New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 100 - Recognition of The 2001 Cso Mortality Table and the 2017 Cso Mortality Table for Use in Determining Minimum Reserve Liabilities And Nonforfeiture Benefits and Recognition and Application of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities
Section 100.10 - Application of the 2001 cso preferred class structure mortality table and the 2017 CSO Preferred Class Structure Mortality Table
Universal Citation: 11 NY Comp Codes Rules and Regs ยง 100.10
Current through Register Vol. 46, No. 39, September 25, 2024
(a) Selection of a table within the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table.
(1) The election
of the 2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO
Preferred Class Structure Mortality Table is on a policy form and calendar year
of issue basis. Once a calendar year cohort of policy forms is placed on the
2001 CSO Preferred Class Structure Mortality Table basis or the 2017 CSO
Preferred Class Structure Mortality Table basis, it shall not subsequently
revert back to the respective standard mortality table basis without the prior
approval of the superintendent. Such change would be considered a basis change
for annual statement reporting purposes. For those calendar years of issue in
which an insurer chooses to use the 2001 CSO Preferred Class Structure
Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table, it
shall use the entire 2001 CSO Preferred Class Structure Mortality Table or the
entire 2017 CSO Preferred Class Structure Mortality Table, respectively, for
the chosen policy forms, i.e ., an insurer shall not use the 2001 CSO Preferred
Class Structure Mortality Table or the 2017 CSO Preferred Class Structure
Mortality Table for the preferred classes and use the respective standard
mortality table for the non-preferred class(es). Additionally, if the insurer
sells two similar policy forms in the same market, the appointed actuary shall
use the same version of the table for both forms and shall not use the 2001 CSO
Preferred Class Structure Mortality Table or the 2017 CSO Preferred Class
Structure Mortality Table on one policy form and the respective standard
mortality table on the other policy form. For example, it would be unacceptable
to put preferred lives under one policy form and non-preferred lives under the
other policy form.
(2) In order to
choose the proper table of mortality rates within the 2001 CSO Preferred Class
Structure Mortality Table or the 2017 CSO Preferred Class Structure Mortality
Table and to develop the preferred class actuarial certification required by
section 100.9 of this Part, the following
requirements apply:
(i) Creation of classes:
(a) The appointed actuary shall reflect the
composition and characteristics of the policies issued under a plan of
insurance in the determination of the appropriate classes that will be
applicable under that plan. The policies that comprise classes shall have
similar underwriting or mortality experience characteristics. When classes are
similar across various plans of insurance, these classes may be combined into a
single aggregate class. Multiple underwriting classes on a policy form can be
mapped into the same table within the 2001 CSO Preferred Class Structure
Mortality Table or the 2017 CSO Preferred Class Structure Mortality Table, if,
in aggregate, the underwriting classes can be shown to have anticipated
mortality no greater than the Valuation Basic Table associated with the table
selected. However, the appointed actuary shall not combine classes that are
expected to have dissimilar anticipated mortality as a means to produce
reserves that are materially lower than those developed if the classes were not
combined.
(b) With respect to
reinsurance, anticipated mortality shall be assessed and classes shall be
created on a gross basis. To the extent that anticipated mortality on
reinsurance ceded or assumed is dissimilar from that on direct business, the
appointed actuary shall create separate class to properly reflect the
anticipated mortality.
(c) If, due
to differences in actual experience by policy form and underwriting class,
groupings of classes are changed from those used in the prior valuation, the
change and the effect of the change shall be disclosed to the superintendent in
the actuarial certification.
(d)
Separate classes shall be established for a single policy form if there are
significant anticipated mortality differences for different cohorts of insured
lives, such as age groups or policy sizes. For instance, if an insurer has
different underwriting thresholds for policies with face amounts of $1 million
or more, it may be appropriate to have a class for policies with face amounts
of less than $1 million and a separate class for policies with face amounts
greater than or equal to $1 million.
(e) If a class of business is assigned to a
different table within the 2001 CSO Preferred Class Structure Mortality Table
or the 2017 CSO Preferred Class Structure Mortality Table from that used in the
prior valuation, the change is not considered a basis change, and the reserve
change must be accounted for in the calculation of gain from
operations.
(ii)
Deriving anticipated mortality:
(a) If
relevant insurer experience for a particular class is available and has full
credibility, the appointed actuary shall use that experience as the basis for
deriving anticipated mortality.
