S T A T E O F N E W Y O R K
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10442
I N A S S E M B L Y
May 27, 2016
___________
Introduced by M. of A. CAHILL -- (at request of the Department of Finan-
cial Services) -- read once and referred to the Committee on Insurance
AN ACT to amend the insurance law, in relation to insurers deemed to be
in a hazardous financial condition
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 1104 of the insurance law, the section heading as
amended and subsections (c) and (d) as added by chapter 235 of the laws
of 1989, and the opening paragraph of subsection (c) as amended by chap-
ter 598 of the laws of 2000, is amended to read as follows:
S 1104. Revocation or suspension of license; restriction of license
authority or limitation on premiums written. (a) The superintendent may
revoke any license, CERTIFICATE OF AUTHORITY, OR REGISTRATION issued to
any foreign or alien insurer to do an insurance business in this state
if, after notice to and hearing, [he] THE SUPERINTENDENT finds that such
insurer has failed to comply with any requirement imposed upon it by the
provisions of this chapter and if in [his] THE SUPERINTENDENT'S judgment
such revocation is reasonably necessary to protect the interests of the
people of this state. The superintendent may, in his OR HER discretion,
reinstate any such license, CERTIFICATE OF AUTHORITY, OR REGISTRATION if
[he] THE SUPERINTENDENT finds that a ground for such revocation no long-
er exists.
(b) The superintendent shall revoke the certificate of authority of
any corporation or agent convicted of violating section two thousand six
hundred three of this chapter.
(c) [The] (1) NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER, THE
superintendent may [suspend the license, restrict the license authority,
or limit the amount of premiums written in this state of any accident
and health insurance company, property/casualty insurance company,
co-operative property/casualty insurance company, title insurance compa-
ny, mortgage guaranty insurance company, reciprocal insurer, Lloyds
underwriters or nonprofit property/casualty insurance company] TAKE ONE
OR MORE OF THE ACTIONS SPECIFIED IN SUBPARAGRAPH (B) OF PARAGRAPH FOUR
OF THIS SUBSECTION AGAINST AN INSURER, except those insurers subject to
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14173-02-6
A. 10442 2
the provisions of subsection (c) of section two thousand three hundred
forty-three of this chapter, if after a hearing on a record, unless
waived by the affected insurer, the superintendent determines that such
insurer's surplus to policyholders is not adequate in relation to the
insurer's outstanding liabilities or to its financial needs OR IF THE
SUPERINTENDENT OTHERWISE DETERMINES THAT THE CONTINUED OPERATION OF THE
INSURER MIGHT BE DEEMED TO BE HAZARDOUS TO THE INSURER'S POLICYHOLDERS,
CREDITORS, OR TO THE GENERAL PUBLIC.
(2) All matters pertaining to a proceeding or determination pursuant
to this subsection shall be confidential and not subject to subpoena or
public inspection under article six of the public officers law or any
other statute, except to the extent that the superintendent finds
release of information necessary to protect the public. The hearing
shall be initiated within twenty days after written notice to the insur-
er. Any determination pursuant to this subsection shall contain findings
specifying the factors deemed significant in regard to the particular
insurer, and shall set forth the reasons supporting the suspension,
restriction or limitation ordered by the superintendent.
(3) The SUPERINTENDENT MAY CONSIDER THE following factors [shall be
considered by the superintendent] in making [such] A determination AS TO
WHETHER AN INSURER'S SURPLUS TO POLICYHOLDERS IS ADEQUATE IN RELATION TO
THE INSURER'S OUTSTANDING LIABILITIES OR TO ITS FINANCIAL NEEDS:
[(1)] (A) the size of the insurer as measured by its admitted assets,
capital and surplus to policyholders, reserves, premium writings, insur-
ance in force and other appropriate criteria, with such surplus to poli-
cyholders for foreign insurers adjusted in accordance with section one
thousand four hundred thirteen of this chapter;
[(2)] (B) the extent to which the insurer's business is diversified
among the several kinds of insurance;
[(3)] (C) the number and size of risks insured in each kind of insur-
ance and the insurer's loss experience in regard to such risks;
[(4)] (D) the extent of geographical dispersion of the insurer's
risks;
[(5)] (E) the nature and extent of the insurer's reinsurance program;
[(6)] (F) the quality, diversification and liquidity of the insurer's
investment portfolio;
[(7)] (G) the recent past and projected future trends in regard to the
insurer's loss experience and in the size of the insurer's surplus to
policyholders;
[(8)] (H) the surplus to policyholders maintained by other comparable
insurers;
[(9)] (I) the adequacy of the insurer's reserves; and
[(10)] (J) the quality and liquidity of investments in subsidiaries
made pursuant to this chapter.
