NY State Senate Bill S8978A

Archive: Last Bill Status - Signed by Governor

Introduced
In Committee
On Floor Calendar
- Passed Senate
- Passed Assembly
Delivered to Governor
Signed by Governor

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Actions

view actions (13)

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Dec 07, 2018	signed chap.394
Nov 27, 2018	delivered to governor
Jun 19, 2018	returned to senate passed assembly ordered to third reading rules cal.301 substituted for a11116a
Jun 18, 2018	referred to codes delivered to assembly passed senate ordered to third reading cal.1898
Jun 15, 2018	print number 8978a
Jun 15, 2018	amend (t) and recommit to rules
Jun 08, 2018	referred to rules

Votes

Bill Amendments

Original

A (Active)

Original

A (Active)

S8978 - Details

See Assembly Version of this Bill:: A11116
Law Section:: Insurance Law
Laws Affected:: Amd §4217, Ins L

S8978 - Summary

Relates to the implementation of a valuation manual and directs the department of financial services to study the impact of such implementation.

S8978 - Sponsor Memo

 
BILL NUMBER: S8978

SPONSOR: SEWARD
 
TITLE OF BILL:  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

 
PURPOSE:

To allow principle-based reserving for individual and group life insur-
ance policies and annuity contracts.

 
SUMMARY OF PROVISIONS:

Section one of the bill would add a new subsection (g) to section 4217
of the insurance law to authorize the use of principle-based reserving
for life insurance policies and annuity contracts. This subsection
would:

*Require life insurance companies to calculate reserves for individual

and group life insurance policies and annuity contracts using a princi-
ple-based valuation established by the valuation manual adopted by the
National Association of Insurance Commissioners as modified and as
approved by the superintendent;

*Authorize the superintendent to deviate from the reserve standards and
methods in the valuation manual, provided that such deviation is not
lower than the minimum standards prescribed in the valuation manual and
may be based on a percentage of the reserves held for the policies and
contracts prior to the operative date of the manual;

*Provide guidance regarding the content of the valuation manual;

*Identify the conditions that life insurers will be required to meet
when calculating reserves using the valuation manual;

*Require life insurers to establish internal procedures for corporate
governance and oversight of the reserve calculating process; and

*Authorize the superintendent to exempt the policies of a life insurer
doing business only in New York from the requirements of a principle-
based valuation.

Section two of the bill would direct the department of financial
services to study the impact on the New York state life insurance indus-
try and consumers of the implementation of the valuation manual and
submit a report of the department's findings to the legislature on no
later than the fifth anniversary of the operative date of the valuation
manual. Section three of the bill sets forth the effective date.

Section three establishes the effective date.

 
JUSTIFICATION:

Life insurers operating in New York currently calculate their required
reserves for life insurance policies and annuity contracts using pre-set
formulas in New York Insurance Law section 4217. In 2009, the National
Association of Insurance Commissioners (NAIC) adopted a new method for
establishing life insurance reserves known as principled-based reserving
(PBR) and in 2013 various states began enacting laws to authorize the
use of PBR.

PBR differs from current reserving standards in that PBR allows for
companies to incorporate their own experiences and assumptions regarding
insurance and annuity products into the calculations of their reserves
instead of basing their calculations entirely on formulas and assump-
tions prescribed by law.

This bill would establish a regulatory framework for the implementation
of PBR within New York State and would require the department of finan-
cial services to study the impact of PBR on the New York life insurance
market.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.

S8978 - Bill Text download pdf


                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  8978

                            I N  S E N A T E

                              June 8, 2018
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

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

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 4217 of the insurance law is amended  by  adding  a
new subsection (g) to read as follows:
  (G)(1)  THIS  SUBSECTION SHALL APPLY ONLY TO INDIVIDUAL AND GROUP LIFE
INSURANCE POLICIES AND ANNUITY CONTRACTS ISSUED ON OR AFTER  THE  OPERA-
TIVE DATE OF THE VALUATION MANUAL AS PRESCRIBED BY THE SUPERINTENDENT BY
REGULATION,  PROVIDED  THAT  THE  OPERATIVE DATE SHALL BE NO SOONER THAN
JANUARY FIRST, TWO THOUSAND NINETEEN.
  (2) FOR THE  PURPOSES  OF  THIS  SUBSECTION,  "NAIC"  SHALL  MEAN  THE
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS.
  (3) FOR PURPOSES OF THIS SUBSECTION, "PRINCIPLE-BASED VALUATION" SHALL
MEAN  A  RESERVE VALUATION THAT USES METHODS AND ASSUMPTIONS REQUIRED BY
PARAGRAPH ELEVEN OF THIS SUBSECTION AS SPECIFIED IN THE VALUATION  MANU-
AL.
  (4)  FOR PURPOSES OF THIS SUBSECTION, "QUALIFIED ACTUARY" SHALL MEAN A
MEMBER IN GOOD STANDING OF THE AMERICAN ACADEMY OF ACTUARIES  WHO  MEETS
THE REQUIREMENTS PRESCRIBED BY THE SUPERINTENDENT BY REGULATION.
  (5) FOR PURPOSES OF THIS SUBSECTION, "VALUATION MANUAL" SHALL MEAN THE
VALUATION  MANUAL  ADOPTED  BY THE NAIC ON DECEMBER SECOND, TWO THOUSAND
TWELVE, AS SUBSEQUENTLY AMENDED, AND AS APPROVED BY  THE  SUPERINTENDENT
UPON A FINDING THAT SUCH MANUAL IS FOR THE BEST INTERESTS OF THE HOLDERS
OF POLICIES AND CONTRACTS AND ANNUITANTS OF THIS STATE.
  (6)  NOTWITHSTANDING  SUBSECTION  (C) OF THIS SECTION AND SECTION FOUR
THOUSAND TWO HUNDRED EIGHTEEN OF THIS ARTICLE, THE MINIMUM STANDARD  FOR
THE  VALUATION  OF ALL SUCH POLICIES AND CONTRACTS SHALL BE THE STANDARD
PRESCRIBED IN THE VALUATION MANUAL, AS MODIFIED  BY  THE  SUPERINTENDENT
PURSUANT TO SUBPARAGRAPH (B) OF PARAGRAPH EIGHT OF THIS SUBSECTION.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD16245-02-8

