Senate Bill S3499A

                                 BILL NUMBER:  S3499A

 TITLE OF BILL :

An act to amend the insurance law, in relation to including credit
union shares, share certificates and share draft accounts as
authorized reserve investments for non-life insurers


 PURPOSE OR GENERAL IDEA OF BILL :

To authorize non-life insurers, such as property/casualty insurance
companies, to purchase shares, share certificates and share draft
accounts by state and federally-chartered credit unions.

 SUMMARY OF PROVISIONS :

Insurance Law section 1404(a) is amended by adding a new paragraph 11
to clarify that credit union shares, share certificates and share
draft accounts are expressly included within the list of authorized
investments for non-life insurers.

 JUSTIFICATION :

In this period of unprecedented financial turmoil when even seemingly
"safe" investments such as bonds are decreasing in value, it seems
              

incongruous to not permit non-life insurers to invest in
federally-backed share certificates of credit unions. Yet since credit
union share certificates are considered "equity" instruments rather
than debt instruments such as a bank certificate of deposit, the
current Insurance Law is interpreted as not allowing investment by
non-life insurers in these federally-guaranteed share certificates.
Although the Insurance Department has issued an opinion disallowing
such investment based on the equity/debt distinction between credit
union share certificates and bank certificates of deposit, the
Department in 2007 also found that an insurance agent or broker may
maintain a premium account in a federally-insured credit union.
Although it is true that different sections of law and a different
instrument are involved, the broader policy for permitting both types
of investments remains the same, namely the safety and security of a
federally-insured credit union. Additionally, in some upstate
communities where some of these smaller insurers operate there may be
a limited number of available banking services and this measure will
simply afford them an additional and convenient option. This measure
would provide small and large insurance companies with another safe
avenue for investing their precious assets, one that is guaranteed by
the Federal government.

 PRIOR LEGISLATIVE HISTORY :

This is a new bill.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
This act shall take effect immediately after it shall have become a
law.