under the provisions of which
separately identified interest credits (other than in connection with dividend
accumulations, premium deposit funds, or other supplementary accounts) and
mortality or expense charges are made to the policy.
Notes
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