N.Y. ISC Law § 1404 — New York Code / Act ISC / Article 14 / Section 1404
Types of reserve investments permitted for non-life insurers
Status: in_force

§ 1404. Types of reserve investments permitted for non-life insurers.\n(a) In addition to the investments specified in subsection (b) hereof,\nbut excluding any investment prohibited by the provisions of paragraph\none, three, four, six, eight, nine or ten of subsection (a) of section\none thousand four hundred seven of this article, the reserve investments\nof a domestic insurer authorized to make investments under the authority\nof this section shall consist of the following:\n  (1) Government obligations. Obligations which are not in default as to\nprincipal or interest, which are valid and legally authorized, and which\nare issued, assumed, guaranteed or insured by:\n  (A) the United States or by any agency or instrumentality thereof,\n  (B) any state of the United States,\n  (C) any territory or possession of the United States or any other\ngovernmental unit in the United States, or\n  (D) any agency or instrumentality of any governmental unit referred to\nin subparagraphs (B) and (C) of this paragraph, provided that\nobligations to be eligible under this paragraph shall be by law\n(statutory or otherwise) payable, as to both principal and interest,\nfrom taxes levied or by law required to be levied or from adequate\nspecial revenues pledged or otherwise appropriated or by law required to\nbe provided for the purpose of such payment, but in no event shall\nobligations be eligible for investment under this paragraph if payable\nsolely out of special assessments on properties benefited by local\nimprovements.\n  (2) Obligations of American institutions.\n  (A) Obligations which are issued by any solvent American institution\nor which are assumed or guaranteed by any solvent American institution\n(other than an insurance company) and which are not in default as to\nprincipal or interest provided such obligations:\n  (i) are adequately secured by collateral security having a market\nvalue not less than the principal amount thereof and have investment\nqualities and characteristics wherein the speculative elements are not\npredominant, or\n  (ii) are rated A or higher (or the equivalent thereto) by a securities\nrating agency recognized by the superintendent, or if not so rated, are\nsimilar in structure and in all material respects to other obligations\nof the same institution which are so rated, or\n  (iii) are insured by one or more authorized insurance companies (other\nthan the investing insurer or any parent, subsidiary or affiliate of\nsuch insurer) who are licensed to insure obligations in this state and,\nafter considering such insurance, are rated Aaa (or the equivalent\nthereto) by a securities rating agency recognized by the superintendent,\nor\n  (iv) have been given the highest quality designation by the Securities\nValuation Office of the National Association of Insurance Commissioners.\n  (B) No investment in or loan upon the obligations of any institution,\nother than an institution which issues mortgage related securities, and\nno investment in any one mortgage related security, made pursuant to the\nprovisions of this paragraph shall exceed five per centum of the\nadmitted assets of such insurer as shown by its last statement on file\nwith the superintendent.\n  (3) Preferred or guaranteed shares of American institutions. (A)\nPreferred or guaranteed shares issued or guaranteed by a solvent\nAmerican institution if all of the institution's obligations are\neligible as investments under item (ii) or (iv) of subparagraph (A) of\nparagraph two of this subsection.\n  (B) No investment in the preferred or guaranteed shares of any\ninstitution made pursuant to the provisions of this paragraph shall\nexceed two percent of such insurer's admitted assets as shown by its\nlast statement on file with the superintendent.\n  (4) Loans secured by real property. (A) Loans secured by first or\nsecond mortgages which are liens on improved real property in the United\nStates (including leasehold estates having an unexpired term of not less\nthan twenty years, inclusive of the term or terms which may be provided\nby enforceable terms of renewal) meeting the following requirements:\n  (i) Priority of mortgages. The mortgaged property shall be subject to\nno prior lien, except a first mortgage and liens for non-delinquent\nground rents, taxes, assessments and similar charges. There shall be no\ncondition or right of re-entry or forfeiture not insured against under\nwhich the mortgage can be cut off, subordinated or otherwise disturbed.\nNo loan secured by a second mortgage shall be made if the principal\namount secured by a prior first mortgage can be increased without the\ninsurer's consent unless the amount of increase is applied to reduce the\nsecond mortgage.