NOTE: WITHDRAWN EFFECTIVE OCTOBER 11, 2002
Circular Letter No. 10 (1995)
August 1, 1995
|
TO: |
All Authorized Life Insurance Companies, Accredited Life Reinsurers, Fraternal Benefit Societies and Charitable Annuity Societies |
|
RE: |
Maximum Reserve Valuation and Maximum Life Policy Nonforfeiture Interest Rates |
Attached hereto is an outline providing maximum reserve valuation and maximum life policy nonforfeiture interest rates for new issues, new purchases or changes in fund (as defined) for years 1982 through 1995 (and other years where shown), under Sections 4217, 4218 and 4221(k) of the New York Insurance Law, as amended in 1982, 1983, 1985, 1986, 1987, 1988, 1990, and 1994.
Previous versions of this Circular Letter distinguished between companies submitting an acceptable Actuarial Opinion and Memorandum (AOM) and companies not doing so. This distinction was a consequence of Section 4217(c)(4)(B)(vi) of the Insurance Law. Section 4217 of the Insurance Law was amended in 1994. The distinction between maximum valuation interest rates with and without an acceptable AOM has been eliminated. This Circular Letter reflects such changes and no longer shows separate rates for companies submitting an acceptable AOM and for Companies not doing so.
Regulation 126, in effect on December 31, 1993, contained provisions regarding the valuation of annuities, GICs, deposit funds, structured settlement annuities and single premium life policies. Such provisions were not incorporated into Regulation 126 promulgated December 1, 1994. It is expected that these provisions regarding annuities, GICs, deposit funds and structured settlement annuities will be incorporated in New York Regulation 150 by December 31, 1995. It is expected that Regulation 147 will be amended to incorporate provisions regarding single premium life policies.
This Circular Letter is to be used for informational purposes, as an aid in complying with the law.
Should any person have any question or comment in regard to this matter, please contact Mr. Stuart Zamlong or Mr. John Karwatowski of the Actuarial Valuation Section of the Life and Health Bureau at (518) 474-6605.
PAGE 1
MAXIMUM RESERVE VALUATION AND MAXIMUM LIFE POLICY NONFORFEITURE INTEREST RATES
UNDER SECTIONS 4217, 4218 AND 4221(k) OF THE NEW YORK INSURANCE LAW
The maximum valuation and nonforfeiture interest rates, prescribed by Sections 4217 and 4221(k) of the New York Insurance Law for future years, will vary from year to year depending on Moody's corporate bond yield averages. The maximum valuation interest rates for issues, purchases and changes-in-fund of years 1982 through 1995 (and other years where shown) are outlined below.
The maximum valuation and nonforfeiture interest rates for Ordinary Life Insurance are shown in Category A of page 2, except for Single Premium Life Insurance (the kind referred to in Section 4217(c)(4)(B)(vi) as amended by Chapter 302 of the laws of 1987) the maximum valuation interest rates for which are shown in Category B on page 3.
PAGE 2
A. ORDINARY LIFE INSURANCE (Except as covered in B on page 3)
| *Issue Year | **Guarantee Duration | ***Maximum Reserve Valuation Interest Rate | Maximum NonForfeiture Interest Rate, 1980 CSO# | |
| 1979- 1989 | See Prior Circular Letter No. 8 (1990) | |||
| 1991 | 10 Years or less | 6.00% | 7.50% | |
| More than 10 years, up to 20 | 6.00 | 7.50 | ||
| More than 20 years | 5.50 | 7.00 | ||
| 1992 | 10 Years or less | 6.00% | 7.50% | |
| More than 10 years, up to 20 | 6.00 | 7.50 | ||
| More than 20 years | 5.50 | ## | 7.00 | |
| 1993 | 10 Years or less | 6.00% | 7.50% | |
| More than 10 years, up to 20 | 6.00 | 7.50 | ||
| More than 20 years | 5.00 | 6.25 | ||
| 1994 | 10 Years or less | 5.50% | ## | 7.00% |
| More than 10 years, up to 20 | 5.25 | ## | 6.50 | |
| More than 20 years | 5.00 | ## | 6.25 | |
| 1995 | 10 Years or less | 5.50% | 7.00% | |
| More than 10 years, up to 20 | 5.25 | 6.50 | ||
| More than 20 years | 4.50 | ## | 5.75 | |
| 1996 | 10 Years or less | 5.50% | 7.00% | |
| More than 10 years, up to 20 | 5.25 | 6.50 | ||
| More than 20 years | 4.50 | 5.75 |
* See the paragraph at the top of page 11.
