The Office of General Counsel issued the following informal opinion on June 5, 2002, representing the position of the New York State Insurance Department.

Re: Reinsurance and N.Y. Ins. Law § 4228(h) (McKinney 2000)

Question Presented:

Pursuant to N.Y. Ins. Law § 4228(h) (McKinney 2000) may reinsurance, as a material element of one or more of the reasonable assumptions enumerated in N.Y. Ins. Law § 4228(h), be included in actuarial assumptions for self-support?


Yes. Reinsurance, as a material element of one or more of the reasonable assumptions enumerated in N.Y. Ins. Law § 4228(h), should be included in the actuarial assumptions for self-support.


No specific facts were provided.


N.Y. Ins. Law § 4228(h) provides:

No company shall offer for sale any life insurance policy form or annuity contract form covered by this section or any debit life insurance policy form which shall not appear to be self-supporting on reasonable assumptions as to interest, mortality, persistency, taxes, agents’ and brokers’ survival and expenses resulting from the sale of the policy or contract form. For all such forms offered for sale in this state, and for all forms filed for use outside this state by domestic life insurance companies, a statement that the requirements of this subsection have been met, signed by an actuary who is a member in good standing of the American Academy of Actuaries and meets the requirements prescribed by the superintendent by regulation shall be submitted with each such life insurance policy or annuity contract form filed pursuant to paragraph one or six of subsection (b) of section three thousand two hundred one of this chapter. A demonstration supporting each such statement, signed by an actuary meeting such qualifications, shall be retained in the company’s home office, while such form is being offered in this state and for a period of six years thereafter and be available for inspection. The superintendent shall promulgate a regulation establishing the guidelines applicable to such demonstration.

With respect to self-support, the 1997 amendment and restatement of N.Y. Ins. Law § 4228 added the references to persistency, taxes and agent survival to the list of reasonable assumptions in N.Y. Ins. Law § 4228(h). Additionally, it added language to that subsection requiring the submission of actuarial self-support statements backed up with actuarial demonstrations supporting each such statement. Accordingly, a formal statement by a qualified actuary applying professional judgment, backed up by an actuarial demonstration, is now required.

As was pointed out in the submission of Mr. W, President and Chief Executive Officer of ABC Life Insurance Council, reinsurance is a potentially significant consideration for actuaries when making reasonable assumptions as to mortality and expense. Such assumptions would have to include the extent to which premiums must be paid to a reinsurer when new policies are issued and the reinsurer is required to reimburse benefits. Consequently, the consideration of reinsurance is inherent in any requirement for assumptions about product mortality and expense cash flows and may play a critically important role in the mortality and expense elements of policy pricing.

N.Y. Ins. Law § 4228(h) requires a qualified actuary, i.e., a member of the American Academy of Actuaries, to submit a statement with each policy form filing that the form complies with the self-support requirement. Because professional actuarial judgment requires recognition of reinsurance when its effects may be material, prohibiting an actuary from following Actuarial Standards of Practice, which provide guidance on when reinsurance should be considered, would make it impossible for the actuary to comply with professional standards and would weaken the reliability of the judgment.

In view of the above, reinsurance expenses and benefits should be reflected in the actuarial assumptions for self-support. Doing so does not add another assumption to those enumerated in N.Y. Ins. Law § 4228(h); rather, it gives consideration to a factor that is implicit in the requirement of reasonable assumptions as to mortality, persistency and expense arising from the sale of the product. Accordingly, it complies with and furthers the intent of the self-support requirement contained in N.Y. Ins. Law § 4228(h).

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.