2023 New York Laws › ISC - Insurance › Article 41 - Property/casualty Insurance Companies › 4117 - Loss and Loss Expense Reserves.

§  4117.  Loss  and  loss  expense  reserves.  (a)  In determining the
financial condition of any property/casualty insurance company  for  the
purpose of applying the provisions of this chapter, and in any financial
statement  or report of any such company, there shall be included in the
liabilities of such company loss reserves and loss expense  reserves  at
least  equal  to  the  amounts  required  under  the  provisions of this
section, and  the  amount  of  such  reserves  shall  be  diminished  by
allowance  or  credit for reinsurance recoverable from assuming insurers
in accordance with paragraph nine  of  subsection  (a)  of  section  one
thousand  three  hundred  one of this chapter. The date as of which such
determination, statement or report is made is hereinafter referred to as
the date of determination.
(b) For all outstanding losses and loss expenses, the  reserves  shall
include the following:
(1) the aggregate estimated amounts due or to become due on account of
all  known  losses  and  claims and loss expenses incurred but not paid,
including the estimated liability on any notice received by the  company
of the occurrence of any event which may result in a loss;
(2)  the  aggregate  amounts  of  liability  for  all  losses and loss
expenses incurred but on which no notice has been received, estimated in
accordance with the company's prior experience,  if  any,  otherwise  in
accordance  with  the  experience  of  similar  companies  under similar
contracts of insurance. The estimated liabilities for such losses  under
all its bonds, policies or contracts of fidelity insurance, shall be not
less  than  ten  percent  of  the net premiums in force thereon, and the
estimated liabilities for all such losses under all its surety contracts
shall be not less than  five  percent  of  the  net  premiums  in  force
thereon.
(c)  Except  as provided in subsection (e) hereof the minimum reserves
for outstanding losses and loss  expenses  under  policies  of  personal
injury  liability  insurance  and under policies of employers' liability
insurance, where  the  losses  were  incurred  during  the  three  years
immediately  preceding the date of determination, shall be calculated in
accordance  with  any  method  adopted  or  approved  by  the   National
Association  of  Insurance  Commissioners and shall be not less than the
aggregate of the estimated unpaid losses and loss  expenses  for  claims
incurred computed in accordance with subsection (b) hereof.
(d)  The  minimum  reserves  for  outstanding losses and loss expenses
under policies of workers' compensation insurance, except as provided in
subsection (e) hereof, shall be computed as follows:
(1) For all such compensation policies where losses were incurred more
than three years prior to the date of determination, such reserves shall
be the sum of the present values, at five percent interest per annum, of
the determined and estimated unpaid losses  computed  on  an  individual
case   basis  plus  the  estimated  unpaid  loss  expenses  computed  in
accordance with subsection (b) hereof.
(2) Where losses were incurred  during  the  three  years  immediately
preceding  the  date of determination, such reserves shall be the sum of
the reserves for each year, which shall be calculated in accordance with
any method adopted or approved by the National Association of  Insurance
Commissioners  and shall be not less than the sum of the present values,
at five percent interest per annum,  of  the  determined  and  estimated
unpaid  losses  computed  on an individual case basis plus the estimated
unpaid loss expenses computed in accordance with subsection (b) hereof.
(e) Whenever in the judgment of the superintendent, the loss and  loss
expense  reserves  of  any  property/casualty  insurance  company  doing
business in this state  calculated  in  accordance  with  the  foregoing

provisions are inadequate or excessive, he may prescribe any other basis
which will produce adequate and reasonable reserves.
(f)  Every  property/casualty insurance company doing business in this
state shall keep a complete and itemized record showing all  losses  and
claims  on  which it has received notices including all notices received
by it of the occurrence of any event which may result in a loss.
(g) (1) Effective with the nineteen hundred ninety  annual  statement,
every  licensed  property/casualty  insurer required to file such annual
statement with the superintendent by the following April  first,  shall,
unless  exempted  by  the superintendent, engage a qualified independent
loss reserve specialist for the following year to render an  opinion  as
to  the  adequacy  of its loss and loss adjustment expense reserves when
two of three of such insurer's results of its loss and  loss  adjustment
expense   ratios  as  indicated  below  are  outside  of  the  indicated
acceptable ranges:
(A) One Year Reserve Development to Surplus
Add the year-end estimate of the losses that were outstanding one year
earlier to the payments on those  losses  made  during  that  year.  The
difference  between  that  sum and the reserves that were established at
the end of the prior year is the one-year reserve development. The ratio
of  one-year  reserve  development  to  prior  year's  surplus  is   the
deficiency  or redundancy. The acceptable range is less than twenty-five
percent deficiency. Any redundancy is acceptable.
(B) Two Year Reserve Development to Surplus
Add the year-end estimate of the  losses  that  were  outstanding  two
years  earlier  to  the  payments  on those losses made during those two
years. The difference between  that  sum  and  the  reserves  that  were
established  at the end of the second prior year is the two-year reserve
development.  The ratio of two-year reserve development  to  the  second
prior  year's  surplus  is  the deficiency or redundancy. The acceptable
range is less than twenty-five percent  deficiency.  Any  redundancy  is
acceptable.
(C) Estimated Current Reserve Deficiency to Surplus
For  the  last  two  years  the  reserves as stated in those years are
adjusted by the one-year or two-year reserve development  as  calculated
in  the  above two ratios. This total is then divided by the net premium
earned in the appropriate  year  to  obtain  the  developed  reserve  to
premium  ratio.  The  estimated  reserves  required  is  the current net
premium  earned  multiplied  by  the  average  ratio  between  developed
reserves  and  earned  premium  for  the  last  two years. The estimated
deficiency is the difference between the estimated reserves required  by
the  company  and  the actual reserves maintained. The estimated current
reserve deficiency or redundancy is taken as a percentage of surplus and
the acceptable range is less than twenty-five  percent  deficiency.  Any
redundancy is acceptable.
(2)  Such  opinion  shall  be  submitted by the qualified loss reserve
specialist  to  the  insurer  and  the  superintendent,  by  such   date
established  by  the superintendent. For the purposes of this section, a
"qualified independent loss reserve specialist" shall mean a person  who
is  not  an  employee,  principal  or  director or indirect owner of the
insurer and is a member of the Casualty Actuarial Society, or  has  such
other  experience  as  is  acceptable  to the superintendent to assure a
professional opinion on the adequacy of loss and loss adjustment expense
ratios.
(3) Nothing in this subsection  shall  be  construed  to  restrict  or
diminish  any  right  or  power  of  the  superintendent under any other
provision of this chapter.
(4) The superintendent shall keep the contents  of  each  report  made
pursuant  to  this subsection and any information obtained in connection
therewith confidential and shall not make the same  public  without  the
prior  written  consent  of  the insurer to which it pertains unless the
superintendent  after  notice  and  an  opportunity  to  be  heard shall
determine that the  interests  of  policyholders,  shareholders  or  the
public will be served by the publication thereof.