** The guarantee duration is the maximum number of years the life insurance can remain inforce on a basis guaranteed in the policy.
*** The maximum reserve valuation interest rate will be the lesser of the rate as determined from the above table and the rate actually used in determining cash values. This applies to basic reserves under Section 4217, not to the minimum reserve test under Section 4218.
# Applicable on or after the operative date elected under Section 4221(k)(12). (See the top paragraph on page 10). These rates do not apply to policies issued pursuant to Section 4221(n)(1).
## In accordance with Section 4221(k)(9)(B)(i) of the New York Insurance Law, the nonforfeiture interest rate used for a particular issue year may not exceed the higher of the applicable maximum nonforfeiture interest rate for such particular issue year and that for the immediately preceding issue year (e.g. 1994 issues may use the rate for 1993, 1995 issues may use the rate for 1994).
PAGE 3
B. Single Premium Life Insurance of the kind referred to in Section 4217(c)(4)(B)(vi) of the New York Insurance Laws (as amended by Chapter 302 of the laws of 1987).#
|
*Maximum Reserve Valuation Interest Rate |
|||
| Issue Year | Guarantee Duration** | Issue Year Basis | Change-In-Fund Basis |
|
1982- 1990 |
See Prior Circular Letter No. 8 (1990) | ||
| 1991 | 10 Years or less | 6.75% | 7.00% |
| More than 10 years, up to 20 | 6.25 | 6.75 | |
| More than 20 years | 5.50 | 6.00 | |
| 1992 | 10 Years or less | 6.25% | 6.50% |
| More than 10 years, up to 20 | 6.00 | 6.25% | |
| More than 20 years | 5.25 | 5.75 | |
| 1993 | 10 Years or less | 5.75% | 6.00% |
| More than 10 years, up to 20 | 5.50 | 5.75 | |
| More than 20 years | 5.00 | 5.25 | |
| 1994 | 10 Years or less | 5.50% | 5.75% |
| More than 10 years, up to 20 | 5.25 | 5.50 | |
| More than 20 years | 4.75 | 5.00 | |
| 1995 | 10 Years or less | 6.00% | 6.25% |
| More than 10 years, up to 20 | 5.50 | 6.00 | |
| More than 20 years | 5.00 | 5.50 | |
* See page 11.
** The guarantee duration is the number of years for which interest rates provided in, or declared pursuant to, a single premium life insurance policy of the kind referred to in Section 4217(c)(4)(B)(vi) are guaranteed to exceed the greater of (1) 6% and (2) the calendar year statutory valuation interest rate for life insurance policies (other than such single premium policy) with guarantee duration's in excess of 20 years.
# Said Chapter 302 amendment became effective, on a mandatory basis, on January 1, 1989. Any company could have filed a written notice of prior election.
PAGE 4
C. Single Premium Immediate Annuities and annuity benefits arising from life insurance policies and annuity and guaranteed interest contracts with cash settlement options.
| Issued of or Purchases Dining | Maximum Reserve Valuation Interest Rate |
|---|---|
| 1982 | 13.25% |
| 1983 | 11.25 |
| 1984 | 11.25 |
| 1985 | 11 |
| 1986 | 9.25 |
| 1987 | 8 |
| 1988 | 8.75 |
| 1989 | 8.75 |
| 1990 | 8.25 |
| 1991 | 8.25 |
| 1992 | 7.75 |
| 1993 | 7 |
| 1994 | 6.5 |
| 1995 | 7.25 |
PAGE 5
D. Other Annuities and Guaranteed Interest Contracts, with cash settlement options and with interest rate guarantees on future considerations, valued on the "Issue Year" basis.
