§ 1403 — Reserve and other investments; certain requirements

New York § 1403

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 14: Investments

Text

§ 1403. Reserve and other investments; certain requirements. (a) If\nthe requirements of section one thousand four hundred two of this\narticle are met:\n (1) any domestic life insurance company may invest its funds in, or\notherwise acquire, or loan upon, only the types of investments specified\nin section one thousand four hundred two, this section, sections one\nthousand four hundred five, one thousand four hundred six, one thousand\nfour hundred ten, four thousand two hundred forty and article seventeen\nof this chapter, subject to the limitations therein contained. The\nprovisions of section one thousand four hundred four of this article\nshall not have any application to investments of life insurance\ncompanies, except to the extent provided in paragraph four of subsection\n(b) of section one thousand four hundred two of this article;\n (2) any domestic corporation subject to article forty-three or\nsixty-four of this chapter and any domestic fraternal benefit society\nsubject to article forty-five of this chapter may invest its funds in,\nor otherwise acquire, or loan upon, only the types of investments\nspecified in section one thousand four hundred two, this section and\nsection one thousand four hundred four of this article, except as may be\nmodified by said article forty-three or sixty-four of this chapter as to\ncorporations organized thereunder or by article forty-five of this\nchapter as to societies organized thereunder. Any such corporation\nsubject to article forty-three or any such society governed by\nsubsection (a) of section forty-five hundred twenty-nine of this chapter\nmay also invest in, or otherwise acquire, subsidiaries to the extent\npermitted by subsection (b) of section one thousand seven hundred one of\nthis chapter. Any such fraternal benefit society may also make policy\nloans under section one thousand four hundred six of this article.\n (b) A domestic charitable annuity society, the investments of which\nare subject to the provisions of section eleven hundred ten of this\nchapter, may invest such of its assets (the investment of which is\ncontrolled by section eleven hundred ten) in, or otherwise acquire, or\nloan upon, only the types of securities specified in section one\nthousand four hundred two, this section and section one thousand four\nhundred four of this article. A retirement system subject to the\nprovisions of article forty-six of this chapter may invest its funds\nonly as provided in article forty-six of this chapter. In addition, a\nretirement system subject to article forty-six may acquire subsidiaries\nunder article seventeen of this chapter and may establish separate\naccounts under section four thousand two hundred forty of this chapter,\nin each case to the extent permitted by article forty-six of this\nchapter.\n (c) If the requirements of section one thousand four hundred two of\nthis article are met, any domestic insurer, other than an insurer\nsubject to subsection (a) or (b) of this section, may, except as set\nforth below, invest its funds in, or otherwise acquire, or loan upon,\nonly the types of investments specified in such section, this section\nand subsection (a) of section one thousand four hundred four of this\narticle (except paragraphs eight and ten of subsection (a) of such\nsection); provided that any such domestic insurer may also invest its\nfunds in, or otherwise acquire or loan upon investments permitted under\nsections one thousand four hundred seven (including investments of the\nclasses described in paragraphs eight and ten of subsection (a) of\nsection one thousand four hundred four), section one thousand four\nhundred eight of this article and article sixteen of this chapter, so\nlong as it maintains cash, investments required by section one thousand\nfour hundred two of this article and reserve investments under\nsubsection (a) of section one thousand four hundred four of this\narticle, free from any lien or pledge, which, when valued in accordance\nwith the provisions of this chapter, shall at least equal fifty percent\nof the aggregate amount of its unearned premium, loss and loss\nadjustment expense reserves as shown by its last sworn statement, annual\nor quarterly, on file with the superintendent. If an insurer, other than\nan accident and health insurance company, maintains cash, investments\nrequired by section one thousand four hundred two of this article and\nreserve investments under subsection (a) of section one thousand four\nhundred four of this article, free from any lien or pledge, which, when\nvalued in accordance with the provisions of this chapter, shall at least\nequal the aggregate of seventy percent of its loss and loss adjustment\nexpense reserves and fifty percent of its unearned premium reserves as\nshown by its last sworn statement, annual or quarterly, on file with the\nsuperintendent, then such insurer, other than an accident and health\ninsurance company, may in addition enter into the types of transactions\nset forth in section one thousand four hundred ten of this article,\nsubject to the limitations set forth in such section. The term "lien or\npledge" as used in this subsection shall not include any deposit of\nsecurities or cash with any government, nor trusteed assets, held in\ntrust for the benefit or protection of all or any class of the\npolicyholders, or policyholders and creditors, of such insurer.\n (d) (1) Except for investments referred to in subsection (e) of this\nsection, investments that are neither interest bearing nor income paying\nshall be purchased or acquired only under, and to the extent permitted\nby, subsection (b) of section one thousand four hundred four of this\narticle (in the case of insurers that make investments under section one\nthousand four hundred four of this article other than insurers making\ninvestments under the authority of subsection (c) of this section),\nparagraph eight of subsection (a) of section one thousand four hundred\nfive of this article (in the case of insurers that make investments\nunder section one thousand four hundred five) or section one thousand\nfour hundred seven of this article (in the case of insurers that make\ninvestments under the authority of subsection (c) of this section),\nhowever, a default in interest or income occurring subsequent to the\npurchase or other acquisition of an investment shall not affect the\nallowance thereof as an admitted asset at the market value thereof.