11 CRR-NY 44.10NY-CRR
STATE COMPILATION OF CODES, RULES AND REGULATIONS OF THE STATE OF NEW YORK
TITLE 11. INSURANCE
CHAPTER III. POLICY AND CERTIFICATE PROVISIONS
SUBCHAPTER A. LIFE, ACCIDENT AND HEALTH INSURANCE
PART 44. INDIVIDUAL DEFERRED ANNUITIES, MARKET-VALUE ADJUSTMENTS WITHDRAWAL CHARGES, AVAILABILITY OF CASH VALUES
11 CRR-NY 44.10
11 CRR-NY 44.10
44.10 Examples.
This section contains examples of the application of market-value adjustment formulae that meet the requirements of this regulation.
MARKET VALUE ADJUSTMENT EXAMPLES
Variables
xAt = Actual Accumulation Amount at time t derived from contribution made at time x
Wt = Withdrawal Charge Factor at time t
CSBt = Cash Surrender Benefit at time t
(a) Single premium contracts.
(1) Internal index.
Example 1:
Five-year guaranteed interest rate contract.
Assume a contract issued three years ago with a five-year guaranteed interest rate of 12%. Currently, two-year single premium contracts are issued with a two-year guaranteed interest rate of 10%.
The current cash surrender benefit is determined to be:
(i) CSB3 = (1 − W3) 0A3 × 1.122/1.102
Alternatively:
(ii) CSB3 = (1 − W 3)(0A3)[1 − (.10 − .12) × 2]
Example 2:
Five-year guaranteed interest rate contract with cap.
Assume a contract issued three years ago with a guaranteed interest rate of 12% in years 1-5, and a minimum interest guarantee of 5% in years 6-10. There is a 5% cap on market value adjustments. Currently, two-year guaranteed interest rates of 8% are being offered on similar contracts.
The current cash surrender benefit is determined to be:
CSB3 = (1 − W3)0A3 × 1.122/1.082 cap of 5%
= (1 − W3) 0A3 × 1.05
(2) External index.
Example 3:
Five-year guaranteed interest rate contract.
Assume a contract issued two-years ago with a five-year guaranteed interest rate of 9%. At issue, the yield to maturity on five-year Treasury bills was 10%. Currently, three -year Treasury bills are yielding 12% to maturity.
The current cash surrender benefit is determined to be:
(i) CSB2 = (1 − W2)0A2 × 1.10 3/1.123
Alternatively:
(ii) CSB2 = (1 − W 2)(0A2)[1 − (.12 − .10) × 3]
(b) Flexible premium contracts.
(1) Internal index.
Example 4:
Five-year flexible premium guaranteed interest rate contract.
Assume a contract issued three years ago, and the guaranteed interest rates to maturity (five years from issue) associated with deposits made during the first three contract years are as follows:
| Time of deposit | Guaranteed interest rate to maturity |
|---|---|
| 0 | 10% |
| 1 | 9% |
| 2 | 9% |
Currently, two-year flexible premium contracts are issued with a guaranteed interest rate to maturity of 8½% on first-year deposits.
The current cash surrender benefit is determined to be:
(i) CSB3 = (1 − W3)(0A3 ×1.102/1.0852 + 1A3 × 1.092/1.0852 + 2A3 × 1.092)/1.0852
Alternatively:
(ii) Let iavg = 0A3 × .10 + 1A3 × .09 + 2A3 × .09/0A3 +1A3 + 2A3
Then:
CSB3 = [(1 − W 3) × ((0A3 + 1A3 + 2A3) × (1 + iavg)2)]/(1.085)2
Example 5:
Five-year flexible premium, flexible maturity guaranteed interest rate contract.
Assume a contract issued three years ago, and the guaranteed interest rates to maturity (five years from deposit) associated with deposits made during the first three contract years are as follows:
| Time of deposit | Guaranteed interest rate to maturity |
|---|---|
| 0 | 10% |
| 1 | 10% |
| 2 | 11% |
Currently, the following guaranteed interest rates are offered on deposits to new issues of similar contracts:
| Years to maturity | Guaranteed interest rate to maturity |
|---|---|
| 2 | 8% |
| 3 | 9% |
| 4 | 10% |
The current cash surrender benefit is determined to be:
(i) CSB3 = (1 − W3)(0A3 ×1.102/1.082 + 1A3 × 1.103/1.093 + 2A3 × 1.114)/1.104
(ii) CSB3 = (1 − W 3)[(0A3)[1 − (.08 − .10) × 2]
+ (1A3)[1 − (.09 − .10) × 3]
+ (2A3)[1 − (.10 − .11) × 4]]
Alternatively:
Let navg = (0A3 × 2) + (1A3 × 3) + (2A3 × 4)/(0A3 + 1A3 + 2A3
Assume navg = 3, Then:
(iii) CSB3 = (1 − W 3)(0A3 × 1.103 + 1A3 × 1.10 3 + 2A3 × 1.113)/1.093
(2) External index.
Example 6:
Five-year flexible premium guaranteed interest rate contract.
Assume a contract issued three years ago with a five-year guaranteed interest rate of 9%. The yield to maturity on Treasury bills during this period was as follows:
| Time | Years to maturity | T–bill yield to maturity |
|---|---|---|
| 0 | 5 | 10% |
| 1 | 4 | 9% |
| 2 | 3 | 9% |
Currently, two-year Treasury bills are yielding 8½% to maturity.
The current cash surrender benefit is determined to be:
CSB3 = (1 − W3)(0A3 × 1.102/1.0852+ 1A3 × 1.092/1.0852+ 2A3 ×1.092)/1.085 2
Example 7:
Five-year flexible premium, flexible maturity guaranteed interest rate contract.
Assume the same facts as in example 6, and further assume that the following market values of $1,000, semiannual coupon Treasury bills are known:
| Time | Years to maturity | Annual coupon rate | Market value |
|---|---|---|---|
| 0 | 5 | 10% | $1,000 |
| 1 | 5 | 10% | $1,000 |
| 2 | 5 | 11% | $1,000 |
| 3 | 2 | 10% | $1,100 |
| 3 | 3 | 10% | $1,100 |
| 3 | 4 | 11% | $1,200 |
The current cash surrender benefit is determined to be:
CSB3 = (1 − W3)(0A3 × 1100/1000 + 1A3 × 1100/1000 + 2A3 × 1200)/1000
11 CRR-NY 44.10
Current through July 31, 2021
| End of Document |
IMPORTANT NOTE REGARDING CONTENT CURRENCY: The "Current through" date indicated immediately above is the date of the most recently produced official NYCRR supplement covering this rule section. For later updates to this section, if any, please: consult editions of the NYS Register published after this date; or contact the NYS Department of State Division of Administrative Rules at [email protected]. See Help for additional information on the currency of this unofficial version of NYS Rules.