NY Ins L § 1404 (2021)
2021 New York Laws ISC - Insurance Article 14 - Investments 1404 - Types of Reserve Investments Permitted for Non-Life Insurers.

§  1404. Types of reserve investments permitted for non-life insurers. (a) In addition to the investments specified in subsection  (b)  hereof, but  excluding  any investment prohibited by the provisions of paragraph one, three, four, six, eight, nine or ten of subsection (a)  of  section one thousand four hundred seven of this article, the reserve investments of a domestic insurer authorized to make investments under the authority of this section shall consist of the following:  (1) Government obligations. Obligations which are not in default as to principal or interest, which are valid and legally authorized, and which are issued, assumed, guaranteed or insured by:  (A) the United States or by any agency or instrumentality thereof,  (B) any state of the United States,  (C)  any  territory  or  possession  of the United States or any other governmental unit in the United States, or  (D) any agency or instrumentality of any governmental unit referred to in  subparagraphs  (B)  and  (C)  of  this  paragraph,   provided   that obligations  to  be  eligible  under  this  paragraph  shall  be  by law (statutory or otherwise) payable, as to  both  principal  and  interest, from  taxes  levied  or  by  law  required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such  payment,  but  in  no  event  shall obligations  be  eligible for investment under this paragraph if payable solely out of special  assessments  on  properties  benefited  by  local improvements.  (2) Obligations of American institutions.  (A)  Obligations  which are issued by any solvent American institution or which are assumed or guaranteed by any solvent  American  institution (other  than  an  insurance  company) and which are not in default as to principal or interest provided such obligations:  (i) are adequately secured by  collateral  security  having  a  market value  not  less  than  the principal amount thereof and have investment qualities and characteristics wherein the speculative elements  are  not predominant, or  (ii) are rated A or higher (or the equivalent thereto) by a securities rating  agency recognized by the superintendent, or if not so rated, are similar in structure and in all material respects to  other  obligations of the same institution which are so rated, or  (iii) are insured by one or more authorized insurance companies (other than  the  investing  insurer  or any parent, subsidiary or affiliate of such insurer) who are licensed to insure obligations in this state  and, after  considering  such  insurance,  are  rated  Aaa (or the equivalent thereto) by a securities rating agency recognized by the superintendent, or  (iv) have been given the highest quality designation by the Securities Valuation Office of the National Association of Insurance Commissioners.  (B) No investment in or loan upon the obligations of any  institution, other  than an institution which issues mortgage related securities, and no investment in any one mortgage related security, made pursuant to the provisions of this  paragraph  shall  exceed  five  per  centum  of  the admitted  assets  of such insurer as shown by its last statement on file with the superintendent.  (3) Preferred or  guaranteed  shares  of  American  institutions.  (A) Preferred  or  guaranteed  shares  issued  or  guaranteed  by  a solvent American  institution  if  all  of  the  institution's  obligations  are eligible  as  investments under item (ii) or (iv) of subparagraph (A) of paragraph two of this subsection.  (B) No investment  in  the  preferred  or  guaranteed  shares  of  any institution  made  pursuant  to  the  provisions of this paragraph shall  exceed two percent of such insurer's admitted assets  as  shown  by  its last statement on file with the superintendent.  (4)  Loans  secured  by  real  property. (A) Loans secured by first or second mortgages which are liens on improved real property in the United States (including leasehold estates having an unexpired term of not less than twenty years, inclusive of the term or terms which may be  provided by enforceable terms of renewal) meeting the following requirements:  (i)  Priority of mortgages. The mortgaged property shall be subject to no prior lien, except a first  mortgage  and  liens  for  non-delinquent ground  rents, taxes, assessments and similar charges. There shall be no condition or right of re-entry or forfeiture not insured  against  under which  the mortgage can be cut off, subordinated or otherwise disturbed. No loan secured by a second mortgage shall  be  made  if  the  principal amount  secured  by  a prior first mortgage can be increased without the insurer's consent unless the amount of increase is applied to reduce the second mortgage.  (ii) Leaseholds. If the mortgaged property is a leasehold:  (I) the lease shall provide for a term of at least twenty-one years,  (II) the property underlying the leasehold  shall  be  subject  to  no prior  lien  except  for  liens  for non-delinquent ground rents, taxes, assessments and similar charges and there shall be no condition or right of re-entry or forfeiture not insured against under which the insurer is unable to continue the lease in force for the duration of the loan, and  (III) the loan shall provide for such payments that at any time during the period of the loan the aggregate payments of principal  to  be  made will be sufficient to repay the loan within the lesser of forty years or a  period  equal  to  eighty  percent  of the term of the lease, through payments of interest only for five years and equal  payments  applicable first  to  interest  and  then  to  principal  at  the  end of each year thereafter. "Term", as used in this paragraph six with  reference  to  a lease,  means  its unexpired term at the date of the loan, plus any term which may be provided by options of the lessee to renew.  (iii) Participations. If the investment is a participation in a loan:  (I) all participations shall be held by the insurer, or  (II) the participation held by the insurer shall give it substantially the rights of a first or second mortgagee, and shall be prior  to  those of the holders of the other participations, or  (III) each participation shall be of equal rank, and  (aa)  the  loan  shall  comply  with items (i), (ii), and (iv) of this subparagraph  (A)  and  with   any   regulations   prescribed   by   the superintendent for investments under this clause (III), and  (bb)  if, when the participation is acquired by the insurer, there are more than five holders of participations in the loan, or more than three such holders and such loan is less than five million dollars in original principal amount, the  mortgagee  shall  be  (and,  in  the  case  of  a participation  in an obligation, the obligation shall be held by) a bank or trust company duly authorized and licensed  to  act  as  a  corporate trustee (with or without a co-trustee). "Participation", as used in this paragraph  four,  means an obligation forming part of an issue of bonds, notes or other evidences of indebtedness which are secured by  the  same mortgage  and  also an instrument evidencing a participating interest in any such bond, note or other evidence of indebtedness.  (iv) Amount of loan. The  amount  of  the  loan  (excluding  any  part guaranteed or insured under title three of the Servicemen's Readjustment Act of 1944, 38 U.S.C. §§ 1801-1827), when added to the amount unpaid on any  prior first mortgage, shall not exceed the following percentages of the value of the real  property  or  leasehold  securing  the  loan,  as  determined  by  an appraisal made by an appraiser for the purpose of the investment:  (I) sixty-six and two-thirds percent,  (II)  seventy-five percent, if the mortgage provides for such payments of principal that at no time during the period of  the  loan  shall  the aggregate  payments  of principal required to be made be less than would have been necessary to reduce the amount of the loan  (plus  the  amount secured  by any such prior mortgage) to sixty-six and two-thirds percent of such value by the end  of  thirty-five  years,  through  payments  of interest  only  for  five  years  and equal payments applicable first to interest and then to principal at the end of each year thereafter, or  (III) ninety percent, if the loan is secured by a  first  mortgage  on real  property improved primarily with a residential building, which may be a condominium unit, for not more than four families and provides  for monthly  payments of principal and interest sufficient to repay the loan within the lesser of forty years or the remaining  useful  life  of  the building as estimated in the appraisal.  (v) Investment limitations.  (I)  Investments  held  by  an  insurer,  except  a  fraternal benefit society, under this subparagraph (A) shall not exceed:  (aa) in the aggregate twenty-five percent of its  admitted  assets  as shown  by  its  last statement on file with the superintendent excluding any amount guaranteed or insured under the Servicemen's Readjustment Act of 1944, 38 U.S.C. §§ 1801-1827, or  (bb) in the aggregate two percent of its admitted assets as  shown  by its  last  statement on file with the superintendent in loans secured by other than first mortgages.  (II) Investments held  by  a  fraternal  benefit  society  under  this paragraph shall not exceed:  (aa) in the aggregate fifty percent of its admitted assets as shown by its last statement on file with the superintendent, excluding any amount guaranteed  or  insured under the Servicemen's Readjustment Act of 1944, 38 U.S.C. §§ 1801-1827, or  (bb) in the aggregate two percent of its admitted assets as  shown  by its  last  statement on file with the superintendent in loans secured by other than first mortgages.  (III) No insurer or society shall invest in or lend upon the  security of  any one property more than the greater of thirty thousand dollars or two percent of its admitted assets as shown by  its  last  statement  on file with the superintendent.  (IV)   Separate   evidences   of  indebtedness  which  are  separately transferable shall be deemed to constitute separate loans which  may  be separately  qualified  under  this paragraph whether or not secured by a single mortgage.  (B)  Purchase  money  mortgages.  Purchase  money  mortgages  or  like securities  received  by  the  insurer  on  the sale or exchange of real property held under paragraph five hereof.  (5) Real property or interests therein. (A) The following  investments in real property (including incidental equipment thereto) located in the United  States,  if  acquired  and  held directly or through partnership interests engaged exclusively in the business of  acquiring,  owing  and managing such property:  (i)  The  land  and  the building thereon in which the insurer has its principal office.  (ii)  Real   property   requisite   for   the   insurer's   convenient accommodation in the transaction of its business.  (iii)  Real  property  acquired  in  total  or partial satisfaction of mortgages, liens, judgments, claims or indebtedness held by the  insurer in the course of its business.  (iv)  Real  property  acquired  as an investment for the production of income or to be improved or developed for such investment purpose.  (B) Investments under this paragraph shall be subject to the following limitations:  (i) The cost of each parcel acquired under item (iv)  of  subparagraph (A)  of  this  paragraph, including the estimated cost to the insurer of the improvement or development thereof, shall not exceed one percent  of the  insurer's  admitted  assets  as shown by its last statement on file with the superintendent, and when added to the book value of  all  other real  property  then  held  by  it pursuant to such item (iv), shall not exceed twelve and one-half  percent  of  such  admitted  assets.  