NU Online News Service, Nov. 21, 8:55 a.m. – The New York State Insurance Department says the state’s life insurers and fraternal benefit societies had better take actual market conditions into effect when they calculate their reserves this year.

The actuarial memoranda that discuss the reserves should talk about the effects of current economic conditions on interest rates, unwanted prepayments on debt securities, defaults on debt securities, and overall asset adequacy, according to a letter sent to carriers by the New York department.

“Examples cited by regulation are no longer appropriate as safe harbors,” the department warns in the sections on prepayments and defaults. “Expected defaults should be commensurate with the current market values for investments of like kind and quality?. Simply assuming past default experience will continue indefinitely may not be acceptable in light of current market conditions and expectations.”

The text of the letter is available on the Web at http://www.ins.state.ny.us/acrobat/res5.pdf