Tex.
Ins. Code Section 425.073
Valuation Manual for Policies Issued on or After the Operative Date of the Valuation Manual
(a)
Except as otherwise provided by this section, for policies issued on or after the operative date of the valuation manual, the standard prescribed by the valuation manual is the minimum standard of valuation required under Section 425.0535 (Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual).(b)
The commissioner by rule shall adopt a valuation manual and determine the operative date of the valuation manual. A valuation manual adopted by the commissioner under this section must be substantially similar to the valuation manual approved by the National Association of Insurance Commissioners. The operative date must be January 1 of the first calendar year immediately following a year in which, on or before July 1, the commissioner determines that:(1)
the valuation manual has been adopted by the National Association of Insurance Commissioners by an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater;(2)
the National Association of Insurance Commissioners Standard Model Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than 75 percent of the direct premiums written as reported in the following annual statements submitted for 2008:(A)
life insurance and accident and health annual statements;(B)
health annual statements; or(C)
fraternal annual statements; and(3)
the National Association of Insurance Commissioners Standard Model Valuation Law, as amended by the National Association of Insurance Commissioners in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions:(A)
the 50 United States;(B)
American Samoa;(C)
the United States Virgin Islands;(D)
the District of Columbia;(E)
Guam; and(F)
Puerto Rico.(c)
After a valuation manual has been adopted by the commissioner by rule, any changes to the valuation manual must be adopted by rule and must be substantially similar to changes adopted by the National Association of Insurance Commissioners. Unless a change in the valuation specifies a later effective date, the effective date for changes to the valuation manual may not be earlier than January 1 of the year immediately following the date on which the commissioner determines that the changes to the valuation manual have been adopted by the National Association of Insurance Commissioners by an affirmative vote representing:(1)
at least three-fourths of the members of the National Association of Insurance Commissioners voting, but not less than a majority of the total membership; and(2)
members of the National Association of Insurance Commissioners representing jurisdictions totaling greater than 75 percent of the direct premiums written as reported in the most recently available annual statements as provided by Subsections (b)(2)(A)-(C).(d)
The valuation manual must specify:(1)
the minimum valuation standards for and definitions of the policies or contracts subject to Section 425.0535 (Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual), including:(A)
the commissioner’s reserve valuation method for life insurance contracts subject to Section 425.0535 (Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual);(B)
the commissioner’s annuity reserve valuation method for annuity contracts subject to Section 425.0535 (Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual); and(C)
the minimum reserves for all other policies or contracts subject to Section 425.0535 (Annual Valuation of Reserves for Policies and Contracts Issued on or After Operative Date of Valuation Manual);(2)
the policies or contracts that are subject to the requirements of a principle-based valuation under Section 425.074 (Requirements of a Principle-based Valuation) and the minimum valuation standards consistent with those requirements, including:(A)
the requirements for the format of reports to the commissioner under Section 425.074 (Requirements of a Principle-based Valuation)(b)(3), which must include the information necessary to determine if a valuation is appropriate and in compliance with this subchapter;(B)
the assumptions prescribed for risks over which the company does not have significant control or influence; and(C)
the procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of the procedures;(3)
the policies that are not subject to a principle-based valuation under Section 425.074 (Requirements of a Principle-based Valuation);(4)
the data and form of data required under Section 425.075 (Experience Reporting for Policies in Force on or After Operative Date of Valuation Manual), to whom the data must be submitted, and other desired requirements, including requirements concerning data analyses and reporting of analyses;(5)
other requirements, including requirements relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, disclosure, certification, reports, actuarial opinions and memorandums, transition rules, and internal controls; and(6)
an exemption that allows certain companies to value reserves based on an exception from certain requirements of this section and Section 425.074 (Requirements of a Principle-based Valuation).(e)
Repealed by Acts 2023, 88th Leg., R.S., Ch. 611 (H.B. 3673), Sec. 2, eff. September 1, 2023.(f)
With respect to policies that are not subject to a principle-based valuation under Section 425.074 (Requirements of a Principle-based Valuation) as described by Subsection (d)(3), the minimum valuation standard specified in the valuation manual must:(1)
be consistent with the minimum valuation standard before the operative date of the valuation manual; or(2)
develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring.(g)
In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual does not in the commissioner’s opinion comply with this subchapter, the company shall, with respect to the requirement, comply with minimum valuation standards prescribed by the commissioner by rule.(h)
The commissioner may employ or contract with a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and provide an opinion concerning the appropriateness of any reserve assumption or method used by the company, or to review and provide an opinion on a company’s compliance with any requirement of this subchapter. The commissioner may rely on the opinion, regarding provisions contained within this subchapter, of a qualified actuary engaged by the insurance supervisory official of another state.(i)
The commissioner may require a company to change an assumption or method as necessary in the commissioner’s opinion to comply with a requirement of the valuation manual or this subchapter.(j)
The commissioner may take other disciplinary action as permitted under Chapter 82 (Sanctions).
Source:
Section 425.073 — Valuation Manual for Policies Issued on or After the Operative Date of the Valuation Manual, https://statutes.capitol.texas.gov/Docs/IN/htm/IN.425.htm#425.073 (accessed Jun. 5, 2024).
