New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 97 - MARKET VALUE SEPARATE ACCOUNTS FUNDING GUARANTEED BENEFITS; SEPARATE ACCOUNTS OPERATIONS AND RESERVE REQUIREMENTS
Section 97.3 - Definitions

Universal Citation: 11 NY Comp Codes Rules and Regs § 97.3

Current through Register Vol. 46, No. 39, September 25, 2024

As used in this Part, the following terms have the following meanings:

(a) Account assets means separate account assets plus any assets held in the general account to meet the asset maintenance requirements.

(b) Account contracts means the contracts providing fixed or guaranteed minimum benefits and funded by one or more separate accounts and, if applicable, funded in part by the general account to meet the asset maintenance requirements.

(c) Actuarial opinion and memorandum means the opinion and memorandum of a qualified actuary required to be submitted to the superintendent pursuant to section 4240 (a)(5)(iii) of the Insurance Law.

(d) Asset maintenance requirements means the requirement to maintain assets to fund contract benefits in accordance with section 97.5 of this Part.

(e) Cash-flow matched means with respect to a separate account or a subportfolio thereof funding specified guaranteed contract liabilities as described in the plan of operations pursuant to section 97.4(b)(11) of this Part:

(1) that it is established to the satisfaction of the superintendent that the separate account or such subportfolio is duration matched or that the account contracts contain provisions which transfer substantially all of the investment risk to the contractholder; and

(2) that in the opinion of the qualified actuary (taking into account any such provisions), it is highly likely that the amount and timing of the cash inflows from separate account assets or the subportfolio thereof will offset the cash outflows needed to meet guaranteed contract liabilities or the specified guaranteed contract liabilities funded by the subportfolio.

(f) Contract means a group annuity contract, funding agreement or group life insurance policy which is within the scope of this Part as set forth in section 97.2(a) of this Part.

(g) Contract benefits means the amounts obligated to be paid by the insurance company under an account contract.

(h) Contract liabilities means the liabilities of the insurance company under account contracts, including liabilities with respect to which guarantees as to amount are provided by the insurance company and liabilities with respect to which guarantees as to amount are not provided by the insurance company.

(i) Duration means, with respect to separate account assets or guaranteed contract liabilities, the Macaulay duration thereof or such other measure of duration as shall be approved by the superintendent.

(j) Duration matched means, with respect to a separate account or a subportfolio thereof funding specified guaranteed contract liabilities as described in the plan of operations pursuant to section 97.4(b)(11) of this Part, that at least 80 percent of the market value of the separate account assets or the subportfolio thereof consists solely of cash and/or one or more of the following securities (and hedging instruments purchased in connection therewith): short-term debt, United States government obligations, investment grade obligations and investment grade commercial mortgage loans; and, after taking into account any prepayment provisions of such securities and the provisions of such hedging instruments, payments to be made from the separate account assets (or the subportfolio thereof) are in the aggregate substantially certain both in amount and timing and the duration of the separate account assets (or the subportfolio thereof) differs from the duration of the guaranteed contract liabilities (or, in the case of a subportfolio of assets, the duration of such specified guaranteed contract liabilities) by less than one-half year; provided that, to the extent that guaranteed contract liabilities are denominated in the currency of a foreign country rated in one of the two highest rating categories by an independent nationally recognized United States rating agency acceptable to the superintendent and are supported by investments denominated in the currency of such foreign country, duration matching may be determined by utilizing spot rates of substantially similar securities denominated in the currency of such foreign country.

(k) Fixed benefits means:

(1) any annuity benefits (and other periodic payments) described in section 97.5(1)(1) of this Part; and

(2) any other benefits described under benefit types A, B or C in section 97.5(1)(2) of this Part.

(l) General account means the assets of the insurance company other than separate account assets, and reserves associated therewith.

(m) Guaranteed minimum benefits means contract benefits payable on any specified date which are the greater of:

(1) the market value of account assets or any part thereof (to the extent that the market value of such assets determines the contractholder's benefits, i.e., to the extent such assets are beneficially client assets); or

(2) a fixed minimum guarantee related to initial considerations.

(n) Hedging instrument means:

(1) any interest rate futures agreement, foreign currency futures agreement or option to purchase any such agreement or any security or foreign currency, used in a bona fide hedging transaction within the meaning of section 1403 (d) of the Insurance Law; or

(2) any financial agreement or arrangement entered into with a qualified broker or dealer or qualified bank as defined in section 1403 (d) of the Insurance Law in connection with investment in one or more securities in order to reduce the risk of changes in market valuation or to create a synthetic investment.

(o) Institution means a corporation, joint-stock company, association, trust, business partnership, business joint venture, or similar entity.

(p) Investment grade commercial mortgage loan means any loan secured by a lien on real estate (fee or leasehold), which is a permissible investment under the terms of the account contract or is authorized by the insurance statute under which the current contract was established, and which meets the following criteria:

(1) the security for the loan is an income-producing property including, but not limited to, a property used primarily as an office building, shopping center, mall, hotel, motel, industrial building, warehouse, building used for research and development, medical or extended care facility, multi-family residential property, or the loan is a recourse loan secured by a property owned by credit-worthy persons, and any additional collateral, such as a letter of credit, a guarantee or cash or cash equivalents;

(2) the amount of the loan secured by a property (or in the event the loan is secured by a junior lien, the amount of the loan secured by a property and all other superior loans) does not exceed 85 percent of the fair market-value of the security as of the time of the making of the determination;

(3) net operating income from the property securing the loan, as determined by the insurance company, (and other assets pledged for this purpose) is not less than 110 percent of the aggregate debt service of the loan and any superior loans secured by the same property, unless the loan is a recourse loan secured by a property that is owned by credit-worthy persons or, whether or not the loan is a recourse loan, unless the property is leased under a long-term (at least life of the loan) lease to credit-worthy persons, in either of which events net operating income shall not be less than 100 percent of the loan debt service; and

(4) the loan as of the time of the making the determination of whether or not it is investment grade shall not then be in default in a manner which would cause an experienced and prudent commercial mortgage lender to accelerate the loan nor shall the loan have been in default at any time during the past 12 months with the exception of technical and nonmaterial defaults, whether or not waived, which do not create a substantial or material risk of nonpayment of the loan or impairment of the security for the loan.