\n  (ii) Leaseholds. If the mortgaged property is a leasehold:\n  (I) the lease shall provide for a term of at least twenty-one years,\n  (II) the property underlying the leasehold shall be subject to no\nprior lien except for liens for non-delinquent ground rents, taxes,\nassessments and similar charges and there shall be no condition or right\nof re-entry or forfeiture not insured against under which the insurer is\nunable to continue the lease in force for the duration of the loan, and\n  (III) the loan shall provide for such payments that at any time during\nthe period of the loan the aggregate payments of principal to be made\nwill be sufficient to repay the loan within the lesser of forty years or\na period equal to eighty percent of the term of the lease, through\npayments of interest only for five years and equal payments applicable\nfirst to interest and then to principal at the end of each year\nthereafter. "Term", as used in this paragraph six with reference to a\nlease, means its unexpired term at the date of the loan, plus any term\nwhich may be provided by options of the lessee to renew.\n  (iii) Participations. If the investment is a participation in a loan:\n  (I) all participations shall be held by the insurer, or\n  (II) the participation held by the insurer shall give it substantially\nthe rights of a first or second mortgagee, and shall be prior to those\nof the holders of the other participations, or\n  (III) each participation shall be of equal rank, and\n  (aa) the loan shall comply with items (i), (ii), and (iv) of this\nsubparagraph (A) and with any regulations prescribed by the\nsuperintendent for investments under this clause (III), and\n  (bb) if, when the participation is acquired by the insurer, there are\nmore than five holders of participations in the loan, or more than three\nsuch holders and such loan is less than five million dollars in original\nprincipal amount, the mortgagee shall be (and, in the case of a\nparticipation in an obligation, the obligation shall be held by) a bank\nor trust company duly authorized and licensed to act as a corporate\ntrustee (with or without a co-trustee). "Participation", as used in this\nparagraph four, means an obligation forming part of an issue of bonds,\nnotes or other evidences of indebtedness which are secured by the same\nmortgage and also an instrument evidencing a participating interest in\nany such bond, note or other evidence of indebtedness.\n  (iv) Amount of loan. The amount of the loan (excluding any part\nguaranteed or insured under title three of the Servicemen's Readjustment\nAct of 1944, 38 U.S.C. §§ 1801-1827), when added to the amount unpaid on\nany prior first mortgage, shall not exceed the following percentages of\nthe value of the real property or leasehold securing the loan, as\ndetermined by an appraisal made by an appraiser for the purpose of the\ninvestment:\n  (I) sixty-six and two-thirds percent,\n  (II) seventy-five percent, if the mortgage provides for such payments\nof principal that at no time during the period of the loan shall the\naggregate payments of principal required to be made be less than would\nhave been necessary to reduce the amount of the loan (plus the amount\nsecured by any such prior mortgage) to sixty-six and two-thirds percent\nof such value by the end of thirty-five years, through payments of\ninterest only for five years and equal payments applicable first to\ninterest and then to principal at the end of each year thereafter, or\n  (III) ninety percent, if the loan is secured by a first mortgage on\nreal property improved primarily with a residential building, which may\nbe a condominium unit, for not more than four families and provides for\nmonthly payments of principal and interest sufficient to repay the loan\nwithin the lesser of forty years or the remaining useful life of the\nbuilding as estimated in the appraisal.\n  (v) Investment limitations.\n  (I) Investments held by an insurer, except a fraternal benefit\nsociety, under this subparagraph (A) shall not exceed:\n  (aa) in the aggregate twenty-five percent of its admitted assets as\nshown by its last statement on file with the superintendent excluding\nany amount guaranteed or insured under the Servicemen's Readjustment Act\nof 1944, 38 U.S.C. §§ 1801-1827, or\n  (bb) in the aggregate two percent of its admitted assets as shown by\nits last statement on file with the superintendent in loans secured by\nother than first mortgages.