2013 New York Consolidated Laws
ISC - Insurance
Article 41 - (4101 - 4121) PROPERTY/CASUALTY INSURANCE COMPANIES
4117 - Loss and loss expense reserves.

 
    §  4117.  Loss  and  loss  expense  reserves.  (a)  In determining the
  financial condition of any property/casualty insurance company  for  the
  purpose of applying the provisions of this chapter, and in any financial
  statement  or report of any such company, there shall be included in the
  liabilities of such company loss reserves and loss expense  reserves  at
  least  equal  to  the  amounts  required  under  the  provisions of this
  section, and  the  amount  of  such  reserves  shall  be  diminished  by
  allowance  or  credit for reinsurance recoverable from assuming insurers
  in accordance with paragraph nine  of  subsection  (a)  of  section  one
  thousand  three  hundred  one of this chapter. The date as of which such
  determination, statement or report is made is hereinafter referred to as
  the date of determination.
    (b) For all outstanding losses and loss expenses, the  reserves  shall
  include the following:
    (1) the aggregate estimated amounts due or to become due on account of
  all  known  losses  and  claims and loss expenses incurred but not paid,
  including the estimated liability on any notice received by the  company
  of the occurrence of any event which may result in a loss;
    (2)  the  aggregate  amounts  of  liability  for  all  losses and loss
  expenses incurred but on which no notice has been received, estimated in
  accordance with the company's prior experience,  if  any,  otherwise  in
  accordance  with  the  experience  of  similar  companies  under similar
  contracts of insurance. The estimated liabilities for such losses  under
  all its bonds, policies or contracts of fidelity insurance, shall be not
  less  than  ten  percent  of  the net premiums in force thereon, and the
  estimated liabilities for all such losses under all its surety contracts
  shall be not less than  five  percent  of  the  net  premiums  in  force
  thereon.
    (c)  Except  as provided in subsection (e) hereof the minimum reserves
  for outstanding losses and loss  expenses  under  policies  of  personal
  injury  liability  insurance  and under policies of employers' liability
  insurance, where  the  losses  were  incurred  during  the  three  years
  immediately  preceding the date of determination, shall be calculated in
  accordance  with  any  method  adopted  or  approved  by  the   National
  Association  of  Insurance  Commissioners and shall be not less than the
  aggregate of the estimated unpaid losses and loss  expenses  for  claims
  incurred computed in accordance with subsection (b) hereof.
    (d)  The  minimum  reserves  for  outstanding losses and loss expenses
  under policies of workers' compensation insurance, except as provided in
  subsection (e) hereof, shall be computed as follows:
    (1) For all such compensation policies where losses were incurred more
  than three years prior to the date of determination, such reserves shall
  be the sum of the present values, at five percent interest per annum, of
  the determined and estimated unpaid losses  computed  on  an  individual
  case   basis  plus  the  estimated  unpaid  loss  expenses  computed  in
  accordance with subsection (b) hereof.
    (2) Where losses were incurred  during  the  three  years  immediately
  preceding  the  date of determination, such reserves shall be the sum of
  the reserves for each year, which shall be calculated in accordance with
  any method adopted or approved by the National Association of  Insurance
  Commissioners  and shall be not less than the sum of the present values,
  at five percent interest per annum,  of  the  determined  and  estimated
  unpaid  losses  computed  on an individual case basis plus the estimated
  unpaid loss expenses computed in accordance with subsection (b) hereof.
    (e) Whenever in the judgment of the superintendent, the loss and  loss
  expense  reserves  of  any  property/casualty  insurance  company  doing
  business in this state  calculated  in  accordance  with  the  foregoing

  provisions are inadequate or excessive, he may prescribe any other basis
  which will produce adequate and reasonable reserves.
    (f)  Every  property/casualty insurance company doing business in this
  state shall keep a complete and itemized record showing all  losses  and
  claims  on  which it has received notices including all notices received
  by it of the occurrence of any event which may result in a loss.
    (g) (1) Effective with the nineteen hundred ninety  annual  statement,
  every  licensed  property/casualty  insurer required to file such annual
  statement with the superintendent by the following April  first,  shall,
  unless  exempted  by  the superintendent, engage a qualified independent
  loss reserve specialist for the following year to render an  opinion  as
  to  the  adequacy  of its loss and loss adjustment expense reserves when
  two of three of such insurer's results of its loss and  loss  adjustment
  expense   ratios  as  indicated  below  are  outside  of  the  indicated
  acceptable ranges:
    (A) One Year Reserve Development to Surplus
    Add the year-end estimate of the losses that were outstanding one year
  earlier to the payments on those  losses  made  during  that  year.  The
  difference  between  that  sum and the reserves that were established at
  the end of the prior year is the one-year reserve development. The ratio
  of  one-year  reserve  development  to  prior  year's  surplus  is   the
  deficiency  or redundancy. The acceptable range is less than twenty-five
  percent deficiency. Any redundancy is acceptable.
    (B) Two Year Reserve Development to Surplus
    Add the year-end estimate of the  losses  that  were  outstanding  two
  years  earlier  to  the  payments  on those losses made during those two
  years. The difference between  that  sum  and  the  reserves  that  were
  established  at the end of the second prior year is the two-year reserve
  development.  The ratio of two-year reserve development  to  the  second
  prior  year's  surplus  is  the deficiency or redundancy. The acceptable
  range is less than twenty-five percent  deficiency.  Any  redundancy  is
  acceptable.
    (C) Estimated Current Reserve Deficiency to Surplus
    For  the  last  two  years  the  reserves as stated in those years are
  adjusted by the one-year or two-year reserve development  as  calculated
  in  the  above two ratios. This total is then divided by the net premium
  earned in the appropriate  year  to  obtain  the  developed  reserve  to
  premium  ratio.  The  estimated  reserves  required  is  the current net
  premium  earned  multiplied  by  the  average  ratio  between  developed
  reserves  and  earned  premium  for  the  last  two years. The estimated
  deficiency is the difference between the estimated reserves required  by
  the  company  and  the actual reserves maintained. The estimated current
  reserve deficiency or redundancy is taken as a percentage of surplus and
  the acceptable range is less than twenty-five  percent  deficiency.  Any
  redundancy is acceptable.
    (2)  Such  opinion  shall  be  submitted by the qualified loss reserve
  specialist  to  the  insurer  and  the  superintendent,  by  such   date
  established  by  the superintendent. For the purposes of this section, a
  "qualified independent loss reserve specialist" shall mean a person  who
  is  not  an  employee,  principal  or  director or indirect owner of the
  insurer and is a member of the Casualty Actuarial Society, or  has  such
  other  experience  as  is  acceptable  to the superintendent to assure a
  professional opinion on the adequacy of loss and loss adjustment expense
  ratios.
    (3) Nothing in this subsection  shall  be  construed  to  restrict  or
  diminish  any  right  or  power  of  the  superintendent under any other
  provision of this chapter.

    (4) The superintendent shall keep the contents  of  each  report  made
  pursuant  to  this subsection and any information obtained in connection
  therewith confidential and shall not make the same  public  without  the
  prior  written  consent  of  the insurer to which it pertains unless the
  superintendent  after  notice  and  an  opportunity  to  be  heard shall
  determine that the  interests  of  policyholders,  shareholders  or  the
  public will be served by the publication thereof.