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 New York Codes Rules Regulations (Last Updated: March 27,2024)
 TITLE 11. Insurance
 Chapter V. Rates and Rating Organizations
 Subchapter E. Methodologies for Measuring the Profitability of Property and Liability Insurance Lines
 Part 165. Methodologies for Measuring the Profitability of Property and Liability Insurance Lines Written in New York State

  Sec. 165.2. Profit measurement definitions and tables  

Latest version.
  • (a) Abbreviations.
    (1) Abbreviations used in this Part include:
    (i) P. = page
    (ii) C. = column
    (iii) L. = line
    (iv) Pt. = part
    (v) Exh. = exhibit
    (vi) IEE = Insurance expense exhibit
    (2) Unless otherwise noted, references are to the annual statement blank.
    (b) Net worth (or surplus to policyholders) computation.
    Net worth (or surplus to policyholders) shall be computed as follows:
    Net worth as reported on the annual statement
    (P. 3, L. 27)
     
    $_____
    Add: Prepaid expenses (equity in the
    unearned premium reserves) for all lines
    [IEE6 + 11 + 1/212 (IEE 7 + 10)/2IEE 1] ×
    (P.7, Pt.2B, L.2 + 4 + 5)
     
    $_____
    Non-admitted assets
    (P.11, Total of amounts in Exh. 2,
    C.2 older than line 23)
     
    _____
    Schedule P excess
    (P.3, L.16, current year)
     
    _____
    Unauthorized Reinsurance
    (P.3, L.15, current year)
     
    _____
    Total Additions
     
    _____
    Sub-total
     
    $
     
    Less: Tax on unrealized capital gains (or
    plus tax savings on unrealized
     
    capital losses)
     
    (Sch. D Summary, L.67, C.3-C.4) × 30%
     
    _____
    Net worth
     
    $_____
    (c) Investable funds.
    Investable funds shall be computed as follows:
    Add: Unpaid losses (P.9, Pt.3A, C5)
     
    $
    _____
    Unpaid loss adjustment expense
     
    (P.9, Pt.3A, C.6)
     
    _____
    Unearned premium reserve
     
    (P.6, Pt.2, C.3)
     
    _____
     
    $_____
    Less: Uncollected premiums and bills
     
    receivable taken for premiums
     
    (P.2, L.8 + L.10 allocated
    *
     
    _____
    Prepaid expenses
     
    [IEE 6 + 11 + 1/212 (IEE 7 + 10)/2IEE 1] (P.7, Pt2B, C.2 + 4 + 5)
     
    _____
     
    _____
    Investable Funds
     
    $_____
     
    _____
    (d) Allocation of investment gains, unrealized capital gains or losses, net worth and assets.
    (1) The allocation of investment gains, unrealized capital gains or losses, net worth and assets to a line of insurance shall be in the proportion that the investable funds for the line bears to the investable funds for all lines, which ratio shall then be multiplied:
    - in the case of investment gain, by the total investment gain and other income (P.4, L.9A + L.17),
    - in the case of unrealized capital gains or losses, by the total unrealized capital gains or losses (P.4, L.23),
    - in the case of net worth, as calculated above under " net worth (or surplus to policyholders) computation," by the average net worth
    [Preceding Yr. + Current Yr./2] and,
    - in the case of assets, by the average total assets (P.2, L.22 + P.11), Total of amounts in Exh. 2, C.2 Other than L.23
    [Preceding Yr. + Current Yr./2]
    (2) The State portion shall be determined by applying to the total the ratio that the State's direct earned premiums for the line bears to the countrywide direct earned premiums for the line.
    (e) Industry-wide pre-tax earnings on investment.
    (1) In computing profitability on the basis of certain industry-wide experience, the following five-year experience shall be used in section 165.3 of this Part for the percentage of pre-tax investment gains and pre-tax unrealized capital gains or losses to premiums earned and this data shall be entered on lines 9(d) and 10(d) of the profit computation:
    TABLE I
    Line of insuranceInvestment gains (pretax)Unrealized capital gains or losses (pretax)
    As percent of premiums earned
    Fire7.0%−1.7%
    Allied lines5.7−1.4
    Homeowners multiple peril5.7−1.4
    Commercial multiple peril7.5−1.8
    Inland marine5.3−1.3
    Workmen's compensation12.0−2.9
    Liability other than auto (B.I.)19.0−4.6
    Liability other than auto (P.D.)12.5−3.0
    Auto no-fault and liability (B.I.)11.8* −2.6*
    Auto liability (P.D.)4.5−1.1
    Auto collision2.2−0.5
    Auto fire, theft and comprehensive2.5−0.6
    Aircraft (all perils)6.7−1.6
    Fidelity14.9−3.5
    Surety7.8−1.9
    Glass3.0−0.6
    Burglary and theft5.5−1.2
    Boiler and machinery9.1−2.1
    Credit3.4−1.0
    *
    The calculation of the premiums earned-to-asset ratio on auto no-fault and liability insurance was based on pre-no-fault experience. As no-fault experience becomes available, it is anticipated that this ratio will need to be changed significantly to properly reflect the experience.
    (2) These percentages have been obtained by averaging the investment gains and unrealized capital gains and losses of all companies over the five-year period 1969 through 1973, and allocating these amounts to each line of insurance in the same proportion that the investable funds in each line bears to the total investable funds for all lines. The amount allocated to each line was then divided by the premiums earned in that line.
    (3) The investable funds for each line from loss adjustment expense reserves and unearned premium reserves were derived from a representative sample of companies.
    (4) These assumptions, based on industry-wide experience, are in accordance with section 2323 of the Insurance Law, which calls for reasonable and uniform assumptions as to “(2) assets available for investment generated by such kinds of insurance” and “(4) average earnings on insurers' investments.” The combination of these assumptions produces the investment earning assumptions listed above.
    (f) Industry-wide premiums-to-surplus ratios.
    (1) In computing profitability on the basis of certain industry-wide experience, the following five-year premiums-to-surplus ratio experience shall be used in section 165.3 of this Part at line 15(b) of the profit computation:
    TABLE II
    Line of insurancePremiums earned- to-surplus ratio
    Fire
     
