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