Section 116.4. Restrictions on discounting loss reserves

The discounting of workers’ compensation loss reserves is subject to the following limitations:

(1) The loss reserves on the insurance company’s annual statement calculated under this section may not be less than those required in section 313 of The Insurance Department Act of 1921 (40 P. S. § 112).

(2) Unless otherwise permitted by paragraphs (3) and (4), an insurance company is not permitted to assume an interest rate greater than the current yield to maturity on a United States Treasury debt instrument with maturities consistent with the expected payout of the liabilities.

(3) An insurance company may request an exception to the maximum interest rate in paragraph (2) if the insurance company can demonstrate to the satisfaction of the Commissioner that its investment yield justifies a higher interest rate assumption. The Commissioner may require the insurance company to submit additional documentation to support its request for approval of a higher interest rate assumption. The Commissioner will act upon requests for exceptions made under this paragraph within 90 days of the date the request is received by the Department.

(4) Insurers having used the previous allowed maximum discount of 6% may continue to use the discount factors previously allowed for accident years 2001 and prior, pertaining to policies issued on or prior to August 11, 2001, as long as they continue to demonstrate that they hold sufficient assets to support the 6% interest rate assumption.

The provisions of this § 116.4 amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4423. Immediately preceding text appears at serial page (254695).

Notation

Authority

The provisions of this § 116.4 amended under The Insurance Company Law of 1921 (40 P. S. § § 341—999); The Insurance Department Act of 1921 (40 P. S. § § 1—321); and sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. § § 66, 186, 411 and 412).