(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 § 425.063; and
(4) W is the weighting factor determined under § 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).

Terms Used In Texas Insurance Code 425.061

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Contract: A legal written agreement that becomes binding when signed.
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Life insurance: means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual. See Texas Insurance Code 425.052
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • Year: means 12 consecutive months. See Texas Government Code 311.005

(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 § 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 § 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.

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