(b) The insurance company at all times shall maintain assets in one or more separate accounts, such that the two following conditions are met:

1. (1) at all times the market-value of the assets equals or exceeds the minimum value of guaranteed contract liabilities (determined in accordance with subdivision [k] of this section); and
2. (2) at all times the market-value of the assets (less the deductions provided for in subdivision [d] of this section) equals or exceeds 92 percent of the minimum value of guaranteed contract liabilities (determined in accordance with subdivision [k] of this section).

(d) In determining compliance with the asset maintenance requirement in accordance with subdivision (b) of this section and the reserve for guaranteed contract liabilities in accordance with subdivision (c) of this section, the insurance company shall deduct the following percentages of the market-values of the following types of separate account assets:

(f) Certainty of payment under obligations and mortgage loans (other than United States government obligations) may be demonstrated by reference to the provisions of the instruments governing the obligations or mortgage loans themselves or the provisions of hedging instruments purchased in connection with such obligations or mortgage loans in order to provide certainty of payment. When options to purchase securities or interest rate caps or floors are used as hedging instruments, there shall be deducted the lower of the cost or market-value of such instruments in determining compliance with the asset maintenance requirement. If a company employs dynamic hedging techniques continually throughout the year with respect to common stock investments in the separate account, and in a manner found satisfactory by the superintendent, it may reduce the percentage deduction for common stock investments in the account from 20 percent to 10 percent.

1. (1) For contracts providing fixed benefits only, the separate account assets shall be subject to the limitations of this paragraph.

   1. (i) For separate account assets chargeable with liabilities arising out of any other business of the insurance company, except as noted in subparagraph (iii) of this paragraph, such assets shall consist in whole or in part of assets which, together with the general account assets, meet the limitations contained in section 1405 of the Insurance Law, computed as though the insurance company's admitted assets included such separate account assets.
   2. (ii) For separate account assets not chargeable with liabilities arising out of any other business of the insurance company, except as noted in subparagraph (iii) of this paragraph, such assets shall consist in whole or in part of assets which meet the limitations of such section, computed as though the insurance company's admitted assets consisted solely of such separate account assets:
   3. (iii) Any separate account assets that do not comply with the limitations of this paragraph shall, to the extent that such assets exceed such limitations, be subject to an additional deduction of 10 percent of the market value thereof in determining the asset maintenance and reserve requirements in subdivisions (b) and (c) of this section.
2. (2) For contracts other than those contracts that provide fixed benefits only, the insurance company shall, upon request of the superintendent, justify the concentration or diversification of separate account assets and any failure of any separate account assets to comply with additional investment restrictions or additional deductions from market value in determining asset maintenance and reserve requirements.

(g) Diversification of assets.

(i) To the extent that guaranteed contract liabilities are denominated in the currency of the United States and are supported by separate account assets denominated in the currency of a foreign country, and to the extent that guaranteed contract liabilities are denominated in the currency of a foreign country and are supported by separate account assets denominated in the currency of the United States, the percentage deduction for any such asset under subdivision (d) of this section will be increased by 15 percent of the market value thereof unless the currency exchange risk thereon has been adequately hedged, in which case the percentage deductions for any such asset under subdivision (d) of this section will be increased by.5 percent. (No guaranteed contract liabilities denominated in the currency of a foreign country shall be supported by separate account assets denominated in the currency of another foreign country without the approval of the superintendent.) For purposes of this subdivision, the currency exchange risk on an asset is deemed to be adequately hedged if:

1. (1) it is an obligation of:

   1. (i) a jurisdiction, which is rated in one of two highest rating categories by an independent nationally recognized United States rating agency acceptable to the superintendent;
   2. (ii) any political subdivision or other governmental unit of any such jurisdiction, or any agency or instrumentality of any such jurisdiction, political subdivision or other governmental unit; or
   3. (iii) an institution which is organized under the laws of any such jurisdiction; and

2. (2) at all times the principal amount thereof and scheduled interest payments thereon are hedged against the United States dollar pursuant to contracts or agreements which are:

   1. (i) issued by or traded on a securities exchange or board of trade regulated under the laws of the United States or Canada or a province thereof;
   2. (ii) entered into with a United States banking institution which has assets in excess of five billion dollars and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized, United States rating agency, or with a broker-dealer registered with the Securities and Exchange Commission which has net capital in excess of $ $250,000,000; or
   3. (iii) entered into with any other banking institution which has assets in excess of $5,000,000,000 and which has obligations outstanding, or has a parent corporation which has obligations outstanding, which are rated in one of the two highest rating categories by an independent, nationally recognized, United States rating agency and which is organized under the laws of a jurisdiction which is rated in one of the two highest rating categories by an independent, nationally recognized United States rating agency.

(k) For purposes of this Section, the minimum value of guaranteed contract liabilities is defined to be an amount equal to the product of P and (1 + x), where P is the base amount of guaranteed contract liabilities, and x is the contract risk factor determined at least annually in accordance with subdivision (l) of this section. The base amount of guaranteed contract liabilities, P, shall be the sum of the expected guaranteed contract benefits, each discounted at a rate corresponding to the expected time of payment of the contract benefit that is not greater than the maximum multiple of the spot rate supportable by the expected return from the separate account assets as described in the plan of operations or the actuary's opinion and memorandum (pursuant to section 97.4[d] of this Part). In no event shall the discount rates exceed the rates given in the following table:

where t is the length of time in years between the valuation date and the expected date of the cashflow payment, and S_t is the spot rate for time t. In projecting cash flows for annuity and life insurance benefits, the mortality tables for such benefits prescribed or authorized by section 4217 of the Insurance Law shall be used.

