New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 103 - Principle-Based Reserving
Section 103.5 - Valuation of payout annuity reserves
Universal Citation: 11 NY Comp Codes Rules and Regs ยง 103.5
Current through Register Vol. 46, No. 39, September 25, 2024
(a) Scope.
(1) This section applies to the following,
whether group or individual, including both life contingent and term certain
only contracts, directly written or assumed through reinsurance:
(i) immediate annuity contracts issued on or
after January 1, 2019;
(ii) deferred
income annuity contracts issued on or after January 1, 2019;
(iii) structured settlements in payout or
deferred status issued on or after January 1, 2019;
(iv) fixed payout annuities resulting from
the exercise of settlement options or annuitizations of host contracts, for
which the fixed payout annuities commence on or after January 1,
2019;
(v) supplementary contracts,
excluding contracts with no scheduled payments (such as retained asset accounts
and settlements at interest), issued on or after January 1, 2019;
(vi) fixed income payment streams
attributable to guaranteed living benefits associated with deferred annuity and
variable annuity contracts, for which the fixed income payment streams commence
on or after January 1, 2019, once the contract funds are exhausted;
and
(vii) certificates with premium
determination dates on or after January 1, 2019, under non-variable group
annuity and pure endowment contracts purchased under a retirement plan or plan
of deferred compensation, established or maintained by an employer, including a
partnership or sole proprietorship, or by an employee organization, or by both,
other than a plan providing individual retirement accounts or individual
retirement annuity contracts under Internal Revenue Code section
408.
(b) Definitions.
For the purpose of this section:
(1) Jumbo contract means a contract with an
initial consideration equal to or greater than $250 million, or each contract
belonging to a group of contracts issued by an insurer to the same contract
holder within 90 days of each other with aggregate considerations equal to or
greater than $250 million.
(2)
Non-jumbo contract means a contract other than a jumbo contract.
(3) Premium determination date means the date
as of which the valuation interest rate for a policy, contract, certificate, or
benefit subject to this section being valued is determined.
The following table specifies the decision rules for setting the premium determination date for each policy, contract, certificate, and benefit subject to this section:
|
Section 103.5(a)(1) |
Description |
Premium determination date |
|
(i) |
Immediate annuity |
Date consideration is determined and committed to by contract holder |
|
(ii) |
Deferred income annuity |
Date consideration is determined and committed to by contract holder |
|
(iii) |
Structured settlements |
Date consideration is determined and committed to by contract holder |
|
(iv) |
Fixed payout annuities resulting Date consideration for benefit is from settlement options or determined and committed to by annuitizations from host contracts contract holder |
|
|
(v) |
Supplementary contracts |
Date of issue of supplementary contract |
|
(vi) |
Fixed income payment streams from guaranteed living benefits |
Date on which account value becomes 0 |
|
(vii) |
Group annuity contracts and Date consideration is determined certificates and committed to by contract holder |
|
(c) Maximum valuation interest rates.
(1) For the policies, contracts,
certificates, and benefits set forth in subdivision (a)(1)(iv) through (vi) of
this section, an insurer may apply the same maximum valuation interest rate
applicable to the base contract to value the payment stream if the insurer
obtains the superintendent's prior approval. In order to obtain the
superintendent's prior approval, the insurer shall demonstrate to the
superintendent that its investment policy and practices are consistent with
this paragraph.
(2) For the
policies, contracts, certificates, and benefits subject to this section with
premium determination dates on or after January 1, 2019 and prior to January 1,
2020, an insurer shall select one of the methods set forth in subparagraph (i),
(ii) or (iii) of this paragraph to determine the maximum valuation interest
rate:
(i) the maximum valuation interest rate
determined in accordance with the methodology and assumptions prescribed by
Insurance Law section 4217(c) and any applicable regulations;
(ii) the maximum valuation interest rate
determined in accordance with the methodology and assumptions prescribed by
Insurance Law section 4217(c) and any applicable regulations, with the
following adjustments:
(a) for jumbo
contracts, the maximum valuation interest rate shall be determined on a monthly
basis, where the reference interest rate as defined in Insurance Law section
4217(c)(4)(F) shall equal the Moody's Corporate Bond Yield Average - Monthly
Average Corporates, as published by Moody's Investors Service, Inc., for the
month preceding the premium determination date; and
(b) for non-jumbo contracts, the maximum
valuation interest rate shall be determined on a quarterly basis, where the
reference interest rate as defined in Insurance Law section 4217(c)(4)(F) shall
equal the average over a period of three months, ending on either March 31,
June 30, September 30, or December 31, of Moody's Corporate Bond Yield Average
- Monthly Average Corporates, as published by Moody's Investors Service, Inc.,
for the calendar year quarter preceding the premium determination date;
or
(iii) the maximum
valuation interest rate determined in accordance with paragraph (3)(i) of this
subdivision.