S. 8978                             2

  (7)  THE  VALUATION  MANUAL  SHALL  NOT BECOME OPERATIVE IN THIS STATE
UNLESS AND UNTIL THE SUPERINTENDENT HAS APPROVED OF SUCH MANUAL AND  HAS
ADOPTED ALL NECESSARY REGULATIONS TO EFFECTUATE THIS SUBSECTION.
  (8) (A) NO AMENDMENT TO THE VALUATION MANUAL SHALL TAKE EFFECT IN THIS
STATE  UNLESS  THE  SUPERINTENDENT  FINDS THAT SUCH AMENDMENT IS FOR THE
BEST INTERESTS OF THE HOLDERS OF POLICIES AND CONTRACTS  AND  ANNUITANTS
OF THIS STATE.
  (B)  THE  SUPERINTENDENT  MAY  DEVIATE,  THROUGH REGULATIONS, FROM THE
RESERVE STANDARDS, VALUATION METHODS, ASSUMPTIONS, AND RELATED  REQUIRE-
MENTS  IN  THE  VALUATION  MANUAL PROVIDED, HOWEVER, THAT SUCH DEVIATION
SHALL NOT RESULT IN RESERVE VALUATIONS THAT ARE LOWER THAN  THE  MINIMUM
STANDARDS  PRESCRIBED  IN  THE  VALUATION  MANUAL  AND MAY BE BASED ON A
PERCENTAGE OF THE RESERVES BEING HELD FOR  THE  POLICIES  AND  CONTRACTS
SUBJECT TO THIS SUBSECTION PRIOR TO THE OPERATIVE DATE OF SUCH MANUAL.
  (9) THE VALUATION MANUAL SHALL SPECIFY ALL OF THE FOLLOWING:
  (A)  MINIMUM  VALUATION  STANDARDS FOR AND DEFINITIONS OF THE POLICIES
AND CONTRACTS SUBJECT TO THIS SUBSECTION AS  DETERMINED  BY  THE  SUPER-
INTENDENT. SUCH MINIMUM VALUATION STANDARDS SHALL BE:
  (I)  THE  COMMISSIONERS  RESERVE  VALUATION  METHOD FOR LIFE INSURANCE
POLICIES SUBJECT TO THIS SUBSECTION; AND
  (II) THE COMMISSIONERS ANNUITY RESERVE VALUATION  METHOD  FOR  ANNUITY
CONTRACTS SUBJECT TO THIS SUBSECTION.
  (B) REQUIREMENTS FOR THE FORMAT OF REPORTS TO THE SUPERINTENDENT UNDER
ITEM  (III)  OF  SUBPARAGRAPH (B) OF PARAGRAPH ELEVEN OF THIS SUBSECTION
AND WHICH SHALL INCLUDE INFORMATION NECESSARY TO DETERMINE IF THE  VALU-
ATION IS APPROPRIATE AND IN COMPLIANCE WITH THIS SUBSECTION;
  (C)  ASSUMPTIONS  FOR RISKS OVER WHICH A COMPANY DOES NOT HAVE SIGNIF-
ICANT CONTROL OR INFLUENCE;
  (D) PROCEDURES FOR CORPORATE GOVERNANCE AND OVERSIGHT OF THE ACTUARIAL
FUNCTION, AND A PROCESS FOR APPROPRIATE WAIVER OR MODIFICATION  OF  SUCH
PROCEDURES;
  (E)  OTHER REQUIREMENTS, INCLUDING, BUT NOT LIMITED TO, THOSE RELATING
TO RESERVE METHODS, MODELS FOR MEASURING RISK,  GENERATION  OF  ECONOMIC
SCENARIOS,  ASSUMPTIONS,  MARGINS, USE OF COMPANY EXPERIENCE, RISK MEAS-
UREMENT, DISCLOSURE, CERTIFICATIONS,  REPORTS,  ACTUARIAL  OPINIONS  AND
MEMORANDUMS, TRANSITION RULES AND INTERNAL CONTROLS; AND
  (F)  THE  DATA AND FORM OF THE DATA REQUIRED UNDER PARAGRAPH TWELVE OF
THIS SUBSECTION, WITH WHOM  THE  DATA  SHALL  BE  SUBMITTED,  AND  OTHER
REQUIREMENTS INCLUDING DATA ANALYSES AND REPORTING OF ANALYSES.
  (10) THE SUPERINTENDENT MAY ENGAGE A QUALIFIED ACTUARY, AT THE EXPENSE
OF  A  COMPANY,  TO PERFORM AN ACTUARIAL EXAMINATION OF SUCH COMPANY AND
OPINE ON THE APPROPRIATENESS OF ANY RESERVE ASSUMPTION OR METHOD USED BY
SUCH COMPANY, OR TO REVIEW AND OPINE ON SUCH COMPANY'S  COMPLIANCE  WITH
ANY REQUIREMENT SET FORTH IN THIS SUBSECTION.
  (11)  (A) A COMPANY THAT ISSUES POLICIES AND CONTRACTS SUBJECT TO THIS
SUBSECTION SHALL ESTABLISH RESERVES USING  A  PRINCIPLE-BASED  VALUATION
THAT  MEETS  THE FOLLOWING CONDITIONS FOR SUCH POLICIES AND CONTRACTS AS
SPECIFIED IN THE VALUATION MANUAL, AS  MODIFIED  BY  THE  SUPERINTENDENT
PURSUANT TO SUBPARAGRAPH (B) OF PARAGRAPH EIGHT OF THIS SUBSECTION:
  (I)  QUANTIFY THE BENEFITS AND GUARANTEES, AND THE FUNDING, ASSOCIATED
WITH THE POLICIES OR CONTRACTS AND THEIR RISKS AT A LEVEL  OF  CONSERVA-
TISM  THAT REFLECTS CONDITIONS THAT INCLUDE UNFAVORABLE EVENTS THAT HAVE
A REASONABLE PROBABILITY OF OCCURRING DURING THE LIFETIME OF  THE  POLI-
CIES  AND  CONTRACTS.  FOR  POLICIES AND CONTRACTS WITH SIGNIFICANT TAIL
RISK, REFLECT CONDITIONS APPROPRIATELY  ADVERSE  TO  QUANTIFY  THE  TAIL
RISK.