(l) In determining the minimum value of guaranteed contract liabilities, x, the contract risk factor, shall be calculated as follows:

1. (1) For contracts providing annuities, x shall be calculated on a life by life basis (or, with the approval of the superintendent, on a group basis that approximates the amount that would result from a calculation on a life by life basis) as follows:

   1. (i) The x-factors listed under “fixed dates” are for immediate annuities and deferred annuities with known payment dates, terms and benefit amounts. The x-factors listed under expected dates are for deferred annuities with unknown payment dates (e.g., unknown retirement dates), forms or benefit amounts but for which the dates, terms and benefit amounts are approximated or estimated and the forms are anticipated.
   2. (ii) For purposes of this paragraph an annuity shall consist of periodic payments not less frequently than annually wherein the payments for any one contract or calendar year are not in excess of 115 percent of the prior year's payments (excluding payments in excess of 115 percent of the preceding year). Payouts to an individual may be split such that some payments or portions thereof may qualify under this paragraph and the nonqualifying payments or portions thereof under paragraph (2) of this subdivision for benefit type B. Comparison may be on a group basis but 110 percent shall be substituted for 115 percent.

   		Years from valuation date to payment date
   Value of ×
   Fixed dates	Expected dated
   .00	.00	5 years or less
   .00	.00	More than 5 years to 10 years
   .00	.03	More than 10 years to 15 years
   .03	.05	More than 15 years to 20 years
   .05	.10	More than 20 years

2. (2) For contracts providing other fixed benefits, x is a function of the guarantee duration and type of the benefit determined in accordance with the following schedule:

   1. (i) For purposes of this paragraph, benefit type shall have the following meaning:

      1. (a) Benefit Type A: The contractholder may withdraw funds only:

         1. (1) with an adjustment to reflect changes in interest rate or asset values since receipt of the funds by the insurance company; or
         2. (2) without such adjustment, but in installments over five years or more; or
         3. (3) as an immediate annuity.

      2. (b) Benefit Type B: The contractholder 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. (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or
         2. (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 installments over less than five years.

      3. (c) Benefit Type C: The contractholder may withdraw funds before the expiration of the interest rate guarantee in a single sum or installments over less than five years either:

         1. (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or
         2. (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

   2. (ii) For purposes of this paragraph, guarantee duration means:

      1. (a) for contracts providing cash settlement options as benefits, the greater of:

         1. (1) the number of years from the valuation date to the dates of scheduled payments; and
         2. (2) the number of years from the valuation date for which interest rates provided in the contract are guaranteed to exceed the last published calendar year statutory valuation interest rate for life insurance policies (other than single premium policies of the kind referred to in section 4217[c][4][B][vi] of the Insurance Law) with guarantee durations in excess of 20 years; and
      2. (b) for contracts not providing cash settlement options as benefits, the number of years from the valuation date to the dates of scheduled payments.

   Guarantee duration	Benefit type	Value of × Benefit type B	Benefit type C
   5 years or less	0	0	.03
   More than 5 years, up to 10 years	0	0	.10
   More than 10 years, up to 15 years	0	.03	.15
   More than 15 years, up to 20 years	.03	.05	.30
   More than 20 years	.05	.10	.50

3. (3) For contracts providing guaranteed minimum benefits where the benefit payable at any specified date is the greater of:

   1. (i) the market value of account assets or any part thereof (to the extent that the market value of such assets determines the contractholder's benefits, i.e., to the extent such assets are beneficially client assets); and

   2. (ii) a fixed minimum guarantee related to initial considerations (i.e., related to client funds deposited in exchange for the participatory interest and minimum guarantee).

      The x-factors shall be applied to the minimum guaranteed benefits described in subparagraph (ii) of this paragraph and shall be determined in accordance with values of x set forth in paragraphs (1) and (2) of this subdivision.

   3. (iii) The asset maintenance requirement described in subdivision (c) of this section shall be satisfied provided that the total of all account assets (client and insurance company within the general account or the separate [or supplemental] accounts less the asset deductions provided for in subdivision [d] of this section shall be at least equal to the minimum value of the minimum guaranteed liability [i.e., P multiplied by [1 + x]) for the minimum benefit described in subparagraph (ii) of this paragraph.

4. (4) For contracts providing benefits other than as covered by paragraphs (1), (2) and (3) of this subdivision, the superintendent may impose contract risk factors as the superintendent deems appropriate for the risk.

   (m) Disclosure of accumulated amounts.

5. (1) Where any guarantee (whether for fixed benefits or guaranteed minimum benefits) is provided under a separate account valued at market, the amount accumulated from risk charges deducted from considerations received or from the separate account, net of losses and the amount of losses, shall be shown in the annual statement. This may be shown as a footnote to the appropriate line in the analysis of operations by line of business pertaining to net transfers to (or from) the separate account. The footnote should include the amounts for the current year and the cumulative amounts from inception to date.
6. (2) The amount of the annual deductions for risk charges and the maximum accumulation shall be in accordance with a plan by the insurer for compensating the general account and shall vary in proportion to the various risks and guarantees for the risks undertaken by the general account and shall vary depending on whether or not the assets of the separate account are chargeable with liabilities arising out of any other business of the insurer.
7. (3) Any losses borne by the general account for the guarantees granted to the market value separate account shall be charged against the amount accumulated pursuant to paragraph (2) of this subdivision.