Bill Text: NY S04329 | 2013-2014 | General Assembly | Amended
Bill Title: Relates to providing for increased efficiency for certain insurance regulations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2013-06-20 - SUBSTITUTED BY A7807A [S04329 Detail]
Download: New_York-2013-S04329-Amended.html
S T A T E O F N E W Y O R K ________________________________________________________________________ 4329--A 2013-2014 Regular Sessions I N S E N A T E March 21, 2013 ___________ Introduced by Sen. SEWARD -- (at request of the Department of Financial Services) -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said commit- tee AN ACT to amend the insurance law, in relation to enhancing regulatory efficiency and efficacy THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Subsection (a) of section 110 of the insurance law, as 2 added by chapter 687 of the laws of 2003, paragraph 1 as amended by 3 chapter 245 of the laws of 2004, is amended to read as follows: 4 (a) In order to assist in the performance of the superintendent's 5 duties under this chapter, the superintendent: 6 (1) may share documents, materials or other information, including 7 [the] confidential and privileged documents, materials or information 8 with other state, federal, and international regulatory agencies, with 9 the National Association of Insurance Commissioners, its affiliates or 10 subsidiaries, and with state, federal, and international law enforcement 11 authorities, INCLUDING MEMBERS OF ANY SUPERVISORY COLLEGE DESCRIBED IN 12 SECTION THREE HUNDRED TWO OF THIS CHAPTER, provided that the recipient 13 has the authority and agrees to maintain the confidentiality and privi- 14 leged status of the document, material or other information; provided, 15 however, that this paragraph shall not be construed as limiting access 16 to records pursuant to article six of the public officers law; 17 (2) may receive documents, materials or information, including other- 18 wise confidential and privileged documents, materials or information, 19 from the National Association of Insurance Commissioners, its affiliates 20 or subsidiaries and from regulatory and law enforcement officials of 21 other foreign or domestic jurisdictions, INCLUDING MEMBERS OF ANY SUPER- 22 VISORY COLLEGE DESCRIBED IN SECTION THREE HUNDRED TWO OF THIS CHAPTER, EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD09114-08-3 S. 4329--A 2 1 and shall maintain as confidential or privileged any document, material 2 or information received with notice or the understanding that it is 3 confidential or privileged under the laws of the jurisdiction that is 4 the source of the document, material or information; AND 5 (3) may enter into agreements governing sharing and use of documents, 6 materials or information consistent with this subsection. 7 S 2. The insurance law is amended by adding a new section 302 to read 8 as follows: 9 S 302. SUPERVISORY COLLEGES. (A) THE SUPERINTENDENT MAY PARTICIPATE IN 10 A SUPERVISORY COLLEGE IN ORDER TO DETERMINE COMPLIANCE WITH THIS CHAPTER 11 WITH RESPECT TO AN INSURER THAT IS REGISTERED UNDER ARTICLE FIFTEEN, 12 SIXTEEN, OR SEVENTEEN OF THIS CHAPTER AND HAS INTERNATIONAL OPERATIONS. 13 THE POWERS OF THE SUPERINTENDENT WITH RESPECT TO SUPERVISORY COLLEGES 14 INCLUDE: 15 (1) INITIATING THE ESTABLISHMENT OF A SUPERVISORY COLLEGE; 16 (2) CLARIFYING THE MEMBERSHIP AND PARTICIPATION OF OTHER SUPERVISORS 17 IN THE SUPERVISORY COLLEGE; 18 (3) CLARIFYING THE FUNCTIONS OF THE SUPERVISORY COLLEGE AND THE ROLE 19 OF OTHER REGULATORS, INCLUDING THE ESTABLISHMENT OF A GROUP-WIDE SUPER- 20 VISOR; 21 (4) COORDINATING THE ONGOING ACTIVITIES OF THE SUPERVISORY COLLEGE, 22 INCLUDING PLANNING MEETINGS, SUPERVISORY ACTIVITIES, AND PROCESSES FOR 23 INFORMATION SHARING; AND 24 (5) ESTABLISHING A CRISIS MANAGEMENT PLAN. 25 (B) EACH INSURER REGISTERED UNDER ARTICLE FIFTEEN, SIXTEEN, OR SEVEN- 26 TEEN OF THIS CHAPTER THAT IS SUBJECT TO A SUPERVISORY COLLEGE SHALL BE 27 LIABLE FOR AND SHALL PAY THE REASONABLE EXPENSES OF THE SUPERINTENDENT'S 28 PARTICIPATION IN A SUPERVISORY COLLEGE, INCLUDING REASONABLE TRAVEL 29 EXPENSES. A SUPERVISORY COLLEGE MAY BE CONVENED AS EITHER A TEMPORARY OR 30 PERMANENT FORUM FOR THE COMMUNICATION AND COOPERATION BETWEEN THE REGU- 31 LATORS CHARGED WITH THE SUPERVISION OF THE INSURER OR ITS PARENT, AFFIL- 32 IATES, OR SUBSIDIARIES. THE SUPERINTENDENT MAY ESTABLISH A REGULAR 33 ASSESSMENT TO THE INSURER FOR THE PAYMENT OF THESE EXPENSES. 