SECTION 13.27. Reserve Requirements

(a) General. The life insurance reserves required to be maintained by all mutual assessment associations shall be computed in accordance with recognized actuarial principles based upon the liability of the association as set out in its various life insurance contracts. In general, the following rules will apply.

(1) As required by the Insurance Code Article 14.15, §2, the reserve liabilities for all outstanding contracts of life insurance shall be computed as soon as possible after the end of each calendar year and a detailed copy of such valuation submitted to the State Board of Insurance. One copy of the valuation must be retained in the home office of the association and be available for the periodical examination of such association. The valuation submitted to the State Board of Insurance must include a recap and summary and be in such form as to enable the reserve analysts to verify the accuracy of such valuation based on the outstanding business as of date of valuation. Valuation forms will be supplied by the State Board of Insurance for those associations which desire to compute their reserves manually by group valuation methods. Machine valuations of reserves must include data sufficient to verify the accuracy and completeness of the valuation.

(2) If the association has computed its reserve liability based on the 1956 Chamberlain Table which provides for reserves calculated on a calendar year basis, the tabular reserve must be increased by an unearned net premium for policies for which the mode of premium payment is other than monthly. Such unearned net premium reserve will be the aggregate of the net premiums applicable to full months of insurance coverage subsequent to valuation date for which the contract premiums were paid prior to the date of valuation. The State Board of Insurance will accept a reasonable estimate of this unearned net premium in lieu of an amount determined by actual computation.

(b) Advanced premiums. All financial statements of the association must include a liability in both the expense fund and mortuary fund for their respective portions of gross premiums collected prior to premium due date.

(c) Unearned premium on accident and health policies. The computation of the unearned accident and health premium must be calculated in a manner described in the Insurance Code, Article 6.01, except that an unearned premium reserve is not required during the first policy year.

Source Note: The provisions of this §13.27 adopted to be effective January 1, 1976; amended to be effective April 11, 1983, 8 TexReg 1025.