NY State Senate Bill 2013-S6972

Archive: Last Bill Status - In Senate Committee Insurance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Apr 09, 2014	referred to insurance

2013-S6972 (ACTIVE) - Details

Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§7702, 7703, 7705, 7708, 7709, 7712, 1108 & 7503, add §7719, Ins L

2013-S6972 (ACTIVE) - Summary

Relates to the life insurance company guaranty corporation of New York.

2013-S6972 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S6972

TITLE OF BILL:  An act to amend the insurance law, in relation to the
life insurance company guaranty corporation of New York

Purpose:

The purpose of this bill is to amend the Insurance Law in order to
eliminate the cap on assessments that may be imposed against member
insurers of the Life Insurance Company Guaranty Corporation of New
York (the "Corporation") and make other changes pertaining to the
Corporation.

Summary of Provisions:

Section 1 of the bill would amend Insurance Law § 7702 to provide that
the purpose of Insurance Law Article 77 is to protect all policy
owners, and not just resident policy owners, against failure in the
performance of contractual obligations due to the impairment or
insolvency of an insurer.

Section 2 would amend Insurance Law § 7703(a) to apply Insurance Law
Article 77 to direct life insurance policies, health insurance
policies, annuity contracts, funding agreements, and supplemental
contracts issued by a life insurer licensed to transact life or health
insurance or annuities in New York at the time such agreement was

issued or on the date of entry of a court order of liquidation or
rehabilitation with respect to such a company that is an impaired or
insolvent insurer, as the case may be.

Section 2 also would amend Insurance Law § 7703(a) to state that
except as otherwise provided in § 7703, Article 77 applies to the
policies, contracts, and funding agreements specified in § 7703(a)(1)
with regard to a person who is: (1) an owner or certificate holder
under a policy, contract, or funding agreement and who is (i) a
resident, or (ii) is not a resident, but only under certain specified
conditions; or (2) the beneficiary, assignee, or payee of the
foregoing person, regardless of where the person resides. Section 2
would add a new Insurance Law § 7703(c) to provide that Article 77
will not apply to a person: (1) who is a payee, or the beneficiary of
a payee if the payee is deceased, of an owner resident if the payee
(or beneficiary) is afforded any coverage by a guaranty entity of
another state; or (2) covered under § 7703(a)(3)(A) if the guaranty
entity of another state provides any coverage to the person.

Section 3 would amend Insurance Law § 7705 to amend the certain
definitions of and add a definition of "supplemental contract."

Section 4 would amend Insurance Law § 7708(a) and (b) to make
technical changes.

Section 5 would amend Insurance Law § 7708(h) to make technical
changes and to permit the Corporation to fund a resolution facility
established pursuant to new Insurance Law § 7719.

Section 6 would amend Insurance Law § 7709(e) (1) to eliminate the cap
on assessments that may be imposed against member insurers.


Section 7 would amend Insurance Law § 7712(b) to make technical
changes and would add a new § 7712(c) to provide that a tax credit is
not authorized for any member insurer in respect of the assessments
paid in connection with the rehabilitation or liquidation of a
domestic member insurer subject to an order of rehabilitation or
liquidation under Insurance Law Article 74 entered on or after April
1, 2013.

Section 8 would add a new Insurance Law § 7719 to permit the
Corporation to incorporate a resolution facility in connection with
the liquidation of an insolvent domestic life insurer under Insurance
Law Article 74 for the purpose of administering and disposing of the
business of the insolvent insurer.

Section 9 would add a new Insurance Law § 1108(1) to exempt a
resolution facility established pursuant to § 7719 from licensing and
other requirements of the Insurance Law (except Article 74).

Section 10 would amend Insurance Law § 7503(f) to give the Corporation
the power to fund a resolution facility.

Section 11 would provide that the bill takes effect immediately.

Existing Law:

Insurance Law § 7709(e)(1) currently caps the amount of total
assessments against all member insurers for all impairments and
insolvencies at $558 million. Insurance Law § 7712(b) grants a member
insurer a tax credit for assessments paid subject to certain
limitations. Article 77 currently applies to a "resident," defined by
Insurance Law § 7705(k) as any person to whom contractual obligations
are owed and who either: (1) resides in New York at the time a member
insurer is determined to be an impaired or insolvent insurer; or (2)
resided in New York at the time a member insurer issued a covered
policy to the person.

A resolution facility (otherwise known as a "special purpose vehicle"
or "SPV") currently may not be formed in New York because it would be
doing an insurance business without a license in violation of the
Insurance Law.

Insurance Law § 7705(h) currently defines a "member insurer" as a life
insurer licensed to transact in New York any kind of insurance to
which Article 77 applies. This subsection also states that solely for
the purposes of the definitions of "impaired insurer" and "insolvent
insurer", the term "member insurer" also means a life insurer formerly
licensed to transact in New York any kind of insurance to which
Article 77 applies. If an insurer that is licensed in New York and
writes policies or contracts here later gives up its New York license,
it would not have to pay assessments if another insurer became
impaired or insolvent. As a result, other life insurers would have to
make up the difference in order for resident policyholders or contract
owners who have policies or contracts that were issued by the formerly
New York-licensed insurer to have coverage under Article 77.

Legislative History:


This is a new bill.