\n (2)(A) Notwithstanding any other provision of this article, a domestic\ninsurer making investments pursuant to paragraph two of subsection (a)\nof this section, a domestic charitable annuity society and a retirement\nsystem making investments pursuant to subsection (b) of this section,\nand a domestic accident and health insurer making investments pursuant\nto subsection (c) of this section may sell call options on securities,\nprovided that:\n (i) such options are traded on a securities exchange registered under\nthe laws of the United States, and\n (ii) the insurer holds, or can immediately acquire through the\nexercise of warrants or conversion rights already owned at a\ncontractually specified price, the underlying securities during the\nentire period the option is outstanding.\n (B) An insurer selling call options on securities pursuant to\nsubparagraph (A) of this paragraph may purchase any such option to\noffset an outstanding option previously sold by the insurer for the same\nkind and amount of securities.\n (e) (1) Nothing contained in this chapter shall prohibit the\nacquisition by any insurer of other securities or property (i) received\nas a dividend or pursuant to a judicial or lawful non-judicial plan of\nreorganization or dissolution or pursuant to a lawful and bona fide\nagreement of bulk reinsurance or consolidation; or (ii) received through\nthe exercise of rights of conversion, stock warrants or stock options\nacquired by it in accordance with this subsection or section one\nthousand four hundred four, one thousand four hundred five, one thousand\nfour hundred seven or one thousand four hundred ten of this article. Nor\nshall anything in this chapter prohibit acquisition of (1) an investment\npermitted under section one thousand four hundred four, one thousand\nfour hundred five, one thousand four hundred seven or one thousand four\nhundred ten of this article because such investment is convertible into\nother securities in which such insurer is not permitted to invest under\nthis chapter, or because such insurer receives in connection with such\ninvestment stock warrants, whether detachable or non-detachable, stock\noptions, stock, property interests or other assets of any kind or (2)\nsecurities or property (real or personal) or any interest therein\nreceived in satisfaction of a debt previously owing to such insurer. If\nany securities or other property received by any insurer in accordance\nwith the first sentence of this paragraph shall consist in whole or in\npart of shares of any institution or of obligations or other property\nnot meeting the requirements specified in section one thousand four\nhundred four (in the case of insurers making investments under the\nauthority of section one thousand four hundred four) or section one\nthousand four hundred five (in the case of insurers making investments\nunder the authority of section one thousand four hundred five) of this\narticle, then any such shares and any such obligations or property so\nreceived shall be disposed of within five years from the time of\nacquisition or before the expiration of such further period or periods\nof time as may be prescribed in writing by the superintendent, unless at\nany time after such acquisition such shares, obligations or property\nshall have met such requirements and the insurer has notified the\nsuperintendent thereof.\n (2) Except as otherwise specifically provided in this chapter,\ninvestments in subsidiaries are not subject to the provisions of this\nsection, section one thousand four hundred four (except paragraph nine\nof subsection (a) thereof) or one thousand four hundred five of this\narticle.\n (f) (1) Subsidiaries of domestic life insurance companies, whether\nacquired under subsection (e) of this section, sections one thousand\nfour hundred five, four thousand two hundred forty, or otherwise, shall\nbe subject to the provisions of article seventeen of this chapter to the\nextent therein provided.\n (2) Subsidiaries of domestic corporations subject to article\nforty-three of this chapter and of domestic retirement systems, whether\nacquired under subsection (e) of this section, section one thousand four\nhundred four, four thousand two hundred forty (in the case of retirement\nsystems), or otherwise, shall be subject to the provisions of article\nseventeen of this chapter to the extent therein provided.\n (g) This section does not prohibit any domestic insurance company from\nacquiring shares under article seventy-one of this chapter or any\ndomestic life insurance company from acquiring shares of its own capital\nstock pursuant to section seven thousand three hundred two of this\nchapter.\n (h) With respect to all transactions between a domestic insurer and\nany person, five percent or more of whose voting securities are held,\ndirectly or indirectly, by such insurer, but which is not a subsidiary,\nthe insurer shall maintain books, accounts and records that disclose\nclearly and accurately the nature and detail of such transactions.\n (i) (1) Except as provided in subparagraph (A) of paragraph two of\nsubsection (a) of section four thousand two hundred forty of this\nchapter, investments made for separate accounts under the provisions of\nsection four thousand two hundred forty of this chapter shall be\ndisregarded, and shall be excluded from admitted assets, in applying the\nquantitative investment limitations contained in this chapter to other\ninvestments.\n (2) Except as provided in subparagraph (A) of paragraph two of\nsubsection (a) or paragraph four of subsection (a) of section four\nthousand two hundred forty of this chapter, the restrictions,\nlimitations and other provisions relating to investments specified in\nthis chapter shall not apply to investments made for separate accounts\nunder the provisions of section four thousand two hundred forty of this\nchapter.\n