NY State Senate Bill 2015-S6789

Senate Bill S6789

Signed By Governor

2015-2016 Legislative Session

Authorizes the superintendent of financial services to suspend crediting of underwriting earnings for a fiscal year for the purpose of accumulating a subscriber's operating reserve

download bill text pdf

Archive: Last Bill Status - Signed by Governor

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
Nov 14, 2016	signed chap.433
Nov 02, 2016	delivered to governor
Jun 14, 2016	returned to senate passed assembly ordered to third reading cal.816 substituted for a9337a referred to insurance delivered to assembly passed senate
Jun 08, 2016	amended on third reading 6789a
Jun 06, 2016	advanced to third reading
Jun 02, 2016	2nd report cal.
Jun 01, 2016	1st report cal.1285
Feb 23, 2016	referred to insurance

Votes

- Jun 14, 2016 - Floor Vote
  S6789
  
  61
  
  Aye
  
  0
  
  Nay
  
  0
  
  Absent
  
  2
  
  Excused
  
  0
  
  Abstained
  - - Floor Vote: Jun 14, 2016
      
      aye (61)
      
      Addabbo Jr.
      
      Akshar
      
      Amedore
      
      Avella
      
      Bonacic
      
      Boyle
      
      Breslin
      
      Carlucci
      
      Comrie
      
      Croci
      
      DeFrancisco
      
      Dilan
      
      Espaillat
      
      Farley
      
      Felder
      
      Flanagan
      
      Funke
      
      Gallivan
      
      Gianaris
      
      Golden
      
      Griffo
      
      Hamilton
      
      Hannon
      
      Hassell-Thompson
      
      Hoylman-Sigal
      
      Kaminsky
      
      Kennedy
      
      Klein
      
      Krueger
      
      LaValle
      
      Lanza
      
      Larkin
      
      Latimer
      
      Little
      
      Marcellino
      
      Marchione
      
      Martins
      
      Montgomery
      
      Murphy
      
      Nozzolio
      
      O'Mara
      
      Ortt
      
      Panepinto
      
      Peralta
      
      Perkins
      
      Persaud
      
      Ranzenhofer
      
      Ritchie
      
      Rivera
      
      Robach
      
      Sanders Jr.
      
      Savino
      
      Serino
      
      Serrano
      
      Seward
      
      Squadron
      
      Stavisky
      
      Stewart-Cousins
      
      Valesky
      
      Venditto
      
      Young
      
      excused (2)
      
      Diaz
      
      Parker
  Jun 1, 2016 - Insurance Committee Vote
  S6789
  
  17
  
  Aye
  
  0
  
  Nay
  
  2
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Insurance Committee Vote: Jun 1, 2016
      
      aye (17)
      
      Avella
      
      Breslin
      
      Carlucci
      
      Golden
      
      Hamilton
      
      Kennedy
      
      Lanza
      
      Larkin
      
      Latimer
      
      Martins
      
      Murphy
      
      O'Mara
      
      Panepinto
      
      Parker
      
      Serino
      
      Seward
      
      Venditto
      
      aye wr (2)
      
      LaValle
      
      Sanders Jr.

Bill Amendments

Original

A (Active)

2015-S6789 - Details

Law Section:: Insurance Law
Laws Affected:: Amd §6109, Ins L

2015-S6789 - Summary

Authorizes the superintendent of financial services to suspend crediting of underwriting earnings for a fiscal year for the purpose of accumulating a subscriber's operating reserve.

2015-S6789 - Sponsor Memo

                                 BILL NUMBER:  S6789

 TITLE OF BILL :  An act to amend the insurance law, in relation to
authorizing the superintendent of financial services to suspend
crediting of underwriting earnings for a fiscal year for the purpose
of accumulating a subscriber's operating reserve

 PURPOSE OR GENERAL IDEA OF BILL : To authorize the superintendent of
the department of financial services to suspend continued funding of
subscriber operating reserves in appropriate circumstances.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1 would amend section 6109 of the insurance law entitled
"Subscriber's operating reserve". Section 2 of the bill provides for
an immediate effective date.

