Reserves for loss adjustment expenses.

(a) Loss adjustment expense reserves shall be calculated with the following standards:

(1) Insurance companies are not permitted to discount loss adjustment expense reserves which are not applicable to specific claims.

(2) Insurance companies are permitted to discount loss adjustment expense reserves which are allocable to specific claims if they can demonstrate, to the satisfaction of the Commissioner, the validity of their assumptions underlying the calculation of the reserves. The insurance company shall provide an actuarial statement of opinion which includes the opinion of the actuary with respect to the criteria in § 116.5 (relating to actuarial statement of opinion).

(b) In evaluating an insurance company’s request to discount allocated loss adjustment expense reserves, the Commissioner will consider the company’s specific loss adjustment expense pattern and the interest rate assumption.