| Maximum Reserve Valuation Interest Rate | ||||
| *Plan Type | ||||
| Issue Year | Guarantee Duration# | A | B | C |
| 1982-1990 | See Prior Circular Letter No. 8 (1990) | |||
| 1991 | 5 Years or less | 8.25% | 7.00% | 6.25% |
| 10 Years or less | 8.00 | 7.00 | 6.25 | |
| More than 10 years, up to 20 | 7.00 | 6.25 | 5.75 | |
| More than 20 years | 5.75 | 5.25 | 5.25 | |
| 1992 | 5 Years or less | 7.75% | 6.50% | 6.00% |
| More than 5 years, up to 10 | 7.50 | 6.50 | 6.00 | |
| More than 10 years, up to 20 | 6.75 | 6.00 | 5.75 | |
| More than 20 years | 5.75 | 5.00 | 5.00 | |
| 1993 | 5 Years or less | 7.00% | 6.00% | 5.50% |
| More than 5 years, up to 10 | 6.75 | 6.00 | 5.50 | |
| More than 10 years, up to 20 | 6.25 | 5.50 | 5.25 | |
| More than 20 years | 5.25 | 4.75 | 4.75 | |
| 1994 | 5 Years or less | 6.50% | 5.75% | 5.25% |
| More than 5 years, up to 10 | 6.50 | 5.75 | 5.25 | |
| More than 10 years, up to 20 | 6.00 | 5.25 | 5.00 | |
| More than 20 years | 5.00 | 4.50 | 4.50 | |
| 1995 | 5 Years or less | 7.25% | 6.25% | 5.75% |
| More than 5 years, up to 10 | 7.00 | 6.25 | 5.75 | |
| More than 10 years, up to 20 | 6.25 | 5.50 | 5.25 | |
| More than 20 years | 5.25 | 4.75 | 4.75 | |
# See definition of guarantee duration for Categories D, E, G and H on page 10.
* See descriptions of plan types on page 10.
PAGE 6
E. Other Annuities and Guaranteed Interest Contracts, with cash settlement options but without interest rate guarantees on future considerations, valued on the "Issue Year" basis.
| Maximum Reserve Valuation Interest Rate | ||||
| *Plan Type | ||||
| Issue Year | Guarantee Duration# | A | B | C |
| 1982- 1990 | See Prior Circular Letter No. 8 (1990) | |||
| 1991 | 5 Years or less | 8.75% | 7.25% | 6.75% |
| More than 5 years, up to 10 | 8.25 | 7.25 | 6.75 | |
| More than 10 years, up to 20 | 7.50 | 6.50 | 6.25 | |
| More than 20 years | 6.25 | 5.50 | 5.50 | |
| 1992 | 5 Years or less | 8.00% | 6.75 | 6.25 |
| More than 5 years, up to 10 | 7.75 | 6.75% | 6.25% | |
| More than 10 years, up to 20 | 7.00 | 6.25 | 6.00 | |
| More than 20 years | 6.00 | 5.25 | 5.25 | |
| 1993 | 5 Years or less | 7.25% | 6.25% | 5.75% |
| More than 5 years, up to 10 | 7.00 | 6.25 | 5.75 | |
| More than 10 years, up to 20 | 6.50 | 5.75 | 5.50 | |
| More than 20 years | 5.50 | 5.00 | 5.00 | |
| 1994 | 5 Years or less | 6.75% | 6.00% | 5.50% |
| More than 5 years, up to 10 | 6.50 | 6.00 | 5.50 | |
| More than 10 years, up to 20 | 6.25 | 5.50 | 5.25 | |
| More than 20 years | 5.25 | 4.75 | 4.75 | |
| 1995 | 5 Years or less | 7.50% | 6.50% | 6.00% |
| More than 5 years, up to 10 | 7.25 | 6.50 | 6.00 | |
| More than 10 years, up to 20 | 6.50 | 5.75 | 5.50 | |
| More than 20 years | 5.50 | 5.00 | 5.00 | |
# See definition of guarantee duration for Categories D, E, G and H on page 10.
* See descriptions of plan types on page 10.