34 (C) IN ORDER TO ASSESS THE BUSINESS STRATEGY, FINANCIAL POSITION, 35 LEGAL AND REGULATORY POSITION, RISK EXPOSURE, RISK MANAGEMENT AND GOVER- 36 NANCE PROCESSES, AND AS PART OF THE EXAMINATION OF INDIVIDUAL INSURERS, 37 THE SUPERINTENDENT MAY PARTICIPATE IN A SUPERVISORY COLLEGE WITH OTHER 38 REGULATORS CHARGED WITH SUPERVISION OF THE INSURER OR ITS PARENT, AFFIL- 39 IATES, OR SUBSIDIARIES, INCLUDING OTHER STATE, FEDERAL, AND INTERNA- 40 TIONAL REGULATORY AGENCIES. THE SUPERINTENDENT MAY ENTER INTO AGREEMENTS 41 PURSUANT TO SECTION ONE HUNDRED TEN OF THIS CHAPTER PROVIDING THE BASIS 42 FOR COOPERATION BETWEEN THE SUPERINTENDENT AND OTHER REGULATORY AGENCIES 43 AND FOR THE ACTIVITIES OF THE SUPERVISORY COLLEGE. NOTHING IN THIS 44 SECTION SHALL DELEGATE TO THE SUPERVISORY COLLEGE THE SUPERINTENDENT'S 45 AUTHORITY TO REGULATE OR SUPERVISE THE INSURER OR ITS PARENT, AFFIL- 46 IATES, OR SUBSIDIARIES WITHIN THE SUPERINTENDENT'S JURISDICTION. 47 S 3. Subsection (a) of section 1501 of the insurance law is amended by 48 adding a new paragraph 7 to read as follows: 49 (7) "ENTERPRISE RISK" MEANS ANY ACTIVITY, CIRCUMSTANCE, EVENT, OR 50 SERIES OF EVENTS INVOLVING THE HOLDING COMPANY SYSTEM THAT, IF NOT REME- 51 DIED PROMPTLY, IS LIKELY TO HAVE A MATERIAL ADVERSE EFFECT UPON THE 52 FINANCIAL CONDITION OR LIQUIDITY OF THE INSURER OR ITS HOLDING COMPANY 53 SYSTEM, INCLUDING ANYTHING THAT WOULD CAUSE THE INSURER'S RISK-BASED 54 CAPITAL TO FALL INTO COMPANY ACTION LEVEL AS SET FORTH IN SECTION ONE 55 THOUSAND THREE HUNDRED TWENTY-TWO OR ONE THOUSAND THREE HUNDRED TWENTY- 56 FOUR OF THIS CHAPTER, OR THAT WOULD CAUSE FURTHER TRANSACTION OF BUSI- S. 4329--A 3 1 NESS TO BE HAZARDOUS TO THE INSURER'S POLICYHOLDERS OR CREDITORS OR THE 2 PUBLIC. 3 S 4. Section 1503 of the insurance law is amended to read as follows: 4 S 1503. Registration. (a) Every person who becomes a controlled insur- 5 er shall, within thirty days thereafter register with the superintendent 6 and [such] SHALL AMEND THE registration [shall be amended] within thirty 7 days following any change in the identity of its holding company OR ANY 8 OTHER MATERIAL CHANGE TO THE INFORMATION PROVIDED IN THE REGISTRATION. 9 THE REGISTRATION SHALL BE IN SUCH FORM AND SHALL CONTAIN SUCH MATTERS AS 10 THE SUPERINTENDENT PRESCRIBES. The superintendent may grant reasonable 11 extensions of the time to register. 12 (b) [Every registrant shall furnish the superintendent with the 13 following information concerning its holding company: 14 (1) a copy of its charter or articles of incorporation and by-laws; 15 (2) the identities of its principal shareholders, officers, directors 16 and controlled persons; and 17 (3) information as to its capital structure and financial condition, 18 and a description of its principal business activities.] A HOLDING 19 COMPANY THAT DIRECTLY OR INDIRECTLY CONTROLS AN INSURER SHALL ADOPT A 20 FORMAL ENTERPRISE RISK MANAGEMENT FUNCTION AND SHALL FILE AN ENTERPRISE 21 RISK REPORT WITH THE SUPERINTENDENT BY APRIL THIRTIETH OF EACH YEAR. THE 22 REPORT SHALL, TO THE BEST OF THE HOLDING COMPANY'S KNOWLEDGE AND BELIEF, 23 IDENTIFY THE MATERIAL RISKS WITHIN THE HOLDING COMPANY SYSTEM THAT COULD 24 POSE ENTERPRISE RISK TO THE INSURER. 25 S 5. Section 1504 of the insurance law is amended to read as follows: 26 S 1504. Reporting; examination; publication. (a) (1) Every controlled 27 insurer shall file with the superintendent such reports or material as 28 [he] THE SUPERINTENDENT may direct for the purpose of disclosing infor- 29 mation concerning the operations of persons within the holding company 30 system [which] THAT may materially affect the operations, management or 31 financial condition of the insurer. 32 (2) TO DETERMINE COMPLIANCE WITH THIS ARTICLE, THE SUPERINTENDENT MAY 33 ORDER ANY CONTROLLED INSURER TO PRODUCE INFORMATION NOT IN THE INSURER'S 34 POSSESSION IF THE INSURER CAN OBTAIN ACCESS TO THE INFORMATION PURSUANT 35 TO CONTRACTUAL RELATIONSHIPS, STATUTORY OBLIGATIONS, OR OTHER METHOD. IN 36 THE EVENT THE INSURER CANNOT OBTAIN THE INFORMATION REQUESTED BY THE 37 SUPERINTENDENT, THE INSURER SHALL PROVIDE THE SUPERINTENDENT A DETAILED 38 EXPLANATION OF THE REASON THAT THE INSURER CANNOT OBTAIN THE INFORMATION 39 AND THE IDENTITY OF THE HOLDER OF INFORMATION. WHENEVER IT APPEARS TO 40 THE SUPERINTENDENT THAT THE DETAILED EXPLANATION IS WITHOUT MERIT, IN 41 ADDITION TO ANY OTHER PENALTY PROVIDED BY LAW, THE SUPERINTENDENT, AFTER 42 NOTICE AND AN OPPORTUNITY TO BE HEARD, MAY LEVY A PENALTY AGAINST THE 43 INSURER NOT TO EXCEED FIVE HUNDRED DOLLARS PER DAY FOR EACH DAY BEYOND 44 THE DATE SPECIFIED BY THE SUPERINTENDENT FOR RESPONSE. 