N.Y. ISC Law § 4207 — New York Code / Act ISC / Article 42 / Section 4207
Dividends to shareholders of life, and accident and health insurance companies
Status: in_force

§ 4207. Dividends to shareholders of life, and accident and health\ninsurance companies. (a)(1) For purposes of this subsection, "earned\nsurplus" means an amount equal to an insurer's positive unassigned\nfunds, excluding eighty-five percent of the change in net unrealized\ncapital gains or losses less capital gains tax, for the immediately\npreceding calendar year as set forth in the insurer's most recent annual\nstatutory financial statement filed with the superintendent pursuant to\nsection three hundred seven of this chapter.\n  (2) Notwithstanding paragraph five of this subsection, any domestic\nstock life insurance company may distribute a dividend to its\nshareholders out of earned surplus where the aggregate amount of such\ndividends in any calendar year does not exceed the greater of:\n  (A) ten percent of its surplus to policyholders as of the immediately\npreceding calendar year; or\n  (B) its net gain from operations for the immediately preceding\ncalendar year, not including realized capital gains, not to exceed\nthirty percent of its surplus to policyholders as of the immediately\npreceding calendar year; provided, however, that, notwithstanding this\nparagraph, in no event may a dividend be distributed without approval of\nthe superintendent, in accordance with paragraph five of this\nsubsection, in the calendar year immediately following a calendar year\nfor which its net gain from operations, not including realized capital\ngains, was negative.\n  (3) Notwithstanding paragraph five of this subsection, any domestic\nstock life insurance company may distribute a dividend to its\nshareholders where the aggregate amount of such dividends in any\ncalendar year does not exceed the lesser of:\n  (A) ten percent of its surplus to policyholders as of the immediately\npreceding calendar year; or\n  (B) its net gain from operations for the immediately preceding\ncalendar year, not including realized capital gains.\n  (4) An insurer shall not distribute a dividend pursuant to both\nparagraph two and paragraph three of this subsection.\n  (5) Except as provided in paragraphs two and three of this subsection,\nno domestic stock life insurance company shall distribute any dividend\nto its shareholders unless a notice of its intention to declare such\ndividend and the amount thereof shall have been filed with the\nsuperintendent not less than thirty days in advance of such proposed\ndeclaration. The superintendent may disapprove such distribution by\ngiving written notice to such company within thirty days after such\nfiling that the superintendent finds that the financial condition of the\ncompany does not warrant such distribution.\n  (6) With respect to dividends to shareholders distributed pursuant to\nparagraph two of this subsection, every domestic stock life insurance\ncompany shall report to the superintendent all such dividends within\nfive business days following the declaration thereof and at least ten\ndays prior to the payment thereof.\n  (7) A domestic stock life insurance company's surplus to policyholders\nfollowing any distribution of dividends to its shareholders under\nparagraph two of this subsection shall be reasonable in relation to the\ncompany's outstanding liabilities and adequate to meet its financial\nneeds.\n  (8) With respect to dividends to shareholders distributed pursuant to\nparagraph two of this subsection, the superintendent may limit or\ndisallow dividends if the superintendent determines that the:\n  (A) domestic stock life insurance company's surplus to policyholders\nis not reasonable in relation to the company's outstanding liabilities\nand not adequate to meet its financial needs; or\n  (B) domestic stock life insurance company is financially distressed or\ntroubled.\n  (b) (1) Except as provided in paragraph three hereof, no domestic\nstock accident and health insurance company shall declare or distribute\nany dividend on its capital stock, except out of earned surplus, as\ndefined in subsection (a) of section four thousand one hundred five of\nthis chapter. Notwithstanding the forgoing, the superintendent may\npermit a domestic stock accident and health insurance company to restate\nits earned surplus under a plan of quasi-reorganization in accordance\nwith regulations as may be promulgated by the superintendent. No\ndomestic stock accident and health insurance company shall declare or\ndistribute any dividend to shareholders which, together with all such\ndividends declared or distributed by it during the next preceding twelve\nmonths, exceeds the lesser of ten percent of its surplus to\npolicyholders, as shown by its last statement on file with the\nsuperintendent, or one hundred percent of adjusted net investment income\nfor such period unless, upon prior application therefor, the\nsuperintendent approves a greater dividend payment based upon his\nfinding that the insurer will retain sufficient surplus to support its\nobligations and writings.  Within the meaning of this section, "adjusted\nnet investment income" means net investment income for the twelve months\nimmediately preceding the declaration or distribution of the current\ndividend increased by the excess, if any, of net investment income over\ndividends declared or distributed during the period commencing\nthirty-six months prior to the declaration or distribution of the\ncurrent dividend and ending twelve months prior thereto; "surplus" means\nthe amount of the insurer's admitted assets in excess of its capital and\nits liabilities; and both "surplus" and "surplus to policyholders" shall\ninclude any voluntary reserves, or any part thereof, which are not\nrequired by law.\n  (2) If the superintendent finds, after notice to and hearing of such\ncompany, that any such company has distributed any dividend in violation\nof this subsection, he may order such company to cease doing any new\nbusiness until the amount of such dividend has been restored to such\ncompany. The directors of any such company who vote in favor of the\ndeclaration and distribution of any dividend in violation of this\nsection shall, in addition to all other liabilities or penalties\nprescribed by law, be jointly and severally liable to the creditors,\nincluding policyholder creditors, of such company to the extent of the\ndividend so declared and paid, and every shareholder receiving any such\ndividend shall be liable to such creditors of such company to the extent\nof the dividend received by such shareholder.\n  (3) Any domestic stock accident and health insurance company may\ndeclare and distribute a stock dividend to its shareholders whenever it\nshall have a surplus as defined in paragraph one hereof, in an amount at\nleast equal to the sum of such dividend and thirty percent of its\nunearned premium liability as shown by its last statement on file in the\noffice of the superintendent and, for such purpose, such company may\nincrease its capital stock from such surplus in the manner prescribed in\nsection one thousand two hundred six of this chapter, and it shall\ndistribute such additional or increased stock to its shareholders in\nproportion to the stock held by each, respectively.\n  (c) Any stock accident and health insurance company authorized to do\nbusiness in this state may include in its charter a provision\nauthorizing the board of directors to permit its policyholders from time\nto time to participate in the profits of its operations through the\npayment of dividends to policyholders. For the purpose of carrying into\neffect any such provision, the board of directors may from time to time\nmake reasonable classifications of policies. Every such classification\nof risks shall be filed with the superintendent and shall not be\neffective as to policies issued or delivered in this state unless\napproved by the superintendent as fair and equitable and not unfairly\ndiscriminatory. Any such classification approved by the superintendent\nshall remain in effect in this state until disapproved by him or until\nwithdrawn or modified with his approval by the company filing the same.\nNo dividends to policyholders shall be declared or paid by any such\ncompany except out of its earned surplus, as defined in subsection (a)\nof section four thousand one hundred five of this chapter.\n