Statement in Support:

Insurance Law Article 77 was enacted to protect New York residents
holding obligations issued by New York authorized life insurers
against a life insurer's failure to perform its contractual
obligations due to the insurer's impairment or insolvency, subject to
certain limitations. Article 77 established the Corporation to
guarantee the payment of benefits and continuation of coverage. Every
life insurer licensed to transact life insurance business in New York
is a member of the Corporation, and the Corporation is funded by
assessments levied against its member insurers once a member insurer
is declared impaired or insolvent by a court of law.

Insurance Law § 7709(e)(1) caps the amount of total assessments
against all member insurers for all impairments and insolvencies at
$558 million. The existing cap will be exhausted shortly after the
payment of the Corporation's obligations associated with the
liquidation of the Executive Life Insurance Company of New York
("ELNY") estate. All other states provide guaranty fund protection,
yet no other state has a lifetime cap on the total amount that can be
assessed against insurers for impairments and insolvencies. Notably,
if a bill is not passed eliminating the cap, New York policyholders
will have no guaranty fund protection in the event of a future life
insurer insolvency.

Insurance Law § 7712(b) currently grants a member insurer a tax credit
for assessments paid subject to certain limitations. Allowing a tax
credit to insurers for assessments paid to cover the obligations of an
insolvent insurer effectively results in taxpayers paying for insurer
insolvencies. Therefore, while this bill eliminates the cap on
assessments, it does not grant member insurers any additional tax
credit for assessments paid other than what is currently provided for
in the law.

In addition, Article 77 currently applies to resident policy owners.
However the National Association of Insurance Commissioners'
("NAIC's") Life and Health Insurance Guaranty Association Model Act
("Model Act") provides protections to certain nonresidents, such as
nonresident beneficiaries or payees, if: (1) the insurer that issued
the policy or contract is domiciled in this state; (2) the state or
states in which the person resides or reside has or have a guaranty
entity or entities similar to the corporation formed by this state's
laws; and (3) the person is not eligible for coverage by a guaranty
entity in another state because the insurer was not licensed in that
state at the time specified in the state's guaranty law. "Orphans" is
a term used to refer to persons who, because they cannot meet all
three of the above criteria, would not be covered by any state's
guaranty fund association. This bill will extend the protections of
the Corporation to these individuals.

Furthermore, if an insurer that is licensed in New York and writes
policies or contracts here later decides to give up its license, it
would not have to pay assessments if another insurer became impaired
or insolvent. As a result, other life insurers would have to make up
the difference so that resident policy owners or contract owners who


have a policy or contract that was issued by the formerly New
York-licensed insurer have coverage under Article 77. This bill will
ensure that an insurer that gives up its New York license will be
considered a member insurer for all purposes, including for
assessments. The amendment is consistent with the Model Act.

Moreover, as part of the ELNY Plan of Liquidation, a resolution
facility was formed in Washington, D.C. to hold all of ELNY's assets
along with payments from various state guaranty associations, and to
administer and pay out ELNY's liabilities. A resolution facility could
not be formed in New York, because it would have to do an insurance
business without a license in violation of the Insurance Law. This
bill would permit the Corporation to form a resolution facility in New
York in the event of a future liquidation and the resolution facility
would not need to be licensed as an insurer.

Budget Implications:

None.

Local impact:

None.

Effective Date:

This bill would take effect immediately.

2013-S6972 (ACTIVE) - Bill Text download pdf

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

                                  6972

                            I N  S E N A T E

                              April 9, 2014
                               ___________

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

AN  ACT  to  amend  the insurance law, in relation to the life insurance
  company guaranty corporation of New York

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

  Section  1. Section 7702 of the insurance law, as added by chapter 802
of the laws of 1985, is amended to read as follows:
  S 7702. Purpose. The purpose of this article is to  provide  funds  to
protect  [resident policyowners] POLICY OWNERS, insureds, beneficiaries,
annuitants, payees and assignees  of  life  insurance  policies,  health
insurance  policies,  annuity  contracts, funding agreements and supple-
mental contracts issued by life insurance companies, subject to  certain
limitations,  against  failure  in  the performance of contractual obli-
gations due to the impairment or insolvency of the insurer issuing  such
policies [or], contracts, OR FUNDING AGREEMENTS.  In the judgment of the
legislature,  the  foregoing  objects  and purposes not being capable of
accomplishment by a corporation created under general laws, the creation
of a not-for-profit corporation of insurers  is  provided  for  by  this
article  to enable the guarantee of payment of benefits and of continua-
tion of coverages, and members of the corporation are subject to assess-
ment to carry out the purposes of this article.
  S 2. Section 7703 of the insurance law, as added by chapter 802 of the
laws of 1985, is amended to read as follows:
  S 7703. Scope. (a) (1) This article shall apply to direct life  insur-
ance  policies,  health  insurance  policies, annuity contracts, funding
agreements, and SUPPLEMENTAL contracts [supplemental to life and  health
insurance  policies, annuity contracts or funding agreements] issued [to
a resident] by a life insurance company licensed  to  transact  life  or
health  insurance  or  annuities  in  this state at the time the policy,
contract, or FUNDING agreement was issued or [at the time it became]  ON
THE DATE OF ENTRY OF A COURT ORDER OF LIQUIDATION OR REHABILITATION WITH

