§ 6907 — Transition provisions

New York § 6907

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 69: Financial Guaranty Insurance Corporations

Text

§ 6907. Transition provisions. A licensed insurer writing financial\nguaranty insurance prior to the effective date of this article, but\nwhich is not authorized to write financial guaranty insurance in this\nstate, shall be subject to all the provisions of this article, except\nsection six thousand nine hundred two of this article, and:\n (a) may, unless the superintendent determines after notice and an\nopportunity to be heard that such activity poses a hazard to the\ninsurer, its policyholders or to the public, continue to write financial\nguaranties (except guaranties of municipal bonds) of the types\nauthorized by subsection (b) of section six thousand nine hundred four\nof this article applicable to financial guaranty insurance corporations,\nsubject to the following conditions:\n (1) For a transition period not to exceed sixty months from the\neffective date of this article, if the insurer has and maintains surplus\nto policyholders of at least seventy-five million dollars (for the\npurpose of this paragraph, if the insurer is a foreign insurer, its\nsurplus to policyholders shall be computed as if it were a domestic\ninsurer); provided that:\n (A) during the sixty month transition period, the amount of surplus to\npolicyholders needed to meet the single and aggregate risk limitations\nimposed by this article must be less than four percent of the insurer's\nsurplus to policyholders;\n (B) within nine months of the effective date of this article, the\ninsurer shall file a reasonable plan of operation, acceptable to the\nsuperintendent, which shall contain:\n (i) a reasonable timetable and appropriate procedures to implement\nthat timetable to make a determination as to whether or not the insurer\nwill make application to organize a financial guaranty insurance\ncorporation during the aforesaid sixty month period;\n (ii) the types and projected diversification of guaranties that will\nbe issued during the transition period;\n (iii) the underwriting procedures that will be followed;\n (iv) oversight methods;\n (v) investment policies; and\n (vi) such other matters as may be prescribed by the superintendent.\nThe plan of operation shall be deemed acceptable unless, within sixty\ndays of its filing, the superintendent notifies the insurer of any\nspecific objections to such plan. The plan shall be updated in the event\nof a material change with respect to the foregoing and at least\nannually;\n (C) if the insurer has determined that it will not organize a\nfinancial guaranty insurance corporation, within thirty days after that\ndetermination it shall notify the superintendent, cease writing policies\nof financial guaranty insurance and comply with the provisions of\nparagraph four of this subsection; and\n (D) the insurer shall file such additional statements or reports as\nmay be required by the superintendent.\n (2) For a transition period not to exceed ninety-six months from the\neffective date of this article, if the insurer has and maintains surplus\nto policyholders of at least one hundred fifty million dollars (for the\npurpose of this section, surplus to policyholders means the aggregate\nsurplus to policyholders of said insurer and other member companies of\nan inter-company pool, and if the insurer is a foreign insurer its\nsurplus to policyholders shall be computed as if it were a domestic\ninsurer) and the aggregate financial guaranty written premium of said\ninsurer and other member companies of an inter-company pool shall have\nbeen at least one million dollars in any one of the five years ending\nDecember thirty-first, nineteen hundred eighty-eight, provided that:\n (A) during the first sixty months of the transition period, the amount\nof surplus to policyholders needed to meet the aggregate risk\nlimitations imposed by this article must be less than four percent of\nthe insurer's surplus to policyholders. After such sixty month period,\nprovided the insurer complies with subparagraph (D) of this paragraph,\nthe amount of surplus to policyholders needed to meet such aggregate\nrisk limitations must be less than five percent of the insurer's surplus\nto policyholders for the succeeding twelve month period and less than\nsix percent for the next succeeding twenty-four month period;\n (B) during the transition period, the amount of surplus to\npolicyholders needed to meet the single risk limitations imposed by\nparagraphs two through five of subsection (d) of section six thousand\nnine hundred four of this article must be less than twenty percent of\nthe insurer's surplus to policyholders, except that the single risk\nlimitation with respect to investment grade obligations under such\nparagraph five shall be the lesser of eighty million dollars or seven\npercent of the insurer's surplus to policyholders;\n (C) during the transition period, notwithstanding the last sentence of\nparagraph one of subsection (b) of section six thousand nine hundred\nfour, industrial development bonds shall not be included in the\ninvestment grade requirements set forth in such sentence.