\n  (II) Investments held by a fraternal benefit society under this\nparagraph shall not exceed:\n  (aa) in the aggregate fifty percent of its admitted assets as shown by\nits last statement on file with the superintendent, excluding any amount\nguaranteed or insured under the Servicemen's Readjustment Act of 1944,\n38 U.S.C. §§ 1801-1827, or\n  (bb) in the aggregate two percent of its admitted assets as shown by\nits last statement on file with the superintendent in loans secured by\nother than first mortgages.\n  (III) No insurer or society shall invest in or lend upon the security\nof any one property more than the greater of thirty thousand dollars or\ntwo percent of its admitted assets as shown by its last statement on\nfile with the superintendent.\n  (IV) Separate evidences of indebtedness which are separately\ntransferable shall be deemed to constitute separate loans which may be\nseparately qualified under this paragraph whether or not secured by a\nsingle mortgage.\n  (B) Purchase money mortgages. Purchase money mortgages or like\nsecurities received by the insurer on the sale or exchange of real\nproperty held under paragraph five hereof.\n  (5) Real property or interests therein. (A) The following investments\nin real property (including incidental equipment thereto) located in the\nUnited States, if acquired and held directly or through partnership\ninterests engaged exclusively in the business of acquiring, owing and\nmanaging such property:\n  (i) The land and the building thereon in which the insurer has its\nprincipal office.\n  (ii) Real property requisite for the insurer's convenient\naccommodation in the transaction of its business.\n  (iii) Real property acquired in total or partial satisfaction of\nmortgages, liens, judgments, claims or indebtedness held by the insurer\nin the course of its business.\n  (iv) Real property acquired as an investment for the production of\nincome or to be improved or developed for such investment purpose.\n  (B) Investments under this paragraph shall be subject to the following\nlimitations:\n  (i) The cost of each parcel acquired under item (iv) of subparagraph\n(A) of this paragraph, including the estimated cost to the insurer of\nthe improvement or development thereof, shall not exceed one percent of\nthe insurer's admitted assets as shown by its last statement on file\nwith the superintendent, and when added to the book value of all other\nreal property then held by it pursuant to such item (iv), shall not\nexceed twelve and one-half percent of such admitted assets. Unless\notherwise required by the superintendent under subsection (b) of section\none thousand four hundred fourteen of this article, each parcel of real\nproperty held under such item (iv) together with each capital\nimprovement or development thereof existing at acquisition or made\nsubsequently shall be valued on the insurer's books as of each last\nyear-end so as to write down the cost of such improvement or\ndevelopment, at a rate averaging at least two percent per annum\ncommencing on the date of acquisition or completion, as the case may be,\nof such improvement or development.\n  (ii) The acquisition of real property serving as the residence of an\nemployee, except a director or trustee of such insurer, if acquired in\nconnection with the relocation by the insurer of the employee's place of\nemployment, including any relocation in connection with his initial\nemployment, at a purchase price not exceeding the property's value as\ndetermined by an independent appraiser for the purpose of such\nacquisition, provided such employee has made reasonable efforts\notherwise to dispose of such property during the month before such\nacquisition. Such property must be acquired under item (ii) of\nsubparagraph (A) hereof, and, in the case of a non-director officer,\nsuch acquisition is subject to the provisions of subsection (h) of\nsection one thousand four hundred eleven of this article.\n  (iii) Real property acquired pursuant to items (i) and (ii) of\nsubparagraph (A) hereof shall be disposed of within five years after it\nshall have ceased to be necessary for the convenient accommodation of\nsuch insurer in the transaction of its business, and real property\nacquired pursuant to item (iii) of subparagraph (A) hereof shall be\ndisposed of within five years after the date of acquisition, unless the\nsuperintendent certifies that the interests of the insurer will suffer\nmaterially by the forced sale thereof and extends the time in such\ncertificate.\n  (iv) No real property shall be acquired by any domestic insurer\npursuant to items (i) and (ii) of subparagraph (A) hereof if its cost,\ntogether with the book value of all real property then held pursuant to\nsuch items (i) and (ii), exceeds ten percent of the insurer's admitted\nassets as shown by its last statement on file with the superintendent.