N.Y. Insurance Law § 4517: Standard of valuation reserves

§ 4517. Standard of valuation reserves. (a) The legal minimum standard

of valuation for all life insurance certificates issued by an authorized

society prior to January first, nineteen hundred fifty-seven shall be in

accordance with provisions of law applicable thereto as of December

thirty-first, nineteen hundred fifty-six, including the setting aside

and maintenance of the required statutory contingency reserve on such of

its certificates as are valued on an interest assumption in excess of

three and one-half percent per annum. The legal minimum standard of

valuation for all annuity contracts, and disability benefits and

accident and sickness benefits in all certificates and contracts shall

be in accordance with the provisions of law applicable thereto as of

December thirty-first, nineteen hundred fifty-six.

(b) In every valuation report of every authorized society and in every

valuation of reserves made or caused to be made by the superintendent or

accepted by him in lieu of such valuation, the reserve liability on all

certificates issued on and after January first, nineteen hundred

fifty-seven shall be determined on a basis of the net tabular value of

the reserves on such certificates, not including any value for the right

to make extra payments or to require additional insurance contributions.

Such tabular values shall not be less than the reserve determined

according to the commissioners reserve valuation method as defined in

this subsection. If the premium charged is less than the tabular net

premium according to the basis of valuation used, an additional reserve

equal to the present value of the deficiency in such premiums, as

determined in the manner prescribed in section four thousand two hundred

eighteen of this chapter, shall be set up and maintained as a liability;

provided that, in the case of any society which is not qualifying with

the provisions of section four thousand five hundred fifteen of this

article, the deficiency reserve shall be determined on the basis of the

difference between the net insurance contribution, as in practice

actually collected for life insurance benefits, and the tabular net

premium. The reserve liability shall be properly adjusted in the event

that the mid-year or tabular values are not appropriate.

(1) Reserves according to the commissioners reserve valuation method,

for the life insurance and endowment benefits of certificates providing

for a uniform amount of insurance and requiring the payment of uniform

premiums shall be the excess, if any, of the present value, at the date

of valuation, of such future guaranteed benefits provided for by such

certificates, over the then present value of any future modified net

premiums therefor. The modified net premiums for any such certificate

shall be such uniform percentage of the respective contract premiums for

such benefits that the present value, at the date of issue of the

certificate, of all such modified net premiums shall be equal to the sum

of the then present value of such benefits provided for by the

certificate and the excess of:

(A) a net level premium equal to the present value, at the date of

issue, of such benefits provided for after the first certificate year,

divided by the present value, at the date of issue, of an annuity of one

dollar per annum payable on the first and each subsequent anniversary of

such certificate on which a premium falls due; provided however, that

such net level annual premium shall not exceed the net level annual

premium on the nineteen year premium whole life plan for insurance of

the same amount at an age one year higher than the age at issue of such

certificate, over

(B) a net one-year term premium for such benefits provided for in the

first certificate year.

(2) Reserves according to the commissioners reserve valuation method

for (i) life insurance certificates providing for varying amounts of

benefits or requiring the payment of varying premiums, (ii) annuity and

pure endowment benefits, (iii) disability and accidental death benefits

in all certificates and contracts, and (iv) all other benefits, except

life insurance and endowment benefits, shall be calculated by a method

consistent with the principles of this subsection (b), except that any

extra premiums charged because of impairments or special hazards shall

be disregarded in the determination of modified net premiums.

(c) (1) The minimum standard for the valuation of life insurance and

annuity certificates issued on and after January first, nineteen hundred

fifty-seven, but prior to July first, nineteen hundred seventy-two,

shall be three percent interest and for life insurance and annuity

certificates issued on and after July first, nineteen hundred

seventy-two, but prior to January first, nineteen hundred eighty, shall

be three and one-half percent interest, and the following tables:

