§ 1405 — Investments of life insurers

New York § 1405

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

Text

§ 1405. Investments of life insurers. (a) The assets of a domestic\ninsurer that is authorized to make investments under this section may be\ninvested in the following types of investments, in addition to\ninvestments otherwise authorized, subject in the case of investments\nmade under this section to the limitations set forth below and the\nprovisions of subsections (c), (d) and (e) of this section:\n (1) Governmental obligations. Obligations, not in default, issued,\nassumed, guaranteed or insured by (i) the United States of America or by\nany agency or instrumentality thereof, (ii) any state of the United\nStates of America, (iii) the District of Columbia, (iv) any territory or\npossession of the United States of America or any other governmental\nunit in the United States, or (v) any agency or instrumentality of any\ngovernmental unit referred to in items (ii), (iii) and (iv) above,\nprovided that, in the case of obligations issued, assumed, guaranteed or\ninsured by any governmental unit referred to in item (iv) above or any\nagency or instrumentality referred to in item (v) above, such\nobligations are by law (statutory or otherwise) payable, as to both\nprincipal and interest, from taxes levied or by law required to be\nlevied or from adequate special revenues pledged or otherwise\nappropriated or by law required to be provided for the purpose of such\npayment, but in no event shall obligations be eligible for investment\nunder this paragraph if payable solely out of special assessments on\nproperties benefited by local improvements.\n (2) Obligations and preferred shares of American institutions. (i)\nObligations, not in default, whether or not secured and with or without\nrecourse, issued, assumed, guaranteed, insured or accepted by American\ninstitutions (or trustees or receivers therefor) and (ii) preferred\nshares of any such institution, provided, however, that after giving\neffect to any such investment in preferred shares of any institution,\nthe aggregate amount of investments in preferred shares of such\ninstitution made under this section shall not exceed two percent of the\ninsurer's admitted assets.\n (3) Obligations secured by real property or interests therein.\nObligations, or participations therein, secured by liens on real\nproperty or interests therein located within the United States and not\neligible under paragraph one or two of this subsection, provided that no\ninsurer making investments under the authority of this section shall\ninvest in or loan upon the security of any one property, under the\nauthority of this paragraph, more than thirty thousand dollars or two\npercent of admitted assets, whichever is the greater.\n (4) Real property or interests therein. Investments in real property\nor interests therein located in the United States, held directly or\nevidenced by partnership interests, stock of corporations (including,\nwithout limitation, subsidiaries engaged or organized to engage\nexclusively in the ownership and management of real property or\ninterests therein), trust certificates or other instruments, and\nacquired (i) as an investment for the production of income or to be\nimproved or developed for such investment purpose, or (ii) for the\nconvenient accommodation of the insurer's business; provided that, after\ngiving effect to any such investment, (I) the aggregate amount of such\ninvestments made under this paragraph and then held by such insurer\nshall not exceed twenty-five percent of the insurer's admitted assets,\n(II) the aggregate amount of investments made under item (i) of this\nparagraph and then held by such insurer shall not exceed twenty percent\nof the insurer's admitted assets, and (III) investments held under item\n(i) above in each property constituting such investment (including\nimprovements thereon) shall not in the aggregate exceed two percent of\nthe insurer's admitted assets, and provided, further, that no investment\nin real property may be made under item (ii) herein, (aa) if, after\ngiving effect thereto, the aggregate amount of such investments then\nheld by the insurer would exceed ten percent of the insurer's admitted\nassets, (bb) without the prior approval of the superintendent, if, after\ngiving effect thereto, the aggregate amount of such investments in each\nproperty constituting such investment (including improvements thereon)\nthen held by such insurer would exceed two percent of the insurer's\nadmitted assets, and (cc) without the prior approval of the\nsuperintendent, in the case of an investment by a domestic insurer in\nreal property located outside this state, if, after giving effect\nthereto, the aggregate amount of such investments in the property\nconstituting such investment (including improvements thereon) would\nexceed one-fifth of one percent of the insurer's admitted assets.