New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 99 - VALUATION OF ANNUITY, SINGLE PREMIUM LIFE INSURANCE, GUARANTEED INTEREST CONTRACT AND OTHER DEPOSIT RESERVES
Section 99.8 - Special considerations in determining valuation interest rates

Universal Citation: 11 NY Comp Codes Rules and Regs § 99.8

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

(a) General.

As indicated by section 4217 (c)(4)(E) of the Insurance Law, a company may elect to value contracts or single premium policies with cash settlement options on either an issue year basis or on a change in fund basis. A change in fund basis of valuation refers to a valuation basis under which different maximum valuation interest rates are determined for each change in fund held under the contract or single premium policy based on the reference rate for the calendar year in which the change in fund occurs. Annuity contracts with no cash settlement options must be valued on an issue year basis. The issue year basis or change in fund basis shall be determined for the contract as a whole, and thus must be consistently applied to all portions of all integrated benefit streams available under the annuity contract. The election of issue year or change in fund basis must be made at the issuance of the contract and must not change during the term of the contract without the prior written approval of the superintendent. The basis chosen (i.e., change in fund basis or issue year basis) shall be applied for all such contracts with the same original year of issue.

(b) Change in fund basis.

(1) For contracts or single premium policy values using the change in fund valuation method, in determining the appropriate calendar year valuation interest rates and the appropriate guarantee durations as measured from date of issue, a company may, at its option, update the issue year for the entire contract or single premium policy to be consistent with the date of declaration of the latest current interest rate, or the year or years of investment of the supporting assets but shall maintain consistency from year to year and shall justify the choice of the basis used. However, for contracts that provide for one-year interest guarantees only, the issue year shall only be updated based on the year or years of investment of supporting assets. The definition of issue year must be appropriate for the type of contract or single premium policy and for the year or years of investment of the supporting assets. The procedures chosen shall be applied for all contracts of the same type issued in the same year.

(2) One suitable application of the change in fund valuation method is where the change in the fund in any given calendar year equals the balance of the fund on December 31st of the given year less the balance of the fund on December 31st one year earlier. This change in fund may be positive or negative. The sum of the annual change in the fund shall equal the fund balance as of the valuation date.

(3) A second suitable application is similar to the one above except that the change in fund in any year must be positive or zero. If application of the above method produces a negative result, the change in fund is zero for that year, and the change in fund for the immediately preceding year is reduced by this amount.

(4) Any other application of the change in fund valuation method substantially similar to paragraph (2) or (3) of this subdivision may be used with the prior written approval of the superintendent.

For contracts or single premium policies involving fund accumulations valued using the issue year valuation method, in determining the appropriate calendar year valuation interest rates and the appropriate guarantee durations as measured from date of issue, a company may, at its option, base the issue year on either the original date of issue of the contract or single premium policy or the date of declaration of the latest current interest rate or the year or years of investment of the supporting assets but shall maintain consistency from year to year and shall justify the choice of the basis used. The definition of issue year must be appropriate for the type of contract or single premium policy and for the year or years of investment of the supporting assets. The procedures chosen shall be applied for all contracts of the same type issued in the same year.

(d) Single weighting factors and interest rates.

(1) This subdivision does not apply to contracts that fall under the scope of section 99.4 of this Part.

(2) For contracts other than single consideration immediate annuities, the guarantee duration and an annuity weighting factor shall be determined. In valuing such contracts with guarantee durations greater than five years, it is not appropriate to use more than one weighting factor in determining the calendar year statutory valuation interest rate unless the contract provides for scheduled installment payments. In that case, it may be appropriate to determine a guarantee duration and weighting factor separately for each scheduled installment payment.

(3) A single valuation interest rate factor is determined based on the guarantee duration. This rate is lower for longer durations and does not change when the remaining guarantee duration becomes less than the lowest duration for the block in which the guarantee duration lies.

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