S. 8978                             3

  (II)  INCORPORATE  ASSUMPTIONS,  RISK  ANALYSIS  METHODS AND FINANCIAL
MODELS AND MANAGEMENT TECHNIQUES  THAT  ARE  CONSISTENT  WITH,  BUT  NOT
NECESSARILY  IDENTICAL  TO,  THOSE UTILIZED WITHIN THE COMPANY'S OVERALL
RISK ASSESSMENT PROCESS,  WHILE  RECOGNIZING  POTENTIAL  DIFFERENCES  IN
FINANCIAL  REPORTING  STRUCTURES AND ANY PRESCRIBED ASSUMPTIONS OR METH-
ODS.
  (III) INCORPORATE ASSUMPTIONS THAT ARE DERIVED IN ONE OF THE FOLLOWING
MANNERS:
  (I) THE ASSUMPTION IS PRESCRIBED IN THE VALUATION MANUAL, AS  MODIFIED
BY THE SUPERINTENDENT PURSUANT TO SUBPARAGRAPH (B) OF PARAGRAPH EIGHT OF
THIS SUBSECTION.
  (II) FOR ASSUMPTIONS THAT ARE NOT PRESCRIBED, THE ASSUMPTIONS SHALL:
  A. BE ESTABLISHED UTILIZING THE COMPANY'S AVAILABLE EXPERIENCE, TO THE
EXTENT  IT IS RELEVANT AND STATISTICALLY CREDIBLE AND IS APPROVED BY THE
SUPERINTENDENT; OR
  B. TO THE EXTENT THAT COMPANY EXPERIENCE IS NOT  AVAILABLE,  RELEVANT,
OR  STATISTICALLY  CREDIBLE,  BE  ESTABLISHED  UTILIZING OTHER RELEVANT,
STATISTICALLY CREDIBLE EXPERIENCE THAT IS APPROVED  BY  THE  SUPERINTEN-
DENT.
  (IV)  PROVIDE  MARGINS FOR UNCERTAINTY INCLUDING ADVERSE DEVIATION AND
ESTIMATION ERROR, SUCH THAT THE GREATER THE UNCERTAINTY THE  LARGER  THE
MARGIN AND RESULTING RESERVE.
  (B)  A  COMPANY  THAT  ISSUES  POLICIES  AND CONTRACTS SUBJECT TO THIS
SUBSECTION SHALL:
  (I) ESTABLISH PROCEDURES FOR CORPORATE GOVERNANCE AND OVERSIGHT OF THE
ACTUARIAL VALUATION FUNCTION CONSISTENT  WITH  THOSE  DESCRIBED  IN  THE
VALUATION MANUAL, AS MODIFIED BY THE SUPERINTENDENT PURSUANT TO SUBPARA-
GRAPH (B) OF PARAGRAPH EIGHT OF THIS SUBSECTION.
  (II)  PROVIDE  TO  THE SUPERINTENDENT, ANNUALLY ON OR BEFORE A DATE AS
DETERMINED BY THE SUPERINTENDENT, AND THE  BOARD  OF  DIRECTORS  OF  THE
COMPANY  AN  ANNUAL  CERTIFICATION  OF THE EFFECTIVENESS OF THE INTERNAL
CONTROLS WITH RESPECT TO THE PRINCIPLE-BASED  VALUATION.  SUCH  CONTROLS
SHALL  BE  DESIGNED  TO  ASSURE  THAT ALL MATERIAL RISKS INHERENT IN THE
LIABILITIES AND ASSOCIATED ASSETS SUBJECT TO SUCH VALUATION ARE INCLUDED
IN THE VALUATION, AND THAT VALUATIONS ARE MADE IN  ACCORDANCE  WITH  THE
VALUATION MANUAL, AS MODIFIED BY THE SUPERINTENDENT PURSUANT TO SUBPARA-
GRAPH  (B)  OF  PARAGRAPH  EIGHT OF THIS SUBSECTION.   THE CERTIFICATION
SHALL BE BASED ON THE CONTROLS IN PLACE AS OF THE END OF  THE  PRECEDING
CALENDAR YEAR.
  (III)  DEVELOP, AND FILE WITH THE SUPERINTENDENT UPON REQUEST, A PRIN-
CIPLE-BASED VALUATION REPORT THAT COMPLIES WITH STANDARDS PRESCRIBED  IN
THE  VALUATION  MANUAL,  AS  MODIFIED  BY THE SUPERINTENDENT PURSUANT TO
SUBPARAGRAPH (B) OF PARAGRAPH EIGHT OF THIS SUBSECTION.
  (C) A PRINCIPLE-BASED VALUATION SHALL INCLUDE A  PRESCRIBED  FORMULAIC
RESERVE COMPONENT.
  (12)  A  COMPANY  THAT  ISSUES  POLICIES AND CONTRACTS SUBJECT TO THIS
SUBSECTION SHALL SUBMIT MORTALITY, MORBIDITY, POLICYHOLDER BEHAVIOR,  OR
EXPENSE EXPERIENCE AND OTHER DATA AS PRESCRIBED IN THE VALUATION MANUAL,
AS  MODIFIED BY THE SUPERINTENDENT PURSUANT TO SUBPARAGRAPH (B) OF PARA-
GRAPH EIGHT OF THIS SUBSECTION TO  THE  SUPERINTENDENT  ANNUALLY  ON  OR
BEFORE A DATE AS DETERMINED BY THE SUPERINTENDENT.
  (13) (A) THE SUPERINTENDENT MAY EXEMPT SPECIFIC PRODUCT FORMS OR PROD-
UCT LINES OF A DOMESTIC COMPANY THAT IS LICENSED AND DOING BUSINESS ONLY
IN THIS STATE FROM THE REQUIREMENTS OF THIS SUBSECTION PROVIDED:
  (I)  THE  SUPERINTENDENT  HAS  ISSUED  AN  EXEMPTION IN WRITING TO THE
COMPANY AND HAS NOT SUBSEQUENTLY REVOKED THE EXEMPTION IN WRITING; AND