\n (5) Personal property or interests therein. Investments in personal\nproperty or interests therein located or used wholly or in part within\nthe United States, held directly or evidenced by partnership interests,\nstock of corporations (including, without limitation, subsidiaries\nengaged or organized to engage exclusively in the ownership and\nmanagement of personal property or interests therein), trust\ncertificates or other instruments, provided that, after giving effect to\nany such investment, (i) the aggregate amount of such investments made\nunder this paragraph and then held by such insurer shall not exceed ten\npercent of the insurer's admitted assets and (ii) investments held under\nthis paragraph in the item of personal property constituting such\ninvestment shall not in the aggregate exceed one percent of the\ninsurer's admitted assets.\n (6) Equity interests. Investments (in addition to investments of the\ntypes described in this paragraph but made or acquired under article\nseventeen, section one thousand four hundred three, paragraphs four and\nfive of this subsection or section four thousand two hundred forty of\nthis chapter) in common shares, partnership interests, trust\ncertificates or other equity interests (other than preferred shares) of\nAmerican institutions, provided that, after giving effect to any\ninvestment made under this paragraph, (i) the aggregate amount of\ninvestments made under this paragraph in the institution in which such\ninvestment is then being made and then held by such insurer shall not\nexceed two percent of the insurer's admitted assets and (ii) the\naggregate amount of all investments made under this paragraph and then\nheld by such insurer shall not exceed twenty percent of the insurer's\nadmitted assets.\n (7) Foreign investments. (A) Canadian investments substantially of the\nsame types as those eligible for investment under paragraphs one through\nsix of this subsection, provided that, after giving effect to any\ninvestment made under this subparagraph, the aggregate amount of\ninvestments made under this subparagraph and then held by such insurer\nshall not exceed ten percent of the insurer's admitted assets, except\nwhere a greater amount is permitted under subparagraph (B) below (in\nwhich case the provisions of this subparagraph shall not be applicable).\n (B) In the case of any domestic insurer that is authorized to do\nbusiness in a foreign country or possession of the United States of\nAmerica or that has outstanding insurance, annuity or reinsurance\ncontracts on lives or risks resident or located in such foreign country\nor possession, investments in such foreign country or possession that\nare substantially of the same types as those eligible for investment\nunder paragraphs one through six of this subsection; provided that,\nexcept where a greater amount is permitted under subparagraph (A) above,\nafter giving effect to any investment in such foreign country or\npossession made under this subparagraph, the aggregate amount of cash in\nthe currency of such foreign country or possession and of investments in\nsuch foreign country or possession made under this subparagraph and then\nheld by such insurer shall not exceed one and one-half times the amount\nof such insurer's reserves and other obligations under such contracts or\nthe amount which such insurer is required by law to invest in such\ncountry or possession, whichever shall be greater.\n (C) Investments in foreign countries, in addition to Canadian\ninvestments and investments permitted by subparagraph (B) of this\nparagraph, that are substantially of the same types as those eligible\nfor investment under paragraphs one through six of this subsection,\nprovided that, after giving effect to any investment made under this\nsubparagraph, the aggregate amount of investments qualified under this\nsubparagraph and then held by such insurer shall not exceed twenty\npercent of the insurer's admitted assets; and\n (i) the issuer or obligor is (I) a jurisdiction, which is rated in one\nof the four highest rating categories by an independent, nationally\nrecognized United States rating agency, (II) any political subdivision\nor other governmental unit of any such jurisdiction, or any agency or\ninstrumentality of any such jurisdiction, political subdivision or other\ngovernmental unit or (III) an institution which is organized under the\nlaws of any such jurisdiction or, in the case of such paragraphs three\nand four of this subsection, the real property is located in any such\njurisdiction; and\n (ii) an insurer shall not make any investment in any foreign country\npursuant to this subparagraph, if such investment, together with all\nother investments in the same foreign country so made and then held by\nsuch insurer, would exceed seven percent of the insurer's admitted\nassets.