PAGE 7
F. Other Annuities and Guaranteed Interest Contracts, without cash settlement options, valued on the "Issue Year" basis.
| Maximum Reserve Valuation Interest Rate | ||
| Issue Year | Guarantee Duration** | *Plan Type A |
| 1982- 1990 | See Prior Circular Letter No. 8 (1990) | |
| 1991 | 5 Years or less | 8.25% |
| More than 5 years, up to 10 | 8.00 | |
| More than 10 years, up to 20 | 7.25 | |
| More than 20 years | 6.00 | |
| 1992 | 5 Years or less | 7.75% |
| More than 5 years, up to 10 | 7.50 | |
| More than 10 years, up to 20 | 6.75 | |
| More than 20 years | 5.75 | |
| 1993 | 5 Years or less | 7.00% |
| More than 5 years, up to 10 | 6.75 | |
| More than 10 years, up to 20 | 6.25 | |
| More than 20 years | 5.25 | |
| 1994 | 5 Years or less | 6.50% |
| More than 5 years, up to 10 | 6.50 | |
| More than 10 years, up to 20 | 6.00 | |
| More than 20 years | 5.00 | |
| 1995 | 5 Years or less | 7.25% |
| More than 5 years, up to 10 | 7.00 | |
| More than 10 years, up to 20 | 6.50 | |
| More than 20 years | 5.50 |
* See descriptions of plan types on page 10.
** The guarantee duration for other annuities and guaranteed interest contracts without cash settlement options, is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
PAGE 8
G. Other Annuities and Guaranteed Interest Contracts, with cash settlement options and with interest rate guarantees on future considerations, valued on the "Change-in-Fund" basis.
| Maximum Reserve Valuation Interest Rate | ||||
| *Plan Type | ||||
| Change in Fund During Year | Guarantee Duration# | A | B | C |
| 1982- 1990 | See Prior Circular Letter No. 8 (1990) | |||
| 1991 | 5 Years or less | 9.25% | 8.75% | 6.75% |
| More than 5 years, up to 10 | 9.00 | 8.75 | 6.75 | |
| More than 10 years, up to 20 | 8.25 | 8.00 | 6.25 | |
| More than 20 years | 7.00 | 7.00 | 5.75 | |
| 1992 | 5 Years or less | 8.50% | 8.00% | 6.25% |
| More than 5 years, up to 10 | 8.25 | 8.00 | 6.25 | |
| More than 10 years, up to 20 | 7.75 | 7.50 | 6.00 | |
| More than 20 years | 6.50 | 6.50 | 5.25 | |
| 1993 | 5 Years or less | 7.75% | 7.25% | 5.75% |
| More than 5 years, up to 10 | 7.50 | 7.25 | 5.75 | |
| More than 10 years, up to 20 | 7.00 | 6.75 | 5.50 | |
| More than 20 years | 6.00 | 6.00 | 5.00 | |
| 1994 | 5 Years or less | 7.25% | 6.75% | 5.50% |
| More than 5 years, up to 10 | 7.00 | 6.75 | 5.50 | |
| More than 10 years, up to 20 | 6.50 | 6.50 | 5.25 | |
| More than 20 years | 5.75 | 5.75 | 4.75 | |
| 1995 | 5 Years or less | 8.25% | 7.50% | 6.00% |
| More than 5 years, up to 10 | 8.00 | 7.50 | 6.00 | |
| More than 10 years, up to 20 | 7.25 | 7.00 | 5.75 | |
| More than 20 years | 6.25 | 6.25 | 5.25 | |
# See definition of guarantee duration for Categories D, E, G and H on page 10.
* See descriptions of plan types on page 10.
