The New York Department of Financial Services (NYDFS) announced on July 6, 2016 adoption of principle-based reserving (PBR) for regulated life insurers beginning January 1, 2018. The move provides further assurance of regulatory uniformity for life insurer reserving in New York. Forty-five other states representing nearly 80 percent of the market that have enacted laws implementing PBR and will begin reserving in accordance with PBR effective January 1, 2017, as noted in KPMG LLP’s (KPMG) recent Points of View publication. New York’s adoption brings the total number of states to 46 with nearly 89 percent of premium.
This is a significant departure from previous department policy as New York was one of few states opposed to refining the reserving methodology. The reasons for opposing it focused on perceptions that PBR processes had been responsible for banking sector failures, lower reserves will increase insurer insolvency risks, unclear benefits to the consumer, and state regulator’s lack of expertise.