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14071-02-4

S. 6972                             2

RESPECT  TO  SUCH A COMPANY THAT IS an impaired or insolvent insurer, as
the case may be.
  (2)  EXCEPT  AS OTHERWISE PROVIDED IN THIS SECTION, THIS ARTICLE SHALL
APPLY TO THE POLICIES, CONTRACTS, AND FUNDING  AGREEMENTS  SPECIFIED  IN
PARAGRAPH ONE OF THIS SUBSECTION WITH REGARD TO A PERSON WHO IS:
  (A)  AN OWNER OR CERTIFICATE HOLDER UNDER A POLICY, CONTRACT, OR FUND-
ING AGREEMENT AND IN EACH CASE WHO:
  (I) IS A RESIDENT; OR
  (II) IS NOT A RESIDENT, BUT ONLY UNDER ALL  OF  THE  FOLLOWING  CONDI-
TIONS:
  (I)  THE  INSURER  THAT  ISSUED  THE POLICY, CONTRACT, OR AGREEMENT IS
DOMICILED IN THIS STATE;
  (II) THE STATE OR STATES IN WHICH THE PERSON RESIDES  HAS  OR  HAVE  A
GUARANTY ENTITY SIMILAR TO THE CORPORATION CREATED BY THIS ARTICLE; AND
  (III)  THE PERSON IS NOT ELIGIBLE FOR COVERAGE BY A GUARANTY ENTITY IN
ANY OTHER STATE BECAUSE THE INSURER WAS NOT LICENSED  OR  AUTHORIZED  IN
THAT STATE AT THE TIME SPECIFIED IN THAT STATE'S GUARANTY ENTITY LAW; OR
  (B)  THE  BENEFICIARY,  ASSIGNEE,  OR PAYEE OF THE PERSON SPECIFIED IN
SUBPARAGRAPH (A) OF THIS  PARAGRAPH,  REGARDLESS  OF  WHERE  THE  PERSON
RESIDES.
  (3) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION:
  (A)  WITH  REGARD  TO A GROUP ANNUITY CONTRACT (OR PORTION OF ANY SUCH
CONTRACT) THAT DOES NOT GUARANTEE ANNUITY BENEFITS WITH RESPECT  TO  ANY
SPECIFIC INDIVIDUAL IDENTIFIED IN THE CONTRACT, THIS ARTICLE SHALL APPLY
TO A PERSON WHO IS THE OWNER OF SUCH A CONTRACT:
  (I)  IF  THE  CONTRACT  IS  ISSUED TO OR IN CONNECTION WITH A SPECIFIC
BENEFIT PLAN WHERE THE PLAN SPONSOR HAS ITS PRINCIPAL PLACE OF  BUSINESS
IN  THIS STATE; PROVIDED, HOWEVER, THAT FOR THE PURPOSE OF THIS SUBPARA-
GRAPH:
  (I) "PLAN SPONSOR" SHALL MEAN:
  (AA) THE EMPLOYER IN THE CASE OF A BENEFIT PLAN ESTABLISHED  OR  MAIN-
TAINED BY A SINGLE EMPLOYER;
  (BB)  THE  EMPLOYEE  ORGANIZATION IN THE CASE OF A BENEFIT PLAN ESTAB-
LISHED OR MAINTAINED BY AN EMPLOYEE ORGANIZATION, PROVIDED THAT "EMPLOY-
EE ORGANIZATION" SHALL MEAN ANY LABOR UNION OR ANY ORGANIZATION  OF  ANY
KIND,  OR  ANY AGENCY OR EMPLOYEE REPRESENTATION COMMITTEE, ASSOCIATION,
GROUP, OR PLAN, IN WHICH EMPLOYEES PARTICIPATE AND THAT EXISTS  FOR  THE
PURPOSE,  IN  WHOLE  OR IN PART, OF DEALING WITH EMPLOYERS CONCERNING AN
EMPLOYEE  BENEFIT  PLAN,  OR  OTHER  MATTERS  INCIDENTAL  TO  EMPLOYMENT
RELATIONSHIPS,  OR  ANY EMPLOYEES' BENEFICIARY ASSOCIATION ORGANIZED FOR
THE PURPOSE IN WHOLE OR IN PART, OF ESTABLISHING SUCH A PLAN; OR
  (CC) IN THE CASE OF A BENEFIT PLAN ESTABLISHED OR MAINTAINED BY TWO OR
MORE EMPLOYERS OR JOINTLY BY ONE OR  MORE  EMPLOYERS  AND  ONE  OR  MORE
EMPLOYEE ORGANIZATIONS, THE ASSOCIATION, COMMITTEE, JOINT BOARD OF TRUS-
TEES,  OR  OTHER  SIMILAR  GROUP  OF  REPRESENTATIVES OF THE PARTIES WHO
ESTABLISH OR MAINTAIN THE BENEFIT PLAN; AND
  (II) "PRINCIPAL PLACE OF BUSINESS" SHALL MEAN:
  (AA) THE STATE IN WHICH THE INDIVIDUALS WHO ESTABLISH POLICY  FOR  THE
DIRECTION,  CONTROL, AND COORDINATION OF THE OPERATIONS OF THE ENTITY AS
A WHOLE PRIMARILY EXERCISE THAT FUNCTION, EXCEPT THAT IF MORE THAN FIFTY
PERCENT OF THE PARTICIPANTS IN THE BENEFIT PLAN ARE EMPLOYED IN A SINGLE
STATE, THEN THAT STATE SHALL BE DEEMED TO  BE  THE  PRINCIPAL  PLACE  OF
BUSINESS OF THE PLAN SPONSOR; OR
  (BB)  WITH  REGARD  TO  A  PLAN SPONSOR OF A BENEFIT PLAN DESCRIBED IN
SUBITEM (CC) OF CLAUSE (I) OF THIS ITEM, THE PRINCIPAL  PLACE  OF  BUSI-
NESS,  AS  DETERMINED  PURSUANT  TO  SUBITEM (AA) OF THIS CLAUSE, OF THE

