N.Y. Comp. Codes R. & Regs. tit. 11, § 94.4 – Claim reserves.

(1) Claim reserves are required for all incurred but unpaid claims on all health insurance policies.
(2) Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims.
(3) All such reserves for prior valuation years are to be tested for adequacy and reasonableness along the lines of claim runoff schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability.
(b) Minimum standards for claim reserves.
(1) Disability income.
1. (i) Interest. The maximum interest rate for claim reserves is specified in section 94.10 of this Part.
2. (ii) Morbidity. Minimum standards with respect to morbidity are those specified in section 94.10 of this Part, except that, at the option of the insurer:
  1. (a) claims incurred under an individual policy;
    1. (i) in calculating the claim reserve on any valuation date for a claim incurred under an individual policy prior to January 1, 2020, or prior to an earlier date if elected under subclause (2) of this clause:
    (1)
(A) with respect to claim termination rates for claim durations from date of disablement of less than two years, an insurer shall use the termination rates specified in section 94.10 of this Part; provided, however, the insurer may base its termination rates on the insurer’s own credible claim termination rate experience or upon other assumptions designed to place a sound value on the liabilities; and
(B) claim termination rates for claim durations after the first two years from the date of disablement must be those specified in section 94.10 of this Part.
1. (ii) Example: A study of the insurer’s claim termination rates shows that for claims terminating in the first 24 months from date of disablement the claim termination rates are 110 percent of the adjusted termination rates shown in section 94.10 of this Part. An open claim as of December 31, 2002 that has a date of disablement of March 31, 2002 and an elimination period of 90 days:
(A) in order to calculate the claim reserve as of December 31, 2002 an insurer may increase the adjusted termination rates for months 10 through 24 by 10 percent, but must use 100 percent of the adjusted termination rates for all claim durations beyond the 24th month;
(B) in order to calculate the claim reserve as of December 31, 2003 an insurer may increase the adjusted termination rates for months 22 through 24 by 10 percent, but must use 100 percent of the adjusted termination rates for all claim durations beyond the 24th month;
1. (2) an insurer may elect to apply the minimum reserve standards in section 94.10(a)(1)(i)(b)(2) of this Part for a claim incurred under an individual policy on or after January 1, 2017 and prior to January 1, 2020, provided such standards are applied to all applicable claims incurred on or after the date elected;
2. (3) in calculating the claim reserve on any valuation date for a claim incurred under an individual policy on or after January 1, 2020, or on or after an earlier date if elected under subclause (2) of this clause, the provisions in section 94.10(a)(1)(i)(b)(2)(i), (ii) and (iii) of this Part are not required if the insurer meets the own experience measurement exemption in accordance with the standards of valuation of individual disability income reserves governed by Part 83 of this Title (Regulation 172);
3. (4) within three years of January 1, 2020, or an earlier date if elected under subclause (2) of this clause, the insurer may elect to apply the standards of section 94.10(a)(1)(i)(b)(2) of this Part to all open claims incurred prior to January 1, 2020. Once an insurer elects to calculate reserves for all open claims based on section 94.10(a)(1)(i)(b)(2) of this Part, all future valuations must be on that basis;
4. (5) in lieu of subclauses (1) through (4) of this clause, for a claim incurred under a worksite disability policy in any year, the insurer may elect to base its reserve on the insurer’s own credible experience using claim run-out analysis or claim triangles, or upon other assumptions and methods designed to place a sound value on the liabilities.
5. (b) Claims incurred under a group policy that is not a group long-term disability policy.
  1. (1) In calculating the claim reserve on any valuation date for a claim incurred under a group policy:
    1. (i) with respect to claim termination rates for claim durations from date of disablement of less than two years, an insurer shall use the termination rates specified in section 94.10 of this Part; provided, however, the insurer may base its termination rates on the insurer’s own credible claim termination rate experience or upon other assumptions designed to place a sound value on the liabilities;
    2. (ii) with respect to claim termination rates for claim durations from the date of disablement of more than two years but less than five years, an insurer shall use the termination rates specified in section 94.10 of this Part; provided, however, that with the approval of the superintendent, rates may be based on the insurer’s own claim termination experience for claim durations of more than two years but less than five years and for which the insurer maintains underwriting and claim administration control if the superintendent determines that the experience is credible. For experience to be considered credible for purposes of this subclause, the insurer must provide claim termination patterns of its own over no more than six years reflecting at least 5,000 claims terminations during the third through fifth claims durations on reasonably similar applicable policy forms; and
    3. (iii) claim termination rates for claim durations after the first five years from the date of disablement of such claims must be those specified in section 94.10 of this Part.
