28 Tex. Admin. Code § 3.7003 - Premium Reserves
(a) General.
(1) Unearned premium reserves are required
for all contracts with respect to the period of coverage for which premiums,
other than premiums paid in advance, have been paid beyond the date of
valuation.
(2) Single premium
credit accident and health insurance, both individual and group, is excluded
from the unearned premium reserve requirements of this subchapter.
(3) If premiums due and unpaid are carried as
an asset, such premiums must be treated as premiums in force, subject to
unearned premium reserve determination. The value of unpaid commissions,
premium taxes, and the cost of collection associated with due and unpaid
premiums must be carried as an offsetting liability.
(4) The gross premiums paid in advance for a
period of coverage commencing after the next premium due date which follows the
date of valuation may be appropriately discounted to the valuation date and
shall be held either as a separate liability or as an addition to the unearned
premium reserve which would otherwise be required as a minimum.
(b) Minimum standards for unearned
premium reserves.
(1) The minimum unearned
premium reserve with respect to any contract is an amount which is not in
excess of the amount or inconsistent with the methods established by the
Insurance Code §
862.102. The minimum
standard shall be the pro rata unearned modal premium that applies to the
premium period beyond the valuation date, with such premium determined on the
basis of:
(A) the valuation net modal premium
on the contract reserve basis applying to the contract; or
(B) the gross modal premium for the contract
if no contract reserve applies.
(2) However, in no event may the sum of the
unearned premium and contract reserves for all contracts of the insurer subject
to contract reserve requirements be less than the gross modal unearned premium
reserve on all such contracts, as of the date of valuation. The reserve shall
never be less than the expected claims for the period beyond the valuation date
represented by the unearned premium reserve to the extent not provided for
elsewhere.
(c) Premium
reserve methods generally. The insurer may employ suitable approximations and
estimates, including, but not limited to, groupings, averages, and aggregate
estimation, in computing premium reserves. Such approximations or estimates
should be tested periodically to determine their continuing adequacy and
reliability.
Notes
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