S. 6972                             3

EMPLOYER OR EMPLOYEE ORGANIZATION THAT HAS THE LARGEST INVESTMENT IN THE
BENEFIT PLAN; OR
  (II) ISSUED TO OR IN CONNECTION WITH A GOVERNMENT LOTTERY IF THE OWNER
IS A RESIDENT; AND
  (B) WITH REGARD TO A STRUCTURED SETTLEMENT ANNUITY, THIS SECTION SHALL
APPLY  TO A PERSON WHO IS A PAYEE UNDER THE STRUCTURED SETTLEMENT ANNUI-
TY, OR THE BENEFICIARY OF A PAYEE IF THE PAYEE IS DECEASED, IF THE PAYEE
(OR BENEFICIARY):
  (I) IS A RESIDENT, REGARDLESS OF WHERE THE  OWNER  OF  THE  STRUCTURED
SETTLEMENT ANNUITY RESIDES; OR
  (II) IS NOT A RESIDENT, BUT ONLY UNDER THE FOLLOWING CONDITIONS:
  (I) (AA) THE OWNER OF THE STRUCTURED SETTLEMENT ANNUITY IS A RESIDENT;
OR
  (BB) THE OWNER OF THE STRUCTURED SETTLEMENT ANNUITY IS NOT A RESIDENT,
BUT  THE  INSURER THAT ISSUED THE STRUCTURED SETTLEMENT ANNUITY IS DOMI-
CILED IN THIS STATE AND THE STATE IN WHICH THE OWNER RESIDES HAS A GUAR-
ANTY ENTITY SIMILAR TO THE CORPORATION CREATED BY THIS ARTICLE; AND
  (II) NEITHER THE PAYEE (OR BENEFICIARY) NOR THE OWNER  OF  THE  STRUC-
TURED  SETTLEMENT  ANNUITY IS ELIGIBLE FOR COVERAGE BY A GUARANTY ENTITY
OF THE STATE IN WHICH THE PAYEE (OR BENEFICIARY) OR OWNER RESIDES.
  (b) This article shall not apply to:
  (1) [That] THAT portion or part of a variable life  insurance  policy,
variable  annuity  contract or variable funding agreement not guaranteed
by an insurer;
  (2) [That] THAT portion or part of any policy, contract  or  agreement
under which the risk is borne by the holder thereof;
  (3) [Any] ANY policy, contract, or agreement, or part thereof, assumed
by  the  impaired  or insolvent insurer under a contract of reinsurance,
other than reinsurance  for  which  assumption  certificates  have  been
issued;
  (4)  [Any] ANY policy, contract, or agreement issued by or through the
facilities of the New York Insurance  Exchange,  Inc.,  or  any  similar
entity, or pursuant to article sixty-three of this chapter;
  (5)  [Any]  ANY  policy,  contract,  or agreement issued or issued for
delivery outside the United States, to the extent it covers persons  not
citizens or permanent residents of the United States; and
  (6)  [Any]  ANY  policy,  contract, or agreement payable other than in
United States dollars.
  (C) THIS ARTICLE SHALL NOT APPLY TO A PERSON:
  (1) WHO IS A PAYEE, OR THE BENEFICIARY OF A  PAYEE  IF  THE  PAYEE  IS
DECEASED, OF AN OWNER RESIDENT IF THE PAYEE (OR BENEFICIARY) IS AFFORDED
ANY COVERAGE BY A GUARANTY ENTITY OF ANOTHER STATE; OR
  (2)  COVERED  UNDER  SUBPARAGRAPH (A) OF PARAGRAPH THREE OF SUBSECTION
(A) OF THIS SECTION IF THE GUARANTY ENTITY OF ANOTHER STATE PROVIDES ANY
COVERAGE TO THE PERSON.
  S 3. Subsections (d), (h), (j), and (k) of section 7705 of the  insur-
ance law, as added by chapter 802 of the laws of 1985, are amended and a
new subsection (l) is added to read as follows:
  (d) "Covered  policy" means any of the kinds of insurance specified in
paragraph one, two or three of subsection (a) of  section  one  thousand
one  hundred thirteen of this chapter, ANY SUPPLEMENTAL CONTRACT, or any
funding agreement referred to in  section  three  thousand  two  hundred
twenty-two  of  this chapter, or any portion or part thereof, within the
scope of this article under section seven thousand seven  hundred  three
of  this  article,  except  that any certificate issued to an individual
under any group policy or contract shall be considered to be a  separate