(4)(A) THE SUPERINTENDENT MAY CONSIDER THE FOLLOWING STANDARDS, EITHER
SINGLY OR A COMBINATION OF TWO OR MORE, TO DETERMINE WHETHER THE CONTIN-
UED OPERATION OF ANY INSURER MIGHT BE DEEMED TO BE HAZARDOUS TO ITS
POLICYHOLDERS, CREDITORS, OR TO THE GENERAL PUBLIC:
(I) ADVERSE FINDINGS REPORTED IN FINANCIAL CONDITION AND MARKET
CONDUCT EXAMINATION REPORTS, AUDIT REPORTS, ACTUARIAL OPINIONS, REPORTS,
OR SUMMARIES, OR OTHER REPORTS;
(II) THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS INSURANCE
REGULATORY INFORMATION SYSTEM AND ITS OTHER FINANCIAL ANALYSIS SOLVENCY
TOOLS AND REPORTS;
(III) WHETHER THE INSURER HAS MADE ADEQUATE PROVISION, ACCORDING TO
PRESENTLY ACCEPTED ACTUARIAL STANDARDS OF PRACTICE, FOR THE ANTICIPATED
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CASH FLOWS REQUIRED BY THE CONTRACTUAL OBLIGATIONS AND RELATED EXPENSES
OF THE INSURER, WHEN CONSIDERED IN LIGHT OF THE ASSETS HELD BY THE
INSURER WITH RESPECT TO SUCH RESERVES AND RELATED ACTUARIAL ITEMS,
INCLUDING THE INVESTMENT EARNINGS ON SUCH ASSETS, AND THE CONSIDERATIONS
ANTICIPATED TO BE RECEIVED AND RETAINED UNDER SUCH POLICIES AND
CONTRACTS;
(IV) THE ABILITY OF AN ASSUMING REINSURER TO PERFORM AND WHETHER THE
INSURER'S REINSURANCE PROGRAM PROVIDES SUFFICIENT PROTECTION FOR THE
INSURER'S REMAINING SURPLUS AFTER TAKING INTO ACCOUNT THE INSURER'S CASH
FLOW AND THE CLASSES OF BUSINESS WRITTEN AS WELL AS THE FINANCIAL CONDI-
TION OF THE ASSUMING REINSURER;
(V) WHETHER THE INSURER'S OPERATING LOSS IN THE LAST TWELVE-MONTH
PERIOD OR ANY SHORTER PERIOD OF TIME, INCLUDING NET CAPITAL GAIN OR
LOSS, CHANGE IN NON-ADMITTED ASSETS, AND CASH DIVIDENDS PAID TO SHARE-
HOLDERS, IS GREATER THAN FIFTY PERCENT OF THE INSURER'S REMAINING
SURPLUS TO POLICYHOLDERS IN EXCESS OF THE MINIMUM REQUIRED;
(VI) WHETHER THE INSURER'S OPERATING LOSS IN THE LAST TWELVE-MONTH
PERIOD OR ANY SHORTER PERIOD OF TIME, EXCLUDING NET CAPITAL GAINS, IS
GREATER THAN TWENTY PERCENT OF THE INSURER'S REMAINING SURPLUS TO POLI-
CYHOLDERS IN EXCESS OF THE MINIMUM REQUIRED;
(VII) WHETHER A REINSURER, AN OBLIGOR, ANY ENTITY IN THE INSURER'S
HOLDING COMPANY SYSTEM, AS DEFINED IN PARAGRAPH SIX OF SUBSECTION (A) OF
SECTION ONE THOUSAND FIVE HUNDRED ONE OF THIS CHAPTER, OR ANY SUBSIDIARY
OF AN INSURER, IS INSOLVENT, THREATENED WITH INSOLVENCY, OR DELINQUENT
IN PAYMENT OF ITS MONETARY OR OTHER OBLIGATIONS, AND WHICH IN THE OPIN-
ION OF THE SUPERINTENDENT MAY AFFECT THE SOLVENCY OF THE INSURER;
(VIII) CONTINGENT LIABILITIES, PLEDGES, OR GUARANTEES THAT EITHER
INDIVIDUALLY OR COLLECTIVELY INVOLVE A TOTAL AMOUNT THAT IN THE SUPER-