45 (b) Every holding company and every controlled person within a holding 46 company system shall be subject to examination by order of the super- 47 intendent if [he] THE SUPERINTENDENT has cause to believe that the oper- 48 ations of such persons may materially affect the operations, management 49 or financial condition of any controlled insurer within the system, 50 INCLUDING BY POSING ENTERPRISE RISK TO THE INSURER, and that [he] THE 51 SUPERINTENDENT is unable to obtain relevant information from such 52 controlled insurer. The grounds relied upon by the superintendent for 53 such examination shall be stated in [his] THE SUPERINTENDENT'S order. 54 Such examination shall be confined to matters specified in the order. 55 The cost of such examination shall be assessed against the person exam- S. 4329--A 4 1 ined and no portion thereof shall thereafter be reimbursed to it direct- 2 ly or indirectly by the controlled insurer. 3 (c) The superintendent shall keep the contents of each report made 4 pursuant to this article and any information obtained in connection 5 therewith confidential and shall not make the same public without the 6 prior written consent of the controlled insurer to which it pertains 7 unless the superintendent after notice and an opportunity to be heard, 8 shall determine that the interests of policyholders, shareholders or the 9 public will be served by the publication thereof. In any action or 10 proceeding by the superintendent against the person examined or any 11 other person within the same holding company system a report of such 12 examination published by [him] THE SUPERINTENDENT shall be admissible as 13 evidence of the facts stated therein. 14 S 6. Subsection (d) of section 1505 of the insurance law is amended to 15 read as follows: 16 (d) The following transactions between a domestic controlled insurer 17 and any person in its holding company system may not be entered into 18 unless the insurer has notified the superintendent in writing of its 19 intention to enter into any such transaction at least thirty days prior 20 thereto, OR WITH REGARD TO REINSURANCE TREATIES OR AGREEMENTS AT LEAST 21 FORTY-FIVE DAYS PRIOR THERETO, or such shorter period as [he] THE SUPER- 22 INTENDENT may permit, and [he] THE SUPERINTENDENT has not disapproved it 23 within such period: 24 (1) sales, purchases, exchanges, loans or extensions of credit, or 25 investments[,] involving [more than one-half of one percent but] less 26 than five percent of the insurer's admitted assets at last year-end, 27 PROVIDED THE TRANSACTIONS ARE EQUAL TO OR EXCEED: 28 (A) THE LESSER OF THREE PERCENT OF THE INSURER'S ADMITTED ASSETS OR 29 TWENTY-FIVE PERCENT OF CAPITAL AND SURPLUS AT LAST YEAR-END, WITH REGARD 30 TO AN ACCIDENT AND HEALTH INSURANCE COMPANY OR A CORPORATION SUBJECT TO 31 ARTICLE FORTY-THREE OF THIS CHAPTER; 32 (B) THREE PERCENT OF THE INSURER'S ADMITTED ASSETS AT LAST YEAR-END, 33 WITH REGARD TO A LIFE INSURANCE COMPANY; OR 34 (C) THE LESSER OF THREE PERCENT OF THE INSURER'S ADMITTED ASSETS OR 35 TWENTY-FIVE PERCENT OF SURPLUS TO POLICYHOLDERS AT LAST YEAR-END, WITH 36 REGARD TO AN INSURER OTHER THAN AS SPECIFIED IN SUBPARAGRAPHS (A) AND 37 (B) OF THIS PARAGRAPH; 38 (2) reinsurance treaties or agreements; 39 (3) rendering of services on a regular or systematic basis; or 40 (4) any material transaction, specified by regulation, [which] THAT 41 the superintendent determines may adversely affect the interests of the 42 insurer's policyholders or shareholders. 43 Nothing herein contained shall be deemed to authorize or permit any 44 transaction [which] THAT, in the case of a non-controlled insurer, would 45 be otherwise contrary to law. 46 S 7. Subsection (a) of section 1506 of the insurance law is amended to 47 read as follows: 48 (a) No person, other than an authorized insurer, shall acquire control 49 of any domestic insurer, whether by purchase of its securities or other- 50 wise, unless: 51 (1) it gives twenty [days'] DAYS written notice to the insurer, or 52 such shorter period of notice as the superintendent permits, of its 53 intention to acquire control, PROVIDED THAT THE NOTICE SHALL INCLUDE AN 54 AGREEMENT BY THE PERSON SEEKING TO ACQUIRE CONTROL THAT THE PERSON WILL 55 PROVIDE THE ANNUAL REPORT SPECIFIED IN SECTION ONE THOUSAND FIVE HUNDRED 56 THREE OF THIS ARTICLE FOR SO LONG AS CONTROL EXISTS; and S. 4329--A 5 1 (2) it receives the superintendent's prior approval. 2 S 8. Section 1506 of the insurance law is amended by adding a new 3 subsection (f) to read as follows: 4 (F) ANY HOLDING COMPANY SEEKING TO DIVEST ITS CONTROLLING INTEREST IN 5 A DOMESTIC INSURER, IN ANY MANNER, SHALL FILE WITH THE SUPERINTENDENT, 6 WITH A COPY TO THE INSURER, NOTICE OF ITS PROPOSED DIVESTITURE AT LEAST 7 THIRTY DAYS PRIOR TO THE CESSATION OF CONTROL. 