PAGE 9
H. Other Annuities and Guaranteed Interest Contracts, with cash settlement options and without interest rate guarantees on future considerations, valued on the "Change-in-Fund" basis.
| Maximum Reserve Valuation Interest Rate | ||||
| *Plan Type | ||||
| Change in Fund During Year | Guarantee Duration# | A | B | C |
| 1982- 1990 | See Prior Circular Letter No. 8 (1990) | |||
| 1991 | 5 Years or less | 9.75% | 9.00% | 7.00% |
| More than 5 years, up to 10 | 9.25 | 9.00 | 7.00 | |
| More than 10 years, up to 20 | 8.75 | 8.25 | 6.75 | |
| More than 20 years | 7.25 | 7.25 | 6.00 | |
| 1992 | 5 Years or less | 9.00% | 8.25% | 6.50% |
| More than 5 years, up to 10 | 8.50 | 8.25 | 6.50 | |
| More than 10 years, up to 20 | 8.00 | 7.75 | 6.25 | |
| More than 20 years | 6.75 | 6.75 | 5.75 | |
| 1993 | 5 Years or less | 8.25% | 7.50% | 6.00% |
| More than 5 years, up to 10 | 7.75 | 7.50 | 6.00 | |
| More than 10 years, up to 20 | 7.25 | 7.00 | 5.75 | |
| More than 20 years | 6.25 | 6.25 | 5.25 | |
| 1994 | 5 Years or less | 7.50% | 7.00% | 5.75% |
| More than 5 years, up to 10 | 7.25 | 7.00 | 5.75 | |
| More than 10 years, up to 20 | 6.75 | 6.50 | 5.50 | |
| More than 20 years | 6.00 | 6.00 | 5.00 | |
| 1995 | 5 Years or less | 8.50% | 8.00% | 6.25% |
| More than 5 years, up to 10 | 8.25 | 8.00 | 6.25 | |
| More than 10 years, up to 20 | 7.50 | 7.25 | 6.00 | |
| More than 20 years | 6.50 | 6.50 | 5.50 | |
# See definition of guarantee duration for Categories D, E, G and H on page 10.
* See descriptions of plan types on page 10.
PAGE 10
Said Section 4221(k)(12) was amended by Chapter 81 of the Laws of 1983 to permit a company to elect to comply with the new provisions of Section 4221 on a plan-by-plan basis, with the proviso that the entire portfolio must be converted to the new provisions on or before January 1 of the third calendar year following the calendar year of compliance for the first plan so converted, but not, in any event, later than January 1, 1989.
Plan types, as used in the above tables, are defined as follows:
Plan Type A: The policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more, or (3) as an immediate life annuity.
Plan Type B: The policyholder may not withdraw funds before the expiration of the interest rate guarantee or, if withdrawals are permitted, before the expiration of such guarantee, may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) without such adjustment but in installments over five years or more. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or in installments over less than five years.
Plan Type C: The policyholder may withdraw funds before the expiration of the interest rate guarantee in a single sum or installments over less than five years either (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
(The most popular plan type, in the group annuity area, for current issues, is plan type B; while the most popular plan type, in the individual annuity area, for current issues, is plan type C.)
The guarantee duration, for other annuities and guaranteed interest contracts with cash settlement options, generally is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies (covered in A on page 2) with a guarantee duration of more than twenty years (See D, E, G and H herein).
The guarantee duration, for other annuities and guaranteed interest contracts without cash settlement options, is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
Other annuities and guaranteed interest contracts, without cash settlement options, may be valued only on an "Issue Year" basis.
For structured settlement annuities with lump sum payments, see Section 95.12 of Regulation 126 in effect on December 31, 1993. As stated in Mr. Callahan's December 12, 1994 distribution letter for Regulation 126, it is expected that a final regulation will be effective by December 31, 1995, based on proposed Regulation 150, distributed by Mr. Callahan on November 16, 1994.
The maximum reserve valuation interest rates, for annuities and guaranteed interest contracts and for single premium life insurance policies of the kind referred to in Section 4217(c)(4)(B)(vi), are based on Moody's Corporate Bond Yield Averages for a one or three year period ending in June of the year of issue, purchase, or change in fund. Consequently, we are not able to compute such rates applicable to 1996 at this time.