(A) for certificates of life insurance issued prior to January first,

nineteen hundred seventy-five -- American Men Ultimate Table of

Mortality, with Bowerman's or Davis' Extension thereof or, with the

consent of the superintendent, the Commissioners 1941 Standard Ordinary

Mortality Table, the Commissioners 1958 Standard Ordinary Mortality

Table or the Commissioners 1941 Standard Industrial Table of Mortality;

provided that for any category of ordinary insurance issued on female

risks, all modified net premiums and present values may be calculated

according to an age not more than three years younger than the actual

age of the insured; and for certificates issued on and after January

first, nineteen hundred seventy-five, -- the Commissioners 1941 Standard

Ordinary Mortality Table, the Commissioners 1958 Standard Ordinary

Mortality Table or the Commissioners 1961 Standard Industrial Table of

Mortality;

(B) for annuity certificates, including life annuities provided or

available under optional modes of settlement in such certificates -- the

1937 Standard Annuity Table or, at the option of the society, the

Annuity Mortality Table for 1949, Ultimate, or any modification of

either table approved by the superintendent;

(C) for disability benefits issued in connection with life benefit

certificates -- Hunter's Disability Table, which, for active lives,

shall be combined with a mortality table permitted for calculating the

reserves on life insurance certificates, except that the table known as

Class III Disability Table (1926) modified to conform to the contractual

waiting period, or, at the option of the society, the tables of Period 2

disablement rates and the 1930 to 1950 termination rates of the 1952

Disability Study of the Society of Actuaries, with due regard to the

type of benefits, shall be used in computing reserves for disability

benefits under a contract which presumes that total disability shall be

considered to be permanent after a specified period; and

(D) for accidental death benefits issued in connection with life

benefit certificate -- the Inter-Company Double Indemnity Mortality

Table or, at the option of the society, the 1959 Accidental Death

Benefits Table. Either such table shall be combined with a mortality

table permitted for calculating the reserves for life insurance

certificates.

(2) The minimum standard for the valuation of life insurance and

annuity certificates issued on and after January first, nineteen hundred

eighty, shall be subject to the requirements and exceptions of section

four thousand two hundred seventeen of this chapter, provided that a

society may also elect to use the Commissioners 1941 Standard Ordinary

Mortality Table or the Commissioners 1961 Standard Industrial Table.

(3) The superintendent may, in his discretion, accept other standards

for valuation if he finds that the reserves produced thereby will not be

less in the aggregate than reserves computed in accordance with the

minimum valuation standard herein prescribed. The superintendent may, in

his discretion, vary the standards of mortality applicable to all

certificates of insurance on substandard lives or other extrahazardous

lives by any society authorized to do business in this state. Whenever

the mortality experience under all certificates valued on the same

mortality table is in excess of the expected mortality according to such

table for a period of three consecutive years, the superintendent may

require additional reserves when deemed necessary in his judgment on

account of such certificates.

(4) Any society, with the consent of the superintendent and under any

conditions he may impose, may establish and maintain reserves on its

certificates in excess of the reserves required thereunder, but the

contractual rights of any insured member shall not be affected thereby.

(d) Every society shall maintain reserves for all individual accident

and health insurance certificates which shall place a sound value on its

liabilities under such certificates and which shall not be less than the

reserves according to the standards set forth in regulations issued by

the superintendent and, in no event, less than the pro rata gross

unearned premium reserve for such certificates. Prior to the issuance

of any regulation provided for in this subsection the superintendent

shall give at least ten days notice thereof to each society licensed to

write accident and health insurance in this state, by ordinary mail

addressed to its principal place of business, and provide an opportunity

for hearing on such proposed action.

(e) All of the foregoing valuations, in any valuation report filed by

a society as required by the provisions of this article, shall either be

certified by a competent actuary, or, at the request and expense of the

society be verified by an actuary of the insurance department of the

state, province or country in which the society is domiciled.

(f) Any authorized society which issues certificates or other

obligations providing for benefits in case of death or disability

resulting solely from accident, or in case of temporary disability

resulting from sickness, or hospital expense or surgical and medical

expense benefits shall maintain reserves for unearned premiums and for

disabled lives in accordance with standards prescribed from time to time

by the superintendent, which standards shall conform as nearly as

practicable to those required for similar reserves of accident and

health insurance companies under the laws of this state.