N.J. Admin. Code § 11:4-6.4

Current through Register Vol. 56, No. 24, December 18, 2024

Section 11:4-6.4 - Claim reserves-minimum standards for claim reserves

(a) The following applies to disability income:

1. The maximum interest rate for claim reserves is specified in N.J.A.C. 11:4-6.1 6.

2. Minimum standards with respect to morbidity are those specified in N.J.A.C. 11:4-6.1 4 and 6.15, except that, at the option of the insurer:

i. For claims with a duration from date of disablement of less than two years, reserves may be based on the insurer's experience, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

ii. For group disability income claims with a duration from date of disablement of more than two years but less than five years, reserves may, with the approval of the Commissioner, be based on the insurer's experience for which the insurer maintains underwriting and claim administration control. The request for such approval of a plan of modification to the reserve basis shall include:

(1) An analysis of the credibility of the experience;

(2) A description of how all of the insurer's experience is proposed to be used in setting reserves;

(3) A description and quantification of the margins to be included;

(4) A summary of the financial impact that the proposed plan of modification would have had on the insurer's last filed annual statement;

(5) A copy of the approval of the proposed plan of modification by the Commissioner of the state of domicile; and

(6) Any other information deemed necessary by the Commissioner.

iii. For experience to be considered credible for the purposes of this subsection, the company should be able to provide claim termination patterns over no more than six years reflecting at least 5,000 claims terminations during the third through fifth claims durations on reasonably similar applicable policy forms.

iv. For claims reserves to reflect sound values and reasonable margins, reserve tables based on credible experience should be adjusted regularly to maintain reasonable margins. Demonstrations may be required.

3. For contracts with an elimination period, the duration of disablement should be measured as dating from the time that benefits would have begun to accrue had there been no elimination period.

(b) The following applies to all other benefits:

1. The maximum interest rate for claim reserves is specified in N.J.A.C. 11:4-6.1 6.

2. The reserve should be based on the insurer's experience for morbidity or other contingency, if such experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities.

N.J. Admin. Code § 11:4-6.4

As amended, R.1984 d.512, eff. 11/5/1984.
See: 16 New Jersey Register 2225(a), 16 New Jersey Register 3039(a).
This section was recodified from 6.1(a)-(c) with substantive changes.