    		1.8
    Allied lines
     
    		2.2
    Homeowners multiple peril
     
    		2.2
    Commercial multiple peril
     
    		1.6
    Inland marine
     
    		2.3
    Workmen's compensation
     
    		1.0
    Liability other than auto (B.I.)
     
    		.6
    Liability other than auto (P.D.)
     
    		1.0
    Auto no-fault and liability (B.I.)
     
    		1.0*
    Auto liability (P.D.)
     
    		2.7
    Auto collision
     
    		5.5
    Auto fire, theft and comprehensive
     
    		4.9
    Aircraft (all perils)
     
    		1.8
    Fidelity
     
    		.8
    Surety
     
    		1.6
    Glass
     
    		4.5
    Burglary and theft
     
    		2.3
    Boiler and machinery
     
    		1.4
    Credit
     
    		3.7
    (2) These ratios were derived on the basis of the experience of all companies for the years 1969 through 1973 in accordance with the allocation method described in subdivision (d) of this section.
    (g) Industry-wide premiums-to-asset ratios.
    (1) In computing profitability on the basis of certain industry-wide experience, the following five-year premiums-to-asset ratio experience shall be used in section 165.3 of this Part at line 16(b) of the profit computation:
    TABLE III
    Line of insurancePremiums earned to asset ratio
    Fire
     
    		0.6
    Allied lines
     
    		0.7
    Homeowners multiple peril
     
    		0.8
    Commercial multiple peril
     
    		0.6
    Inland marine
     
    		0.8
    Workmen's compensation
     
    		0.4
    Liability other than auto (B.I.)
     
    		0.2
    Liability other than auto (P.D.)
     
    		0.3
    Auto no-fault and liability (B.I.)
     
    		0.4**
    Auto liability (P.D.)
     
    		1.0
    Auto collision
     
    		1.9
    Auto fire, theft and comprehensive
     
    		1.7
    Aircraft (all perils)
     
    		0.6
    Fidelity
     
    		0.3
    Surety
     
    		0.5
    Glass
     
    		1.5
    Burglary and theft
     
    		0.8
    Boiler and machinery
     
    		0.5
    Credit
     
    		1.3
    **
    The calculation of the premiums earned-to-asset ratio on auto non-fault and liability insurance was based no pre-no- fault experience. As no-fault experience becomes available, it is anticipated that this ratio will need to be changed significantly to properly reflect the experience.
    (2) These ratios were derived on the basis of the experience of all companies for the years 1969 through 1973 in accordance with the allocation method described in subdivision (d) of this section.
    (h) Annual updating of tables I, II and III. The percentages and ratios shown in tables I, II and III will be up-dated annually by the Department of Financial Services. Thus, for 1975 profit computations, the data in tables I, II and III will be based on the experience of the five-year period 1970 through 1974.

Notation

*
The calculation of the premiums earned-to-asset ratio on auto no-fault and liability insurance was based on pre-no-fault experience. As no-fault experience becomes available, it is anticipated that this ratio will need to be changed significantly to properly reflect the experience.
**
The calculation of the premiums earned-to-asset ratio on auto non-fault and liability insurance was based no pre-no- fault experience. As no-fault experience becomes available, it is anticipated that this ratio will need to be changed significantly to properly reflect the experience.
*
The annual statement does not contain by line data for uncollected premiums or bills receivable taken for premiums. The sum of the two amounts shall be distributed to lines of insurance in accordance with each line's percentage of total direct premiums earned.