senate Bill S4951

Authorizes the superintendent of insurance to suspend the risk to capital requirement for writing new mortgage guaranty insurance risks

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Sponsor

Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 02 / May / 2011
    • REFERRED TO INSURANCE
  • 01 / Jun / 2011
    • 1ST REPORT CAL.898
  • 02 / Jun / 2011
    • 2ND REPORT CAL.
  • 06 / Jun / 2011
    • ADVANCED TO THIRD READING
  • 13 / Jun / 2011
    • PASSED SENATE
  • 13 / Jun / 2011
    • DELIVERED TO ASSEMBLY
  • 13 / Jun / 2011
    • REFERRED TO INSURANCE
  • 04 / Jan / 2012
    • DIED IN ASSEMBLY
  • 04 / Jan / 2012
    • RETURNED TO SENATE
  • 04 / Jan / 2012
    • REFERRED TO INSURANCE

Summary

Grants the superintendent of insurance the power to suspend the requirement of a mortgage guaranty insurer to maintain a minimum policyholder surplus in relation to its outstanding risk in order for the insurer to write a new business.

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Bill Details

See Assembly Version of this Bill:
A3790
Versions:
S4951
Legislative Cycle:
2011-2012
Current Committee:
Senate Insurance
Law Section:
Insurance Law
Laws Affected:
Amd §6502, Ins L
Versions Introduced in 2009-2010 Legislative Cycle:
S6270A, A10712

Sponsor Memo

BILL NUMBER:S4951

TITLE OF BILL:
An act
to amend the insurance law, in relation to mortgage guaranty insurance
and reinsurance and policyholders' surplus

PURPOSE:
To update the Insurance Law to more accurately reflect current
mortgage guaranty insurance industry circumstances and practices, and
to authorize the superintendent of Insurance to suspend the risk to
capital requirement for writing new mortgage guaranty insurance risks.

SUMMARY OF PROVISIONS:
Section 1 of the bill amends paragraph (1) of subsection (b) of
section 6502 of the insurance law to grant the superintendent of
Insurance the power to suspend the requirement for a mortgage
guaranty insurer to maintain a minimum policyholder surplus in
relation to its outstanding risk in order for the insurer to write
new business. The temporary suspension is limited to two years per
each exemption authorized. pursuant to the bill, consecutive waivers
are permitted for mortgage insurers whose policyholder surplus does
not exceed the 25 to 1 liability ratio after the initial waiver
period, but such waivers may not exceed a total of four years.

Section 2 of the bill provides, for an immediate effective date.

JUSTIFICATION:
Mortgage guaranty insurance companies are·proscribed from writing
business when the ratio of their total policy liability to their
policyholder's surplus exceeds a ratio of 25 to 1. This standard was
developed in the 1960s when the modern mortgage guaranty insurance
industry was in its early stages and no risk-to-capital ratio
requirement existed. Given, the nascent state of the industry, the 25
to 1 rule was reasonable, but by its very nature was inflexible and
not reflective of changing or special circumstances. In particular, a
mortgage guaranty insurer is likely to reach the 25 to 1 standard in
the midst of a high claims paying cycle (as the industry is currently
experiencing), but may have more than enough capital to pay expected
claims on its insurance in force. If mortgage guaranty insurers are
compelled to cease writing new business as Section 6502 currently
dictates, the ability of those insurers to remain viable commercial
entities, and to
write insurance after the end of this high claims-paying cycle, will
be impaired.

Under the amendment to Section 6502 (b) (1), the Superintendent is
authorized to evaluate whether the risk to capital requirement should
he suspended for a particular insurer and to determine the period of
time and conditions under which the suspension of that requirement
will apply. Permitting a mortgage guaranty insurer to operate above
the 25 to 1 requirement for a limited period would allow the insurer
to increase its capital base for paying claims and insuring loans in
the future.
Furthermore, if mortgage guaranty insurers are required to cease
writing new business as triggered by the current risk to capital


requirement, fewer loans will be insured in New York, further fueling
pressures on the availability of mortgage finance credit. As a
consequence, the housing recovery in New York (and elsewhere) .ill
likely be impeded, with a concomitant adverse impact on the state's
economic recovery.

LEGISLATIVE HISTORY:
S.6270A of 2009-10

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediate.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  4951

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               May 2, 2011
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

AN ACT to amend the insurance law,  in  relation  to  mortgage  guaranty
  insurance and reinsurance and policyholders' surplus

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Paragraph 1 of subsection (b) of section 6502 of the insur-
ance law, as amended by chapter 517 of the laws of 1989, is  amended  to
read as follows:
  (1)  EXCEPT AS MAY BE OTHERWISE PERMITTED BY THE SUPERINTENDENT UPON A
FINDING THAT IT WOULD NOT BE PREJUDICIAL TO THE INTERESTS OF THE  PEOPLE
OF  THIS  STATE,  have outstanding a total liability under its aggregate
insurance  policies  exceeding  twenty-five  times  its   policyholders'
surplus,  computed  on  the  basis  of the company's liability under its
election as provided in subsection (c)  of  section  six  thousand  five
hundred  three  of this article. Total liability shall be calculated net
of applicable reinsurance. [No] SUBJECT TO SUCH EXCEPTION  PERMITTED  BY
THE  SUPERINTENDENT,  NO  company  which has outstanding total liability
exceeding twenty-five times its policyholders'  surplus  shall  transact
new  business  until  its  total liability no longer exceeds twenty-five
times its policyholders' surplus. THE TERM OF EACH  EXCEPTION  PERMITTED
BY  THE SUPERINTENDENT FOR A MORTGAGE INSURER SHALL NOT EXCEED TWO YEARS
AND CONSECUTIVE EXCEPTIONS PERMITTED FOR A MORTGAGE INSURER  WITHOUT  AN
INTERVENING  ONE-YEAR  PERIOD  OF COMPLIANCE WITH THE LIABILITY LIMIT IN
THIS SUBSECTION SHALL NOT EXCEED A TOTAL OF FOUR YEARS;
  S 2. This act shall take effect immediately.


 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05246-01-1

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