8 S 9. Section 1510 of the insurance law is amended by adding a new 9 subsection (d) to read as follows: 10 (D) WHENEVER IT APPEARS TO THE SUPERINTENDENT THAT ANY PERSON HAS 11 COMMITTED A VIOLATION OF SECTION ONE THOUSAND FIVE HUNDRED SIX OF THIS 12 ARTICLE THAT PREVENTS THE FULL UNDERSTANDING OF THE ENTERPRISE RISK 13 POSED TO THE INSURER BY THE HOLDING COMPANY SYSTEM, THE VIOLATION MAY 14 SERVE AS AN INDEPENDENT BASIS FOR DISAPPROVING DIVIDENDS OR DISTRIB- 15 UTIONS OR AS GROUNDS FOR REHABILITATION OR LIQUIDATION PURSUANT TO ARTI- 16 CLE SEVENTY-FOUR OF THIS CHAPTER. 17 S 10. Section 1603 of the insurance law is amended to read as follows: 18 S 1603. Notice of intent to acquire OR DIVEST. (a) [No acquisition of 19 a majority of any corporation's outstanding common shares shall be made 20 pursuant to this article] A DOMESTIC INSURER SHALL NOT ACQUIRE CONTROL 21 OF ANY OTHER DOMESTIC INSURER, WHETHER BY PURCHASE OF ITS SECURITIES OR 22 OTHERWISE, unless: 23 (1) a notice of intention of such proposed acquisition shall have been 24 filed with the superintendent not less than ninety days, or such shorter 25 period as may be permitted by the superintendent, in advance of such 26 proposed acquisition[, nor shall any such acquisition be made if the 27 superintendent at any time prior thereto finds]; AND 28 (2) THE INSURER RECEIVES THE SUPERINTENDENT'S PRIOR APPROVAL. 29 (B) THE SUPERINTENDENT SHALL DISAPPROVE SUCH ACQUISITION IF THE SUPER- 30 INTENDENT DETERMINES that the proposed acquisition is contrary to law or 31 determines that such proposed acquisition would be contrary to the best 32 interests of the parent insurer's policyholders or of the people of this 33 state. Only the following factors shall be considered in making the 34 foregoing determination: 35 (1) the availability of the funds or assets required for such acquisi- 36 tion; 37 (2) the fairness of any exchange of shares, assets, cash or other 38 consideration for the shares or assets to be received; 39 (3) the impact of the new operation on the parent insurer's surplus 40 and existing insurance business and the risks inherent in the parent 41 insurer's investment portfolio and operations; 42 (4) the fairness and adequacy of the financing proposed for the 43 subsidiary; 44 (5) the likelihood of undue concentration of economic power; 45 (6) whether the effect of the acquisition may be substantially to 46 lessen competition in any line of commerce in insurance or to tend to 47 create a monopoly therein; and 48 (7) whether the acquisition might result in an excessive proliferation 49 of subsidiaries [which] THAT would tend to unduly dilute management 50 effectiveness or weaken financial strength, or otherwise be contrary to 51 the best interests of the parent insurer's policyholders or of the 52 people of this state. 53 [(b)] (C) At any time after an acquisition the superintendent may 54 order its disposition if [he] THE SUPERINTENDENT finds, after notice and 55 an opportunity to be heard, that its continued retention is hazardous or 56 prejudicial to the interests of the parent insurer's policyholders. S. 4329--A 6 1 (D) ANY DOMESTIC INSURER SEEKING TO DIVEST ITS CONTROLLING INTEREST IN 2 ANOTHER DOMESTIC INSURER, IN ANY MANNER, SHALL FILE WITH THE SUPERINTEN- 3 DENT, WITH A COPY TO THE INSURER, NOTICE OF ITS PROPOSED DIVESTITURE AT 4 LEAST THIRTY DAYS PRIOR TO THE CESSATION OF CONTROL. 5 [(c)] (E) The contents of each notice of intention of a proposed 6 acquisition OR DIVESTITURE filed hereunder and information pertaining 7 thereto shall be kept confidential, shall not be subject to subpoena and 8 shall not be made public unless after notice and opportunity to be heard 9 the superintendent determines that the interests of policyholders, 10 shareholders or the public will be served by publication. 11 S 11. The insurance law is amended by adding a new section 1604 to 12 read as follows: 13 S 1604. REGISTRATION. (A) AN AUTHORIZED DOMESTIC INSURER SHALL REGIS- 14 TER WITH THE SUPERINTENDENT WITHIN THIRTY DAYS OF BECOMING SUBJECT TO 15 REGISTRATION AND SHALL AMEND THE REGISTRATION WITHIN THIRTY DAYS FOLLOW- 16 ING ANY MATERIAL CHANGE TO THE INFORMATION PROVIDED IN THE REGISTRATION. 17 THE REGISTRATION SHALL BE IN SUCH FORM AND SHALL CONTAIN SUCH MATTERS AS 18 THE SUPERINTENDENT PRESCRIBES. THE SUPERINTENDENT MAY GRANT REASONABLE 19 EXTENSIONS OF THE TIME TO REGISTER. 20 (B)(1) AN AUTHORIZED DOMESTIC INSURER, OTHER THAN A DOMESTIC INSURER 21 REQUIRED TO REGISTER AS A CONTROLLED INSURER PURSUANT TO SECTION ONE 22 THOUSAND FIVE HUNDRED THREE OF THIS CHAPTER, SHALL ADOPT A FORMAL ENTER- 23 PRISE RISK MANAGEMENT FUNCTION AND SHALL FILE AN ENTERPRISE RISK REPORT 24 WITH THE SUPERINTENDENT BY APRIL THIRTIETH OF EACH YEAR. THE REPORT 25 SHALL, TO THE BEST OF THE INSURER'S KNOWLEDGE AND BELIEF, IDENTIFY THE 26 MATERIAL RISKS WITHIN ANY SUBSIDIARY THAT COULD POSE ENTERPRISE RISK TO 27 THE INSURER. 