 EXISTING LAW : Under current law, the superintendent may approve
alternative methods for accumulating Subscriber operating reserves
upon application from a reciprocal's Attorney-in-Fact. However, the
existing law does not specifically provide that the Superintendent s
discretion would include suspension of further crediting of
underwriting earnings to a Subscribers operating reserve.

 JUSTIFICATION : Municipal Insurance Reciprocals are licensed by the
State to provide a long term stable and secure market for New York

States local governments. A priority of municipal reciprocals is to
avoid the volatility in pricing which is an anathema for municipal
budgets.

An existing requirement of the Insurance Law's statutory provisions
for financing and funding of all reciprocals, including municipal
reciprocals since 1986, requires 25% of each year underwriting
earnings to be credited to member operating reserves. A Subscriber
may, however, upon withdrawal from membership, and after giving notice
to the Attorney-in-Fact, withdraw the amount of its operating reserve.
As the amounts in municipal subscriber operating reserves have built
up over time, they can provide an artificial incentive for New York's
local governments to exit a municipal reciprocal insurer, if only to
access those funds which have accumulated in the operating reserve.
This likelihood is even more acute in the current fiscal environment
where municipal budgets are subject to a property tax cap and to
exploding expenditures for pension and health benefits which municipal
leaders and legislatures have virtually no control over.

The New York Municipal Insurance Reciprocal (NYMIR) has raised this
issue with the Department over the past several years and inquired
whether the Superintendent could exercise the existing ("approve other
methods") authority pursuant to section 6109 (a) (3) to address this
problem which will only continue to grow as NYMIR matures further. The
Department has concluded that the existing statute provides
insufficient authority to permit the Superintendent to suspend further
contribution to member operating reserves. This legislation would
specifically authorize the Superintendent, on an annual basis and only
when requested by the Attorney-in-Fact for a municipal reciprocal, to
suspend further crediting of such underwriting earnings to operating
reserves, and to instead redirect those funds directly to municipal
subscribers in the year immediately following the fiscal year for
which said underwriting earnings were generated.

 PRIOR LEGISLATIVE HISTORY : New Bill.

 FISCAL IMPLICATIONS : None, except that it would have a salutatory
effect on the more than 860 local government members of NYMIR in any
future year in which the reciprocal generates underwriting earnings,
and the Superintendent would agree that the financial position of
NYMIR (currently A Excellent rated by AM Best) would support a direct
return of earnings to members.

 EFFECTIVE DATE : Immediately.

2015-S6789 - Bill Text download pdf

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

    S. 6789                                                  A. 9337

                      S E N A T E - A S S E M B L Y

                            February 23, 2016
                               ___________

IN SENATE -- Introduced by Sen. BRESLIN -- read twice and ordered print-
  ed, and when printed to be committed to the Committee on Insurance

IN ASSEMBLY -- Introduced by M. of A. McDONALD -- read once and referred
  to the Committee on Insurance

AN ACT to amend the insurance law, in relation to authorizing the super-
  intendent  of  financial services to suspend crediting of underwriting
  earnings for a fiscal year for the purpose of accumulating a subscrib-
  er's operating reserve

