PUBLIC LAW 105-277—OCT. 21, 1998 112 STAT. 2681-898 "(3) PRINCIPLES FOR DETERMINING INSURANCE INCOME. — Except as provided by the Secretary, for purposes of subparagraphs (A) and (B) of paragraph (2)— "(A) in the case of any contract which is a separate account-type contract (including any variable contract not meeting the requirements of section 817), income credited under such contract shall be allocable only to such contract, and "(B) income not allocable under subparagraph (A) shall be allocated ratably among contracts not described in subparagraph (A). " (4) METHODS FOR DETERMINING UNEARNED PREMIUMS AND RESERVES.— For purposes of paragraph (2)(A)— "(A) PROPERTY AND CASUALTY CONTRACTS.—The unearned premiums and reserves of a qualifying insurance compgmy or a qualifying insurance company branch with respect to property, casualty, or health insurance contracts shall be determined using the same methods and interest rates which would be used if such company or branch were subject to tax under subchapter L, except that— "(i) the interest rate determined for the functional currency of the company or branch, and which, except as provided by the Secretary, is calculated in the same manner as the Federal mid-term rate under section 1274(d), shall be substituted for the applicable Federal interest rate, and "(ii) such company or branch shall use the appropriate foreign loss payment pattern. "(B) LIFE INSURANCE AND ANNUITY CONTRACTS. —The amount of the reserve of a qualifying insurance company or qualifying insurance company branch for any life insurance or annuity contract shall be equal to the greater of— "(i) the net surrender value of such contract (as defined in section 807(e)(1)(A)), or "(ii) the reserve determined under paragraph (5). "(C) LIMITATION ON RESERVES. —In no event shall the reserve determined under this paragraph for any contract as of any time exceed the amount v,^hich would be taken into account with respect to such contract as of such time in determining foreign statement reserves (less any catastrophe, deficiency, equalization, or similar reserves). "(5) AMOUNT OF RESERVE. —The amount of the reserve determined under this paragraph with reispect to any contract shall be determined in the same manner as it would be determined if the qualifying insurance company or qualifying insurance company branch were subject to tax under subchapter L, except that in applying such subchapter— "(A) the interest rate determined for the functional currency of the company or branch, and which, except as provided by the Secretary, is calculated in the same manner as the Federal mid-term rate under section 1274(d), shall be substituted for the applicable Federal interest rate, "(B) the highest assumed interest rate permitted to be used in determining foreign statement reserves shall
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