28 (2) FOR THE PURPOSES OF THIS ARTICLE, "ENTERPRISE RISK" MEANS ANY 29 ACTIVITY, CIRCUMSTANCE, EVENT, OR SERIES OF EVENTS INVOLVING ONE OR MORE 30 SUBSIDIARIES OF AN INSURER THAT, IF NOT REMEDIED PROMPTLY, IS LIKELY TO 31 HAVE A MATERIAL ADVERSE EFFECT UPON THE FINANCIAL CONDITION OR LIQUIDITY 32 OF THE INSURER, INCLUDING ANYTHING THAT WOULD CAUSE THE INSURER'S RISK- 33 BASED CAPITAL TO FALL INTO COMPANY ACTION LEVEL AS SET FORTH IN SECTION 34 ONE THOUSAND THREE HUNDRED TWENTY-FOUR OF THIS CHAPTER, OR THAT WOULD 35 CAUSE FURTHER TRANSACTION OF BUSINESS TO BE HAZARDOUS TO THE INSURER'S 36 POLICYHOLDERS OR CREDITORS OR THE PUBLIC. 37 S 12. Section 1608 of the insurance law is amended by adding a new 38 subsection (e) to read as follows: 39 (E) THE FOLLOWING TRANSACTIONS BETWEEN A DOMESTIC INSURER AND ANY 40 SUBSIDIARY MAY NOT BE ENTERED INTO UNLESS THE INSURER HAS NOTIFIED THE 41 SUPERINTENDENT IN WRITING OF ITS INTENTION TO ENTER INTO ANY SUCH TRANS- 42 ACTION AT LEAST THIRTY DAYS PRIOR THERETO, OR WITH REGARD TO REINSURANCE 43 TREATIES OR AGREEMENTS AT LEAST FORTY-FIVE DAYS PRIOR THERETO, OR SUCH 44 SHORTER PERIOD AS THE SUPERINTENDENT MAY PERMIT, AND THE SUPERINTENDENT 45 HAS NOT DISAPPROVED IT WITHIN SUCH PERIOD: 46 (1) SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, OR 47 INVESTMENTS WITH A SUBSIDY, PROVIDED THE TRANSACTIONS ARE EQUAL TO OR 48 EXCEED THE LESSER OF THREE PERCENT OF THE INSURER'S ADMITTED ASSETS OR 49 TWENTY-FIVE PERCENT OF SURPLUS TO POLICYHOLDERS AT LAST YEAR-END; 50 (2) LOANS OR EXTENSIONS OF CREDIT TO ANY PERSON WHO IS NOT A SUBSID- 51 IARY, WHERE THE INSURER MAKES LOANS OR EXTENSIONS OF CREDIT WITH THE 52 AGREEMENT OR UNDERSTANDING THAT THE PROCEEDS OF SUCH TRANSACTIONS, IN 53 WHOLE OR IN SUBSTANTIAL PART, ARE TO BE USED TO MAKE LOANS OR EXTENSIONS 54 OF CREDIT TO, PURCHASE ASSETS OF, OR MAKE INVESTMENTS IN, ANY SUBSIDIARY 55 OF THE INSURER MAKING THE LOANS OR EXTENSIONS OF CREDIT, PROVIDED THE 56 TRANSACTIONS ARE EQUAL TO OR EXCEED THE LESSER OF THREE PERCENT OF THE S. 4329--A 7 1 INSURER'S ADMITTED ASSETS OR TWENTY-FIVE PERCENT OF SURPLUS TO POLICY- 2 HOLDERS AT LAST YEAR-END; 3 (3) REINSURANCE TREATIES OR AGREEMENTS WITH A SUBSIDIARY THAT THE 4 INSURER HAS NOT OTHERWISE SUBMITTED TO THE SUPERINTENDENT, PROVIDED, 5 HOWEVER, THE INSURER NEED NOT SUBMIT A COPY OF A REINSURANCE AGREEMENT 6 UNLESS REQUESTED BY THE SUPERINTENDENT WHERE THE REINSURANCE PREMIUM OR 7 A CHANGE IN THE INSURER'S LIABILITIES, OR THE PROJECTED REINSURANCE 8 PREMIUM OR A CHANGE IN THE INSURER'S LIABILITIES IN ANY OF THE NEXT 9 THREE YEARS, IS LESS THAN FIVE PERCENT OF THE INSURER'S SURPLUS TO POLI- 10 CYHOLDERS AT LAST YEAR-END. THIS SHALL INCLUDE AGREEMENTS THAT MAY 11 REQUIRE, AS CONSIDERATION, THE TRANSFER OF ASSETS FROM AN INSURER TO A 12 NON-SUBSIDIARY, IF AN AGREEMENT OR UNDERSTANDING EXISTS BETWEEN THE 13 INSURER AND NON-SUBSIDIARY THAT ANY PORTION OF THE ASSETS WILL BE TRANS- 14 FERRED TO ONE OR MORE SUBSIDIARIES OF THE INSURER; AND 15 (4) MANAGEMENT AGREEMENTS, SERVICE CONTRACTS, TAX ALLOCATION AGREE- 16 MENTS, GUARANTEES, AND ALL COST-SHARING ARRANGEMENTS. 17 S 13. Section 1702 of the insurance law, as amended by chapter 526 of 18 the laws of 1987, is amended to read as follows: 19 S 1702. Meaning of "subsidiary" [and], "parent corporation" AND 20 "ENTERPRISE RISK"; certain types of subsidiaries defined. As used in 21 this article[, "subsidiary" (i)]: (A) "SUBSIDIARY" means subsidiaries of 22 the types described in subsection (b) of section one thousand seven 23 hundred four of this article and subsidiaries acquired or held under 24 this article, section one thousand four hundred five or section four 25 thousand two hundred forty of this chapter, but [(ii) does] SHALL not 26 include a subsidiary acquired or held under section one thousand four 27 hundred four of this chapter or a subsidiary acquired or held by an 28 insurer authorized to make investments by subsection (c) of section one 29 thousand four hundred three of this chapter[; and "parent corporation"]. 30 (B) "PARENT CORPORATION" means a parent corporation of a type 31 described in subsection (a), (b) or (c) of section one thousand seven 32 hundred one of this article[; "holding company operating subsidiary"]. 