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

  Section  1.  Section  6109  of  the  insurance  law, subsection (a) as
amended by chapter 138 of the laws  of  1987,  is  amended  to  read  as
follows:
  S 6109. Subscriber's operating reserve. (a) (1) Every subscriber of an
authorized  reciprocal  insurer  in  which  subscribers  are  subject to
contingent liability shall accumulate a minimum operating reserve, to be
credited to such subscriber on the books and records of such  reciprocal
insurer,  by  authorizing the attorney-in-fact to credit to such account
at the end of the fiscal year of such reciprocal insurer, an amount  not
less  than one quarter of such subscriber's underwriting earnings during
such period.
  (2) Such accumulation shall be made so long as such subscriber's oper-
ating reserve is less than twice the amount of annual premiums in force.
  (3) Notwithstanding the foregoing, the superintendent may, upon appli-
cation from the attorney-in-fact[,]:
  (A) approve other methods for accumulating such subscriber's operating
reserve; OR
  (B) PERMIT THE SUSPENSION OF THE ACCUMULATION OF THE OPERATING RESERVE
FOR A FISCAL YEAR PROVIDED THAT  THOSE  EARNINGS  ARE  RETURNED  TO  THE
SUBSCRIBER  IN  ACCORDANCE  WITH  SUBPARAGRAPH  (B)  OF PARAGRAPH TWO OF
SUBSECTION (C) OF THIS SECTION.
  (b) Any authorized reciprocal insurer may, pursuant to  the  terms  of
the  subscriber's  agreement and to any action of its advisory committee

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

                                                           LBD14124-01-6

S. 6789                             2                            A. 9337

authorized thereunder, require its subscribers to  accumulate  subscrib-
er's operating reserves in excess of the minimum specified in subsection
(a)  [hereof]  OF THIS SECTION and may require a longer period of notice
for  the  withdrawal of all or any part of such reserve than that herein
specified.
  (c) (1) No subscriber shall have a secured or preferred claim  against
any  assets  of  the  reciprocal  insurer  arising out of such operating
reserve, but all assets held by such insurer shall be available for  the
payment  of  claims  of  policyholders  and creditors of such reciprocal
insurer in preference to any claim for withdrawal  by  a  subscriber  as
such.
  (2)  Any subscriber's operating reserve accumulated by any such recip-
rocal insurer shall be maintained at all times, except that:
  (A) a subscriber may, upon withdrawal from membership and cancellation
of all insurance contracts held by [him] THE SUBSCRIBER in such insurer,
and after giving to the attorney-in-fact written notice of withdrawal at
least sixty days in advance, withdraw the amount of [his] THE  SUBSCRIB-
ER'S  operating  reserve  less such surrender charges as may be deducted
pursuant to the subscriber's agreement; OR
  (B) WHERE THE SUPERINTENDENT HAS DETERMINED THAT THE SUSPENSION OF THE
ACCUMULATION OF THE OPERATING RESERVE WOULD NOT BE  HARMFUL  TO  POLICY-
HOLDERS  OR  THE  PEOPLE OF THIS STATE, THE ATTORNEY-IN-FACT MAY, IN THE
FISCAL YEAR FOLLOWING THE YEAR FOR WHICH THE SUSPENSION OF  THE  ACCUMU-
LATION OF THE OPERATING RESERVE WAS AUTHORIZED, RETURN TO EACH SUBSCRIB-
ER  AN  AMOUNT EQUAL TO THE UNDERWRITING EARNINGS THAT WOULD HAVE OTHER-
WISE BEEN CREDITED TO THE SUBSCRIBER'S OPERATING RESERVE.
  (3) No [such] withdrawal shall be permitted after an order  of  liqui-
dation  of, or the appointment of a receiver or liquidating trustee for,
any such reciprocal insurer.
  S 2. This act shall take effect immediately.

2015-S6789A (ACTIVE) - Details

Law Section:: Insurance Law
Laws Affected:: Amd §6109, Ins L

2015-S6789A (ACTIVE) - Summary

Authorizes the superintendent of financial services to suspend crediting of underwriting earnings for a fiscal year for the purpose of accumulating a subscriber's operating reserve.

