Bill Text: NY A11116 | 2017-2018 | General Assembly | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relates to the implementation of a valuation manual and directs the department of financial services to study the impact of such implementation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-06-19 - substituted by s8978a [A11116 Detail]
Download: New_York-2017-A11116-Introduced.html
Bill Title: Relates to the implementation of a valuation manual and directs the department of financial services to study the impact of such implementation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-06-19 - substituted by s8978a [A11116 Detail]
Download: New_York-2017-A11116-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 11116 IN ASSEMBLY June 5, 2018 ___________ Introduced by COMMITTEE ON RULES -- (at request of M. of A. Cahill) -- read once and referred to the Committee on Insurance AN ACT to amend the insurance law, in relation to the implementation of a valuation manual; and to direct the department of financial services to study the impact of the implementation of such valuation manual; and providing for the repeal of such provisions upon expiration there- of The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Section 4217 of the insurance law is amended by adding a 2 new subsection (g) to read as follows: 3 (g)(1) This subsection shall apply only to individual and group life 4 insurance policies and annuity contracts issued on or after the opera- 5 tive date of the valuation manual as prescribed by the superintendent by 6 regulation, provided that the operative date shall be no sooner than 7 January first, two thousand nineteen. 8 (2) For the purposes of this subsection, "NAIC" shall mean the 9 National Association of Insurance Commissioners. 10 (3) For purposes of this subsection, "principle-based valuation" shall 11 mean a reserve valuation that uses methods and assumptions required by 12 paragraph eleven of this subsection as specified in the valuation manu- 13 al. 14 (4) For purposes of this subsection, "qualified actuary" shall mean a 15 member in good standing of the American Academy of Actuaries who meets 16 the requirements prescribed by the superintendent by regulation. 17 (5) For purposes of this subsection, "valuation manual" shall mean the 18 valuation manual adopted by the NAIC on December second, two thousand 19 twelve, as subsequently amended, and as approved by the superintendent 20 upon a finding that such manual is for the best interests of the holders 21 of policies and contracts and annuitants of this state. 22 (6) Notwithstanding subsection (c) of this section and section four 23 thousand two hundred eighteen of this article, the minimum standard for 24 the valuation of all such policies and contracts shall be the standard 25 prescribed in the valuation manual. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD15583-04-8A. 11116 2 1 (7) The valuation manual shall not become operative in this state 2 unless and until the superintendent has approved of such manual and has 3 adopted all necessary regulations to effectuate this subsection. 4 (8) (A) No amendment to the valuation manual shall take effect in this 5 state unless the superintendent finds that such amendment is for the 6 best interests of the holders of policies and contracts and annuitants 7 of this state. 8 (B) Upon ninety days' notice to the legislature, the superintendent 9 may deviate, through regulations, from the reserve standards, valuation 10 methods, assumptions, and related requirements in the valuation manual 11 provided, however, that such deviation shall not result in reserve valu- 12 ations that are lower than the minimum standards prescribed in the valu- 13 ation manual and may be based on a percentage of the reserves being held 14 for the policies and contracts subject to this subsection prior to the 15 operative date of such manual. Such notice shall include for each devi- 16 ation from the valuation manual an explanation of such deviation and why 17 it is necessary, the impact such deviation would have on the reserves 18 and premiums for each insurance and annuity product such deviation 19 applies to and an estimated time line for implementation. 20 (9) The valuation manual shall specify all of the following: 21 (A) Minimum valuation standards for and definitions of the policies 22 and contracts subject to this subsection as determined by the super- 23 intendent. Such minimum valuation standards shall be: 24 (i) The commissioners reserve valuation method for life insurance 25 policies subject to this subsection; and 26 (ii) The commissioners annuity reserve valuation method for annuity 27 contracts subject to this subsection. 28 (B) Requirements for the format of reports to the superintendent under 29 item (iii) of subparagraph (B) of paragraph eleven of this subsection 30 and which shall include information necessary to determine if the valu- 31 ation is appropriate and in compliance with this subsection; 32 (C) Assumptions for risks over which a company does not have signif- 33 icant control or influence; 34 (D) Procedures for corporate governance and oversight of the actuarial 35 function, and a process for appropriate waiver or modification of such 36 procedures; 37 (E) Other requirements, including, but not limited to, those relating 38 to reserve methods, models for measuring risk, generation of economic 39 scenarios, assumptions, margins, use of company experience, risk meas- 40 urement, disclosure, certifications, reports, actuarial opinions and 41 memorandums, transition rules and internal controls; and 42 (F) The data and form of the data required under paragraph twelve of 43 this subsection, with whom the data shall be submitted, and other 44 requirements including data analyses and reporting of analyses. 45 (10) The superintendent may engage a qualified actuary, at the expense 46 of a company, to perform an actuarial examination of such company and 47 opine on the appropriateness of any reserve assumption or method used by 48 such company, or to review and opine on such company's compliance with 49 any requirement set forth in this subsection. 50 (11) (A) A company that issues policies and contracts subject to this 51 subsection shall establish reserves using a principle-based valuation 52 that meets the following conditions for such policies and contracts as 53 specified in the valuation manual: 54 (i) Quantify the benefits and guarantees, and the funding, associated 55 with the policies or contracts and their risks at a level of conserva- 56 tism that reflects conditions that include unfavorable events that haveA. 