33 (C) "HOLDING COMPANY OPERATING SUBSIDIARY" means a subsidiary (other 34 than a separate account subsidiary) engaged or organized to engage in 35 either or both of the following activities [(i)](1) the ownership and 36 management of other subsidiaries, and [(ii)](2) the raising of capital 37 (debt or equity) [which] THAT could be loaned to, or invested in, other 38 subsidiaries or loaned to the parent corporation, provided that any such 39 subsidiary may in addition engage in the ownership and management of 40 assets authorized as investments for the parent corporation[; "invest- 41 ment subsidiary"]. 42 (D) "INVESTMENT SUBSIDIARY" means a subsidiary (other than a separate 43 account subsidiary) engaged or organized to engage exclusively in the 44 ownership and management of assets (other than equity securities of 45 subsidiaries) authorized as investments for the parent corporation and 46 of other investment subsidiaries[; and "separate account subsidiary"]. 47 (E) "SEPARATE ACCOUNT SUBSIDIARY" means a subsidiary acquired or held 48 under section four thousand two hundred forty of this chapter. 49 (F) "ENTERPRISE RISK" MEANS ANY ACTIVITY, CIRCUMSTANCE, EVENT, OR 50 SERIES OF EVENTS INVOLVING ONE OR MORE SUBSIDIARIES OF A PARENT CORPO- 51 RATION THAT, IF NOT REMEDIED PROMPTLY, IS LIKELY TO HAVE A MATERIAL 52 ADVERSE EFFECT UPON THE FINANCIAL CONDITION OR LIQUIDITY OF THE PARENT 53 CORPORATION, INCLUDING ANYTHING THAT WOULD CAUSE THE PARENT CORPO- 54 RATION'S RISK-BASED CAPITAL TO FALL INTO COMPANY ACTION LEVEL AS SET 55 FORTH IN SECTION ONE THOUSAND THREE HUNDRED TWENTY-TWO OF THIS CHAPTER, S. 4329--A 8 1 OR THAT WOULD CAUSE FURTHER TRANSACTION OF BUSINESS TO BE HAZARDOUS TO 2 THE INSURER'S POLICYHOLDERS OR CREDITORS OR THE PUBLIC. 3 S 14. Section 1710 of the insurance law, as amended by chapter 805 of 4 the laws of 1984, is amended to read as follows: 5 S 1710. [Superintendent's] DIVESTITURE OF CONTROL; SUPERINTENDENT'S 6 power to order disposition of subsidiaries. 7 (A) ANY PARENT CORPORATION SEEKING TO DIVEST ITS CONTROLLING INTEREST 8 IN A DOMESTIC INSURER, IN ANY MANNER, SHALL FILE WITH THE SUPERINTEN- 9 DENT, WITH A COPY TO THE INSURER, NOTICE OF ITS PROPOSED DIVESTITURE AT 10 LEAST THIRTY DAYS PRIOR TO THE CESSATION OF CONTROL. 11 (B) In addition to the powers granted to the superintendent elsewhere 12 in this chapter (including, without limitation, [sections] SECTION one 13 hundred nine [and three hundred twenty-seven] of this chapter AND 14 SECTION THREE HUNDRED NINE OF THE FINANCIAL SERVICES LAW), the super- 15 intendent may, at any time, order a parent corporation to dispose of any 16 subsidiary, if the superintendent finds, after notice and an opportunity 17 to be heard, either: 18 [(i)](1) that its acquisition or continued retention is or was not 19 permitted by the provisions of this article; or 20 [(ii)](2) except in the case of a subsidiary then exempted by the 21 provisions of subsection (a) or (b) of section one thousand seven 22 hundred four of this article, that its continued retention is materially 23 adverse to the interests of the parent corporation's policyholders or 24 subscribers. 25 S 15. Section 1712 of the insurance law is amended to read as follows: 26 S 1712. Relationships and transactions between parent corporation and 27 subsidiary. (A) The business operations, corporate proceedings and 28 fiscal and accounting records of subsidiaries shall be conducted or 29 maintained so as to assure the separate legal and operating identities 30 of the parent corporation and subsidiary, but nothing herein shall 31 preclude arrangements for common management or the cooperative or joint 32 use of personnel, property, or services, otherwise consistent with this 33 chapter. All transactions between the parent corporation and its subsid- 34 iaries shall be fair and equitable, charges or fees for services 35 performed shall be reasonable and all expenses incurred and payments 36 received shall be allocated to the parent corporation on an equitable 37 basis in conformity with customary insurance accounting practices 38 consistently applied. The books, accounts and records of each party to 39 all such transactions shall be so maintained as to disclose clearly and 40 accurately the nature and details of the transactions, including such 41 accounting information as is necessary to support the reasonableness of 42 the charges or fees to the respective parties. 