S T A T E O F N E W Y O R K
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11342--A
I N A S S E M B L Y
June 3, 2010
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Introduced by COMMITTEE ON RULES -- (at request of M. of A. Morelle,
Pretlow) -- read once and referred to the Committee on Insurance --
reported and referred to the Committee on Rules -- Rules Committee
discharged, bill amended, ordered reprinted as amended and recommitted
to the Committee on Rules
AN ACT to amend the insurance law, in relation to qualified trusts and
qualified reserve credits; and providing for the repeal of such
provisions upon expiration thereof
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subsection (d) of section 6901 of the insurance law, as
added by chapter 48 of the laws of 1989, is amended to read as follows:
(d) "Aggregate net liability" means the aggregate amount of insured
unpaid principal, interest and other monetary payments, if any, of guar-
antied obligations insured or assumed, less reinsurance ceded [and
less], collateral AND QUALIFIED RESERVE CREDITS.
S 2. Section 6901 of the insurance law is amended by adding two new
subsections (t) and (u) to read as follows:
(T) "QUALIFIED TRUST" MEANS A TRUST THAT IS ENGAGED OR ORGANIZED TO
ENGAGE EXCLUSIVELY IN THE ACQUISITION AND MANAGEMENT OF INVESTMENTS
AVAILABLE FIRST FOR THE PAYMENT OF LOSSES AND CLAIMS OF A SINGLE FINAN-
CIAL GUARANTY INSURANCE CORPORATION.
(U) "QUALIFIED RESERVE CREDIT" MEANS, WITH RESPECT TO INVESTMENTS IN
WHICH THE INTERESTS OF THE QUALIFIED TRUST ARE LIMITED TO RIGHTS TO
PRINCIPAL, INTEREST OR OTHER PAYMENTS FROM SUCH INVESTMENTS, THE PRESENT
VALUE OF AMOUNTS RECEIVABLE BY THE QUALIFIED TRUST FROM INVESTMENTS
GIVEN A DESIGNATION OF ONE BY THE SECURITIES VALUATION OFFICE OF THE
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS.
S 3. Section 6902 of the insurance law is amended by adding three new
subsections (c), (d) and (e) to read as follows:
(C) IN DETERMINING THE FINANCIAL CONDITION OF A DOMESTIC OR FOREIGN
FINANCIAL GUARANTY INSURANCE CORPORATION FOR THE PURPOSES OF THIS CHAP-
TER, IN ADDITION TO THE ASSETS SET FORTH IN SECTION ONE THOUSAND THREE
HUNDRED ONE OF THIS CHAPTER, THERE SHALL BE ALLOWED AS AN ADMITTED ASSET
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD17531-04-0
A. 11342--A 2
OF SUCH FINANCIAL GUARANTY INSURANCE CORPORATION THE NET EQUITY OF A
QUALIFIED TRUST. THE ASSETS OF SUCH QUALIFIED TRUST CONSIDERED IN DETER-
MINING ITS NET EQUITY SHALL BE LIMITED TO CASH, INCLUDING LEGAL TENDER
OR THE EQUIVALENT IN ANY OFFICE OF SUCH COMPANY OR IN TRANSIT UNDER ITS
CONTROL AND THE TRUE BALANCE OF ANY DEPOSIT IN A SOLVENT BANK, TRUST
COMPANY OR THRIFT INSTITUTION, AND OBLIGATIONS WHICH ARE NOT IN DEFAULT
AS TO PRINCIPAL OR INTEREST, WHICH ARE VALID AND LEGALLY AUTHORIZED, AND
WHICH ARE ISSUED, ASSUMED, GUARANTEED OR INSURED BY THE UNITED STATES OR