  2. (2) Example: A study of the insurer’s group claim termination rates shows that for claims terminating in the first 24 months from date of disablement the claim termination rates are 120 percent of those of the 1987 Commissioners Group Disability Income Table found in Group Long-Term Disability Valuation Tables, Transactions of Society of Actuaries 1987, Volume XXXIX, pp. 393 through 457¹ (87CGDT) and for months 25 through 60 (years three through five) are 110 percent of the 87CGDT. A copy of such document, as adopted by the Society of Actuaries, 475 N. Martingale Road, Suite 800, Schaumburg, IL 60173-2226, in 1988 is available for public inspection at the Department of Financial Services offices at One Commerce Plaza, Albany, NY 12257 and at One State Street, New York, NY 10004. An open claim as of December 31, 2002 has a date of disablement of July 31, 2001 and an elimination period of 180 days. In order to calculate the claim reserve:
    1. (i) as of December 31, 2002, the insurer may increase the claim termination rates of the 87CGDT for months 18 through 24 by 20 percent, and may increase the claim termination rates of the 87CGDT for durations three through five years by 10 percent (if approved by the superintendent) but must use 100 percent of the claim termination rates of the 87CGDT for all claim durations beyond the fifth claim year; and
    2. (ii) as of December 31, 2003 and thereafter, the insurer may increase the claim termination rates of the 87CGDT for months 30 through 60 by 10 percent, (if approved by the superintendent) but must use 100 percent of the claim termination rates of the 87CGDT for all claim durations beyond the fifth claim year.
  3. (3) The request for approval described in item (1)(ii) of this subclause regarding the use of the insurer's own experience must include:
    1. (i) an analysis of the credibility of the experience;
    2. (ii) a description of how all of the insurer's experience is proposed to be used in setting reserves;
    3. (iii) a description and quantification of the margins to be included;
    4. (iv) a summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;
    5. (v) a copy of the approval of the proposed plan of modification by the superintendent of the state of domicile; and
    6. (vi) any other information deemed necessary by the superintendent.
6. (c) Claims incurred prior to October 1, 2014 for group long-term disability income contracts.
  1. (1) In calculating the claim reserve for a claim incurred under a group long-term disability income contract prior to January 1, 2005, an insurer shall comply with the requirements in clause (e) of this subparagraph or comply with items (i) through (iii) of this subclause; provided, however, that once an insurer elects to calculate reserves pursuant to clause (e) of this subparagraph, all open claims incurred prior to October 1, 2014 shall be calculated on that basis, and the insurer shall continue to make all of its future valuations on that basis. In calculating the claim reserve:
    1. (i) with respect to claim termination rates for claim durations from the date of disablement of less than two years, an insurer shall use the termination rates specified in section 94.10 of this Part; provided, however, the insurer may base its termination rates on the insurer’s own credible claim termination rate experience or upon other assumptions designed to place a sound value on the liabilities;
    2. (ii) with respect to claim termination rates for claim durations from the date of disablement of more than two years but less than five years, an insurer shall use the termination rates specified in section 94.10 of this Part; provided, however, that with the approval of the superintendent, rates may be based on the insurer’s own claim termination experience for claim durations of more than two years but less than five years and for which the insurer maintains underwriting and claim administration control if the superintendent determines that the experience is credible. For experience to be considered credible for purposes of this subclause, the insurer must provide claim termination patterns of its own over no more than six years reflecting at least 5,000 claim terminations during the third through fifth claim durations on reasonably similar applicable policy forms; and
    3. (iii) claim termination rates for claim durations after the first five years from the date of disablement of such claims shall be those specified in section 94.10 of this Part.
