(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.

Terms Used In Texas Insurance Code 425.068

  • Company: means an entity that:
    (A) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and has at least one such policy in force or on claim; or
    (B) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state. See Texas Insurance Code 425.052
  • 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
  • Year: means 12 consecutive months. See Texas Government Code 311.005

(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 § 425.064, ignoring § 425.064(c). The minimum reserve at each policy anniversary is the greater of:
(1) the minimum reserve computed in accordance with § 425.064, including § 425.064(c); or
(2) the minimum reserve computed in accordance with this section.

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