(a) Except as provided in §3.6102 of this subchapter (relating to Claims Reserves), the minimum reserves for premium refunds required by these rules and the payment of benefits under outstanding credit life insurance policies and certificates issued prior to January 1, 2009, may not be less in the aggregate than 130 percent of the reserves computed on the 1958 CSO Mortality Table with interest not to exceed 5.5 percent; or, at the option of the company, such reserves may be maintained at 100 percent of the reserves computed on the 1941 CSO Mortality Table or the 1958 CET Mortality Table with interest not to exceed 5.5 percent; or 150 percent of the 1980 CSO Mortality Table with interest not to exceed 5.5 percent; provided, however, notwithstanding any other law or rule, the minimum reserve requirements for policy reserves applicable to credit life policies and certificates issued prior to January 1, 2009, under the Insurance Code Chapter 1153 or these rules are met if, in aggregate, the reserves are maintained at 100 percent of the 1980 CSO Mortality Table, with interest not to exceed 5.5 percent. Subchapter EE of this chapter (relating to Valuation of Life Insurance Policies) shall not apply to credit life insurance. For credit life insurance policies and certificates issued on or after January 1, 2009, the minimum reserve requirements are as follows:

(1) The minimum standard for both male and female insureds shall be the 2001 CSO Male Composite Ultimate Mortality Table. This table contains rates of mortality that do not distinguish between smokers and nonsmokers and is one of the tables contained in the 2001 CSO Mortality Table adopted by reference in §3.9103(d) of this chapter (relating to 2001 CSO Mortality Table).

(2) Where the credit life insurance policy or certificate insures two lives, the minimum standard shall be twice the mortality in the 2001 CSO Male Composite Ultimate Mortality Table based on the age of the older insured.

(3) The interest rates used in determining the minimum standard of valuation shall be the calendar year valuation interest rates as defined in the Insurance Code §§425.060 - 425.063.

(4) The method used in determining the minimum standard for valuation shall be the commissioners reserve valuation method as defined in the Insurance Code §425.064.

(b) The policy reserve requirements for single premium credit accident and health insurance contracts issued on or after January 1, 2009, are prescribed in §§3.7001, 3.7004, 3.7005, and 3.7006 of this chapter (relating to Introduction; Contract Reserves; Reinsurance; and Specific Standards for Morbidity, Interest, and Mortality). The policy reserve requirements for credit accident and health insurance contracts issued after December 31, 1980, and before January 1, 2009, and for non-single premium credit accident and health insurance contracts issued on or after January 1, 2009, may not be less than the product rounded to the next higher dollar of the gross presumptive single premium rate per $100 of insured indebtedness for the term of the indebtedness remaining as of the valuation date times the number of hundreds of dollars of indebtedness outstanding as of the valuation date (herein called the rule of anticipation) or, as an alternative and at the option of the insurer, the mean of the gross unearned premium calculated by the "sum of the digits" (rule of 78) and the pro rata methods. The reserve for such insurance which has an effective date prior to January 1, 1981, may not be less than the gross unearned premium calculated by the sum of the digits (rule of 78) method.

(c) Pursuant to the Insurance Code §425.058(l)(4), for all credit insurance contracts, if the net premium refund liability exceeds the aggregate recorded contract reserves, the insurer shall establish an additional reserve liability that is equal to the excess of the net refund liability over the contract reserve recorded. The net refund liability may include consideration of commission, premium tax, and other expenses recoverable.

Source Note: The provisions of this §3.6101 adopted to be effective October 1, 1980, 5 TexReg 2772; amended to be effective June 30, 1992, 17 TexReg 4345; amended to be effective February 16, 2003, 28 TexReg 1195; amended to be effective January 26, 2010, 35 TexReg 485