11116 3 1 a reasonable probability of occurring during the lifetime of the poli- 2 cies and contracts. For policies and contracts with significant tail 3 risk, reflect conditions appropriately adverse to quantify the tail 4 risk. 5 (ii) Incorporate assumptions, risk analysis methods and financial 6 models and management techniques that are consistent with, but not 7 necessarily identical to, those utilized within the company's overall 8 risk assessment process, while recognizing potential differences in 9 financial reporting structures and any prescribed assumptions or meth- 10 ods. 11 (iii) Incorporate assumptions that are derived in one of the following 12 manners: 13 (I) The assumption is prescribed in the valuation manual. 14 (II) For assumptions that are not prescribed, the assumptions shall: 15 a. be established utilizing the company's available experience, to the 16 extent it is relevant and statistically credible; or 17 b. to the extent that company experience is not available, relevant, 18 or statistically credible, be established utilizing other relevant, 19 statistically credible experience. 20 (iv) Provide margins for uncertainty including adverse deviation and 21 estimation error, such that the greater the uncertainty the larger the 22 margin and resulting reserve. 23 (B) A company that issues policies and contracts subject to this 24 subsection shall: 25 (i) Establish procedures for corporate governance and oversight of the 26 actuarial valuation function consistent with those described in the 27 valuation manual. 28 (ii) Provide to the superintendent, annually on or before a date as 29 determined by the superintendent, and the board of directors of the 30 company an annual certification of the effectiveness of the internal 31 controls with respect to the principle-based valuation. Such controls 32 shall be designed to assure that all material risks inherent in the 33 liabilities and associated assets subject to such valuation are included 34 in the valuation, and that valuations are made in accordance with the 35 valuation manual. The certification shall be based on the controls in 36 place as of the end of the preceding calendar year. 37 (iii) Develop, and file with the superintendent upon request, a prin- 38 ciple-based valuation report that complies with standards prescribed in 39 the valuation manual. 40 (C) A principle-based valuation shall include a prescribed formulaic 41 reserve component. 42 (12) A company that issues policies and contracts subject to this 43 subsection shall submit mortality, morbidity, policyholder behavior, or 44 expense experience and other data as prescribed in the valuation manual 45 to the superintendent annually on or before a date as determined by the 46 superintendent. 47 (13) (A) The superintendent may exempt specific product forms or prod- 48 uct lines of a domestic company that is licensed and doing business only 49 in this state from the requirements of this subsection provided: 50 (i) The superintendent has issued an exemption in writing to the 51 company and has not subsequently revoked the exemption in writing; and 52 (ii) The company computes reserves using assumptions and methods used 53 prior to the operative date of the valuation manual in addition to any 54 requirements established by the superintendent and promulgated by regu- 55 lation.A. 11116 4 1 (B) For any company granted an exemption under this paragraph, 2 subsections (c), (d), (e) and (f) of this section and section four thou- 3 sand two hundred eighteen of this article shall be applicable. With 4 respect to any company applying for this exemption, any reference to 5 subsection (g) found in subsections (c), (d), (e) and (f) of this 6 section and section four thousand two hundred eighteen of this article 7 shall not be applicable. 8 § 2. 1. For purposes of this section, valuation manual shall have the 9 same meaning as such term is defined by section 4217 of the insurance 10 law. 11 2. The department of financial services shall study the impact on the 12 New York state life insurance industry and consumers of the implementa- 13 tion of the valuation manual for determining the amount of required 14 reserves for individual and group life insurance policies and annuity 15 contracts. Such study shall include but not be limited to: 16 (a) The percentage change between the reserves required under New York 17 state law prior to the implementation of the valuation manual and the 18 reserves required pursuant to such manual for individual and group life 19 insurance policies and annuity contracts; 20 (b) The percentage change between premiums prior to the implementation 21 of the valuation manual and premiums after the implementation of such 22 manual in the individual and group life insurance markets and annuity 23 market; 24 (c) Identification of the redundancies eliminated from the reserves 25 for each product subject to the valuation manual; 26 (d) The impact on the use of captive insurance companies by the life 27 insurance industry to reinsure existing policies and contracts; 28 (e) The changes to the department of financial services oversight of 29 insurance companies that have occurred as a result of implementing the 30 valuation manual; 31 (f) The impact on risk based capital requirements; 32 (g) The impact on consumers including cost savings, cost increases, 33 any loss of accrued interest on policies and contracts, any loss of 34 existing consumer protections and the impact of replacement products; 35 and 36 (h) An analysis of any regulations promulgated by the department of 37 financial services that allow deviations from the reserve standards, 38 valuation methods, assumptions, and related requirements in the valu- 39 ation manual, including (1) a summary of such deviations, (2) whether 40 such deviations are based upon a percentage of the reserves held for the 41 policies and contracts subject to subsection (g) of section 4217 of the 42 insurance law prior to the operative date of the valuation manual, and 43 (3) the impact of such deviations on reserves for impacted insurance and 44 annuity products including a comparison of the differences between 45 reserves for impacted insurance and annuity products required prior to 46 the implementation of the valuation manual and reserves required for 47 impacted insurance and annuity products as a result of such deviations 48 from the valuation manual. 49 3. The superintendent of the department of financial services shall 50 submit a report to the governor, temporary president of the senate and 51 speaker of the assembly of the department's findings no later than one 52 year after the operative date of the valuation manual, and every two 53 years thereafter. 54 § 3. This act shall take effect immediately; and shall be deemed 55 repealed 10 years after it shall have become a law.
