Life Bureau Guidance Note

Guidance Date: July 21, 2020

Frequently Asked Questions Regarding Amendment No. 1 to Regulation 213

The New York State Department of Financial Services (the “Department”) promulgated Amendment No. 1 to Insurance Regulation 213 (11 NYCRR 103), Principle-Based Reserving (“Regulation 213” or “PBR”), which has an effective date of February 19, 2020.

To assist insurers in complying with Regulation 213, the Department has compiled the following list of frequently asked questions.

The responses provided in this Q&A are limited to the questions presented. The addition, deletion, or modification of facts may change the Department’s responses. These responses do not represent a pre-determination of an insurer’s overall compliance with the regulation. Compliance with Regulation 213 will be examined in the context of all relevant facts and circumstances.

1) Does Regulation 213 allow for the Small Company Exemption as provided in Section II of the NAIC Valuation Manual? If yes, how do companies go about applying for the exemption?

Yes. Life PBR Exemption filings should be sent to the Albany Life Bureau (with a copy to Amanda Fenwick and Matthew Ryan) indicating that the requirements outlined in the Valuation Manual have been met.

2) Do all requirements of Section 103.6 of Regulation 213 need to be implemented for quarterly financial statements in 2020, or can reasonable estimation methods be used in 2020 quarterly statements to calculate the phase-in amounts as outlined in Section 103.6(b)(2)(ii)?

The Department is planning to amend Section 103.6 of Regulation 213 to be effective for valuations on or after 12/31/2020.

3) Regarding the request to delay implementation of the reserve standards cited in Sections 103.4(d) and 103.7(d):

  • What information is to be provided?
  • To whom should the request be sent?

These requests should be sent to The Albany Life Bureau (with a copy to Amanda Fenwick and Matthew Ryan. Such requests should include an overview of the applicable business and a brief explanation for the deferral request.

4) May companies that plan to elect the linear grading option, as outlined in Section 103.6(b)(2)(ii), finalize their decision just before the 12/31/2020 financial statement is filed?


5) Regulation 213 is written such that the old and new reserve methods would need to be calculated each financial reporting period when linearly grading between the two. This contrasts with the NAIC VM-21 grading methodology which, for simplicity, only calculates the difference under the old and new methods at 1/1/2020, freezes the difference, and then grades into the impact over three years. Is it possible to amend Regulation 213 to permit companies to use the NAIC grading methodology?

The Department does not intend to amend Regulation 213 to allow companies to use the NAIC grading methodology. However, the Department intends to amend the grading methodology as described in Section 103.6(b)(2)(ii) as follows:

  • Revise the grading period from 3 years to 5 years.
  • Revise the amount to be graded in from [NY Floor – max(2017 AG43, VM-21)] to [max(NY Floor, VM-21) – 2017 AG43].

6) How frequently and where will the Department publish the maximum valuation interest rates under Section 103.5?

The maximum valuation interest rates per Section 103.5 will be published monthly here:

7) What guidance does the Department plan to provide on the VM-20 supplement blanks for the blue book? How will the additional floors and deviations from the Valuation Manual be reported?

The VM-20 Reserves Supplement should be completed in accordance with the Valuation Manual requirements, except that columns 1 and 2 of Part 1 shall equal the final reported reserve. For example, these columns should reflect the final reported reserve in accordance with Regulation 213.

8) Is it correct to say that all deviations from the Valuation Manual are in the First Amendment to 11 NYCRR 103 (Regulation 213)? Specifically, is the Department adopting the Valuation Manual’s

  • Actuarial Opinion and Memorandum Regulation (AOMR) requirements,
  • Nonforfeiture requirements, and
  • Experience reporting requirements?

Per Section 103.3(c) of Regulation 213, “Except where the valuation manual conflicts with any provision of the Insurance Law or this Title, the valuation manual is adopted in its entirety, subject to the effective dates and other requirements specified in the applicable sections of this Part that deviate from the valuation manual.”

Please see question #9 below regarding the AOMR requirements.

Regulation 213 currently does not cover nonforfeiture requirements.

Regarding experience reporting, the Department may request information in addition to that which is currently specified in the Valuation Manual.

9) How does New York’s adoption of the NAIC Valuation Manual (which includes VM-30) now impact Regulation 126?

Regulation 126 is still effective. Companies should continue to submit Actuarial Opinions and Memoranda that satisfy the requirements of Regulation 126. However, the Regulatory Asset Adequacy Issues Summary (“RAAIS”) should be consistent with that prescribed by the Valuation Manual as noted in the Department’s Special Considerations Letter.

10) Do deficiency reserves continue to be required under Regulation 213?


11) Does the Department expect to amend Regulation 213 to routinely adopt the annual updates to the Valuation Manual?

This is likely the approach the Department will take; however, each subsequent adoption will require further discussion.

12) During the phase-in period of Regulation 213, is it necessary to submit both the AG43 report with certifications and the VM-21 report?

Companies that elect to use the phase-in option per Section 103.6(b)(2)(ii) must submit both the AG43 report and accompanying certifications and the VM-31 report, which includes the reporting requirements previously provided in VM-21. For those companies that do not elect to use the phase-in option, an AG43 report is not required.

13) With respect to variable annuities, is it permissible for the ceding company’s gross reserves to fully reflect the reinsurer’s existing hedges held as of the valuation date (for example, in the development of the NY floor reserve)?