The Commissioner of Insurance adopts amended 28 TAC
§3.9901, relating to the adoption of changes to the valuation
manual for reserving and related requirements. The amendment is adopted
without changes to the proposed text published in the November 6,
2020, issue of the Texas Register (45
TexReg 7979).

REASONED JUSTIFICATION. Amended §3.9901 is necessary to satisfy
Insurance Code §425.073, which requires the Commissioner to adopt
a valuation manual that is substantially similar to the valuation
manual adopted by the National Association of Insurance Commissioners
(NAIC). The adopted NAIC valuation manual may currently be viewed
at: content.naic.org/sites/default/files/pbr_data_valuation_manual_future_edition.pdf.
Effective January 1, 2021, the adopted manual can be viewed at the
following website: content.naic.org/sites/default/files/pbr_data_valuation_manual_current_edition.pdf.

Under Insurance Code §425.073, the Commissioner must adopt
the valuation manual, and any changes to it, by rule.

Under Insurance Code §425.073(c), when the NAIC adopts changes
to the valuation manual, the Texas Department of Insurance (TDI) must
adopt substantially similar changes. This subsection also requires
the Commissioner to determine that the NAIC's changes were approved
by an affirmative vote representing at least three-fourths of the
voting NAIC members, but not less than a majority of the total membership.
In addition, the NAIC members voting in favor of amending the valuation
manual must represent jurisdictions totaling greater than 75% of the
direct written premiums as reported in the most recently available
life, accident, and health/fraternal annual statements and health
annual statements.

TDI originally adopted the valuation manual in §3.9901 on
December 29, 2016, in compliance with Insurance Code §425.073.
On August 14, 2020, the NAIC voted to adopt changes to the valuation
manual. Fifty-four jurisdictions, representing 99.98% of the relevant
direct written premiums, voted in favor of adopting the amendments.
The vote adopting changes to the NAIC valuation manual meets the requirements
of Insurance Code §425.073(c).

Amended §3.9901. TDI amended §3.9901 by striking the
date on which the NAIC adopted its previous valuation manual and inserting
the date on which the NAIC adopted its current valuation manual, changing
it from August 6, 2019, to August 14, 2020.

In addition to clarifying existing provisions, the 2021 valuation
manual includes changes to:

- directly reference the interest rate used in the definition of
"life insurance" under the Tax Code as the floor for the life nonforfeiture
interest rate;

- allow for a transition from using the London Inter-bank Offered
Rate because that rate standard is being eliminated;

- allow companies to use different credibility methods for different
blocks of the life principle-based reserving business; and

- provide that reserving must reflect risks due to policy conversions
and be included in reporting requirements.

SUMMARY OF COMMENTS. TDI did not receive any comments on the proposed amendment.

STATUTORY AUTHORITY. The Commissioner adopts amended
28 TAC §3.9901 under Insurance Code §425.073 and §36.001.

Section 425.073 requires the Commissioner to adopt changes to the
valuation manual that are substantially similar to the changes to
the valuation manual adopted by NAIC, and it provides that after a
valuation manual has been adopted by the Commissioner by rule, any
changes to the valuation manual must be adopted by rule.

Insurance Code §36.001 provides that the Commissioner may
adopt any rules necessary and appropriate to implement the powers
and duties of TDI under the Insurance Code and other laws of this state.

The agency certifies that legal counsel has reviewed the
adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2020.

TRD-202005356

James Person

General Counsel

Texas Department of Insurance

Effective date: December 29, 2020

Proposal publication date: November 6, 2020

For further information, please call: (512) 676-6584