S. 8978                             4

  (II) THE COMPANY COMPUTES RESERVES USING ASSUMPTIONS AND METHODS  USED
PRIOR  TO THE OPERATIVE DATE OF THE VALUATION MANUAL, AS MODIFIED BY THE
SUPERINTENDENT PURSUANT TO SUBPARAGRAPH (B) OF PARAGRAPH EIGHT  OF  THIS
SUBSECTION  IN  ADDITION  TO  ANY REQUIREMENTS ESTABLISHED BY THE SUPER-
INTENDENT AND PROMULGATED BY REGULATION.
  (B)  FOR  ANY  COMPANY  GRANTED  AN  EXEMPTION  UNDER  THIS PARAGRAPH,
SUBSECTIONS (C), (D), (E) AND (F) OF THIS SECTION AND SECTION FOUR THOU-
SAND TWO HUNDRED EIGHTEEN OF THIS  ARTICLE  SHALL  BE  APPLICABLE.  WITH
RESPECT  TO  ANY  COMPANY  APPLYING FOR THIS EXEMPTION, ANY REFERENCE TO
SUBSECTION (G) FOUND IN SUBSECTIONS  (C),  (D),  (E)  AND  (F)  OF  THIS
SECTION  AND  SECTION FOUR THOUSAND TWO HUNDRED EIGHTEEN OF THIS ARTICLE
SHALL NOT BE APPLICABLE.
  (14) THE SUPERINTENDENT MAY REQUIRE A COMPANY TO CHANGE ANY ASSUMPTION
OR METHOD USED TO CALCULATE THE COMPANY'S RESERVES THAT, IN THE  OPINION
OF THE SUPERINTENDENT, IS NECESSARY IN ORDER TO COMPLY WITH THE REQUIRE-
MENTS  OF THE VALUATION MANUAL OR THIS SUBSECTION; AND THE COMPANY SHALL
ADJUST THE RESERVES AS REQUIRED BY THE SUPERINTENDENT.
  § 2. 1. For purposes of this  section,  the  term  "valuation  manual"
shall have the same meaning as such term is defined by subsection (g) of
section 4217 of the insurance law.
  2.  The  department  of  financial  services shall, in connection with
issuing the report required in subdivision 3 of this section, study  the
impact  on  the  New York state life insurance industry and consumers of
the implementation of the valuation manual for determining the amount of
required reserves for individual and group life insurance  policies  and
annuity contracts. Such study shall include but not be limited to:
  (a) The percentage change between the reserves required under New York
state  law  prior  to the implementation of the valuation manual and the
reserves required pursuant to such manual for individual and group  life
insurance policies and annuity contracts;
  (b) The percentage change between premiums prior to the implementation
of  the  valuation  manual and premiums after the implementation of such
manual in the individual and group life insurance  markets  and  annuity
market;
  (c)  The  changes to the department of financial services oversight of
insurance companies that have occurred as a result of  implementing  the
valuation manual;
  (d) The impact on risk based capital requirements; and
  (e)  The  impact  on consumers including cost savings, cost increases,
any loss of accrued interest on policies  and  contracts,  any  loss  of
existing consumer protections and the impact of replacement products.
  3.  The  superintendent  of the department of financial services shall
submit a report to the governor, temporary president of the  senate  and
speaker  of the assembly of the department's findings no later than five
years after the operative date of the valuation manual.
  § 3. This act shall take effect immediately.