BY ANY AGENCY OR INSTRUMENTALITY THEREOF. THE RIGHTS AND OBLIGATIONS OF
THE FINANCIAL GUARANTY INSURANCE CORPORATION WITH RESPECT TO A QUALIFY-
ING TRUST SHALL BE DETERMINED BY THE TERMS AND CONDITIONS OF THE QUALI-
FYING TRUST, PROVIDED HOWEVER THAT THE RIGHTS OF ALL OTHER PARTIES SHALL
BE SUBORDINATE TO THE RIGHTS OF SUCH FINANCIAL GUARANTY INSURANCE CORPO-
RATION. THE FINANCIAL GUARANTY INSURANCE CORPORATION SHALL ESTABLISH THE
TERMS AND CONDITIONS OF THE QUALIFYING TRUST, WHICH SHALL INCLUDE, WITH-
OUT LIMITATION, THE REQUIREMENT THAT THE TRUSTEE'S AUTHORITY TO INVEST
AND ACCEPT SUBSTITUTIONS THEREOF SHALL BE SUBJECT TO THE PRIOR APPROVAL
OF SUCH FINANCIAL GUARANTY INSURANCE CORPORATION UNLESS THE TRUST
INSTRUMENT OR AGREEMENT OF THE QUALIFYING TRUST SETS FORTH THE INVEST-
MENTS ACCEPTABLE TO SUCH FINANCIAL GUARANTY INSURANCE CORPORATION. THE
TERMS AND CONDITIONS OF A QUALIFYING TRUST FORMED BY A DOMESTIC FINAN-
CIAL GUARANTY INSURANCE CORPORATION AND ANY AMENDMENT THERETO SHALL BE
SUBJECT TO THE SUPERINTENDENT'S APPROVAL. NO PAYMENT IN COMPLIANCE WITH
THE TERMS AND CONDITIONS OF A QUALIFYING TRUST SHALL BE SUBJECT TO, OR
INCLUDED IN CONNECTION WITH THE APPLICATION OF, SECTION FOUR THOUSAND
ONE HUNDRED FIVE OF THIS CHAPTER. SECTION ONE THOUSAND FOUR HUNDRED NINE
OF THIS CHAPTER SHALL NOT APPLY TO QUALIFYING TRUSTS OR A FINANCIAL
GUARANTY INSURANCE CORPORATION'S INTEREST IN A QUALIFIED TRUST.
(D) IF THE REQUIREMENTS OF SECTION ONE THOUSAND FOUR HUNDRED TWO OF
THIS CHAPTER AND PARAGRAPH ONE OF SUBSECTION (B) OF THIS SECTION ARE
MET, A FINANCIAL GUARANTY INSURANCE CORPORATION, MAY, EXCEPT AS SET
FORTH BELOW, INVEST ITS FUNDS IN, OR OTHERWISE ACQUIRE, OR LOAN UPON,
ONLY THE TYPES OF INVESTMENTS SPECIFIED IN SECTION ONE THOUSAND FOUR
HUNDRED TWO OF THIS CHAPTER, SECTION ONE THOUSAND FOUR HUNDRED THREE OF
THIS CHAPTER AND SUBSECTION (A) OF SECTION ONE THOUSAND FOUR HUNDRED
FOUR OF THIS CHAPTER (EXCEPT PARAGRAPHS EIGHT AND TEN OF SUBSECTION (A)
OF SUCH SECTION); PROVIDED THAT ANY SUCH CORPORATION MAY ALSO INVEST ITS
FUNDS IN, OR OTHERWISE ACQUIRE OR LOAN UPON INVESTMENTS PERMITTED UNDER
SECTIONS ONE THOUSAND FOUR HUNDRED SEVEN OF THIS CHAPTER (INCLUDING
INVESTMENTS OF THE CLASSES DESCRIBED IN PARAGRAPHS EIGHT AND TEN OF
SUBSECTION (A) OF SECTION ONE THOUSAND FOUR HUNDRED FOUR OF THIS CHAP-
TER), SECTION ONE THOUSAND FOUR HUNDRED EIGHT OF THIS CHAPTER AND ARTI-
CLE SIXTEEN OF THIS CHAPTER, SO LONG AS IT MAINTAINS CASH, INVESTMENTS
REQUIRED BY SECTION ONE THOUSAND FOUR HUNDRED TWO OF THIS CHAPTER OR
PARAGRAPH THREE OF SUBSECTION (B) OF THIS SECTION, RESERVE INVESTMENTS
UNDER SUBSECTION (A) OF SECTION ONE THOUSAND FOUR HUNDRED FOUR OF THIS
CHAPTER AND INTERESTS IN A QUALIFIED TRUST, FREE FROM ANY LIEN OR
PLEDGE, WHICH, WHEN VALUED IN ACCORDANCE WITH THE PROVISIONS OF THIS
CHAPTER, SHALL AT LEAST EQUAL FIFTY PERCENT OF THE AGGREGATE AMOUNT OF
