§ 6405 — Reserves

New York § 6405

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 64: Title Insurance Corporations

Text

§ 6405. Reserves. (a) Every title insurance corporation organized and\ndoing an insurance business under this article shall establish,\nsegregate and maintain a reinsurance reserve during the period and for\nthe uses and purposes hereinafter provided which shall at all times and\nfor all purposes be deemed and shall constitute unearned portions of the\noriginal premiums and shall be charged as a reserve liability of such\ncorporation in determining its financial condition.\n (1) Beginning June first, nineteen hundred forty-five, the amount of\nsuch reserve shall be cumulative and shall consist of (i) one dollar\nfifty cents for each risk assumed under a binder or policy of insurance\nor any certificate or agreement issued under either of them, plus\none-eightieth of one percent of the face amount of insurance effected\nthereby; and (ii) three percent of the gross fees and premiums received\nby it for guaranteed certificates of title, guaranteed searches and\nguaranteed abstracts of title not included in item (i) of this\nparagraph. That portion of the reinsurance reserve established as\nrequired by this paragraph more than one hundred eighty months prior\nshall be released and shall no longer constitute part of the reinsurance\nreserve and may be used for any corporation purpose.\n (2) Beginning January first, nineteen hundred eighty-six, the amount\nof such reserve provided shall consist of (i) one dollar fifty cents for\neach risk assumed under a binder or policy of insurance or any\ncertificate or agreement issued under either of them, plus one-eightieth\nof one percent of the face amount of insurance effected thereby; and\n(ii) three percent of the gross fees and premiums received by it for\nguaranteed certificates of title, guaranteed searches and guaranteed\nabstracts of title not included in item (i) of this paragraph. "Risk\nassumed" and "insurance effected", as used in this paragraph, shall not\ninclude the face amount of a policy insuring a lender to the extent of\nthe face amount of a policy insuring the owner of an interest in the\nsame land under an owner's policy which provides that any amount paid\nunder the lender's policy shall reduce the amount of, and be deemed a\npayment under, the owner's policy. A title insurer shall release from\nthe reinsurance reserve established as required by this paragraph a sum\nequal to five percent of the amount added to the reserve during each\nyear following the year in which the sum was added, until the entire\namount added has been released.\n (b) Every title insurance corporation organized or authorized to do\nbusiness in this state shall on or before March first each year, file a\nreport in such form as may be prescribed by the superintendent of all\nunpaid losses and claims upon title insurance policies, guaranteed\ncertificates of title, guaranteed searches and guaranteed abstracts of\ntitle (such policies, certificates, searches and abstracts being\nhereafter in this section called "guarantees") of which the corporation\nhas received due notice in writing from or on behalf of the insured or\nthe guaranteed and keep such records thereof as may be prescribed by the\nsuperintendent. Every title insurance corporation doing business under\nthis article shall set up and maintain a loss reserve at least equal to\nthe aggregate estimated amounts due or to become due on account of all\nsuch unpaid losses and claims.\n (c) The reinsurance reserve required by subsection (a) of this section\nshall be maintained as follows:\n Admitted assets of a value at least equal to the amount required for\nsuch reserve shall be continuously held by the corporation as a\nsegregated reserve fund at all times distinct and separate from all its\nother assets. Cash paid into such fund shall, unless invested, be kept\nin legal tender or deposited in a separate account. Securities which are\na part of such fund shall be kept separate from all other securities and\nshall be clearly identified as securities belonging to such fund. The\nnet income and profits derived from such fund investments shall be\ntransferred to the general assets of the corporation. Such corporation\nshall at all times keep a separate record of the cash and securities in\nsuch fund, giving complete identification of the assets belonging at any\ntime to such fund and showing full particulars as to withdrawals and\nadditions. No assets of such fund shall be taken or used in satisfaction\nof any claim against such corporation except as hereinafter provided and\nsuch fund shall be held solely for the purpose of satisfying such\nclaims.\n (d) The funds constituting the reinsurance reserve required by\nsubsection (a) of this section shall be held in cash or invested only in\nthe types of reserve investments that meet the requirements of\nparagraphs one, two, and three of subsection (a) of section one thousand\nfour hundred four of this chapter. In no event shall the investment made\nunder such paragraph three exceed twenty percent of the reinsurance\nreserve at preceding year-end.\n (e) If at any time the superintendent finds from the report of any\nexaminer filed pursuant to section three hundred eleven of this chapter\nor otherwise, after reasonable notice to and hearing of such\ncorporation, that the value of the cash and investments lawfully in the\nreserve fund required to be established, segregated and maintained by\nsubsection (c) of this section is less than the amount required to be\nmaintained at such time pursuant to subsection (a) of this section, the\nsuperintendent shall determine the amount of such impairment and issue a\nwritten requisition to such corporation to remove, repair or make good\nsuch impairment within such period as he shall designate, not less than\nthirty nor more than ninety days from the service of such requisition.