S8978A (ACTIVE) - Details

See Assembly Version of this Bill:: A11116
Law Section:: Insurance Law
Laws Affected:: Amd §4217, Ins L

S8978A (ACTIVE) - Summary

Relates to the implementation of a valuation manual and directs the department of financial services to study the impact of such implementation.

S8978A (ACTIVE) - Sponsor Memo

 
BILL NUMBER: S8978A       REVISED MEMO 06/27/2018

SPONSOR: SEWARD
 
TITLE OF BILL:  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 thereof

 
PURPOSE:

To allow principle-based reserving for individual and group life insur-
ance policies and annuity contracts.

 
SUMMARY OF PROVISIONS:

Section one of the bill would add a new subsection (g) to section 4217
of the insurance law to authorize the use of principle-based reserving
for life insurance policies and annuity contracts. This subsection
would:

*Require life insurance companies to calculate reserves for individual
and group life insurance policies and annuity contracts using a princi-
ple-based valuation established by the valuation manual adopted by the
National Association of Insurance Commissioners as modified and as
approved by the superintendent;

*Authorize the superintendent to deviate from the reserve standards and
methods in the valuation manual, provided that such deviation is not
lower than the minimum standards prescribed in the valuation manual and
may be based on a percentage of the reserves held for the policies and
contracts prior to the operative date of the manual;

*Provide guidance regarding the content of the valuation manual;

*Identify the conditions that life insurers will be required to meet
when calculating reserves using the valuation manual;

*Require life insurers to establish internal procedures for corporate
governance and oversight of the reserve calculating process; and

*Authorize the superintendent to exempt the policies of a life insurer
doing business only in New York from the requirements of a principle-
based valuation.

Section two of the bill would direct the department of financial
services to study the impact on the New York state life insurance indus-
try and consumers of the implementation of the valuation manual and
submit a report of the department's findings to the legislature on no
later than the fifth anniversary of the operative date of the valuation
manual.

Section three of the bill sets forth the effective date.

Section three establishes the effective date.

 
JUSTIFICATION:


Life insurers operating in New York currently calculate their required
reserves for life insurance policies and annuity contracts using pre-set
formulas in New York Insurance Law section 4217. In 2009, the National
Association of Insurance Commissioners (NAIC) adopted a new method for
establishing life insurance reserves known as principled-based reserving
(PBR) and in 2013 various states began enacting laws to authorize the
use of PBR.

PBR differs from current reserving standards in that PBR allows for
companies to incorporate their own experiences and assumptions regarding
insurance and annuity products into the calculations of their reserves
instead of basing their calculations entirely on formulas and assump-
tions prescribed by law. The department of financial services may
require a company to change any assumption or method used to calculate
the company's reserves, and require the company to adjust the reserves
accordingly, if the department believes it is necessary to comply with
the requirements of the valuation manual or Insurance Law Section 4217
(g).

This bill would establish a regulatory framework for the implementation
of PBR within New York State and would require the department of finan-
cial services to study the impact of PBR on the New York life insurance
market.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.

S8978A (ACTIVE) - Bill Text download pdf


                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 8978--A

                            I N  S E N A T E

                              June 8, 2018
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be  committed  to  the  Committee  on  Rules  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

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:

  Section 1. Section 4217 of the insurance law is amended  by  adding  a
new subsection (g) to read as follows:
  (G)(1)  THIS  SUBSECTION SHALL APPLY ONLY TO INDIVIDUAL AND GROUP LIFE
INSURANCE POLICIES AND ANNUITY CONTRACTS ISSUED ON OR AFTER  THE  OPERA-
TIVE DATE OF THE VALUATION MANUAL AS PRESCRIBED BY THE SUPERINTENDENT BY
REGULATION,  PROVIDED  THAT  THE  OPERATIVE DATE SHALL BE NO SOONER THAN
JANUARY FIRST, TWO THOUSAND NINETEEN.
  (2) FOR THE  PURPOSES  OF  THIS  SUBSECTION,  "NAIC"  SHALL  MEAN  THE
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS.
  (3) FOR PURPOSES OF THIS SUBSECTION, "PRINCIPLE-BASED VALUATION" SHALL
MEAN  A  RESERVE VALUATION THAT USES METHODS AND ASSUMPTIONS REQUIRED BY
PARAGRAPH ELEVEN OF THIS SUBSECTION AS SPECIFIED IN THE VALUATION  MANU-
AL.
  (4)  FOR PURPOSES OF THIS SUBSECTION, "QUALIFIED ACTUARY" SHALL MEAN A
MEMBER IN GOOD STANDING OF THE AMERICAN ACADEMY OF ACTUARIES  WHO  MEETS
THE REQUIREMENTS PRESCRIBED BY THE SUPERINTENDENT BY REGULATION.
  (5) FOR PURPOSES OF THIS SUBSECTION, "VALUATION MANUAL" SHALL MEAN THE
VALUATION  MANUAL  ADOPTED  BY THE NAIC ON DECEMBER SECOND, TWO THOUSAND
TWELVE, AS SUBSEQUENTLY AMENDED, AND AS APPROVED BY  THE  SUPERINTENDENT
UPON A FINDING THAT SUCH MANUAL IS FOR THE BEST INTERESTS OF THE HOLDERS
OF  POLICIES  AND CONTRACTS AND ANNUITANTS OF THIS STATE AND WHICH MEETS
THE REQUIREMENTS AS SET FORTH IN THIS SUBSECTION.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD16245-03-8