S. 6972                             4

covered  policy  for  purposes  of  section seven thousand seven hundred
eight of this article.
  (h) "Member  insurer"  means  any  life  insurance company licensed to
transact in this state any kind  of  insurance  to  which  this  article
applies  under  section seven thousand seven hundred three of this arti-
cle[. Solely for purposes of subsections (f) and (g) of this  section,];
PROVIDED,  HOWEVER,  THAT  the term "member insurer" [shall] also [mean]
MEANS any life insurance company formerly licensed to transact  in  this
state  any kind of insurance to which this article applies under section
seven thousand seven hundred three of this article.
  (j) "Person" means any individual OR LEGAL ENTITY, INCLUDING A  corpo-
ration,  partnership,  association, LIMITED LIABILITY COMPANY, TRUST, or
voluntary organization.
  (k) "Resident" means [any] A person to whom A contractual [obligations
are] OBLIGATION IS owed and who either: (1) resides in  this  state  [at
the  time] ON THE DATE OF ENTRY OF A COURT ORDER OF LIQUIDATION OR REHA-
BILITATION WITH RESPECT TO a member insurer [is determined to  be]  THAT
IS  an impaired or insolvent insurer[,]; or (2) resided in this state at
the time a member insurer issued a covered policy to such person.
  (L) "SUPPLEMENTAL CONTRACT" MEANS AN AGREEMENT OR ANY OTHER  MECHANISM
FOR  THE  DISTRIBUTION OF PROCEEDS UNDER A LIFE INSURANCE POLICY, HEALTH
INSURANCE POLICY, ANNUITY CONTRACT, OR FUNDING AGREEMENT.
  S 4. Subsections (a) and (b) of section 7708 of the insurance law,  as
added by chapter 802 of the laws of 1985, is amended to read as follows:
  (a) (1) If a domestic insurer is an impaired or insolvent insurer, the
corporation shall, with the approval of the superintendent:
  [(1)]  (A)  guarantee, assume, or reinsure, or cause to be guaranteed,
assumed, or reinsured, the covered policies [of residents],  or  arrange
for  replacement  by policies found by the superintendent to be substan-
tially similar to such covered policies;
  [(2)] (B)  assure  payment  of  the  contractual  obligations  of  the
impaired or insolvent insurer [to residents]; and
  [(3)]  (C)  provide  such  moneys, pledges, notes, guarantees or other
means as are reasonably necessary to discharge such duties.
  (2) The aggregate liability of the corporation under  this  subsection
shall not exceed five hundred thousand dollars for all benefits, includ-
ing cash values, with respect to any one life or, to the extent benefits
are  not  allocated pursuant to a covered policy to any one life, to any
one covered policy; provided, however,  [(i)]  that  (A)  the  foregoing
limitation  shall  not  apply to any group or blanket accident or health
insurance or accident and health insurance policy; and [(ii)  that]  (B)
the  corporation  shall be liable under this subsection in an amount not
to exceed one million dollars for all benefits, including  cash  values,
with  respect  to  any  group  annuity  contract (or portion of any such
contract) that does not guarantee annuity benefits with respect  to  any
specific  individual  identified in the contract and with respect to any
funding agreement issued to fund benefits  under  any  employee  benefit
plan.
  (b)  (1)  If  a  foreign  or alien insurer is an impaired or insolvent
insurer, the corporation shall, with the approval of the superintendent:
  [(1)] (A) guarantee, assume, or reinsure or cause  to  be  guaranteed,
assumed,  or  reinsured  the covered policies [of residents], or arrange
for replacement by policies found by the superintendent to  be  substan-
tially similar to such covered policies;
  [(2)]  (B) assure payment of the contractual obligations of the insol-
vent insurer [to residents]; and

S. 6972                             5

  [(3)] (C) provide such moneys, pledges, notes,  guarantees,  or  other
means as are reasonably necessary to discharge such duties.
  (2)  The  aggregate liability of the corporation under this subsection
shall be the excess over any amount that the  superintendent  determines
to  be  the  statutory obligation of the guaranty corporation or associ-
ation of the foreign or alien insurer's state of domicile  or  state  of
entry,  but in no event shall the corporation's liability, when added to
the amount so determined to be available from such other guaranty corpo-
ration or association, exceed five  hundred  thousand  dollars  for  all
benefits,  including  cash  values, with respect to any one life, or, to
the extent benefits are not allocated pursuant to a  covered  policy  to
any  one  life, to any one covered policy; provided, however, [(i)] that
the (A) foregoing five hundred  thousand  dollar  limitation  shall  not
apply  to  any group or blanket accident or health insurance or accident
and health insurance policy; and [(ii) that the] (B)  liability  of  all
such  guaranty  corporations or associations may in the aggregate equal,
but shall not exceed one million dollars  for  all  benefits,  including
cash  values,  with respect to any group annuity contract (or portion of
any such contract) that does not guarantee annuity benefits with respect
to any specific individual identified in the contract and  with  respect
to  any  funding  agreement  issued  to fund benefits under any employee
benefit plan.
  S 5. Subsection (h) of section 7708 of the insurance law, as added  by
chapter 802 of the laws of 1985, is amended to read as follows:
  (h) The corporation may:
  (1)  [Enter]  ENTER  into such contracts as are necessary or proper to
carry out the provisions and purposes of this article[.];
  (2) [Sue] SUE or be sued, including taking any legal actions necessary
or proper for recovery of any unpaid  assessments  under  section  seven
thousand seven hundred nine of this article[.];
  (3)  [Borrow]  BORROW  money  to effect the purposes of this article[.
The], PROVIDED, HOWEVER, THAT THE corporation may agree, as a  condition
of  any  borrowing,  that the lender will be subrogated to the rights of
the corporation against the impaired or insolvent insurer to the  extent
of  the  amount  borrowed  and  interest  accruing  thereon[.  Any], AND
PROVIDED FURTHER THAT ANY note or other evidence of indebtedness of  the
corporation  not  in  default  shall  be a legal investment for domestic
insurers and may be carried as admitted assets[.];
  (4) [Employ] EMPLOY or retain such persons as are necessary or  proper
to  handle the financial transactions of the corporation, and to perform
such  other  functions  as  become  necessary  or  proper   under   this
article[.];
  (5)  [With]  WITH  the  approval  of the superintendent, negotiate and
contract with any liquidator, rehabilitator,  conservator  or  ancillary
receiver to carry out the powers and duties of the corporation[.];
  (6) [Take] TAKE such legal action as may be necessary to avoid payment
of improper claims[.];
  (7)  [Exercise]  EXERCISE, for the purposes of this article and to the
extent approved by the superintendent, the powers  of  a  domestic  life
insurance  company,  but  in no case may the corporation issue insurance
policies or annuity contracts other than those  issued  to  perform  the
contractual obligations of the impaired or insolvent insurer[.];
  (8)  FUND  A RESOLUTION FACILITY ESTABLISHED PURSUANT TO SECTION SEVEN
THOUSAND SEVEN HUNDRED NINETEEN OF THIS ARTICLE; AND
  (9) [Exercise] EXERCISE all powers necessary  or  convenient  for  the
purposes of this article.