INTENDENT'S OPINION MAY AFFECT THE INSURER'S SOLVENCY;
(IX) WHETHER ANY PERSON WHO CONTROLS AN INSURER, AS DEFINED IN PARA-
GRAPH TWO OF SUBSECTION (A) OF SECTION ONE THOUSAND FIVE HUNDRED ONE OF
THIS CHAPTER, IS DELINQUENT IN THE TRANSMITTING TO, OR PAYMENT OF, NET
PREMIUMS TO THE INSURER;
(X) THE AGE AND COLLECTABILITY OF RECEIVABLES;
(XI) WHETHER THE MANAGEMENT OF AN INSURER, INCLUDING OFFICERS, DIREC-
TORS, OR ANY OTHER PERSON WHO DIRECTLY OR INDIRECTLY CONTROLS THE OPERA-
TION OF THE INSURER, FAILS TO POSSESS AND DEMONSTRATE THE COMPETENCE,
FITNESS, AND REPUTATION DEEMED NECESSARY TO SERVE THE INSURER IN SUCH
POSITION;
(XII) WHETHER THE INSURER'S MANAGEMENT HAS FAILED TO RESPOND TO AN
INQUIRY OF THE SUPERINTENDENT RELATIVE TO THE INSURER'S CONDITION OR HAS
FURNISHED FALSE AND MISLEADING INFORMATION CONCERNING SUCH AN INQUIRY;
(XIII) WHETHER THE INSURER HAS FAILED TO MEET FINANCIAL FILING
REQUIREMENTS OR FILING REQUIREMENTS PURSUANT TO ARTICLES FIFTEEN,
SIXTEEN, OR SEVENTEEN OF THIS CHAPTER, OR REGULATIONS PROMULGATED THERE-
UNDER, IN THE ABSENCE OF A REASON SATISFACTORY TO THE SUPERINTENDENT;
(XIV) WHETHER THE INSURER'S MANAGEMENT EITHER HAS FILED ANY FALSE OR
MISLEADING SWORN FINANCIAL STATEMENT, OR HAS RELEASED FALSE OR MISLEAD-
ING FINANCIAL STATEMENTS TO LENDING INSTITUTIONS OR TO THE GENERAL
PUBLIC, OR HAS MADE A FALSE OR MISLEADING ENTRY, OR HAS OMITTED AN ENTRY
OF MATERIAL AMOUNT IN THE INSURER'S BOOKS;
(XV) WHETHER THE INSURER HAS GROWN SO RAPIDLY AND TO SUCH AN EXTENT
THAT IT LACKS ADEQUATE FINANCIAL AND ADMINISTRATIVE CAPACITY TO MEET ITS
OBLIGATIONS IN A TIMELY MANNER;
(XVI) WHETHER THE INSURER HAS EXPERIENCED OR IS EXPECTED TO EXPERIENCE
IN THE FORESEEABLE FUTURE CASH FLOW OR LIQUIDITY PROBLEMS;
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(XVII) WHETHER MANAGEMENT HAS ESTABLISHED RESERVES THAT DO NOT COMPLY
WITH MINIMUM STANDARDS ESTABLISHED BY THIS CHAPTER OR REGULATIONS
PROMULGATED THEREUNDER, STATUTORY ACCOUNTING STANDARDS, AS ADOPTED BY
THE SUPERINTENDENT, SOUND ACTUARIAL PRINCIPLES AND STANDARDS OF PRAC-
TICE;
(XVIII) WHETHER MANAGEMENT PERSISTENTLY ENGAGES IN MATERIAL UNDER
RESERVING THAT RESULTS IN ADVERSE DEVELOPMENT;
(XIX) WHETHER ANY TRANSACTION WITH AN AFFILIATE, A SUBSIDIARY, OR A
PARENT FOR WHICH THE INSURER RECEIVES ASSETS OR CAPITAL GAINS, OR BOTH,
DO NOT PROVIDE SUFFICIENT VALUE, LIQUIDITY, OR DIVERSITY TO ASSURE THE
INSURER'S ABILITY TO MEET ITS OUTSTANDING OBLIGATIONS AS THEY MATURE;
AND
(XX) ANY OTHER FINDING DETERMINED BY THE SUPERINTENDENT TO BE HAZARD-
OUS TO THE INSURER'S POLICYHOLDERS, CREDITORS, OR TO THE GENERAL PUBLIC.