S. 8978--A                          2

  (6) NOTWITHSTANDING SUBSECTION (C) OF THIS SECTION  AND  SECTION  FOUR
THOUSAND  TWO HUNDRED EIGHTEEN OF THIS ARTICLE, THE MINIMUM STANDARD FOR
THE VALUATION OF ALL SUCH POLICIES AND CONTRACTS SHALL BE  THE  STANDARD
PRESCRIBED IN THE VALUATION MANUAL.
  (7)  THE  VALUATION  MANUAL  SHALL  NOT BECOME OPERATIVE IN THIS STATE
UNLESS AND UNTIL THE SUPERINTENDENT HAS APPROVED OF SUCH MANUAL AND  HAS
ADOPTED ALL NECESSARY REGULATIONS TO EFFECTUATE THIS SUBSECTION.
  (8) (A) NO AMENDMENT TO THE VALUATION MANUAL SHALL TAKE EFFECT IN THIS
STATE  UNLESS  THE  SUPERINTENDENT  FINDS THAT SUCH AMENDMENT IS FOR THE
BEST INTERESTS OF THE HOLDERS OF POLICIES AND CONTRACTS  AND  ANNUITANTS
OF THIS STATE.
  (B)  THE  SUPERINTENDENT  MAY  DEVIATE,  THROUGH REGULATIONS, FROM THE
RESERVE STANDARDS, VALUATION METHODS, ASSUMPTIONS, AND RELATED  REQUIRE-
MENTS  IN  THE  VALUATION  MANUAL,  INCLUDING  FOR INDIVIDUAL COMPANIES,
PROVIDED, HOWEVER, THAT SUCH DEVIATION SHALL NOT RESULT IN RESERVE VALU-
ATIONS THAT ARE LOWER THAN THE MINIMUM STANDARDS PRESCRIBED IN THE VALU-
ATION MANUAL AND MAY BE BASED ON A PERCENTAGE OF THE RESERVES BEING HELD
FOR THE POLICIES AND CONTRACTS SUBJECT TO THIS SUBSECTION PRIOR  TO  THE
OPERATIVE DATE OF SUCH MANUAL.
  (9) THE VALUATION MANUAL SHALL SPECIFY ALL OF THE FOLLOWING:
  (A)  MINIMUM  VALUATION  STANDARDS FOR AND DEFINITIONS OF THE POLICIES
AND CONTRACTS SUBJECT TO THIS SUBSECTION AS  DETERMINED  BY  THE  SUPER-
INTENDENT. SUCH MINIMUM VALUATION STANDARDS SHALL BE:
  (I)  THE  COMMISSIONERS  RESERVE  VALUATION  METHOD FOR LIFE INSURANCE
POLICIES SUBJECT TO THIS SUBSECTION; AND
  (II) THE COMMISSIONERS ANNUITY RESERVE VALUATION  METHOD  FOR  ANNUITY
CONTRACTS SUBJECT TO THIS SUBSECTION.
  (B) REQUIREMENTS FOR THE FORMAT OF REPORTS TO THE SUPERINTENDENT UNDER
ITEM  (III)  OF  SUBPARAGRAPH (B) OF PARAGRAPH ELEVEN OF THIS SUBSECTION
AND WHICH SHALL INCLUDE INFORMATION NECESSARY TO DETERMINE IF THE  VALU-
ATION IS APPROPRIATE AND IN COMPLIANCE WITH THIS SUBSECTION;
  (C)  ASSUMPTIONS  FOR RISKS OVER WHICH A COMPANY DOES NOT HAVE SIGNIF-
ICANT CONTROL OR INFLUENCE;
  (D) PROCEDURES FOR CORPORATE GOVERNANCE AND OVERSIGHT OF THE ACTUARIAL
FUNCTION, AND A PROCESS FOR APPROPRIATE WAIVER OR MODIFICATION  OF  SUCH
PROCEDURES;
  (E)  OTHER REQUIREMENTS, INCLUDING, BUT NOT LIMITED TO, THOSE RELATING
TO RESERVE METHODS, MODELS FOR MEASURING RISK,  GENERATION  OF  ECONOMIC
SCENARIOS,  ASSUMPTIONS,  MARGINS, USE OF COMPANY EXPERIENCE, RISK MEAS-
UREMENT, DISCLOSURE, CERTIFICATIONS,  REPORTS,  ACTUARIAL  OPINIONS  AND
MEMORANDUMS, TRANSITION RULES AND INTERNAL CONTROLS; AND
  (F)  THE  DATA AND FORM OF THE DATA REQUIRED UNDER PARAGRAPH TWELVE OF
THIS SUBSECTION, WITH WHOM  THE  DATA  SHALL  BE  SUBMITTED,  AND  OTHER
REQUIREMENTS INCLUDING DATA ANALYSES AND REPORTING OF ANALYSES.
  (10) THE SUPERINTENDENT MAY ENGAGE A QUALIFIED ACTUARY, AT THE EXPENSE
OF  A  COMPANY,  TO PERFORM AN ACTUARIAL EXAMINATION OF SUCH COMPANY AND
OPINE ON THE APPROPRIATENESS OF ANY RESERVE ASSUMPTION OR METHOD USED BY
SUCH COMPANY, OR TO REVIEW AND OPINE ON SUCH COMPANY'S  COMPLIANCE  WITH
ANY REQUIREMENT SET FORTH IN THIS SUBSECTION.
  (11)  (A) A COMPANY THAT ISSUES POLICIES AND CONTRACTS SUBJECT TO THIS
SUBSECTION SHALL ESTABLISH RESERVES USING  A  PRINCIPLE-BASED  VALUATION
THAT  MEETS  THE FOLLOWING CONDITIONS FOR SUCH POLICIES AND CONTRACTS AS
SPECIFIED IN THE VALUATION MANUAL:
  (I) QUANTIFY THE BENEFITS AND GUARANTEES, AND THE FUNDING,  ASSOCIATED
WITH  THE  POLICIES OR CONTRACTS AND THEIR RISKS AT A LEVEL OF CONSERVA-
TISM THAT REFLECTS CONDITIONS THAT INCLUDE UNFAVORABLE EVENTS THAT  HAVE