\n (D) In addition to the foreign investments permitted under the\npreceding subparagraphs of this paragraph, foreign investments that are\nsubstantially of the same types as those eligible for investment under\nparagraphs one through six of this subsection, provided that, after\ngiving effect to any investment made under this subparagraph, the\naggregate amount of investments made under this subparagraph and then\nheld by such insurer shall not exceed six percent of the insurer's\nadmitted assets, and provided further that an insurer shall not make any\ninvestment in any foreign country pursuant to this subparagraph, if such\ninvestment, together with all other investments in the same foreign\ncountry so made and then held by such insurer, would exceed three\npercent of the insurer's admitted assets.\n (8) Other investments. Investments that do not qualify or are not\npermitted under any other paragraph of this subsection, provided that,\nafter giving effect to any such investment, (i) if such investment is of\na type described in paragraph three or five or item (i) of paragraph\nfour or paragraph six of this subsection, the aggregate amount of\ninvestments of such type made under this paragraph and then held by such\ninsurer shall not exceed five percent of the insurer's admitted assets,\n(ii) if such investment is of a type described in paragraph six of this\nsubsection, the aggregate amount of such investments made under this\nparagraph in the institution in which such investment is then being made\nand then held by such insurer shall not exceed two percent of the\ninsurer's admitted assets, (iii) if such investment is of a type\ndescribed in paragraph seven of this subsection, the aggregate amount of\ninvestments of all types described in said paragraph seven and made\nunder this paragraph and then held by such insurer shall not exceed two\npercent of the insurer's admitted assets, and (iv) the aggregate amount\nof all investments made under this paragraph and then held by such\ninsurer shall not exceed fourteen percent (but not more than ten percent\nin investments in institutions not having their principal operations in\nthis state and in real and personal property and interests therein\nlocated outside this state and in mortgages and security interests with\nrespect to real and personal property located outside this state) of the\ninsurer's admitted assets. Investments that are neither interest bearing\nnor income paying, made under this paragraph as provided in paragraph\none of subsection (d) of section one thousand four hundred three of this\narticle, shall be subject to all the provisions of this paragraph and\nmay not be acquired if the aggregate amount thereof immediately after\nsuch acquisition would exceed three percent of the insurer's admitted\nassets.\n (b) (1) For the purposes of this section, article seventeen of this\nchapter and section one thousand four hundred three of this article,\n (A) "aggregate amount" of investments means, subject to the provisions\nof the final sentence of this subsection, the aggregate depreciated cost\nthereof, in the case of investments of the types described in paragraphs\nfour and five of subsection (a) of this section, and the aggregate cost\nthereof in the case of investments of other types;\n (B) "admitted assets" means the amount thereof as of the last day of\nthe most recently concluded annual statement year subject to the\nfollowing adjustments;\n (i) assets held in separate accounts established under section four\nthousand two hundred forty of this chapter shall be included only to the\nextent of amounts allocated to such separate accounts pursuant to\nparagraph three of subsection (a) of said section four thousand two\nhundred forty; and\n (ii) investments in subsidiaries referred to in subsection (c) of\nsection one thousand seven hundred four of this chapter shall be\nexcluded; and\n (C) the eligibility of any investment under any paragraph of\nsubsection (a) of this section shall be determined at the time of\nacquisition thereof, except that (i) any investment qualified pursuant\nto item (ii) of subparagraph (C) of paragraph seven of such subsection\n(a) shall remain so qualified only at such time or times as the hedging\nrequirements of such item (ii) are met with respect thereto; and (ii)\ninvestments qualified under paragraph eight of said subsection (a) may\nbe requalified at a later date under another paragraph of said\nsubsection (a), if the relevant conditions are satisfied at the time of\nsuch requalification. In computing depreciated cost of investments of\nthe types described in paragraphs four and five of subsection (a) of\nthis section, depreciation may be computed at a rate no greater than\nthat permitted for federal income tax purposes and, in the case of\ninvestments described in said paragraph four, the cost of an investment\nshall be depreciated over its estimated useful life, not to exceed fifty\nyears.