\n (D) during the transition period, reinsurance in the form of\nintercompany pooling agreements, shall not be subject to subparagraphs\n(C), (D), (E) and (F) of paragraph two of subsection (a) of section six\nthousand nine hundred six of this article, if such intercompany pooling\nagreements were in effect on January first, nineteen hundred\neighty-nine, and reinsurance placed with insurers which are subject to\nthe provisions of paragraph two of subsection (a) of section six\nthousand nine hundred six and are not members of the ceding company's\nintercompany pooling agreement may not exceed sixty percent of the total\nexposures insured net of collateral remaining after deducting any\nreinsurance placed with another financial guaranty insurance corporation\nor an insurer writing only financial guaranty insurance as is or would\nbe permitted by this article;\n (E) within sixty months of the effective date of this article, the\ninsurer shall file a reasonable plan of operation, acceptable to the\nsuperintendent, which shall contain:\n (i) a reasonable timetable and appropriate procedures to implement\nthat timetable to make a determination as to whether or not the insurer\nwill make application to organize a financial guaranty insurance\ncorporation during the aforesaid ninety-six month period;\n (ii) the types and projected diversification of guaranties that will\nbe issued during the transition period;\n (iii) the underwriting procedures that will be followed;\n (iv) oversight methods;\n (v) investment policies; and\n (vi) such other matters as may be prescribed by the superintendent.\nThe plan of operation shall be deemed acceptable unless, within sixty\ndays of its filing, the superintendent notifies the insurer of any\nspecific objections to such plan. The plan shall be updated in the event\nof a material change with respect to the foregoing and at least\nannually;\n (F) if the insurer has determined that it will not organize a\nfinancial guaranty insurance corporation, within thirty days after that\ndetermination it shall notify the superintendent, cease writing policies\nof financial guaranty insurance and comply with the provisions of\nparagraph four of this subsection; and\n (G) the insurer shall file such additional statements or reports as\nmay be required by the superintendent.\n (3) For a transition period not to exceed twelve months from the\neffective date of this article, in the case of an insurer transacting\nonly financial guaranty insurance prior to the effective date of this\narticle and which qualifies for licensing as a financial guaranty\ninsurance corporation under section six thousand nine hundred two of\nthis article, provided that it makes application to amend its current\nlicense to that of a financial guaranty insurance corporation licensed\nto transact only those kinds of insurance permitted pursuant to section\nsix thousand nine hundred two of this article within sixty days of the\neffective date of this article, and provided that, for purposes of this\nparagraph, an insurer shall be deemed to be transacting only financial\nguaranty insurance prior to the effective date of this article if, with\nthe approval of the superintendent, it has reinsured all of any other\ninsurance liabilities with one or more authorized insurers or has\notherwise made provision for such liabilities.\n (4) For a transition period not to exceed nine months, in the case of\nan insurer that does not qualify under either paragraph one, two or\nthree of this subsection or does not file a plan of operation pursuant\nto paragraph one or two of this subsection, such insurer shall cease\nwriting any new financial guaranty insurance business and may:\n (A) reinsure its net in force business with a licensed financial\nguaranty insurance corporation; or\n (B) subject to the prior approval of its domiciliary commissioner,\nreinsure all or part of its net in force business in accordance with the\nrequirements of paragraph two of subsection (a) of section six thousand\nnine hundred six of this article, except that subparagraphs (D), (E) and\n(F) of paragraph two of such subsection shall not be applicable. The\nassuming insurer shall maintain reserves of such reinsured business in\nthe manner applicable to the ceding insurer under this paragraph; or\n (C) thereafter continue the risks then in force and, with thirty days\nprior written notice to its domiciliary commissioner, issue new\nfinancial guaranty policies, provided that the issuing of such policies\nis reasonably prudent to mitigate either the amount of or possibility of\nloss in connection with business transacted prior to the effective date\nof this article. Provided, however, an insurer must receive the prior\napproval of its domiciliary commissioner before issuing any new\nfinancial guaranty insurance policies that would have the effect of\nincreasing its risk of loss;\n (b) shall, for all guaranties in force prior to the effective date of\nthis article, including those which fall under the definition of\nfinancial guaranty insurance contained in subsection (a) of section six\nthousand nine hundred one of this article, be subject to the reserve\nrequirements applicable for municipal bond guaranties in effect prior to\nthe effective date of this article. To the extent that the insurer's\ncontingency reserves maintained as of the effective date of this article\nare less than those required for municipal bond guaranties, the insurer\nshall have three years to bring its reserves into compliance, except\nthat a part of the reserve may be released proportional to the reduction\nin aggregate net liability resulting from reinsurance, provided that the\nreinsurer shall, on the effective date of the reinsurance, establish a\nreserve in an amount equal to the amount released and, in addition, a\npart of the reserve may be released with the approval of the\nsuperintendent upon demonstration that the amount carried is excessive\nin relation to the corporation's outstanding obligations; and\n (c) shall be subject to the reserve requirements specified in section\nsix thousand nine hundred three of this article for all policies of\nfinancial guaranty insurance issued on or after the effective date of\nthis article.\n