\n  (v) Except with the superintendent's approval, no domestic insurer\nshall:\n  (I) acquire any real property pursuant to items (i) and (ii) of\nsubparagraph (A) of this paragraph, if the real property being acquired\nis greater than one percent of the insurer's admitted assets as shown by\nits last statement on file with the superintendent, or\n  (II) with respect to any building which was acquired under items (i)\nand (ii) of subparagraph (A) of this paragraph, make any improvement\nwhich should be capitalized according to generally accepted accounting\nprinciples if the annual expenditure for such improvements for any such\nbuilding will exceed the greater of ten percent of its book value or one\npercent of the insurer's admitted assets as shown by its last statement\non file with the superintendent.\n  (6) Foreign investments. (A) Investments in a foreign country or in a\npossession of the United States which are substantially of the same\nkinds, classes and investment grades as those eligible for investment\nunder other provisions of this subsection. The aggregate amount of\nforeign investments including cash in the currency of such country or\npossession, obligations of American institutions payable outside of the\nUnited States and cash deposited in a bank, trust company or thrift\ninstitution located outside of the United States held at any time\npursuant to the provisions of this section shall not exceed ten percent\nof the insurer's admitted assets as shown by its last statement on file\nwith the superintendent.\n  (B) Investments in any one possession of the United States or in any\none foreign country, other than Canada, made pursuant to this paragraph\nshall not exceed (i) in the case of any possession or country having the\nhighest sovereign debt rating, as established by a securities rating\nagency recognized by the superintendent, three percent of the insurer's\nadmitted assets as shown by its last statement on file with the\nsuperintendent, or\n  (ii) in the case of any other possession or country one percent of the\ninsurer's admitted assets as shown by its last statement on file with\nthe superintendent.\n  (7) Development bank obligations. Obligations issued or guaranteed by\nthe international bank for reconstruction and development, the\ninter-American development bank, the Asian development bank, the African\ndevelopment bank or the international finance corporation; provided that\n  (i) obligations of such banks and the international finance\ncorporation are rated AA or higher (or the equivalent thereto) by a\nsecurities rating agency recognized by the superintendent, or if not so\nrated are similar in structure and in all material respects to other\nobligations of the same institution which are so rated, and\n  (ii) the aggregate investment made pursuant to the provisions of this\nparagraph in each such bank and the international finance corporation at\nany time, shall not exceed five percent of the insurer's admitted assets\nas shown by its last statement on file with the superintendent, and\n  (iii) the aggregate investment made pursuant to the provisions of this\nparagraph in all such banks and the international finance corporation\nshall not exceed fifteen percent of the insurer's admitted assets as\nshown by its last statement on file with the superintendent.\n  (8) Equity interests. (A) Investments in common shares or partnership\ninterests of any solvent American institution, if:\n  (i) all its obligations and preferred shares, if any, are eligible as\ninvestments under this subsection and\n  (ii) such equity interests of any such institution except an insurance\ncompany are registered on a national securities exchange, as provided in\nthe Securities Exchange Act of 1934, 15 U.S.C. §§78a-78kk or otherwise\nregistered pursuant to said act and, if so otherwise registered, price\nquotations therefor are furnished through a nationwide automated\nquotations system approved by the National Association of Securities\nDealers, Inc., provided that an insurer may invest under this paragraph\nan amount not exceeding one percent of the insurer's admitted assets as\nshown by its last statement on file with the superintendent even though\nsuch equity interests are not so registered and are not issued by an\ninsurance company.