S. 8978--A                          3

A  REASONABLE  PROBABILITY OF OCCURRING DURING THE LIFETIME OF THE POLI-
CIES AND CONTRACTS. FOR POLICIES AND  CONTRACTS  WITH  SIGNIFICANT  TAIL
RISK,  REFLECT  CONDITIONS  APPROPRIATELY  ADVERSE  TO QUANTIFY THE TAIL
RISK.
  (II)  INCORPORATE  ASSUMPTIONS,  RISK  ANALYSIS  METHODS AND FINANCIAL
MODELS AND MANAGEMENT TECHNIQUES  THAT  ARE  CONSISTENT  WITH,  BUT  NOT
NECESSARILY  IDENTICAL  TO,  THOSE UTILIZED WITHIN THE COMPANY'S OVERALL
RISK ASSESSMENT PROCESS,  WHILE  RECOGNIZING  POTENTIAL  DIFFERENCES  IN
FINANCIAL  REPORTING  STRUCTURES AND ANY PRESCRIBED ASSUMPTIONS OR METH-
ODS.
  (III) INCORPORATE ASSUMPTIONS THAT ARE DERIVED IN ONE OF THE FOLLOWING
MANNERS:
  (I) THE ASSUMPTION IS PRESCRIBED IN THE VALUATION MANUAL.
  (II) FOR ASSUMPTIONS THAT ARE NOT PRESCRIBED, THE ASSUMPTIONS SHALL:
  A. BE ESTABLISHED UTILIZING THE COMPANY'S AVAILABLE EXPERIENCE, TO THE
EXTENT IT IS RELEVANT AND STATISTICALLY CREDIBLE; OR
  B. TO THE EXTENT THAT COMPANY EXPERIENCE IS NOT  AVAILABLE,  RELEVANT,
OR  STATISTICALLY  CREDIBLE,  BE  ESTABLISHED  UTILIZING OTHER RELEVANT,
STATISTICALLY CREDIBLE EXPERIENCE.
  (IV) PROVIDE MARGINS FOR UNCERTAINTY INCLUDING ADVERSE  DEVIATION  AND
ESTIMATION  ERROR,  SUCH THAT THE GREATER THE UNCERTAINTY THE LARGER THE
MARGIN AND RESULTING RESERVE.
  (B) A COMPANY THAT ISSUES  POLICIES  AND  CONTRACTS  SUBJECT  TO  THIS
SUBSECTION SHALL:
  (I) ESTABLISH PROCEDURES FOR CORPORATE GOVERNANCE AND OVERSIGHT OF THE
ACTUARIAL  VALUATION  FUNCTION  CONSISTENT  WITH  THOSE DESCRIBED IN THE
VALUATION MANUAL.
  (II) PROVIDE TO THE SUPERINTENDENT, ANNUALLY ON OR BEFORE  A  DATE  AS
DETERMINED  BY  THE  SUPERINTENDENT,  AND  THE BOARD OF DIRECTORS OF THE
COMPANY AN ANNUAL CERTIFICATION OF THE  EFFECTIVENESS  OF  THE  INTERNAL
CONTROLS  WITH  RESPECT  TO THE PRINCIPLE-BASED VALUATION. SUCH CONTROLS
SHALL BE DESIGNED TO ASSURE THAT ALL  MATERIAL  RISKS  INHERENT  IN  THE
LIABILITIES AND ASSOCIATED ASSETS SUBJECT TO SUCH VALUATION ARE INCLUDED
IN  THE  VALUATION,  AND THAT VALUATIONS ARE MADE IN ACCORDANCE WITH THE
VALUATION MANUAL.  THE CERTIFICATION SHALL BE BASED ON THE  CONTROLS  IN
PLACE AS OF THE END OF THE PRECEDING CALENDAR YEAR.
  (III)  DEVELOP, AND FILE WITH THE SUPERINTENDENT UPON REQUEST, A PRIN-
CIPLE-BASED VALUATION REPORT THAT COMPLIES WITH STANDARDS PRESCRIBED  IN
THE VALUATION MANUAL.
  (C)  A  PRINCIPLE-BASED VALUATION SHALL INCLUDE A PRESCRIBED FORMULAIC
RESERVE COMPONENT.
  (12) A COMPANY THAT ISSUES POLICIES  AND  CONTRACTS  SUBJECT  TO  THIS
SUBSECTION  SHALL SUBMIT MORTALITY, MORBIDITY, POLICYHOLDER BEHAVIOR, OR
EXPENSE EXPERIENCE AND OTHER DATA AS PRESCRIBED IN THE VALUATION  MANUAL
TO  THE SUPERINTENDENT ANNUALLY ON OR BEFORE A DATE AS DETERMINED BY THE
SUPERINTENDENT.
  (13) (A) THE SUPERINTENDENT MAY EXEMPT SPECIFIC PRODUCT FORMS OR PROD-
UCT LINES OF A DOMESTIC COMPANY THAT IS LICENSED AND DOING BUSINESS ONLY
IN THIS STATE FROM THE REQUIREMENTS OF THIS SUBSECTION PROVIDED:
  (I) THE SUPERINTENDENT HAS ISSUED  AN  EXEMPTION  IN  WRITING  TO  THE
COMPANY AND HAS NOT SUBSEQUENTLY REVOKED THE EXEMPTION IN WRITING; AND
  (II)  THE COMPANY COMPUTES RESERVES USING ASSUMPTIONS AND METHODS USED
PRIOR TO THE OPERATIVE DATE OF THE VALUATION MANUAL IN ADDITION  TO  ANY
REQUIREMENTS  ESTABLISHED BY THE SUPERINTENDENT AND PROMULGATED BY REGU-
LATION.

