New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter IV - Financial Condition Of Insurer and Reports to Superintendent › Subchapter B - Life Insurers › Part 94 - Valuation Of Individual And Group Accident And Health Insurance Reserves › Section 94.9 - Reserve adequacy

Current through Register Vol. 46, No. 28, July 10, 2024
(a) The
				  insurer shall maintain reserves for all individual and group accident and
				  health insurance policies, which reserves shall reflect a sound value placed on
				  its liabilities under such policies.
(b) When an insurer determines that adequacy
				  of its health insurance reserves requires reserves in excess of the minimum
				  standards specified herein, such increased reserves shall be held and shall be
				  considered the minimum for that insurer.
(c) A premium deficiency reserve is a reserve
				  that is established when future premiums and current reserves are not
				  sufficient to cover future claim payments and expenses for the remainder of a
				  contract period. This reserve is in addition to claim reserves and contract
				  reserves. When the expected present value of claims payments or incurred costs,
				  claim adjustment expenses and administration costs exceed the present value of
				  premiums to be collected for the remainder of a contract period, a premium
				  deficiency reserve shall be recognized by recording an additional reserve for
				  the deficiency. For purposes of determining if a premium deficiency exists,
				  contracts shall be grouped in a manner consistent with how policies are
				  marketed, serviced and measured. A reserve shall be recognized for each
				  grouping where a premium deficiency is indicated. Deficiencies shall not be
				  offset by anticipated profits in other policy groupings. Such accruals shall be
				  made for any loss contracts, even if the contract period has not yet
				  started.
(d) With respect to any
				  block of contracts, or with respect to an insurer's health business as a whole,
				  a prospective gross premium valuation is a test of reserve adequacy as of a
				  given valuation date. Such a gross premium valuation will take into account,
				  for contracts in force, in a claims status, or in a continuation of benefits
				  status on the valuation date, the present value as of the valuation date of:
				  all expected benefits unpaid, all expected expenses unpaid, and all unearned or
				  expected premiums, adjusted for future premium increases reasonably expected to
				  be put into effect.
(e) A gross
				  premium valuation as specified in subdivision (d) of this section is to be
				  performed whenever a significant doubt exists as to reserve adequacy with
				  respect to any major block of contracts, or with respect to the insurer's
				  health business as a whole. In the event inadequacy is found to exist,
				  immediate loss recognition shall be made and the reserves restored to adequacy.
				  Adequate reserves (inclusive of claim, premium and contract reserves, if any)
				  shall be held with respect to all contracts, regardless of whether contract
				  reserves are otherwise required for such contracts under this Part.
(f) Whenever minimum reserves, as defined in
				  these standards, exceed reserve requirements as determined by a prospective
				  gross premium valuation, such minimum reserves remain the minimum requirement
				  under this Part.
(g) Adequacy of an
				  insurer's health insurance reserves is to be determined on the basis of all
				  three categories combined (i.e., claim, premium, and contract reserves).
				  However, the standards of this Part are intended to emphasize the importance of
				  determining appropriate reserves for each of the three categories
				  separately.