43 (B) THE FOLLOWING TRANSACTIONS BETWEEN A PARENT CORPORATION AND ANY 44 SUBSIDIARY MAY NOT BE ENTERED INTO UNLESS THE PARENT CORPORATION HAS 45 NOTIFIED THE SUPERINTENDENT IN WRITING OF ITS INTENTION TO ENTER INTO 46 ANY SUCH TRANSACTION AT LEAST THIRTY DAYS PRIOR THERETO, OR WITH REGARD 47 TO REINSURANCE TREATIES OR AGREEMENTS AT LEAST FORTY-FIVE DAYS PRIOR 48 THERETO, OR SUCH SHORTER PERIOD AS THE SUPERINTENDENT MAY PERMIT, AND 49 THE SUPERINTENDENT HAS NOT DISAPPROVED IT WITHIN SUCH PERIOD: 50 (1) SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, OR 51 INVESTMENTS WITH A SUBSIDY, PROVIDED THE TRANSACTIONS ARE EQUAL TO OR 52 EXCEED: 53 (A) THREE PERCENT OF THE PARENT CORPORATION'S ADMITTED ASSETS AT LAST 54 YEAR-END, WITH REGARD TO A DOMESTIC LIFE INSURANCE COMPANY; OR 55 (B) THE LESSER OF THREE PERCENT OF THE PARENT CORPORATION'S ADMITTED 56 ASSETS OR TWENTY-FIVE PERCENT OF CAPITAL AND SURPLUS AT LAST YEAR-END, S. 4329--A 9 1 WITH REGARD TO A DOMESTIC CORPORATION SUBJECT TO ARTICLE FORTY-THREE OF 2 THIS CHAPTER; OR 3 (2) LOANS OR EXTENSIONS OF CREDIT TO ANY PERSON WHO IS NOT A SUBSID- 4 IARY, WHERE THE PARENT CORPORATION MAKES LOANS OR EXTENSIONS OF CREDIT 5 WITH THE AGREEMENT OR UNDERSTANDING THAT THE PROCEEDS OF SUCH TRANS- 6 ACTIONS, IN WHOLE OR IN SUBSTANTIAL PART, ARE TO BE USED TO MAKE LOANS 7 OR EXTENSIONS OF CREDIT TO, PURCHASE ASSETS OF, OR MAKE INVESTMENTS IN, 8 ANY SUBSIDIARY OF THE PARENT CORPORATION MAKING THE LOANS OR EXTENSIONS 9 OF CREDIT, PROVIDED THE TRANSACTIONS ARE EQUAL TO OR EXCEED: 10 (A) THREE PERCENT OF THE PARENT CORPORATION'S ADMITTED ASSETS AT LAST 11 YEAR-END, WITH REGARD TO A DOMESTIC LIFE INSURANCE COMPANY; OR 12 (B) THE LESSER OF THREE PERCENT OF THE PARENT CORPORATION'S ADMITTED 13 ASSETS OR TWENTY-FIVE PERCENT OF CAPITAL AND SURPLUS AT LAST YEAR-END, 14 WITH REGARD TO A DOMESTIC CORPORATION SUBJECT TO ARTICLE FORTY-THREE OF 15 THIS CHAPTER; OR 16 (3) REINSURANCE TREATIES OR AGREEMENTS WITH A SUBSIDIARY THAT THE 17 PARENT CORPORATION HAS NOT OTHERWISE SUBMITTED TO THE SUPERINTENDENT. 18 THIS SHALL INCLUDE AGREEMENTS THAT MAY REQUIRE, AS CONSIDERATION, THE 19 TRANSFER OF ASSETS FROM A PARENT CORPORATION TO A NON-SUBSIDIARY, IF AN 20 AGREEMENT OR UNDERSTANDING EXISTS BETWEEN THE PARENT CORPORATION AND 21 NON-SUBSIDIARY THAT ANY PORTION OF THE ASSETS WILL BE TRANSFERRED TO ONE 22 OR MORE SUBSIDIARIES OF THE PARENT CORPORATION; AND 23 (4) MANAGEMENT AGREEMENTS, SERVICE CONTRACTS, TAX ALLOCATION AGREE- 24 MENTS, GUARANTEES, AND ALL COST-SHARING ARRANGEMENTS. 25 S 16. The insurance law is amended by adding a new section 1717 to 26 read as follows: 27 S 1717. REGISTRATION. (A) A PARENT CORPORATION SHALL REGISTER WITH THE 28 SUPERINTENDENT WITHIN THIRTY DAYS OF BECOMING SUBJECT TO REGISTRATION 29 AND SHALL AMEND THE REGISTRATION WITHIN THIRTY DAYS FOLLOWING ANY MATE- 30 RIAL CHANGE TO THE INFORMATION PROVIDED IN THE REGISTRATION. THE REGIS- 31 TRATION SHALL BE IN SUCH FORM AND SHALL CONTAIN SUCH MATTERS AS THE 32 SUPERINTENDENT PRESCRIBES. THE SUPERINTENDENT MAY GRANT REASONABLE 33 EXTENSIONS OF THE TIME TO REGISTER. 34 (B) A PARENT CORPORATION, OTHER THAN A PARENT CORPORATION REQUIRED TO 35 REGISTER AS A CONTROLLED INSURER PURSUANT TO SECTION ONE THOUSAND FIVE 36 HUNDRED THREE OF THIS CHAPTER, SHALL ADOPT A FORMAL ENTERPRISE RISK 37 MANAGEMENT FUNCTION AND SHALL FILE AN ENTERPRISE RISK REPORT WITH THE 38 SUPERINTENDENT BY APRIL THIRTIETH OF EACH YEAR. THE REPORT SHALL, TO THE 39 BEST OF THE PARENT CORPORATION'S KNOWLEDGE AND BELIEF, IDENTIFY THE 40 MATERIAL RISKS WITHIN ANY SUBSIDIARY THAT COULD POSE ENTERPRISE RISK TO 41 THE PARENT CORPORATION. 42 S 17. Subsection (d) of section 1110 of the insurance law, as amended 43 by chapter 431 of the laws of 2000, is amended to read as follows: 44 (d) No such corporation or association shall make or issue in this 45 state any annuity contract before obtaining a permit issued in accord- 46 ance with the provisions of this section except that if its requisite 47 reserve on its outstanding annuity agreements computed in accordance 48 with section four thousand two hundred seventeen of this chapter does 49 not exceed the amount of [five hundred thousand] ONE MILLION dollars, it 50 may make gift annuity agreements in this state and shall be exempted 51 from securing a permit provided it maintains the reserve required by 52 section four thousand two hundred seventeen of this chapter and a 53 surplus of at least twenty-five per centum of such reserve. If the 54 superintendent finds, after notice and hearing, that any such corpo- 55 ration or association, having such a permit, has failed to comply with 56 the requirements of this section, [he] THE SUPERINTENDENT may revoke or S. 4329--A 10 1 suspend such permit or order it to cease making new annuity contracts 2 until it complies. The superintendent may, in [his] THE SUPERINTENDENT'S 3 discretion, either dispense with the requirement of annual statements by 4 such corporations or associations or accept a sworn statement by two or 5 more of its principal officers, in such form as will satisfy the super- 6 intendent that the requirements of this section are being complied with. 7 S 18. Section 1110 of the insurance law is amended by adding a new 8 subsection (f) to read as follows: 9 (F) THE SUPERINTENDENT MAY, IN THE SUPERINTENDENT'S DISCRETION, EXAM- 10 INE ANY SUCH CORPORATION OR ASSOCIATION THAT IS EXEMPT FROM OBTAINING A 11 PERMIT PURSUANT TO SUBSECTION (D) OF THIS SECTION. 