S. 6972                             6

  S  6.  Paragraph  1 of subsection (e) of section 7709 of the insurance
law, as amended by chapter 217 of the laws of 2012, is amended  to  read
as follows:
  (1)  [The total assessment against all member insurers for all impair-
ments and insolvencies, less the amount of refunds (not including inter-
est) to member insurers pursuant to  subsection  (f)  of  this  section,
shall  not  exceed  five hundred million dollars, except that with] WITH
respect to a member insurer that is a domestic insurer and is subject to
an order of rehabilitation under article seventy-four of this chapter as
of March first two thousand twelve, [such] THE TOTAL assessment  [limit]
AGAINST  ALL  MEMBER INSURERS FOR IMPAIRMENTS AND INSOLVENCIES, LESS THE
AMOUNT OF REFUNDS (NOT INCLUDING INTEREST) TO MEMBER  INSURERS  PURSUANT
TO  SUBSECTION  (F)  OF  THIS SECTION, shall be five hundred fifty-eight
million dollars; provided, however, that such five  hundred  fifty-eight
million dollar [limit] TOTAL shall be subject to reduction in an amount,
if  any,  determined  by  the superintendent, on a date not earlier than
twelve months after the entry of an order of liquidation with respect to
such domestic insurer, to be not needed for the corporation to  be  able
to  pay  its  obligations and reasonable expenses in connection with the
liquidation of such  domestic  insurer,  but  in  no  event  shall  such
reduction exceed fifty-eight million dollars.
  S  7. Subsection (b) of section 7712 of the insurance law, as added by
chapter 802 of the laws of 1985, is amended and a new subsection (c)  is
added to read as follows:
  (b)  [The]  EXCEPT  AS PROVIDED IN SUBSECTION (C) OF THIS SECTION, THE
maximum authorized credit for each company in respect of the assessments
paid during the most recent calendar  year  covered  by  such  statement
shall be as follows:
  (1)  if  the  sum  of the net assessments paid by all companies in the
period reported on  in  the  statement  of  operations  required  to  be
furnished by the superintendent pursuant to the provisions of subsection
(a)  of  this  section is less than one hundred million dollars, THEN no
such credits shall be authorized;
  (2) (A) if the sum of such net assessments IS EQUAL TO OR exceeds  one
hundred  million dollars, the maximum authorized credit for each company
with respect to net assessments paid by such company in any  year  shall
be  the  excess,  if any, of (i) over (ii), where (i) is the sum of such
company's tentative cross-over year credit and its tentative credits for
subsequent years, both as determined pursuant to subparagraphs  (B)  and
(C) of this paragraph, and (ii) is the sum of the maximum credits there-
tofore  authorized  for  the  years  covered  by  such statement, to and
including the most recently completed year, determined with reference to
the periods covered by all prior such statements.
  (B) Such company's tentative cross-over year credit  shall  be  eighty
per  centum  of  the  product  of  (i) and (ii), where (i) is the sum of
assessments paid by such company during the cross-over year, and (ii) is
a fraction, the numerator of  which  is  the  excess  over  one  hundred
million  dollars  of  the  sum  of net assessments paid by all companies
during such period and the denominator  of  which  is  the  sum  of  net
assessments  paid  by  such  companies  during  the cross-over year. For
purposes of this paragraph, the cross-over year is the first year during
the period covered by such statement in which the net  assessments  paid
by all companies during such period exceeded one hundred million dollars
in whole or in part.

