N.Y. ISC Law § 4117 — New York Code / Act ISC / Article 41 / Section 4117
Loss and loss expense reserves
Status: in_force

§ 4117. Loss and loss expense reserves. (a) In determining the\nfinancial condition of any property/casualty insurance company for the\npurpose of applying the provisions of this chapter, and in any financial\nstatement or report of any such company, there shall be included in the\nliabilities of such company loss reserves and loss expense reserves at\nleast equal to the amounts required under the provisions of this\nsection, and the amount of such reserves shall be diminished by\nallowance or credit for reinsurance recoverable from assuming insurers\nin accordance with paragraph nine of subsection (a) of section one\nthousand three hundred one of this chapter. The date as of which such\ndetermination, statement or report is made is hereinafter referred to as\nthe date of determination.\n  (b) For all outstanding losses and loss expenses, the reserves shall\ninclude the following:\n  (1) the aggregate estimated amounts due or to become due on account of\nall known losses and claims and loss expenses incurred but not paid,\nincluding the estimated liability on any notice received by the company\nof the occurrence of any event which may result in a loss;\n  (2) the aggregate amounts of liability for all losses and loss\nexpenses incurred but on which no notice has been received, estimated in\naccordance with the company's prior experience, if any, otherwise in\naccordance with the experience of similar companies under similar\ncontracts of insurance. The estimated liabilities for such losses under\nall its bonds, policies or contracts of fidelity insurance, shall be not\nless than ten percent of the net premiums in force thereon, and the\nestimated liabilities for all such losses under all its surety contracts\nshall be not less than five percent of the net premiums in force\nthereon.\n  (c) Except as provided in subsection (e) hereof the minimum reserves\nfor outstanding losses and loss expenses under policies of personal\ninjury liability insurance and under policies of employers' liability\ninsurance, where the losses were incurred during the three years\nimmediately preceding the date of determination, shall be calculated in\naccordance with any method adopted or approved by the National\nAssociation of Insurance Commissioners and shall be not less than the\naggregate of the estimated unpaid losses and loss expenses for claims\nincurred computed in accordance with subsection (b) hereof.\n  (d) The minimum reserves for outstanding losses and loss expenses\nunder policies of workers' compensation insurance, except as provided in\nsubsection (e) hereof, shall be computed as follows:\n  (1) For all such compensation policies where losses were incurred more\nthan three years prior to the date of determination, such reserves shall\nbe the sum of the present values, at five percent interest per annum, of\nthe determined and estimated unpaid losses computed on an individual\ncase basis plus the estimated unpaid loss expenses computed in\naccordance with subsection (b) hereof.\n  (2) Where losses were incurred during the three years immediately\npreceding the date of determination, such reserves shall be the sum of\nthe reserves for each year, which shall be calculated in accordance with\nany method adopted or approved by the National Association of Insurance\nCommissioners and shall be not less than the sum of the present values,\nat five percent interest per annum, of the determined and estimated\nunpaid losses computed on an individual case basis plus the estimated\nunpaid loss expenses computed in accordance with subsection (b) hereof.\n  (e) Whenever in the judgment of the superintendent, the loss and loss\nexpense reserves of any property/casualty insurance company doing\nbusiness in this state calculated in accordance with the foregoing\nprovisions are inadequate or excessive, he may prescribe any other basis\nwhich will produce adequate and reasonable reserves.\n  (f) Every property/casualty insurance company doing business in this\nstate shall keep a complete and itemized record showing all losses and\nclaims on which it has received notices including all notices received\nby it of the occurrence of any event which may result in a loss.\n  (g) (1) Effective with the nineteen hundred ninety annual statement,\nevery licensed property/casualty insurer required to file such annual\nstatement with the superintendent by the following April first, shall,\nunless exempted by the superintendent, engage a qualified independent\nloss reserve specialist for the following year to render an opinion as\nto the adequacy of its loss and loss adjustment expense reserves when\ntwo of three of such insurer's results of its loss and loss adjustment\nexpense ratios as indicated below are outside of the indicated\nacceptable ranges:\n  (A) One Year Reserve Development to Surplus\n  Add the year-end estimate of the losses that were outstanding one year\nearlier to the payments on those losses made during that year. The\ndifference between that sum and the reserves that were established at\nthe end of the prior year is the one-year reserve development. The ratio\nof one-year reserve development to prior year's surplus is the\ndeficiency or redundancy. The acceptable range is less than twenty-five\npercent deficiency. Any redundancy is acceptable.\n  (B) Two Year Reserve Development to Surplus\n  Add the year-end estimate of the losses that were outstanding two\nyears earlier to the payments on those losses made during those two\nyears. The difference between that sum and the reserves that were\nestablished at the end of the second prior year is the two-year reserve\ndevelopment.  The ratio of two-year reserve development to the second\nprior year's surplus is the deficiency or redundancy. The acceptable\nrange is less than twenty-five percent deficiency. Any redundancy is\nacceptable.\n  (C) Estimated Current Reserve Deficiency to Surplus\n  For the last two years the reserves as stated in those years are\nadjusted by the one-year or two-year reserve development as calculated\nin the above two ratios. This total is then divided by the net premium\nearned in the appropriate year to obtain the developed reserve to\npremium ratio. The estimated reserves required is the current net\npremium earned multiplied by the average ratio between developed\nreserves and earned premium for the last two years. The estimated\ndeficiency is the difference between the estimated reserves required by\nthe company and the actual reserves maintained. The estimated current\nreserve deficiency or redundancy is taken as a percentage of surplus and\nthe acceptable range is less than twenty-five percent deficiency. Any\nredundancy is acceptable.\n  (2) Such opinion shall be submitted by the qualified loss reserve\nspecialist to the insurer and the superintendent, by such date\nestablished by the superintendent. For the purposes of this section, a\n"qualified independent loss reserve specialist" shall mean a person who\nis not an employee, principal or director or indirect owner of the\ninsurer and is a member of the Casualty Actuarial Society, or has such\nother experience as is acceptable to the superintendent to assure a\nprofessional opinion on the adequacy of loss and loss adjustment expense\nratios.\n  (3) Nothing in this subsection shall be construed to restrict or\ndiminish any right or power of the superintendent under any other\nprovision of this chapter.\n  (4) The superintendent shall keep the contents of each report made\npursuant to this subsection and any information obtained in connection\ntherewith confidential and shall not make the same public without the\nprior written consent of the insurer to which it pertains unless the\nsuperintendent after notice and an opportunity to be heard shall\ndetermine that the interests of policyholders, shareholders or the\npublic will be served by the publication thereof.\n