(a) Chapter 365 of the Laws of 1986 amended section 4221 of the Insurance Law, among other things, to provide in subdivision (n-2) thereof that any policy under which additional amounts are credited pursuant to section 4232(b) of the Insurance Law may provide for cash surrender benefits determined in accordance with a market-value adjustment formula; provided, however, that such policy provides for cash surrender benefits determined without adjustment in accordance with such a formula at specified times (not less frequent than once every 10 years after issuance of the policy). The chapter defined market-value adjustment formula to mean a formula which is described in the policy for increasing and decreasing cash surrender values that would otherwise meet the nonforfeiture requirements of section 4221(n-1) of the Insurance Law and which takes into account (1) changes in interest rates on publicly traded debt obligations or other investments or in interest rates provided in, or declared pursuant to, policies of the same class as the policy being surrendered; and (2) the length of time between the date on which the policy is surrendered and the next date on which the policy would have provided cash surrender benefits determined without the use of any market-value adjustment formula. The chapter authorized the superintendent to promulgate reasonable regulations to define permissible forms of market-value adjustment formulae.

(b) The chapter also amended section 4222 of the Insurance Law to provide that the policy loan value for a policy under which any cash surrender value is adjusted in accordance with a market-value adjustment formula shall be a percentage (not less than 75 percent) of the sum of (1) the amount of any loan outstanding; and (2) the remaining portion of the cash surrender value as so adjusted at the time the loan is applied for, but, if the policy so provides, not in excess of such cash surrender value before adjustment.

(c) The chapter also amended section 4217 of the Insurance Law to direct the superintendent, by regulation, to issue guidelines for the determination of the minimum reserve value for any plan or plans of life insurance policies under which cash surrender values and policy loan values are adjusted in accordance with a market-value adjustment formula. The amendment provided that the regulation may require any company issuing or delivering such policies in this State to submit to the superintendent with each annual report an opinion, in form and substance satisfactory to the superintendent, of a qualified actuary that the reserves for all such policies in force at the end of the year, and the assets held by the company in support of such reserves, make good and sufficient provision for the policy liabilities, such opinion to be accompanied by a memorandum, also in form and substance satisfactory to the superintendent, of the qualified actuary describing the calculations made in support of such opinion and the assumptions used in the calculations. The amendment further provided that the regulation may prescribe the calculations required to support such opinions and may provide that if the company has designated particular assets primarily to support reserves for a class or classes of policies, including reserves for policies determined in accordance with the regulation, the opinion of the company's qualified actuary may apply to the policies whose reserves are supported by such assets.

(d) Finally, the chapter provided, in effect, that if the assets supporting the policies are maintained in a separate account at their market value in accordance with section 4240(a)(5)(iii) of the Insurance Law, the reserves for the policies may be valued in a consistent manner.

(e) These amendments also apply to certificates of life insurance under which additional amounts are credited pursuant to section 4518 of the Insurance Law.