12 S 19. Paragraph 1 of subsection (a) of section 307 of the insurance 13 law is amended to read as follows: 14 (1) Every insurer and every fraternal benefit society [which] THAT is 15 authorized to do an insurance business in this state, and every pension 16 fund, retirement system or state fund [which] THAT is required, by any 17 law of this state, to report to the superintendent or is subject to 18 [his] THE SUPERINTENDENT'S examination, shall file in the office of the 19 superintendent, annually on or before the first day of March, a state- 20 ment, to be known as its annual statement, executed in duplicate, veri- 21 fied by the oath of at least two of its principal officers, showing its 22 condition at last year-end or, in the case of a pension fund or retire- 23 ment system, on such date in the year next preceding as the superinten- 24 dent may approve. Such statement shall be in such form and shall contain 25 such matters as the superintendent shall prescribe. THE SUPERINTENDENT 26 MAY ACCEPT AN ELECTRONIC FILING OF A FOREIGN INSURER'S ANNUAL STATEMENT 27 THAT DOES NOT CONTAIN THE SIGNATURES OR VERIFICATION OF THE OFFICERS 28 PROVIDED THAT THE FOREIGN INSURER HAS FILED, IN ITS STATE OF DOMICILE, 29 AN ANNUAL STATEMENT VERIFIED BY THE OATH OF AT LEAST TWO OF ITS PRINCI- 30 PAL OFFICERS. IN SUCH A SITUATION, THE OFFICERS OF THE FOREIGN INSURER 31 SHALL BE DEEMED TO HAVE GIVEN THEIR OATH IN THIS STATE. 32 S 20. Subsection (b) of section 7428 of the insurance law is amended 33 to read as follows: 34 (b) If the amount of any such REAL OR PERSONAL PROPERTY OWNED BY, OR 35 debt or claim owed by or to, such insurer does not exceed twenty-five 36 [hundred] THOUSAND dollars, THEN the superintendent may SELL OR DISPOSE 37 OF ALL OR ANY PART OF THE REAL OR PERSONAL PROPERTY, OR compromise or 38 compound the [same] DEBT OR CLAIM, upon such terms as [he] THE SUPER- 39 INTENDENT may deem for the best interests of such insurer without 40 obtaining the approval of the court. 41 S 21. Subsection (g) of section 7602 of the insurance law, as amended 42 by chapter 578 of the laws of 1990, is amended to read as follows: 43 (g) "Allowed claim" means a claim [which] THAT has been allowed by the 44 [court] SUPERINTENDENT in a proceeding under article seventy-four of 45 this chapter OR, IF SUCH CLAIM EXCEEDS TWENTY-FIVE THOUSAND DOLLARS, HAS 46 BEEN ALLOWED BY THE COURT IN A PROCEEDING UNDER ARTICLE SEVENTY-FOUR OF 47 THIS CHAPTER, and which is based upon: 48 (1) a policy insuring property or risks located or resident in this 49 state, or 50 (2) a policy issued in this state to a resident of this state insuring 51 property or risks, located or resident outside this state but within the 52 United States, its possessions and territories, and Canada, provided 53 that, with respect to policies covered under this paragraph: 54 (A) irrespective of the amount of claim [which] THAT has been allowed, 55 no person shall recover any amount from this fund until such person has 56 exhausted all rights of recovery from any security fund, guaranty asso- S. 4329--A 11 1 ciation, or the equivalent in the jurisdiction where such property or 2 risks are located or resident; and, thereafter, such person's recovery 3 from this fund, when combined with amounts recovered or recoverable from 4 any other security fund, guaranty association, or the equivalent in such 5 jurisdiction, shall not exceed the maximum limit available to a quali- 6 fied claimant for a recovery solely from such other security fund, guar- 7 anty association, or the equivalent; and 8 (B) the aggregate limit for all claims arising out of any one policy, 9 excluding claims with respect to property or risks located or resident 10 in this state, shall not exceed the lesser of the aggregate limit of the 11 policy or five million dollars. 12 S 22. This act shall take effect immediately, except that: 13 (1) sections four, eleven, and sixteen of this act shall take effect 14 on the ninetieth day after this act shall have become a law; and 15 (2) the amendments to subsection (d) of section 1505 of the insurance 16 law made by section six of this act, the amendments to section 1608 of 17 the insurance law made by section twelve of this act and the amendments 18 to section 1712 of the insurance law made by section fifteen of this act 19 shall apply only to transactions entered into on or after the effective 20 date of this act.