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

Current through Register Vol. 46, No. 28, July 10, 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.