Texas Insurance Code 887.405 – Computation of Reserve Liability
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(a) Each year, an association shall compute its reserve liability on all outstanding insurance certificates.
(b) To make the computation, an association:
(1) shall use the net premium basis in accordance with the reserve table and interest rate adopted by the association and approved by the commissioner; and
(2) may use group methods and approximate averages for fractions of a year.
Terms Used In Texas Insurance Code 887.405
- 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
- Year: means 12 consecutive months. See Texas Government Code 311.005
(c) The reserve liability may be computed on not more than a one-year preliminary term.
(d) As soon as practical each year, the commissioner shall compute or cause to be computed the reserve liability of each association. To make the computation, the commissioner may use group methods and approximate averages for fractions of a year.