S. 8978--A                          4

  (B) FOR  ANY  COMPANY  GRANTED  AN  EXEMPTION  UNDER  THIS  PARAGRAPH,
SUBSECTIONS (C), (D), (E) AND (F) OF THIS SECTION AND SECTION FOUR THOU-
SAND  TWO  HUNDRED  EIGHTEEN  OF  THIS ARTICLE SHALL BE APPLICABLE. WITH
RESPECT TO ANY COMPANY APPLYING FOR THIS  EXEMPTION,  ANY  REFERENCE  TO
SUBSECTION  (G)  FOUND  IN  SUBSECTIONS  (C),  (D),  (E) AND (F) OF THIS
SECTION AND SECTION FOUR THOUSAND TWO HUNDRED EIGHTEEN OF  THIS  ARTICLE
SHALL NOT BE APPLICABLE.
  §  2. 1. For purposes of this section, valuation manual shall have the
same meaning as such term is defined by section 4217  of  the  insurance
law.
  2.  The department of financial services shall study the impact on the
New York state life insurance industry and consumers of the  implementa-
tion  of  the  valuation  manual  for determining the amount of required
reserves for individual and group life insurance  policies  and  annuity
contracts. Such study shall include but not be limited to:
  (a) The percentage change between the reserves required under New York
state  law  prior  to the implementation of the valuation manual and the
reserves required pursuant to such manual for individual and group  life
insurance policies and annuity contracts;
  (b) The percentage change between premiums prior to the implementation
of  the  valuation  manual and premiums after the implementation of such
manual in the individual and group life insurance  markets  and  annuity
market;
  (c)  Identification  of  the redundancies eliminated from the reserves
for each product subject to the valuation manual;
  (d) The impact on the use of captive insurance companies by  the  life
insurance industry to reinsure existing policies and contracts;
  (e)  The  changes to the department of financial services oversight of
insurance companies that have occurred as a result of  implementing  the
valuation manual;
  (f) The impact on risk based capital requirements;
  (g)  The  impact  on consumers including cost savings, cost increases,
any loss of accrued interest on policies  and  contracts,  any  loss  of
existing  consumer  protections  and the impact of replacement products;
and
  (h) An analysis of any regulations promulgated by  the  department  of
financial  services  that  allow  deviations from the reserve standards,
valuation methods, assumptions, and related requirements  in  the  valu-
ation  manual,  including  (1) a summary of such deviations, (2) whether
such deviations are based upon a percentage of the reserves held for the
policies and contracts subject to subsection (g) of section 4217 of  the
insurance  law  prior to the operative date of the valuation manual, and
(3) the impact of such deviations on reserves for impacted insurance and
annuity products including  a  comparison  of  the  differences  between
reserves  for  impacted insurance and annuity products required prior to
the implementation of the valuation manual  and  reserves  required  for
impacted  insurance  and annuity products as a result of such deviations
from the valuation manual.
  3. The superintendent of the department of  financial  services  shall
submit  a  report to the governor, temporary president of the senate and
speaker of the assembly of the  department's  findings  in  the  second,
fifth  and seventh years after the operative date of the valuation manu-
al.
  § 3. This act shall take  effect  immediately;  and  shall  be  deemed
repealed 10 years after it shall have become a law.

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The New York State Senate

senate Bill S8978A

Sponsored By

Archive: Last Bill Status - Signed by Governor

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Votes

Jun 18, 2018 - floor Vote

Floor Vote: Jun 18, 2018

Jun 18, 2018 - Rules committee Vote

Rules Committee Vote: Jun 18, 2018

Bill Amendments

S8978 - Details

S8978 - Summary

S8978 - Sponsor Memo

S8978 - Bill Text download pdf

S8978A (ACTIVE) - Details

S8978A (ACTIVE) - Summary

S8978A (ACTIVE) - Sponsor Memo

S8978A (ACTIVE) - Bill Text download pdf

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senate Bill S8978A

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Sponsored By

James L. Seward

Archive: Last Bill Status - Signed by Governor

Your Voice

Actions

Votes

Jun 18, 2018 - floor Vote

Floor Vote: Jun 18, 2018

Jun 18, 2018 - Rules committee Vote

Rules Committee Vote: Jun 18, 2018

Bill Amendments

S8978 - Details

S8978 - Summary

S8978 - Sponsor Memo

S8978 - Bill Text download pdf

S8978A (ACTIVE) - Details

S8978A (ACTIVE) - Summary

S8978A (ACTIVE) - Sponsor Memo

S8978A (ACTIVE) - Bill Text download pdf

Comments