New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 94 - Valuation Of Individual And Group Accident And Health Insurance Reserves
Section 94.9 - Reserve adequacy

(a) The insurer shall maintain reserves for all individual and group accident and health insurance policies, which reserves shall reflect a sound value placed on its liabilities under such policies.

(b) When an insurer determines that adequacy of its health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum for that insurer.

(c) A premium deficiency reserve is a reserve that is established when future premiums and current reserves are not sufficient to cover future claim payments and expenses for the remainder of a contract period. This reserve is in addition to claim reserves and contract reserves. When the expected present value of claims payments or incurred costs, claim adjustment expenses and administration costs exceed the present value of premiums to be collected for the remainder of a contract period, a premium deficiency reserve shall be recognized by recording an additional reserve for the deficiency. For purposes of determining if a premium deficiency exists, contracts shall be grouped in a manner consistent with how policies are marketed, serviced and measured. A reserve shall be recognized for each grouping where a premium deficiency is indicated. Deficiencies shall not be offset by anticipated profits in other policy groupings. Such accruals shall be made for any loss contracts, even if the contract period has not yet started.

(d) With respect to any block of contracts, or with respect to an insurer's health business as a whole, a prospective gross premium valuation is a test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of: all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

(e) A gross premium valuation as specified in subdivision (d) of this section is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are otherwise required for such contracts under this Part.

(f) Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under this Part.

(g) Adequacy of an insurer's health insurance reserves is to be determined on the basis of all three categories combined (i.e., claim, premium, and contract reserves). However, the standards of this Part are intended to emphasize the importance of determining appropriate reserves for each of the three categories separately.