ITS UNEARNED PREMIUM, LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AS SHOWN
BY ITS LAST SWORN STATEMENT, ANNUAL OR QUARTERLY, ON FILE WITH THE
SUPERINTENDENT. IF A FINANCIAL GUARANTY INSURANCE CORPORATION MAINTAINS
CASH, INVESTMENTS REQUIRED BY SECTION ONE THOUSAND FOUR HUNDRED TWO OF
THIS ARTICLE OR PARAGRAPH THREE OF SUBSECTION (B) OF THIS SECTION,
RESERVE INVESTMENTS UNDER SUBSECTION (A) OF SECTION ONE THOUSAND FOUR
HUNDRED FOUR OF THIS CHAPTER AND INTERESTS IN A QUALIFIED TRUST, FREE
A. 11342--A 3
FROM ANY LIEN OR PLEDGE, WHICH, WHEN VALUED IN ACCORDANCE WITH THE
PROVISIONS OF THIS CHAPTER, SHALL AT LEAST EQUAL THE AGGREGATE OF SEVEN-
TY PERCENT OF ITS LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES AND FIFTY
PERCENT OF ITS UNEARNED PREMIUM RESERVES AS SHOWN BY ITS LAST SWORN
STATEMENT, ANNUAL OR QUARTERLY, ON FILE WITH THE SUPERINTENDENT, THEN
SUCH CORPORATION MAY IN ADDITION ENTER INTO THE TYPES OF TRANSACTIONS
SET FORTH IN SECTION ONE THOUSAND FOUR HUNDRED TEN OF THIS CHAPTER,
SUBJECT TO THE LIMITATIONS SET FORTH IN SUCH SECTION. THE TERM "LIEN OR
PLEDGE" AS USED IN THIS SUBSECTION SHALL NOT INCLUDE ANY DEPOSIT OF
SECURITIES OR CASH WITH ANY GOVERNMENT, NOR TRUSTED ASSETS, HELD IN
TRUST FOR THE BENEFIT OR PROTECTION OF ALL OR ANY CLASS OF THE POLICY-
HOLDERS, OR POLICYHOLDERS AND CREDITORS, OF SUCH CORPORATION.
(E) FOR PURPOSES OF DETERMINING QUALIFIED RESERVE CREDITS, THE
DISCOUNT RATE USED TO DETERMINE PRESENT VALUE SHALL BE THE AVERAGE RATE
OF RETURN ON THE ADMITTED ASSETS OF THE FINANCIAL GUARANTY INSURANCE
CORPORATION AS OF THE DATE OF THE COMPUTATION OF THE APPLICABLE RESERVE
UNDER THIS CHAPTER. THE DISCOUNT RATE SHALL BE ADJUSTED AT THE END OF
EACH CALENDAR YEAR.
S 4. Paragraph 5 of subsection (a) of section 6903 of the insurance
law, as amended by chapter 605 of the laws of 2004, is amended to read
as follows:
(5) Contingency reserves required in paragraphs two, three and four of
this subsection may be established and maintained net of collateral
[and], reinsurance AND QUALIFIED RESERVE CREDITS, provided that, in the
case of reinsurance, the reinsurance agreement requires that the
reinsurer shall, on or after the effective date of the reinsurance,
establish and maintain a reserve in an amount equal to the amount by
which the insurer reduces its contingency reserve, and contingency
reserves required in paragraphs three and four of this subsection may be
maintained (A) net of refundings and refinancings to the extent the
refunded or refinanced issue is paid off or secured by obligations which
are directly payable or guarantied by the United States government and
(B) net of insured securities in a unit investment trust or mutual fund
that have been sold from the trust or fund without insurance.
S 5. This act shall take effect immediately and shall expire and be
deemed repealed 5 years after such date.