2015-S6789A (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S6789A

 TITLE OF BILL :

An act to amend the insurance law, in relation to authorizing the
superintendent of financial services to suspend crediting of
underwriting earnings for a fiscal year for the purpose of
accumulating a subscriber's operating reserve

 PURPOSE OR GENERAL IDEA OF BILL :

To authorize the superintendent of the department of financial
services to suspend continued funding of subscriber operating reserves
in appropriate circumstances.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1 would amend section 6109 of the insurance law entitled
"Subscriber's operating reserve". Section 2 of the bill provides for
an immediate effective date.

 EXISTING LAW :

Under current law, the superintendent may approve alternative methods
for accumulating Subscriber operating reserves upon application from a
reciprocal's Attorney-in-Fact. However, the existing law does not

specifically provide that the Superintendent s discretion would
include suspension of further crediting of underwriting earnings to a
Subscribers operating reserve.

 JUSTIFICATION :

Municipal Insurance Reciprocals are licensed by the State to provide a
long term stable and secure market for New York States local
governments. A priority of municipal reciprocals is to avoid the
volatility in pricing which is an anathema for municipal budgets.

An existing requirement of the Insurance Law's statutory provisions
for financing and funding of all reciprocals, including municipal
reciprocals since 1986, requires 25% of each year underwriting
earnings to be credited to member operating reserves. A Subscriber
may, however, upon withdrawal from membership, and after giving notice
to the Attorney-in-Fact, withdraw the amount of its operating reserve.
As the amounts in municipal subscriber operating reserves have built
up over time, they can provide an artificial incentive for New York's
local governments to exit a municipal reciprocal insurer, if only to
access those funds which have accumulated in the operating reserve.
This likelihood is even more acute in the current fiscal environment
where municipal budgets are subject to a property tax cap and to
exploding expenditures for pension and health benefits which municipal
leaders and legislatures have virtually no control over.

The New York Municipal Insurance Reciprocal (NYMIR) has raised this
issue with the Department over the past several years and inquired
whether the Superintendent could exercise the existing ("approve other
methods") authority pursuant to section 6109 (a) (3) to address this
problem which will only continue to grow as NYMIR matures further. The
Department has concluded that the existing statute provides
insufficient authority to permit the Superintendent to suspend further
contribution to member operating reserves. This legislation would
specifically authorize the Superintendent, on an annual basis and only
when requested by the Attorney-in-Fact for a municipal reciprocal, to
suspend further crediting of such underwriting earnings to operating
reserves, and to instead redirect those funds directly to municipal
subscribers in the year immediately following the fiscal year for
which said underwriting earnings were generated.
 PRIOR LEGISLATIVE HISTORY :

New Bill.

 FISCAL IMPLICATIONS :

None, except that it would have a salutatory effect on the more than
860 local government members of NYMIR in any future year in which the
reciprocal generates underwriting earnings, and the Superintendent
would agree that the financial position of NYMIR (currently A
Excellent rated by AM Best) would support a direct return of earnings
to members.

 EFFECTIVE DATE :
Immediately.

2015-S6789A (ACTIVE) - Bill Text download pdf

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

                                 6789--A
    Cal. No. 1285

                            I N  S E N A T E

                            February 23, 2016
                               ___________

Introduced  by  Sen. BRESLIN -- read twice and ordered printed, and when
  printed to be committed to the  Committee  on  Insurance  --  reported
  favorably  from  said  committee,  ordered to first and second report,
  ordered to a third reading, amended and ordered  reprinted,  retaining
  its place in the order of third reading

AN ACT to amend the insurance law, in relation to authorizing the super-
  intendent  of  financial services to suspend crediting of underwriting
  earnings for a fiscal year for the purpose of accumulating a subscrib-
  er's operating reserve