The attached Appendix describes the method of calculating the maximum reserve valuation interest rates, in accordance with the specifications of Section 4217 of the New York Insurance Law, as amended.
PAGE 11
Section 4217, as amended by Chapter 749 of the Laws of 1983, permits the dynamic interest rates (under the 1982 amendments) to be used for issues of January 1, 1982 and later, independent of a company's election or non-election under Section 4221(k)(12). Thus, the new dynamic interest rates may be used either with 1958 CSO issues of January 1, 1982 through December 31, 1988 or with 1980 CSO issues of January 1, 1982 and later, for valuation purposes.
The reserve for a Single Premium Life Insurance policy, of the kind referred to in Section 4217(c)(4)(B)(vi) of the New York Insurance Law, must not be less than its cash value. See Section 95.14 of Regulation 126 in effect on December 31, 1993. It is expected that Regulation 147 will be amended to incorporate provisions regarding single premium life policies.
APPENDIX
The maximum reserve valuation interest rates are based on reference interest rates, which are averages of corporate bond earnings published by Moody's Investors Service, Inc., and weighting factors prescribed by Section 4217.
The weighting factors do not vary from year to year. None of the weighting factors given in Table 1 below will change unless Section 4217 is revised by new legislation. The following formulas are used to compute the maximum reserve valuation interest rates:
I = 3.00% + W(R1- 3.00)% + W/2(R2 - 9.00)%, (Formula 1, called "Life Insurance Formula")
or
1 = 3.00% + W(R- 3.00)%, (Formula 2, called "Annuity Formula")
Where:
I = Maximum calendar year statutory valuation interest rate, rounded to the nearer 1/4%.
R = Reference interest rate, derived from Moody's corporate bond monthly yield averages, rounded to the nearer basis point (.01 of 1%).
R1 = Lesser of R and 9.00%.
R2 = Greater of R and 9.00%.
W = Weighting factor.
The third term of Formula 1 is dropped whenever the reference interest rate falls below 9.00%. The weighting factors vary by type of benefit, guarantee duration, and valuation basis (i.e. `issue year" basis or `change-in-fund" basis). An asterisk (*), where shown with the weighting factor in Table 1, indicates that Formula 2 may optionally be used with a given factor if an acceptable actuarial opinion and memorandum are provided, as required by Section 4217(c)(4)(B)(vi).
TABLE 1
| Benefit Category (In this Circular Letter) | Guarantee Duration (Where duration t, in years, is) | Valuation Basis | Reference Interest Rate (Column from Table 2) | Weighting Factor |
|---|---|---|---|---|
| A | = or < 10 | Issue Year |
(3) |
.50 |
|
> 10, = or <20 |
.45 | |||
|
> 20 |
.35 | |||
| B | = or < 10 | Issue Year |
(1) |
.55 |
|
> 10, = or <20 |
Issue Year |
(3) |
.50 | |
|
> 20 |
Issue Year |
(3) |
.40 | |
| B | = or < 10 | Change-in-Fund |
(1) |
.60* |
|
> 10, = or <20 |
Change-in-Fund |
(1) |
.55* | |
|
> 20 |
Change-in-Fund |
(1) |
.45* | |
| C | Not Applicable | Issue or Purchase Year |
(1) |
.80* |
| Benefit Category (In this Circular Letter) | Guarantee Duration (Where duration t, in years, is) | Valuation Basis | Reference Interest Rate (Column from Table 2) | Weighting Factor | ||
|---|---|---|---|---|---|---|
|
Type |
||||||
| A | B | C | ||||
| D |
= or <5 |
Issue Year |
(1) |
.80* | .60* | .50* |
| > 5, = or < 10 | (1) | .75* | .60 | .50* | ||
|
> 10, = or < 20 |
(3) | .65 | .50 | .45 | ||
|
> 20 |
(3) | .45 | .35 | .35 | ||
| E |
= or <5 |
Issue Year |
(1) |
.85* | .65* | .55* |
| > 5, = or < 10 |
(1) |
.80* | .65* | .55* | ||
|
> 10, = or < 20 |
(3) |
.70 | .55 | .50 | ||
|
> 20 |
(3) | .50 | .40 | .40 | ||
| F |
= or <5 |
Issue Year |
(1) |
.80* | ||
| > 5, = or < 10 |
(1) |
.75* | ||||
|
> 10, = or < 20 |
(1) |
.65* | ||||
|
> 20 |
(1) | .45* | ||||
| G |
= or <5 |
Change-in-Fund | (1) | .95* | .85* | .55* |
| > 5, = or < 10 | (1) | .90* | .85* | .55* | ||
|
> 10, = or < 20 |
(1) | .80* | .75* | .50* | ||
|
> 20 |
(1) |
.60* | .60* | .40* | ||
| H |
= or <5 |
Change-in-Fund | (1) | 1.00* | .90* | .60* |
| > 5, = or < 10 | (1) | .95* | .90* | .60* | ||
|
> 10, = or < 20 |
(1) | .85* | .80* | .55* | ||
|
> 20 |
(1) | .65* | .65* | .45* | ||
The reference interest rates are based on the average corporate bond earnings published by Moody's Investors Service, Inc.
