The New York State Insurance Department has issued reserving guidelines for guaranteed minimum living benefits offered through variable annuities. The Department sent out a letter at the end of October regarding the application of Regulation 128 to those guarantees.

The state only intends for variable annuity carriers to conform with Regulation 128 as a stop gap measure until the National Association of Insurance Commissioners "adopts a permanent solution for reserves that considers the risks in such product designs."

The Department provides specific calculations for reserves, but carriers are also able to present alternative reserving methods, given adequate explanations. Also, appropriate dynamic hedging can allow insurers to reduce the "haircut" on common stocks from 20% to 10%, subject to approval.

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