\nIf at the expiration of such designated period such impairment has not\nbeen removed, repaired or made good, the superintendent shall order such\ncorporation in writing to cease doing any new business. If such\ncorporation, or any officer thereof, having notice of such order of the\nsuperintendent, shall thereafter transact or participate in the\ntransaction of any new business, such corporation or person shall be in\nviolation of the provisions of this chapter.\n (f) The reinsurance reserve fund required to be maintained pursuant to\nsubsection (c) of this section shall constitute a separate and distinct\ntrust fund for the security of holders of guarantees of the corporation\nas hereinafter provided.\n (g) In the event the superintendent, pursuant to the provisions of\narticle seventy-four of this chapter, obtains an order for the\nrehabilitation or liquidation of a title insurance corporation, he shall\nhave the power:\n (1) to pay out of such reinsurance reserve fund, subject to the\napproval of the court, the claims for losses sustained by the holders of\nguarantees of such corporation pending at the time of the making of such\norder or arising subsequently thereto and up to the time reinsurance is\neffected, and\n (2) to negotiate and enter into a contract with one or more solvent\ncorporations authorized to transact the business of title insurance,\nsubject to the approval of the court, for the reinsurance of the\nobligations under such outstanding guarantees in accordance with their\nterms, covenants and conditions, and\n (3) to pay the cost of reinsurance out of said reinsurance reserve\nfund of such corporation.\n (h) After the payments hereinbefore authorized shall have been made by\nthe superintendent, he shall transfer any balance in said reinsurance\nreserve fund to the general assets of the corporation in rehabilitation\nor liquidation. The reinsuring corporation shall segregate and maintain\nthe reinsurance reserve fund acquired from the superintendent under the\nterms of the agreement of reinsurance except that on the first day of\nthe month next succeeding such acquisition and on the first day of each\nmonth thereafter, one one-hundred-eightieth of the amount of the said\nfund so acquired shall be released therefrom and shall no longer\nconstitute part of the reinsurance reserve fund so acquired and may be\nused for any corporate purpose of the reinsuring corporation.\n (i) In the event the superintendent shall be unable to effect a\ncontract for reinsurance as provided in subsection (g) of this section,\nfor the reinsurance of the outstanding guarantees of a title corporation\nin rehabilitation or liquidation, the reinsurance reserve fund of such\ncorporation shall constitute a separate and distinct trust fund for the\npayment therefrom by the superintendent, on the approval of the court,\nin the following order of preference, (i) of all expenses of proceedings\nincurred under this subsection, (ii) of all allowed claims for losses\nsustained by the holders of guarantees of such corporation which are\nunpaid or pending at the time fixed by the court for the filing of\nclaims and (iii) of all allowed claims for losses which shall be\nasserted at any time within twenty years from the date of the entry of\nsuch order of rehabilitation or liquidation and which shall be paid in\nthe order of the date of their allowance by the court. Any balance in\nthe reinsurance reserve fund of a title insurance corporation after\npayment of allowed claims asserted within twenty years from the date of\nthe entry of the order of rehabilitation or liquidation shall be\ntransferred to the general assets of such corporation. The\nsuperintendent shall keep and retain for such period of twenty years all\ntitle records of the corporation which he in his discretion shall deem\nnecessary to effectuate the purposes of this trust.\n (j) The payments out of the reinsurance reserve fund which shall have\nbeen made by the superintendent on allowed claims for losses which shall\nhave been filed within the time fixed by the court for the filing of\nclaims in a rehabilitation or liquidation proceeding, shall constitute\nan allowed claim in favor of the reinsurance reserve fund of such\ncorporation entitled to share with general creditors in the dividends\ndirected to be paid and the dividends so paid on such claim shall fall\ninto such reinsurance reserve fund.\n (k) In proceedings for the rehabilitation or liquidation of a title\ninsurance corporation which shall not have been declared insolvent, no\nassets of such corporation shall be distributed to the shareholders of\nsuch corporation (i) until all claims allowed in the rehabilitation or\nliquidation proceedings have been paid in full, and (ii) if such\ndistribution is within twenty years from the date of the entry of the\norder of rehabilitation or liquidation such distribution shall not be\nmade unless prior to or at the time of the making of such distribution\nthere shall be transferred to the reinsurance reserve fund general\nassets of the corporation sufficient to restore such fund to its amount\non the date of the entry of such order. Upon the expiration of twenty\nyears from the date of the entry of such order of rehabilitation or\nliquidation any balance in such reinsurance reserve fund after payment\nof all allowed claims asserted within such twenty year period shall be\ntransferred to the general assets of such corporation.\n