New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter A - Life, Accident and Health Insurance
Part 43 - Individual Life Insurance Market-value Adjustment
Section 43.3 - Market-value adjustment formulae
Universal Citation: 11 NY Comp Codes Rules and Regs ยง 43.3
Current through Register Vol. 46, No. 39, September 25, 2024
(a) General principles.
(1) Except on a guaranteed benefit date, a
policy may provide for the determination of cash surrender benefits in
accordance with a market-value adjustment formula, by applying the formula to
the nonborrowed portion of the policy value before reduction for any surrender
charge.
(2) The same market-value
adjustment formula shall be applied during periods when its application would
result in an increase in cash surrender value as is applied during periods when
its application would result in a decrease in cash surrender value; unless the
company can demonstrate, to the satisfaction of the superintendent, that equity
to terminating and continuing policyholders and to the company is better served
by use of a different formula in such circumstances.
(3) If a policy limits the amount by which
cash surrender benefits may be increased by application of a market-value
adjustment formula to a specific percentage of the policy value, the same or
lower percentage limit shall apply during periods when the application of the
market-value adjustment formula results in a decrease in cash surrender
benefits (see example 2 in section
43.9[a][1] of
this Part), unless the company can demonstrate, to the satisfaction of the
superintendent, that equity to terminating and continuing policyholders and to
the company is better served by using a different percentage limit in such
circumstances.
(b) Single premium policies.
(1) For single
premium policies, a market-value adjustment formula may be based on (i) the
difference between the guaranteed rate being credited on the policy value and
the new guarantee rate; and (ii) the period from the date the policy is
surrendered for its cash value to the expiry date applicable to the guaranteed
rate being so credited. On and after such expiry date, any cash surrender
benefits shall be made available without adjustment by the market-value
adjustment formula until such time as a new guaranteed rate is established.
(See examples 1 and 2 in section
43.9[a][1] of
this Part.)
(2) Alternatively, a
market-value adjustment formula for a single premium policy may be based on (i)
the difference between the interest rate, at the time the premium is remitted,
based on an appropriate index of publicly traded obligations for the specified
time interval, and the interest rate at the time the policy is surrendered for
its cash value, based on the same index, or if no longer available, on an
appropriate substitute index of publicly traded obligations, for the period
remaining under the policy until the guaranteed benefit date (i.e., the end of
the specified time interval); and (ii) such remaining period. No index used
under this paragraph may be based on publicly traded obligations that are owned
or managed by the company. (See example 3 in section
43.9[a][2] of
this Part.)
(c) Policies other than single premium policies.
(1) Each
premium or series of premiums may be subject to a separate guaranteed interest
rate, with each rate running for a specified time interval, not to exceed 10
years, for each premium or first premium of a series of premiums such that each
premium or series of premiums has a separate guaranteed benefit date.
(2) Each premium or series of premiums may be
subject to a separate guaranteed interest rate, but with different specified
time intervals (no one to exceed 10 years) such that there is a common
guaranteed benefit date for all premiums.
(3) A guaranteed rate may be declared for all
premiums to be received within a two-year period of time. A new guarantee rate
must be declared for premiums to be received during each succeeding period not
to exceed two years.
(4) A
market-value adjustment formula may be applied separately to the part of the
nonborrowed portion of the policy value resulting from each premium, or series
of premiums, remitted based on the guaranteed rate applicable to such premium
(or series of premiums), or the applicable rate based on an appropriate index
of publicly traded obligations, and the period remaining until the guaranteed
benefit date or dates. (See examples 4[i], 5[i], 5[ii], 6 and 7 in section
43.9[b] of this
Part.)
(5) At its option, the
company may base a market-value adjustment on the weighted average period
remaining until the guaranteed benefit date, for all premiums previously
remitted, as an approximation for adjustments based on each such period
individually. (See example 5[iii[ in section
43.9 [b[[1[ of this
Part.)
(6) At its option, where
there is a common guaranteed benefit date for all premiums remitted, the
company may base a market-value adjustment on a blended interest rate based on
the weighted average of the interest rates associated with premiums previously
credited as an approximation for adjustments based on each such interest rate.
(See example 4[ii[ in section
43.9 [b[[1[ of this
Part.)
(d) Additional requirements.
(1) Under a market-value
adjustment formula described in this subdivision:
(i) the interest rates used must be
determined in a consistent manner and, for a market-value adjustment formula
described in paragraph (b)(1) of this section, must be based only on guaranteed
interest rates;
(ii) the new
guarantee rate under a market-value adjustment formula described in paragraph
(b)(1) of this section, for the period from the date the policy is surrendered
to the end of the specified time interval, may be determined, if the company
does not issue policies with guaranteed rates for such period, by using
reasonable interpolations or extrapolations of new policy rates for other
periods for which the company offers guarantees and, if the company no longer
issues policies with guaranteed rates, by following the procedure provided in
paragraph (b)(2) of this section; and
(iii) there shall be a minimum period of 30
days either immediately preceding or immediately following a guaranteed benefit
date or some combination thereof of 30 days during which the policyholder may
apply for a cash surrender benefit without adjustment. An unadjusted cash
surrender benefit need be available only on a single date, namely on the
guaranteed benefit date, in which case the 30 day application period must
precede such date.
(2)
The company may reimpose a market-value adjustment after a guaranteed benefit
date based on a new guaranteed benefit period, but if the policy provides for a
different procedure for determining cash surrender benefits or a different
specified time interval, or a different index of publicly traded obligations,
or a different guaranteed rate, the new data shall be fully disclosed to the
policyholder and the policyholder shall have a period of at least 30 days
commencing after the date of such disclosures during which he or she may apply
for a cash surrender benefit without a market-value adjustment. The data shall
also indicate either the new guaranteed rate, or if such rate has not yet been
determined, disclosure of this fact along with a notice as to guaranteed rates
currently in effect. Where the effective date of the new guaranteed rate
coincides with the date on which cash surrender is available without
adjustment, this period of 30 days may be the same as that under subparagraph
(1)(iii) of this subdivision.
(3)
The company may, at its option, treat the election of a policyholder to
transfer the nonborrowed portion of the policy value to another investment
medium in the same manner as a surrender of the policy for its cash surrender
benefits.
(4) In computing the
amount of any market-value adjustment under paragraph (b)(1) of this section,
the company, may, at its option, increase the new guaranteed rate by up to one
quarter of one percent (.25%).
(5)
The market-value adjustment formula must be stated in the policy and the
formula must not pass any material risk of asset default or deterioration in
asset quality from the company to the policyholder.
(6) On application of the company, the
superintendent may authorize the use of any other market-value adjustment
formula that is fair and equitable to all parties.
(7) A policy can permit a partial cash
surrender option on (i) a first-in, first-out basis; (ii) a last-in, first-out
basis; (iii) a pro rata basis from the portion of the policy value attributable
to each premium; or (iv) any other specified basis that the superintendent
believes is equitable. The amount withdrawn from the nonborrowed portion of the
policy value attributable to each premium to provide the cash surrender benefit
may be adjusted by the same market value adjustment formula that would apply to
a full cash surrender election made on the same date in which event, the amount
of the nonborrowed portion of the policy value attributable to each premium
would be reduced as of that date by the amount so withdrawn (before any
adjustment in accordance with the market value adjustment formula).
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