Section 4217 defines running averages of the published monthly yield rates for 12-month and 36-month periods.
The year of issue, of purchase or of change-in-fund, applicable to the running yield average ending in the current year, is the next following year for Life Insurance other than single premium life insurance of the kind referred to in Section 4217(c)(4)(B)(vi) (i.e. Category A in the Circular Letter) and the current year for all other business (i.e. Categories B through H in the Circular Letter).
The following table shows Moody's yield averages for recent years:
TABLE 2
| For Period Ending June 30 of Year | 12-Month Running Average | 36-Month Running Average | Lesser of Two Averages |
|---|---|---|---|
| (1) | (2) |
(3) |
|
| 1981 | 13.71 | 11.57 | 11.57 |
| 1982 | 15.7 | 13.64 | 13.64 |
| 1983 | 13.39 | 14.26 | 13.39 |
| 1984 | 13.22 | 14.10 | 13.22 |
| 1985 | 13.01 | 13.21 | 13.01 |
| 1986 | 10.75 | 12.33 | 10.75 |
| 1987 | 9.4 | 11.05 | 9.40 |
| 1988 | 10.32 | 10.15 | 10.15 |
| 1989 | 10.09 | 9.93 | 9.93 |
| 1990 | 9.52 | 9.97 | 9.52 |
| 1991 | 9.63 | 9.74 | 9.63 |
| 1992 | 8.88 | 9.34 | 8.88 |
| 1993 | 8.13 | 8.88 | 8.13 |
| 1994 | 7.52 | 8.18 | 7.52 |
| 1995 | 8.42 | 8.03 | 8.03 |
The maximum nonforfeiture interest rate for Life Insurance, under Section 4221(k), for a particular issue year, is equal to 125% of the maximum reserve valuation interest rate for the same issue year, rounded to the nearer 1/4%.
Should the computed maximum reserve valuation interest rate for Life Insurance (other than Single Premium Life Insurance covered in Category B on page 3 of the Circular Letter) for a particular issue year be different from the actual maximum reserve valuation interest rate for the next previous issue year by less than 1/2%, then the maximum reserve valuation interest rate for such particular issue year will be the same as that for such next previous issue year.
CROSS REFERENCE INS. LAW § 4217; INS. LAW § 4218; INS. LAW § 4221
DATE NEW 1995
SUBJECT CATEGORY
020 - Life insurance / insurers
040 - Annuities
300 - The policy
560 - Finance and investments
INDEX
Policy reserves and Valuation methods and Life insurance
Interest rates and Valuation methods and Policy reserves
Nonforfeiture benefits and Valuation methods and Interest rates
Annuities and Policy reserves and Valuation methods
Single premium policies and Policy reserves and Valuation methods
INFORMATION TYPE TEXT;CHARTS/TABLES
DOCUMENT ID NY MISC BC Circular Letter 1995-10