(3) For the
policies, contracts, certificates, and benefits subject to this section with
premium determination dates on or after January 1, 2020, the maximum valuation
interest rate shall be the lesser of the rates determined in accordance with
subparagraph (i) and (ii) of this paragraph.
(i) Modified maximum valuation interest rate.
(a) The modified maximum valuation interest
rate for non-jumbo contracts shall equal (1) less (2), where:
(1) is the valuation interest rate determined
in accordance with the methodology and assumptions prescribed by the valuation
manual; and
(2) is the greater of
zero and (i) less (ii) rounded down to the nearest 25 basis points, where:
(i) is the valuation interest rate determined
in accordance with the methodology and assumptions prescribed by the valuation
manual prior to rounding the valuation interest rate to the nearest 25 basis
points; and
(ii) is the unrounded
valuation interest rate determined in accordance with the methodology and
assumptions prescribed by the valuation manual, except for the following:
(A) the prescribed portfolio credit quality
distribution as defined in Section 2.I of VM-22 of the valuation manual shall
mean the following credit rating distribution:
(I) 5.0% Treasuries;
(II) 45.0% Aa bonds (15.0% Aa1, 15.0% Aa2,
15.0% Aa3); and
(III) 50.0% A bonds
(50.0%/3 A1, 50.0%/3 A2, 50.0%/3 A3); and
(B) the individual spreads constituting the
Table X spreads as defined in Section 2.F of VM-22 of the valuation manual
shall each be no greater than 200 basis points.
(b) The modified maximum valuation
interest rate for jumbo contracts shall equal the lesser of (1) and (2), where:
(1) is the Daily Valuation Rate defined by
Section 3.C.5 of VM-22 of the valuation manual less the amount determined in
accordance with clause (a)(2) of this subparagraph for the calendar quarter
preceding the business day immediately preceding the premium determination
date;
(2) is the maximum daily
valuation rate defined as Rd-1 + 1.90% - D - E, where:
(i) Rd-1 is the daily reference rate for the
business day immediately preceding the premium determination date. The daily
reference rate for each Valuation Rate Bucket, defined by Section 3.A of VM-22
of the valuation manual, is calculated as the weighted average of the daily
Treasury rates immediately preceding the premium determination date for
two-year, five-year, 10-year and 30-year U.S. Treasuries using Table 1 weights
as determined in accordance with Section 3.I of VM-22 of the valuation manual
effective for the calendar year in which the premium determination date
falls;
(ii) D is the default cost
rate determined in accordance with Section 3.F of VM-22 of the valuation manual
and based on the portfolio credit quality distribution defined in clause
(a)(2)(ii)(A) of this subparagraph effective for the calendar year quarter in
which the premium determination date falls; and
(iii) E is the spread deduction defined as
0.25%; and
(ii) the maximum valuation interest rate
determined in accordance with the methodology and assumptions prescribed by the
valuation manual.
(d) The minimum reserve for the policies, contracts, certificates, and benefits subject to this section with premium determination dates on or after January 1, 2019 shall be the greater of:
(1) the minimum reserve calculated in
accordance with the methodology and assumptions prescribed by Insurance Law
section 4217(a) through (f), Part 99 (Insurance Regulation 151) of this Title,
and any other applicable regulations, except that the maximum valuation
interest rate shall be determined in accordance with subdivision (c) of this
section; and
(2) the minimum
reserve calculated in accordance with the methodology and assumptions
prescribed by the valuation manual prior to reflecting any reinsurance
ceded.
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