(B) IF THE SUPERINTENDENT DETERMINES THAT THE INSURER'S SURPLUS TO
POLICYHOLDERS IS NOT ADEQUATE IN RELATION TO THE INSURER'S OUTSTANDING
LIABILITIES OR TO ITS FINANCIAL NEEDS OR IF THE SUPERINTENDENT OTHERWISE
DETERMINES THAT THE CONTINUED OPERATION OF THE INSURER MAY BE HAZARDOUS
TO ITS POLICYHOLDERS, CREDITORS, OR TO THE GENERAL PUBLIC, THEN THE
SUPERINTENDENT MAY, UPON A DETERMINATION, SUSPEND THE INSURER'S LICENSE,
CERTIFICATE OF AUTHORITY, OR REGISTRATION, RESTRICT THE INSURER'S
LICENSE, CERTIFICATE OF AUTHORITY, OR REGISTRATION, OR ISSUE AN ORDER
REQUIRING THE INSURER TO DO ONE OR MORE OF THE FOLLOWING:
(I) REDUCE THE TOTAL AMOUNT OF PRESENT AND POTENTIAL LIABILITY FOR
POLICY BENEFITS BY REINSURANCE;
(II) REDUCE, SUSPEND, OR LIMIT THE VOLUME OF BUSINESS BEING ACCEPTED
OR RENEWED, OR LIMIT THE AMOUNT OF PREMIUMS WRITTEN IN THIS STATE;
(III) REDUCE GENERAL INSURANCE AND COMMISSION EXPENSES BY SPECIFIED
METHODS;
(IV) INCREASE THE INSURER'S CAPITAL AND SURPLUS;
(V) SUSPEND OR LIMIT THE DECLARATION AND PAYMENT OF DIVIDENDS BY AN
INSURER TO ITS STOCKHOLDERS OR POLICYHOLDERS;
(VI) FILE REPORTS ON A FORM AND IN A MANNER ACCEPTABLE TO THE SUPER-
INTENDENT CONCERNING THE MARKET VALUE OF AN INSURER'S ASSETS;
(VII) LIMIT OR WITHDRAW FROM CERTAIN INVESTMENTS OR DISCONTINUE
CERTAIN INVESTMENT PRACTICES TO THE EXTENT THE SUPERINTENDENT DEEMS
NECESSARY;
(VIII) DOCUMENT THE ADEQUACY OF PREMIUM RATES IN RELATION TO THE RISKS
INSURED;
(IX) FILE, IN ADDITION TO REGULAR ANNUAL STATEMENTS, INTERIM FINANCIAL
REPORTS ON A FORM AND IN A MANNER PRESCRIBED BY THE SUPERINTENDENT,
WHICH MAY INCLUDE A FORM ADOPTED BY THE NATIONAL ASSOCIATION OF INSUR-
ANCE COMMISSIONERS;
(X) CORRECT CORPORATE GOVERNANCE PRACTICE DEFICIENCIES, AND ADOPT AND
UTILIZE GOVERNANCE PRACTICES ACCEPTABLE TO THE SUPERINTENDENT;
(XI) PROVIDE A BUSINESS PLAN TO THE SUPERINTENDENT IN ORDER TO CONTIN-
UE TO TRANSACT BUSINESS IN THIS STATE; OR
(XII) NOTWITHSTANDING ANY OTHER PROVISION OF LAW, ADJUST RATES FOR ANY
NON-LIFE INSURANCE POLICY OR CONTRACT WRITTEN BY THE INSURER THAT THE
SUPERINTENDENT CONSIDERS NECESSARY TO IMPROVE THE INSURER'S FINANCIAL
CONDITION.
(d) [The superintendent shall identify and review those licensed
property/casualty insurers needing immediate or targeted regulatory
attention, and shall include the number of insurers so identified in the
report required by section three hundred thirty-four of this chapter.
Such report shall also include the name of each licensed
A. 10442 5
property/casualty insurer placed in formal conservatorship, rehabili-
tation or liquidation during the preceding year. Nothing herein shall be
construed to restrict or diminish any right or power of the superinten-
dent under any other provision of this chapter] FOR THE PURPOSES OF THIS
SECTION, "INSURER" SHALL MEAN ANY PERSON, FIRM, ASSOCIATION, CORPO-
RATION, OR JOINT-STOCK COMPANY AUTHORIZED TO DO AN INSURANCE BUSINESS IN
THIS STATE BY A LICENSE IN FORCE PURSUANT TO THE PROVISIONS OF THIS
CHAPTER OR EXEMPTED BY THE PROVISIONS OF THIS CHAPTER FROM SUCH LICENS-
ING.
S 2. This act shall take effect immediately.