S. 6972                             7

  (C)  Such  company's  tentative credit for each year subsequent to the
cross-over year shall be eighty per centum of the net  assessments  paid
by such company during such year.
  (C) A CREDIT SHALL NOT BE AUTHORIZED FOR ANY MEMBER INSURER IN RESPECT
OF  THE ASSESSMENTS PAID IN CONNECTION WITH THE REHABILITATION OR LIQUI-
DATION OF A DOMESTIC MEMBER INSURER SUBJECT TO  AN  ORDER  OF  REHABILI-
TATION OR LIQUIDATION UNDER ARTICLE SEVENTY-FOUR OF THIS CHAPTER ENTERED
ON OR AFTER APRIL FIRST, TWO THOUSAND THIRTEEN.
  [(3)]  (D)  For  the  purposes  of this section, net assessments means
gross assessments, less any recoveries or  reimbursements,  paid  during
the  period covered by the most recent statement of operations furnished
by the superintendent pursuant to the provisions of  subsection  (a)  of
this section.
  S 8. The insurance law is amended by adding a new section 7719 to read
as follows:
  S  7719. RESOLUTION FACILITY.  (A) THE CORPORATION MAY INCORPORATE ONE
OR MORE NOT-FOR-PROFIT CORPORATIONS, KNOWN AS A RESOLUTION FACILITY,  IN
CONNECTION  WITH THE LIQUIDATION OF AN INSOLVENT DOMESTIC LIFE INSURANCE
COMPANY UNDER ARTICLE SEVENTY-FOUR OF THIS CHAPTER FOR  THE  PURPOSE  OF
ADMINISTERING  AND  DISPOSING  OF THE BUSINESS OF THE INSOLVENT DOMESTIC
LIFE INSURANCE COMPANY.
  (B) TO THE EXTENT THAT THE PROVISIONS  OF  THE  NOT-FOR-PROFIT  CORPO-
RATION  LAW  DO  NOT CONFLICT WITH THE PROVISIONS OF THIS SECTION OR THE
PLAN OF OPERATION OF THE RESOLUTION FACILITY HEREUNDER, THE NOT-FOR-PRO-
FIT CORPORATION LAW SHALL APPLY  TO  THE  RESOLUTION  FACILITY  AND  THE
RESOLUTION  FACILITY SHALL BE A TYPE C NOT-FOR-PROFIT CORPORATION PURSU-
ANT TO THE NOT-FOR-PROFIT CORPORATION LAW. IF AN APPLICABLE PROVISION OF
THIS SECTION OR THE PLAN OF OPERATION OF THE RESOLUTION  FACILITY  HERE-
UNDER  RELATES TO A MATTER EMBRACED IN A PROVISION OF THE NOT-FOR-PROFIT
CORPORATION LAW BUT IS NOT IN CONFLICT THEREWITH, THEN  BOTH  PROVISIONS
SHALL APPLY. THE CORPORATION SHALL BE A MEMBER OF THE RESOLUTION FACILI-
TY, AND OTHER PERSONS, INCLUDING THE LIFE INSURANCE GUARANTY CORPORATION
CONTINUED  UNDER ARTICLE SEVENTY-FIVE OF THIS CHAPTER AND GUARANTY ENTI-
TIES OF OTHER STATES, MAY BECOME MEMBERS OF THE RESOLUTION  FACILITY  IN
ACCORDANCE  WITH  THE RESOLUTION FACILITY'S CERTIFICATE OF INCORPORATION
AND PLAN OF OPERATION.
  (C) IN ADDITION TO ITS  CERTIFICATE  OF  INCORPORATION,  A  RESOLUTION
FACILITY  SHALL  SUBMIT  TO  THE SUPERINTENDENT A PLAN OF OPERATION, AND
AMENDMENTS THERETO, NECESSARY OR SUITABLE TO ASSURE  THE  FAIR,  REASON-
ABLE,  AND EQUITABLE ADMINISTRATION OF THE RESOLUTION FACILITY. THE PLAN
OF OPERATION, AND ANY AMENDMENTS THERETO, SHALL  BECOME  EFFECTIVE  UPON
APPROVAL  IN  WRITING BY THE SUPERINTENDENT. THE PLAN OF OPERATION SHALL
CONSTITUTE THE BYLAWS OF THE RESOLUTION FACILITY.
  (D) A RESOLUTION FACILITY MAY:
  (1) GUARANTEE,  ASSUME,  OR  REINSURE,  OR  CAUSE  TO  BE  GUARANTEED,
ASSUMED,  OR REINSURED, THE COVERED POLICIES, OR ARRANGE FOR REPLACEMENT
BY POLICIES FOUND BY THE SUPERINTENDENT TO BE SUBSTANTIALLY  SIMILAR  TO
THE COVERED POLICIES;
  (2)  EXERCISE,  FOR  THE  PURPOSES  OF  THIS ARTICLE AND TO THE EXTENT
APPROVED BY THE SUPERINTENDENT, THE POWERS OF A DOMESTIC LIFE  INSURANCE
COMPANY,  BUT  IN  NO  CASE  MAY THE RESOLUTION FACILITY ISSUE INSURANCE
POLICIES,  ANNUITY  CONTRACTS,  FUNDING  AGREEMENTS,   OR   SUPPLEMENTAL
CONTRACTS OTHER THAN THOSE ISSUED TO PERFORM THE CONTRACTUAL OBLIGATIONS
OF THE IMPAIRED OR INSOLVENT INSURER;
  (3)  ASSURE  PAYMENT  OF  THE CONTRACTUAL OBLIGATIONS OF THE INSOLVENT
INSURER; AND