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

  Section  1.  Section  6109  of  the  insurance  law, subsection (a) as
amended by chapter 138 of the laws  of  1987,  is  amended  to  read  as
follows:
  S 6109. Subscriber's operating reserve. (a) (1) Every subscriber of an
authorized  reciprocal  insurer  in  which  subscribers  are  subject to
contingent liability shall accumulate a minimum operating reserve, to be
credited to such subscriber on the books and records of such  reciprocal
insurer,  by  authorizing the attorney-in-fact to credit to such account
at the end of the fiscal year of such reciprocal insurer, an amount  not
less  than one quarter of such subscriber's underwriting earnings during
such period.
  (2) Such accumulation shall be made so long as such subscriber's oper-
ating reserve is less than twice the amount of annual premiums in force.
  (3) Notwithstanding the foregoing, the superintendent may, upon appli-
cation from the attorney-in-fact[,]:
  (A) approve other methods for accumulating such subscriber's operating
reserve; OR
  (B) PERMIT THE SUSPENSION OF THE ACCUMULATION OF THE OPERATING RESERVE
FOR A FISCAL YEAR PROVIDED THAT  THOSE  EARNINGS  ARE  RETURNED  TO  THE
SUBSCRIBER  IN  ACCORDANCE  WITH  SUBPARAGRAPH  (B)  OF PARAGRAPH TWO OF
SUBSECTION (C) OF THIS SECTION.
  (b) Any authorized reciprocal insurer may, pursuant to  the  terms  of
the  subscriber's  agreement and to any action of its advisory committee

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

                      [ ] is old law to be omitted.
                                                           LBD14124-02-6

S. 6789--A                          2

authorized thereunder, require its subscribers to  accumulate  subscrib-
er's operating reserves in excess of the minimum specified in subsection
(a)  [hereof]  OF THIS SECTION and may require a longer period of notice
for  the  withdrawal of all or any part of such reserve than that herein
specified.
  (c) (1) No subscriber shall have a secured or preferred claim  against
any  assets  of  the  reciprocal  insurer  arising out of such operating
reserve, but all assets held by such insurer shall be available for  the
payment  of  claims  of  policyholders  and creditors of such reciprocal
insurer in preference to any claim for withdrawal  by  a  subscriber  as
such.
  (2)  Any subscriber's operating reserve accumulated by any such recip-
rocal insurer shall be maintained at all times, except that:
  (A) a subscriber may, upon withdrawal from membership and cancellation
of all insurance contracts held by [him] THE SUBSCRIBER in such insurer,
and after giving to the attorney-in-fact written notice of withdrawal at
least sixty days in advance, withdraw the amount of [his] THE  SUBSCRIB-
ER'S  operating  reserve  less such surrender charges as may be deducted
pursuant to the subscriber's agreement; OR
  (B) WHERE THE SUPERINTENDENT HAS DETERMINED THAT THE SUSPENSION OF THE
ACCUMULATION OF THE OPERATING RESERVE WOULD NOT BE  HARMFUL  TO  POLICY-
HOLDERS  OR  THE  PEOPLE OF THIS STATE, THE ATTORNEY-IN-FACT MAY, IN THE
FISCAL YEAR FOLLOWING THE YEAR FOR WHICH THE SUSPENSION OF  THE  ACCUMU-
LATION OF THE OPERATING RESERVE WAS AUTHORIZED, RETURN TO EACH SUBSCRIB-
ER  AN  AMOUNT EQUAL TO THE UNDERWRITING EARNINGS THAT WOULD HAVE OTHER-
WISE BEEN CREDITED TO THE SUBSCRIBER'S OPERATING RESERVE.
  (3) No [such] withdrawal shall be permitted after an order  of  liqui-
dation  of, or the appointment of a receiver or liquidating trustee for,
any such reciprocal insurer OR, NOTWITHSTANDING ANY OTHER  PROVISION  OF
LAW TO THE CONTRARY, WHERE THERE IS AN AUTHORIZED CONTROL LEVEL EVENT OR
A  MANDATORY  CONTROL LEVEL EVENT AS DEFINED IN SECTION THIRTEEN HUNDRED
TWENTY-FOUR OF THIS CHAPTER.
  S 2. This act shall take effect immediately.

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