NY State Senate Bill 2009-S5994

Senate Bill S5994

2009-2010 Legislative Session

Permits mortgage guaranty insurers to obtain credit for reinsurance in a manner conforming to the requirements prescribed by the superintendent of insurance

download bill text pdf

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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Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2010	referred to insurance
Jun 19, 2009	referred to rules

2009-S5994 (ACTIVE) - Details

Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §6507, Ins L

2009-S5994 (ACTIVE) - Summary

Permits mortgage guaranty insurers to obtain credit for reinsurance in a manner conforming to the requirements prescribed by the superintendent of insurance with respect to other insurers.

2009-S5994 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S5994

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


 PURPOSE :
To permit mortgage guaranty insurers to obtain credit for reinsurance
in a manner conforming to the requirements prescribed by the
Superintendent of Insurance with respect to other insurers.

 SUMMARY OF PROVISIONS :
Section 1 of the bill amends Section 6507(d) of the Insurance Law to
establish guidelines for a mortgage guaranty insurer to receive credit
for reinsurance under certain circumstances. Under the bill, where a
mortgage guaranty insurer cedes insurance to another mortgage guaranty
insurer not licensed under New York law, or to an insurer that insures
or reinsures other lines of insurance in addition to mortgage guaranty
insurance, the ceding insurer can receive credit for such reinsurance
as an asset or as a reduction from liabilities where the assuming
insurer establishes and maintains in a segregated trust assets equal
to or greater than the assets found in the mortgage guaranty insurer's
contingency reserve, or four percent of the outstanding total
liability under the aggregate insurance policies assumed from the
mortgage guaranty insurer. To the extent the assuming insurer

(reinsurer) does not establish such a segregated trust, the mortgage
guaranty insurer must establish and maintain the required contingency
reserve and policyholders surplus sufficient to support the liability
at issue.

Section 1 also requires that any segregated trust established, except
as otherwise required by the Superintendent of Insurance, must comply
with the requirements for a trust agreement generally applicable to
obtain credit for reinsurance ceded to an unauthorized reinsurer
involving property and casualty risks.

Finally, Section 1 requires the assuming insurer and the terms of any
reinsurance to comply with other requirements prescribed by the
Superintendent of Insurance.

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

 JUSTIFICATION :
Currently, New York law contains many unnecessary procedural
requirements with respect to obtaining credit for reinsurance ceded,
placing a regulatory burden on the New York State Insurance Department
and mortgage guaranty insurance companies alike.  This bill amends
Insurance Law Section 6507( d) to render credit for reinsurance
requirements for mortgage guaranty insurers consistent with credit for
reinsurance requirements for other insurance companies, and within
prudent boundaries customarily associated with mortgage guaranty
reinsurance practices.

 LEGISLATIVE HISTORY :
S.7316-B (2008).

 FISCAL IMPLICATIONS :
None.

 EFFECTIVE DATE :
This act shall take effect immediately.

2009-S5994 (ACTIVE) - Bill Text download pdf

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

                                  5994

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                              June 19, 2009
                               ___________

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

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

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

  Section 1.  Subsection (d) of section 6507 of the  insurance  law,  as
added by chapter 517 of the laws of 1989, is amended to read as follows:
  (d) Where a mortgage insurer cedes any insurance to a mortgage insurer
not  licensed under this article or an insurer that insures or reinsures
other lines of insurance in addition to mortgage guaranty insurance,  in
order for the mortgage insurer to receive credit for such reinsurance as
an  asset  or as a reduction from liabilities, including its contingency
reserve liability, in its financial statements,  such  assuming  insurer
must maintain a surplus to policyholders of at least thirty-five million
dollars and the following must occur[;]:
  (1)  the  ASSUMING  insurer  [must]  SHALL establish and maintain in a
segregated trust an amount equal to the greater of either the contingen-
cy reserve required by paragraph two of subsection (a)  of  section  six
thousand  five  hundred  two  of  this  article,  or four percent of the
outstanding total  liability  under  the  aggregate  insurance  policies
assumed  from  the  mortgage insurer, BUT TO THE EXTENT IT DOES NOT, THE
MORTGAGE INSURER SHALL ESTABLISH AND MAINTAIN SUCH REQUIRED  CONTINGENCY
RESERVE  AND  SUCH  POLICYHOLDERS SURPLUS AS IS REQUIRED TO SUPPORT SUCH
LIABILITY;
  (2) the ASSUMING insurer must establish and maintain in  a  segregated
trust,  or  provide  a letter of credit in a form approved by the super-
intendent, an amount equal to the unearned premium and loss reserves;
  (3) any such [aggregated] SEGREGATED trust shall EXCEPT  AS  OTHERWISE
REQUIRED BY THE SUPERINTENDENT, COMPLY WITH THE REQUIREMENTS FOR A TRUST
AGREEMENT AS WOULD BE GENERALLY APPLICABLE IN ORDER TO OBTAIN CREDIT FOR

