Empire State Updates Life Reserving Rules

The New York State Insurance Department has adopted an emergency regulation amendment that increases reserve requirements for some life insurance policy guarantees.

Department officials say they adopted the emergency amendment, which describes 8 classes of guarantees that lead to extra reserve requirements, because some insurers have been trying to get around existing reserve requirements.

Actuarial Guideline 38, a set of life reserving rules adopted by the National Association of Insurance Commissioners, Kansas City, Mo., in 2002, “stated that new policy designs which are created simply to disguise guarantees provided by the policy must be reserved in a manner similar to more typical designs with similar guarantees,” officials write in the notes explaining the regulation amendment.

The NAIC dealt with the guarantee design problem by revising the reserving rules in October 2005, and the new New York amendment is consistent with the new NAIC standards, officials write.

The new amendment, which revises Regulation 147, applies to financial statements filed on or after Dec. 31, 2004.

The new amendment lists 8 types of features that may increase reserve requirements:

Those features include:

- Limits on the insurer’s ability to increase premiums.

- Refund options.