Current through Register Vol. 46, No. 39, September 25, 2024
(a)
General.
(1)
(i) Except as exempted in this Part, a
memorandum, in form and substance acceptable to the superintendent as specified
in this Part shall be prepared to support each actuarial opinion submitted
pursuant to section
95.8 of this Part.
(ii) Except as provided in subparagraph (iii)
of this paragraph, each company required to prepare the memorandum shall submit
the memorandum to the superintendent as part of the actuarial
opinion.
(iii) If a foreign or
alien company has submitted to the insurance regulator of a state accredited by
the NAIC a memorandum in support of an opinion of an appointed actuary for the
prior year, which was in form and substance acceptable to such insurance
regulator as evidenced in writing and was in support of an opinion of an
appointed actuary that was required by laws or regulations of that state to
meet standards adopted from time to time by the Actuarial Standards Board and
such additional standards as such insurance regulator has prescribed, such
foreign or alien company need submit the memorandum required by this section
only at the request of the superintendent.
(2) In preparing the memorandum, the
appointed actuary may rely on, and include as a part of his or her own
memorandum, memoranda prepared and signed by other actuaries who are qualified
actuaries within the meaning of section
95.5(d) of this
Part, with respect to the areas covered in such memoranda, and so state in
their memoranda.
(3) If the
superintendent finds that the analysis described in any such memorandum fails
to meet the standards of the Actuarial Standards Board or the standards and
requirements of this Part, the superintendent may designate a qualified actuary
(the "reviewing actuary") to review the opinion and prepare such supporting
memorandum as is required for review. The reasonable and necessary expenses of
the independent review shall be paid by the company but the review shall be
directed and controlled by the superintendent.
(4) The reviewing actuary shall have the same
status as an examiner for the purposes of obtaining data from the company, and
the work papers and documentation of the reviewing actuary shall be retained by
the superintendent; provided, however, that any information provided by the
company to the reviewing actuary and included in the work papers shall be
considered as material provided by the company to the superintendent and shall
be kept confidential to the same extent as is prescribed by law and in this
Part with respect to other material provided by the company to the
superintendent pursuant to the statute governing this Part. The reviewing
actuary shall not be a current or past employee of the company or an employee
of a consulting firm involved with the preparation of any prior memorandum or
opinion for the company pursuant to this Part for any one of the current year
or the preceding three years.
(b)
Details of the memorandum section
documenting asset adequacy analysis.
When an actuarial opinion under section
95.8 of this Part is provided, the
memorandum shall demonstrate that the analysis has been done in accordance with
the standards for asset adequacy referred to in section
95.5(f) of this
Part and any additional standards under this Part. It shall specify:
(1) For reserves:
(i) product descriptions, including market
description, underwriting, expenses (underwriting, marketing, commissions,
administration, etc.) lapses, loan provisions, loan utilization, mortality, and
other aspects of a risk profile and the specific risks the appointed actuary
deems significant;
(ii) sources and
liabilities in force;
(iii) reserve
methods and bases;
(iv) investment
reserves;
(v) reinsurance
arrangements;
(vi) description of
assumptions made for:
(a) lapse rates (both
base and excess), including a comparison of assumed lapse rates with actual
lapse rates, provided lapse experience studies have been performed;
(b) interest crediting rate
methodology;
(c) mortality bases,
including a description of any base table used that is not published in any
publication of the Society of Actuaries. Such a description should include a
comparison of any significant deviations in mortality rates between the
two;
(d) policyholder and
shareholder dividends;
(e)
competitor or market interest rate;
(f) annuitization rates;
(g) commissions and expenses, including a
comparison of assumptions with recent actual commissions and expenses;
and
(h) the extent to which the
appointed actuary uses assumptions in the asset adequacy analysis which are
materially different than the assumptions used in the previous asset adequacy
analysis.
(2)
For assets:
(i) portfolio descriptions,
including a risk profile disclosing the quality, distribution and types of
assets, call provisions, prepayment provisions, default, hedges,
puts;
(ii) investment and
disinvestment assumptions;
(iii)
sources of asset data;
(iv) asset
valuation bases;
(v) description of
assumptions made for:
(a) default
costs;
(b) bond call
function;
(c) mortgage prepayment
function;
(d) determining market
value for assets sold due to disinvestment strategy;
(e) anticipated yield on assets acquired
through the investment strategy; and
(f) the extent to which the appointed actuary
uses assumptions in the asset adequacy analysis which are materially different
than the assumptions used in the previous asset adequacy analysis.
(3) Analysis basis:
(i) methodology, e.g., cash
flow testing, duration analysis, gross premium reserve tests, loss ratio
methods, development methods, follow-up studies, analysis of products where all
significant risks have been transferred to policyholder;
(ii) rationale for inclusion/exclusion of
different blocks of business and how pertinent risks were analyzed;
(iii) rationale for degree of rigor in
analyzing different blocks of business;
(iv) criteria for determining asset
adequacy;
(v) methodology to
recognize the impact of reinsurance on the company's cash flows; including both
assets and liabilities, under each of the scenarios tested;
(vi) effect of Federal income taxes, and
other relevant factors;
(vii) the
amount of reserves and the identity of the product lines which had been
subjected to asset adequacy analysis in the prior opinion but were not subject
to such analysis for the current opinion; and
(viii) if sensitivity testing was performed,
identify the assumptions tested and describe the variation in ending surplus
values on a market value basis from the base case values.
(4) Impact of changes in assumptions used in
asset adequacy analysis.
(5)
Summary of results.
(6)
Conclusions.
(c)
Conformity to standards of practice.
The memorandum shall include a statement:
"The actuarial methods, considerations and analyses used in
the preparation of this memorandum conform to the appropriate Standards of
Practice as promulgated by the Actuarial Standards Board to the extent, not
inconsistent with 11 NYCRR 95 (Insurance Regulation No. 126) and conform to the
requirements of such regulation."
(d)
Confidentiality.
Nonpublic information (meaning information not otherwise
available from public documents or records) contained in any memorandum in
support of the opinion, or in any other material provided by the company to the
superintendent in connection therewith, shall at the written request of the
company be kept confidential by the superintendent as, and to the extent,
prescribed by section
4217 of the
Insurance Law or by this Part. The request for confidentiality may be satisfied
by any reasonable method, including, but not limited to: by marking
"confidentiality requested" any page for which confidentiality is claimed or by
designating specific pages of the memorandum or other material as
"confidentiality requested" within the letter to the superintendent requesting
confidentiality, which shall accompany such memorandum or other
material.