(b)
In situations where relevant insurer experience for a particular class is
available but does not have full credibility, the appointed actuary shall
derive the anticipated mortality by blending the relevant insurer experience
for the class with actual relevant, credible experience and past trends in
experience of other similar classes, either in the same insurer, in other
insurers (including reinsurers), or from other sources, generally in that order
of preference, provided that the appointed actuary submits underwriting-based
justification as part of the annual actuarial report required by this Part. The
blending process shall be based on a credibility methodology that is recognized
by the actuarial profession and is acceptable to the superintendent.
(c) In situations where relevant insurer
experience for a particular class is not available (e.g. a new product), the
appointed actuary shall derive the anticipated mortality using actual relevant
credible experience and past trends in experience of other similar classes
either in the same insurer, in other insurers (including reinsurers), or from
other sources, generally in that order of preference, provided that the
appointed actuary submits to the superintendent underwriting-based
justification.
(d)
Underwriting-based justification shall include an analysis of the relationship
between the underwriting-based criteria for the class where no experience data
is available or does not have full credibility and the underwriting-based
criteria that underlie the actual relevant credible experience data.
(e) If no sufficient underwriting-based nor
experienced-based justification is made to derive anticipated mortality for a
class, the insurer shall not use the 2001 CSO Preferred Class Structure
Mortality Table nor the 2017 CSO Preferred Class Structure Mortality Table for
valuation.
(iii)
Periodic assessment of anticipated mortality. The appointed actuary shall
annually review relevant emerging experience and underwriting methods for the
purpose of assessing the appropriateness of anticipated mortality for each
class and, in aggregate, for all classes combined. If the results of
statistical or other testing indicate that previously anticipated mortality for
a given class is inadequate, then the appointed actuary shall set a new
anticipated mortality for each class, the appointed actuary shall analyze the
appropriateness of the anticipated mortality assumptions at the aggregate
level. If the analysis at the aggregate level indicates that aggregate
anticipated mortality is inadequate, then the appointed actuary shall adjust
the anticipated mortality assumption for one or more of the classes until the
appointed actuary is satisfied that the anticipated mortality assumptions are
adequate at the aggregate level.
(iv) The superintendent may require an
insurer to change the valuation mortality table if it is determined by the
superintendent that inadequate justification of anticipated mortality is
provided by the insurer.
Communications and disclosures.
(1) The appointed actuary shall annually file
with the superintendent an actuarial certification that, as of the valuation
date, the anticipated mortality experience for each class of business, other
than the residual standard class, meets the criteria described in section
100.9 of this Part.
(b) Communications and disclosures.
(1) The
appointed actuary shall annually file with the superintendent an actuarial
certification that, as of the valuation date, the anticipated mortality
experience for each class of business, other than the residual standard class,
meets the criteria described in section 100.0 of this Part.
(2) Additionally, the appointed actuary shall
prepare an annual actuarial report in support of the actuarial certification,
subject to appropriate Actuarial Standards of Practice promulgated by the
Actuarial Standards Board of the American Academy of Actuaries. The actuarial
report shall include the following items:
(i)
the specified plans of insurance for which the insurer has elected to use the
2001 CSO Preferred Class Structure Mortality Table or the 2017 CSO Preferred
Class Structure Mortality Table. A brief description of each plan and the
amount of in force business, including the policy count, face amount, and
associated reserves, shall be provided as of the valuation date;
(ii) demonstration of compliance with the
tests of sufficiency;
(iii)
description of sources of information used as a basis for determining
anticipated mortality, including a description of the underwriting-based
criteria used;
(iv) analysis
performed to evaluate the credibility of relevant historical insurer experience
when establishing anticipated mortality for each class;
(v) analysis performed to evaluate the
relationship between the underwriting-based criteria and the anticipated
mortality established in each class;
(vi) statistical or other quantitative
analyses performed in assessing the continued appropriateness of the
anticipated mortality assumption for each class and for all classes in
aggregate, and a summary of changes made as a result of the analyses;
(vii) anticipated mortality, without
recognition of mortality improvement beyond the date of valuation, for each
class and for all classes in aggregate;
(viii) for each class, the ratio of
anticipated mortality to the valuation mortality table in the Valuation Basic
Table corresponding to the table being used for that class;
(ix) any changes made in the approach or
parameters applied to the statistical analyses or tests performed compared to
those performed at the last annual valuation; and
(x) disclosure of the financial impact of any
change in the chosen valuation mortality table.
(3) Each insurer subject to this Part shall
submit the required actuarial certification and annual actuarial report to the
superintendent each year contemporaneously with its annual statement pursuant
to section
307 of the
Insurance Law.
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