\n (2) In computing the "aggregate amount" of investments, as provided in\nthe first sentence of paragraph one of this subsection, (A) valuation of\ninvestments acquired under paragraph four of subsection (a) of this\nsection shall also be subject to any regulation with respect to such\nvaluation that the superintendent may prescribe and (B) investments of\ninvestment subsidiaries as defined in section one thousand seven hundred\ntwo of this chapter shall be valued as though the parent corporation\nowned the assets of such subsidiaries directly instead of the stock of\nsuch subsidiaries and shall be subject to the provisions of subsection\n(d) of section one thousand seven hundred four of this chapter.\n (c) In addition to other requirements of law (statutory or otherwise)\nthat affect the standard of care of directors and officers of\ncorporations, in making investments under this section, directors and\nofficers shall perform their duties in good faith and with that degree\nof care that an ordinarily prudent individual in a like position would\nuse under similar circumstances. In the case of investments made under\nparagraphs two and six of subsection (a) of this section and investments\nthat are substantially of the same types as those eligible for\ninvestment under such paragraphs, but are made under paragraph seven of\nsuch subsection, the institution that determines the eligibility of any\nsuch investment shall be a solvent institution whose obligations, if\nany, are not in default as to principal or interest, unless such\ninvestment is necessary to protect an investment theretofore made in the\nsecurities of such institution.\n (d) After giving effect to any investment of a type described in item\n(i), (ii) or (iii) below, the aggregate amount of (i) investments in\nsubsidiaries charged against the limit contained in paragraph one of\nsubsection (a) of section one thousand seven hundred five of this\nchapter, (ii) investments made under item (i) of paragraph four and\nparagraphs five and six of subsection (a) of this section, and (iii)\ninvestments of the types described in said item (i) of paragraph four\nand such paragraphs five and six but made under paragraph seven or eight\nof subsection (a) of this section, shall not exceed forty percent of the\ninsurer's admitted assets plus, to the extent permitted by the\nsuperintendent, investments (not exceeding five percent of the insurer's\nadmitted assets) of the types referred to above in (I) new business\nenterprises located in the state; (II) technologically oriented\nbusinesses located in the state; (III) minority-owned businesses located\nin the state; (IV) businesses located in areas in the state that have\nexperienced a high rate of chronic unemployment; and (V) development of\nhousing in the state for families and persons of low income. If, at the\ntime of the making of any investment of a type described in item (i),\n(ii) or (iii) of the first sentence of this subsection, the aggregate\namount of investments of the types described in clauses (I), (II),\n(III), (IV) and (V) of such sentence made by the insurer on or after the\ndate on which this subdivision becomes effective and then held by the\ninsurer is one percent or more of its admitted assets, then the forty\npercent figure in such sentence shall be deemed to be increased by an\nequal amount up to a maximum of forty-five percent, thus providing for a\nmaximum of investments described in items (i), (ii) and (iii) herein of\nfifty percent of total admitted assets.\n (e) No domestic life insurer shall hold a direct or indirect ownership\ninterest in a risk retention group, as defined in article fifty-nine of\nthis chapter, other than in a risk retention group all of whose members\nare insurance companies.\n (f) Any investment may be denominated in a currency other than United\nStates dollars, provided that the aggregate amount of all such\ninvestments (other than investments made pursuant to subparagraphs (A)\nand (B) of paragraph seven of subsection (a) of this section) that are\nnot effectively hedged, substantially in their entirety, against the\nUnited States dollar, reduced, on a currency by currency basis, by the\namount of foreign-currency denominated insurance liabilities may not\nexceed four percent of the insurer's admitted assets. An investment\nshall be deemed to be effectively hedged, substantially in its entirety,\nif it has been hedged:\n (1) for an insurer that has an approved derivative use plan under\nsection one thousand four hundred ten of this article, pursuant to\ncontracts or agreements entered into under and in accordance with that\nderivative use plan and subject to the counterparty exposure limits\nthereunder; or\n (2) for any other insurer, pursuant to contracts or agreements\n(derivative transactions) which are cleared through a "derivatives\nclearinghouse" or entered into with a "qualified counterparty", as those\nterms are defined pursuant to subsection (f) of section one thousand\nfour hundred ten of this article.\n