(p) When used in this definition, credit-worthy person means a firm that has outstanding or could issue investment grade obligations; net operating income from a property means income from the property less operating expenses, before payment of debt service; and debt service means the periodic (normally monthly) payment of interest, or interest and principal, required by the loan.

(q) Investment grade obligation means an obligation that:

(1) has been placed in one of the top four generic lettered or numbered rating classifications by Moody's or Standard and Poor's or by any other securities rating agency acceptable to the superintendent;

(2) has been identified in writing by such a rating agency to be of investment grade quality; or

(3) has not been rated, or so identified, by such a rating agency but has been determined to be in one of the top two designations by the Securittes Valuation Office of the National Association of Insurance Commissioners.

(r) Macaulay duration means, with respect to a sequence of anticipated payments A 1, A 2. . . A n occurring at times t 1, t 2. . . t n from the valuation date (whether such payments represent anticipated benefits payable consistent with the minimum value of guaranteed contract liabilities under section 97.5[k] of this Part or whether such payments represent anticipated asset cash flows consistent with actual or assumed market values) the quotient of (a) divided by (b) where

(a) =	n [SIGMA] j=1	tAVtj,
(b) =	n [SIGMA] j=1	AVtj,

[Vtj = (1 + 1)-tj] Vtj = (1 + i)-tj, and

ij is the discount rate used under section 97.5(k) of this Part.

(r) Thus, for benefits payments corresponding to guaranteed contract liabilities referred to in section 97.5(k) of this Part, the denominator, i.e., (b) above, is identical to the value P, the base amount of guaranteed contract liabilities described in that section.

(s) Market-value means:

(1) in the case of any asset publicly traded security, the price at which such security is traded or, if to such price is available, a price that appropriately reflects the latest bid price or the latest bid and asked prices for such security; and

(2) in the case of any other asset, the fair value of the asset, in either case determined in accordance with the account contract and the procedures set forth in the plan of operations filed pursuant to section 97.4 of this Part. For the purposes of this definition, fair value means with respect to an asset a reasonable estimate of what a knowledgeable seller would be willing to accept, and a knowledgeable buyer would be willing to pay, for the asset on an arm's length basis.

(t) Market-value separate account means a separate account in which the separate account assets are valued at their market-value.

(u) Obligations means bonds, debentures, notes and other evidences of indebtedness (whether or not liability for payment extends beyond any security therefor), as well as participation interests in any of the foregoing, and preferred stock.

(v) Person means an institution or individual.

(w) Private placement means a security that is not publicly traded and was acquired by the insurance company:

(1) from the issuer in an exempt transaction described in section 4(2) or (6) of the Securities Act; or

(2) from any other person in an exempt transaction described in section 4(1) of the Securities Act if the security was originally disposed of by the issuer in an exempt transaction described in section 4(2) or (6) of the Securities Act.

(x) Publicly traded means a security:

(1)

(i) that the insurance company can sell to any person in an exempt transaction described in section 4(1) of the Securities Act; and

(ii) that is listed in a national securities exchange or for which a market is maintained by dealers in the security or for which market quotations are readily available; or

(2) that the insurance company has acquired from another person in a transaction under Rule 144A of the Securities and Exchange Commission (17 CFR 230.144A).

(y) Qualified actuary means any individual who meets the qualification standards set forth in section 95.5 of this Title.

(z) Real estate means real property or interests therein.

(aa) Securities Act means the Securities Act of 1933, 15 U.S.C. sections 77 a - 77aa, as amended from time to time.

(ab) Security means any investment described in paragraph (1), (2), (3) or (6) of section 1405 (a) of the Insurance Law or any foreign investment substantially similar to one of the types described in such paragraphs.

(ac) Separate account means an account established pursuant to section 4240 of the Insurance Law and includes a supplemental account.

(ad) Separate account-assets means the assets held in one or more separate accounts.

(ae) Short-term debt means an obligation which has a maturity at the time of acquisition not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.

(af) Spot rate corresponding to a given time of benefit payment means the yield on a zero-coupon noncallable United States Government obligation maturing at that time, or the zero-coupon yield implied by the price of a representative sampling of coupon bearing noncallable United States Government obligations in accordance with a formula set forth in the plan of operations filed pursuant to section 97.4 of this Part; provided that, to the extent that guaranteed contract liabilities are denominated in the currency of a foreign country rated in one of the two highest rating categories by an independent nationally recognized United States rating agency acceptable to the superintendent and are supported by investments denominated in the currency of such foreign country, the spot rate may be determined by reference to substantially similar obligations of the government of such foreign country.

(ag) Supplemental account means a market-value separate account established pursuant to section 97.5 of this Part to which assets may be contributed by the insurance company for the purpose of complying, in whole or in part, with the asset maintenance requirement and with respect to which the account contracts shall not provide that the assets of the supplemental account are not chargeable with liabilities arising out of any other business of the insurance company.

(ah) United States government-obligation means a direct obligation issued, assumed, guaranteed or insured by the United States of America or by any agency or instrumentality thereof.

Disclaimer: These regulations may not be the most recent version. New York may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.