  2. (2) Example: A study of the insurer’s group claim termination rates shows that for claims terminating in the first 24 months from date of disablement the claim termination rates are 120 percent of those of the 87CGDT and for months 25 through 60 (years three through five) are 110 percent of the 87CGDT. An open claim as of December 31, 2002 has a date of disablement of July 31, 2001 and an elimination period of 180 days. In order to calculate the claim reserve:
    1. (i) as of December 31, 2002, the insurer may increase the claim termination rates of the 87CGDT for months 18 through 24 by 20 percent, and the claim termination rates of the 87CGDT for durations three through five years by 10 percent (if approved by the superintendent) but must use 100 percent of the claim termination rates of the 87CGDT for all claim durations beyond the fifth claim year;
    2. (ii) as of December 31, 2003 and thereafter, the insurer may increase the claim termination rates of the 87CGDT for months 30 through 60 by 10 percent (if approved by the superintendent) but must use 100 percent of the claim termination rates of the 87CGDT for all claim durations beyond the fifth claim year.
  3. (3) The insurer’s request for approval described in item (1)(ii) of this subclause, regarding the use of the insurer’s own experience, must include the information specified in subclause (b)(3) of this clause.
  4. (4) Except where an insurer opts to apply the minimum standards in clause (e) of this subparagraph pursuant to subclause (1) of this clause with respect to a claim incurred under a group long-term disability income contract prior to January 1, 2005, in calculating the claim reserve for all claims incurred under a group long-term disability income contract on or after January 1, 2005 and prior to the date selected by the insurer under clause (d) of this subparagraph an insurer shall either comply with the requirements of items (i) through (iii) of subclause (1) of this clause or clause (e) of this subparagraph; provided, however, that once an insurer elects to calculate reserves for all open claims incurred on or after January 1, 2005 pursuant to clause (e) of this subparagraph, the insurer shall continue to make all of its future valuations on that basis.
7. (d) In calculating the claim reserve for a claim incurred under a group long-term disability income contract on or after October 1, 2014 and prior to January 1, 2017, an insurer shall either comply with the requirements of clause (c) of this subparagraph or clause (e) of this subparagraph; provided, however, that once an insurer elects to calculate reserves for all open claims pursuant to clause (e) of this subparagraph, the insurer shall continue to make all of its future valuations on that basis.
8. (e) In calculating the claim reserve for a claim incurred under a group long-term disability income contract on or after January 1, 2017, an insurer shall use the 2012 Group Long-Term Disability Valuation Table (2012 GLTD Table)², which was adopted by the NAIC in 2014, provided that:
  1. (1) the insurer shall incorporate its own experience exemption determined in accordance with the standards of valuation of group long-term disability reserves governed by Part 83 of this Title (Insurance Regulation 172); or
  2. (2) if the exemption specified in subclause (1) of this clause is not available, then the insurer shall incorporate:
    1. (i) the insurer’s own experience computed in accordance with the standards of the valuation of group long-term disability reserves governed by Part 83 of this Title;
    2. (ii) an adjustment to include an own experience measurement margin derived in accordance with the standards of valuation of group long-term disability reserves governed by Part 83 of this Title; and
    3. (iii) a credibility factor derived in accordance with the standards of valuation of group long-term disability reserves governed by Part 83 of this Title.
9. (iii) Duration of disablement. For contracts with an elimination period, the duration of disablement is measured as dating from the time that benefits would have begun to accrue had there been no elimination period.
10. (2) All other benefits.
  1. (i) Interest. The maximum interest rate for claim reserves is specified in section 94.10 of this Part.
  2. (ii) Morbidity or other contingency. If section 94.10 of this Part does not specify a minimum standard, the reserve should be based on the insurer's experience, if the experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.
11. (3) For claim reserves to reflect "sound values" and reasonable margins, reserve tables based on credible experience should be adjusted regularly to maintain reasonable margins. Demonstrations may be required by the superintendent based on published literature.
12. (4) Claim reserve methods generally. A generally accepted actuarial reserving method or other reasonable method, if, after a public hearing, the method is approved by the superintendent prior to the statement date, or a combination of such methods may be used to estimate all claim liabilities. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. Approximations based on groupings and averages may also be employed. Adequacy of the claim reserves, however, shall be determined in the aggregate.

(a) General.