\n  (B) Investment limitations. (i) No insurer subject to the provisions\nof paragraph two of subsection (a) or subsection (b) of section one\nthousand four hundred three of this article shall invest in or loan upon\nany one institution's outstanding equity interests an amount exceeding\none percent of the insurer's admitted assets as shown by its last\nstatement on file with the superintendent, and (ii) the cost of any\ninvestment in equity interests, made pursuant to this paragraph, when\nadded to the aggregate cost of all other investments in equity interests\nthen held pursuant to this paragraph, paragraph six and clause (ii) of\nsubparagraph (A) of paragraph ten of this subsection shall not exceed:\n  (I) in the case of an insurer authorized to make investments under\nitem (i) of this subparagraph except a retirement system organized\npursuant to article forty-six of this chapter, the lesser of its surplus\nto policyholders or ten percent of its admitted assets as shown by its\nlast statement on file with the superintendent, and\n  (II) in the case of a retirement system organized pursuant to article\nforty-six of this chapter, thirty percent of its admitted assets as\nshown by its last statement on file with the superintendent.\n  (9) Investments made by subsidiaries. The net investment in real\nproperty and loans secured by real property made by subsidiaries engaged\nor organized to engage exclusively in the acquisition, ownership and\nmanagement of such investments. Such loans and real property must\nqualify as a reserve investment under paragraph four or five of this\nsubsection. The subsidiary's net investment in such real property and\nloans shall be included under such paragraph when computing any\nlimitations applicable to such real property and loans and excluded when\ncomputing the limitations applicable to equity interests under paragraph\neight of this subsection. In order to qualify, a subsidiary must be\nwholly-owned either by the insurer or by two or more insurance companies\ndomiciled in the United States who are members of the same holding\ncompany system, as such term is defined in article fifteen of this\nchapter, and each individual insurer's share of the net investments made\nby such subsidiary shall be computed in proportion to its equity\ninterest in such subsidiary.\n  (10) Investment companies.  (A) Securities of any investment company\nregistered pursuant to the federal Investment Company Act of 1940, 15\nU.S.C. § 802, if such company:\n  (i) invests at least ninety percent of its assets in the types of\nsecurities which qualify as a reserve investment pursuant to the\nprovisions of paragraph one, two or three of this subsection or which\ninvest in securities which are determined by the superintendent to be\nsubstantively similar to the types of securities set forth in such\nparagraphs; or\n  (ii) invests at least ninety percent of its assets in the types of\nequity interests which qualify as a reserve investment pursuant to the\nprovisions of paragraph eight of this subsection.\n  (B) Investment limitations.  Investments made by an insurer subject to\nthe provisions of paragraph two of subsection (a) or subsection (b) of\nsection one thousand four hundred three of this article shall not exceed\nthe following limitations:\n  (i) in any investment company qualifying under item (i) of\nsubparagraph (A) hereof, ten percent of such insurer's admitted assets\nas shown by its last statement on file with the superintendent and the\naggregate amount of investment in such qualifying investment companies\nshall not exceed twenty-five percent of such insurer's admitted assets\nas shown by its last statement on file with the superintendent; and\n  (ii) in any investment company qualifying under item (ii) of\nsubparagraph (A) hereof, five percent of such insurer's admitted assets\nas shown by its last statement on file with the superintendent and the\naggregate amount of investment in such qualifying investment companies\nshall be included when calculating the permissible aggregate value of\nequity interests pursuant to the provisions of subparagraph (B) of\nparagraph eight of this subsection.\n  (11) Credit union shares, share certificates and share draft accounts.\nShares, share certificates and share draft accounts issued by credit\nunions and federal credit unions not to exceed the amounts which are\nassumed, guaranteed or insured by the United States or any agency or\ninstrumentality thereof.\n  (b) Leeway provision. Investments which do not qualify or are not\npermitted under subsection (a) hereof, but excluding any investment\nprohibited by the provisions of paragraph six of subsection (a) of this\nsection or by the provisions of paragraph one, two, three, four, six,\neight, nine or ten of subsection (a) of section one thousand four\nhundred seven of this article, provided that:\n  (1) the aggregate cost of such investments shall not exceed five\npercent of the admitted assets of the insurer as shown by its last\nstatement on file with the superintendent, and\n  (2) investments that are neither interest-bearing nor income-paying,\nmade under this subsection as provided in paragraph one of subsection\n(d) of section one thousand four hundred three of this article shall not\nin the aggregate exceed three percent of the admitted assets of the\ninsurer as shown by its last statement on file with the superintendent.\n