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14281-01-9

S. 5994                             2

REINSURANCE  CEDED  TO  AN UNAUTHORIZED REINSURER INVOLVING PROPERTY AND
CASUALTY RISKS AND SHALL be funded by assets permitted by article  four-
teen of this chapter for the loss reserve required by paragraph three of
subsection  (a) of section six thousand five hundred two of this article
and for the unearned premium reserve required by  section  one  thousand
three  hundred  five  of this chapter, and shall be funded by either the
types of assets specified in paragraphs one, two and three of subsection
(b) of section one thousand four hundred two and paragraphs  one[,]  AND
two  [and twelve] of subsection (a) of section one thousand four hundred
four of this chapter or by tax and loss bonds purchased  pursuant  to  S
832(e)  of  the  Internal  Revenue Code for the greater of the amount of
reserves required by paragraph two of  subsection  (a)  of  section  six
thousand five hundred two of this article or paragraph one of subsection
(b) of section six thousand five hundred two of this article;
  (4)  [the  reinsurance agreement must be submitted to the commissioner
or superintendent of insurance of the mortgage  insurer's  domicile  for
approval]  EXCEPT AS OTHERWISE REQUIRED BY THE SUPERINTENDENT, THE REIN-
SURANCE AGREEMENT SHALL COMPLY WITH THE REQUIREMENTS FOR  A  REINSURANCE
AGREEMENT AS WOULD BE GENERALLY APPLICABLE IN ORDER TO OBTAIN CREDIT FOR
REINSURANCE  CEDED  TO  AN UNAUTHORIZED REINSURER INVOLVING PROPERTY AND
CASUALTY RISKS; and
  (5) [the reinsurance agreement must provide that:
  (A) it is not valid until approved by the commissioner or  superinten-
dent of insurance of the mortgage insurer's domicile;
  (B)  any  amendments to the reinsurance agreement must be submitted to
the commissioner or superintendent of insurance of the  mortgage  insur-
er's domicile for approval prior to becoming effective;
  (C) the ceding mortgage insurer has a right to terminate the ceding of
additional  insurance  under  the reinsurance agreement if so ordered by
the superintendent;
  (D) the superintendent has the right  to  request  from  the  assuming
reinsurer information concerning its financial condition;
  (E)  the  assuming  reinsurer  shall  notify the superintendent of any
material change in its financial condition; and
  (F) such agreements and any amendments thereto shall  be  provided  to
the superintendent, who shall have the right to disapprove of any agree-
ment.  Such  agreements  and  any  amendments  thereto  shall  be deemed
approved by the superintendent unless  disapproved  within  thirty  days
from  the  date  provided  to  the superintendent. If the superintendent
disapproves of any reinsurance agreement or amendments thereto the mort-
gage insurer shall not receive credit for such reinsurance as  an  asset
or  as  a  reduction  from  liabilities  in its financial statement] THE
ASSUMING INSURER AND THE TERMS OF THE REINSURANCE SHALL COMPLY WITH SUCH
OTHER REQUIREMENTS AS PRESCRIBED BY THE SUPERINTENDENT.
  S 2. This act shall take effect immediately.

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