S. 6972                             8

  (4) PROVIDE SUCH MONEYS, PLEDGES, NOTES, GUARANTEES, OR OTHER MEANS AS
ARE REASONABLY NECESSARY TO DISCHARGE ITS DUTIES.
  (E)  A  RESOLUTION  FACILITY SHALL NOT BE SUBJECT TO ANY PROVISIONS OF
THIS CHAPTER OR THE FINANCIAL SERVICES LAW EXCEPT:
  (1) THIS SECTION; AND
  (2) SECTIONS SEVEN THOUSAND SEVEN  HUNDRED  FOURTEEN,  SEVEN  THOUSAND
SEVEN  HUNDRED FIFTEEN, AND SEVEN THOUSAND SEVEN HUNDRED SIXTEEN OF THIS
CHAPTER, WHICH SHALL APPLY IN THE SAME  MANNER  AS  THEY  APPLY  TO  THE
CORPORATION.
  (F) NOTWITHSTANDING SUBSECTION (E) OF THIS SECTION, THE SUPERINTENDENT
MAY  ADDRESS  TO  THE RESOLUTION FACILITY ANY INQUIRY IN RELATION TO ITS
TRANSACTIONS OR CONDITION OR ANY MATTER CONNECTED THEREWITH PURSUANT  TO
SECTION THREE HUNDRED EIGHT OF THIS CHAPTER.
  (G)  (1) IF THE SUPERINTENDENT DETERMINES THAT THE RESOLUTION FACILITY
IS NOT ADMINISTERING AND DISPOSING  OF  THE  BUSINESS  OF  AN  INSOLVENT
DOMESTIC  LIFE  INSURANCE COMPANY CONSISTENT WITH THE RESOLUTION FACILI-
TY'S CERTIFICATE OF INCORPORATION, PLAN OF OPERATION, OR  THIS  SECTION,
THEN  THE SUPERINTENDENT SHALL PROVIDE NOTICE TO THE RESOLUTION FACILITY
AND THE RESOLUTION FACILITY SHALL HAVE THIRTY DAYS  TO  RESPOND  TO  THE
SUPERINTENDENT AND CURE THE DEFECT.
  (2)  IF,  AFTER  THIRTY  DAYS, THE SUPERINTENDENT CONTINUES TO BELIEVE
THAT THE RESOLUTION FACILITY IS NOT ADMINISTERING AND DISPOSING  OF  THE
BUSINESS OF AN INSOLVENT DOMESTIC LIFE INSURANCE COMPANY CONSISTENT WITH
THE  RESOLUTION  FACILITY'S CERTIFICATE OF INCORPORATION, PLAN OF OPERA-
TION, OR THIS SECTION, THEN THE SUPERINTENDENT MAY APPLY  TO  THE  COURT
FOR  AN ORDER DIRECTING THE RESOLUTION FACILITY TO CORRECT THE DEFECT OR
TAKE OTHER APPROPRIATE ACTIONS.
  S 9. Section 1108 of the insurance law is  amended  by  adding  a  new
subsection (n) to read as follows:
  (N)  A RESOLUTION FACILITY ESTABLISHED PURSUANT TO SECTION SEVEN THOU-
SAND SEVEN HUNDRED NINETEEN OF THIS CHAPTER.
  S 10. Subsection (f) of section 7503 of the insurance law  is  amended
to read as follows:
  (f) The corporation shall have the power:
  (1)  [To] TO use a corporate seal, to contract, to sue and be sued and
to possess and exercise all  powers  necessary  or  convenient  for  the
purposes of this article[.];
  (2)  [With]  WITH the approval of the superintendent, to assume, rein-
sure or guaranty, or cause  to  be  assumed,  reinsured  or  guaranteed,
partially  or  wholly,  any  or  all policies or contracts of any member
company and to make available from the fund such sums as may  be  neces-
sary for such purposes[.];
  (3)  [To] TO carry out the provisions of this article, the corporation
shall have and may exercise all necessary rights, powers, privileges and
franchises of a domestic life insurance company except that it shall not
be authorized  to  issue  contracts  or  policies  unless  they  replace
contracts  or  policies  representing obligations in whole or in part of
another domestic life insurance company or of the corporation[.];
  (4) [To] TO borrow money for the purposes of the fund with or  without
security  and  pledge such assets in the fund as security for such loans
and in connection therewith to rehypothecate any securities  or  collat-
eral  pledged to it by a company[. Obligations], PROVIDED, HOWEVER, THAT
OBLIGATIONS of the corporation shall be legal investments  for  domestic
life insurance companies and to the extent authorized by the superinten-
dent may be carried as admitted assets[.];

S. 6972                             9

  (5)  [To]  TO  collect, or enforce by legal proceedings, if necessary,
the payment of, all assessments for which any contributor may be  liable
under  this article; to collect any obligation due to the corporation or
to the fund[.]; AND
  (6)  TO  FUND  A  RESOLUTION  FACILITY ESTABLISHED PURSUANT TO SECTION
SEVEN THOUSAND SEVEN HUNDRED NINETEEN OF THIS CHAPTER.
  S 11. This act shall take effect immediately.

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Senate Bill S6972

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

2013-S6972 (ACTIVE) - Details

2013-S6972 (ACTIVE) - Summary

2013-S6972 (ACTIVE) - Sponsor Memo

2013-S6972 (ACTIVE) - Bill Text download pdf

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Senate Bill S6972

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Sponsored By

James L. Seward

Archive: Last Bill Status - In Senate Committee Insurance Committee

2013-S6972 (ACTIVE) - Details

2013-S6972 (ACTIVE) - Summary

2013-S6972 (ACTIVE) - Sponsor Memo

2013-S6972 (ACTIVE) - Bill Text download pdf

Comments