Unless otherwise required by the superintendent under subsection (b) of section one  thousand four hundred fourteen of this article, each parcel of real property  held  under  such  item  (iv)  together  with   each   capital improvement  or  development  thereof  existing  at  acquisition or made subsequently shall be valued on the insurer's  books  as  of  each  last year-end   so  as  to  write  down  the  cost  of  such  improvement  or development, at  a  rate  averaging  at  least  two  percent  per  annum commencing on the date of acquisition or completion, as the case may be, of such improvement or development.  (ii)  The  acquisition of real property serving as the residence of an employee, except a director or trustee of such insurer, if  acquired  in connection with the relocation by the insurer of the employee's place of employment,  including  any  relocation  in  connection with his initial employment, at a purchase price not exceeding the  property's  value  as determined   by  an  independent  appraiser  for  the  purpose  of  such acquisition,  provided  such  employee  has  made   reasonable   efforts otherwise  to  dispose  of  such  property  during the month before such acquisition.  Such  property  must  be  acquired  under  item  (ii)   of subparagraph  (A)  hereof,  and,  in the case of a non-director officer, such acquisition is subject to  the  provisions  of  subsection  (h)  of section one thousand four hundred eleven of this article.  (iii)  Real  property  acquired  pursuant  to  items  (i)  and (ii) of subparagraph (A) hereof shall be disposed of within five years after  it shall  have  ceased  to be necessary for the convenient accommodation of such insurer in the transaction  of  its  business,  and  real  property acquired  pursuant  to  item  (iii)  of subparagraph (A) hereof shall be disposed of within five years after the date of acquisition, unless  the superintendent  certifies  that the interests of the insurer will suffer materially by the forced sale thereof  and  extends  the  time  in  such certificate.  (iv)  No  real  property  shall  be  acquired  by any domestic insurer pursuant to items (i) and (ii) of subparagraph (A) hereof if  its  cost, together  with the book value of all real property then held pursuant to such items (i) and (ii), exceeds ten percent of the  insurer's  admitted assets as shown by its last statement on file with the superintendent.  (v)  Except  with  the  superintendent's approval, no domestic insurer shall:  (I) acquire any real property  pursuant  to  items  (i)  and  (ii)  of subparagraph  (A) of this paragraph, if the real property being acquired is greater than one percent of the insurer's admitted assets as shown by its last statement on file with the superintendent, or  (II) with respect to any building which was acquired under  items  (i) and  (ii)  of  subparagraph  (A) of this paragraph, make any improvement which should be capitalized according to generally  accepted  accounting  principles  if the annual expenditure for such improvements for any such building will exceed the greater of ten percent of its book value or one percent of the insurer's admitted assets as shown by its last  statement on file with the superintendent.  (6)  Foreign investments. (A) Investments in a foreign country or in a possession of the United States which  are  substantially  of  the  same kinds,  classes  and  investment grades as those eligible for investment under other provisions of  this  subsection.  The  aggregate  amount  of foreign  investments  including  cash in the currency of such country or possession, obligations of American institutions payable outside of  the United  States  and  cash  deposited  in a bank, trust company or thrift institution located outside of  the  United  States  held  at  any  time pursuant  to the provisions of this section shall not exceed ten percent of the insurer's admitted assets as shown by its last statement on  file with the superintendent.  (B)  Investments  in any one possession of the United States or in any one foreign country, other than Canada, made pursuant to this  paragraph shall not exceed (i) in the case of any possession or country having the highest  sovereign  debt  rating,  as established by a securities rating agency recognized by the superintendent, three percent of the  insurer's admitted  assets  as  shown  by  its  last  statement  on  file with the superintendent, or  (ii) in the case of any other possession or country one percent of the insurer's admitted assets as shown by its last statement  on  file  with the superintendent.  (7)  Development bank obligations. Obligations issued or guaranteed by the  international  bank  for  reconstruction   and   development,   the inter-American development bank, the Asian development bank, the African development bank or the international finance corporation; provided that  (i)   obligations   of   such  banks  and  the  international  finance corporation are rated AA or higher (or  the  equivalent  thereto)  by  a securities  rating agency recognized by the superintendent, or if not so rated are similar in structure and in all  material  respects  to  other obligations of the same institution which are so rated, and  (ii)  the aggregate investment made pursuant to the provisions of this paragraph in each such bank and the international finance corporation at any time, shall not exceed five percent of the insurer's admitted assets as shown by its last statement on file with the superintendent, and  (iii) the aggregate investment made pursuant to the provisions of this paragraph in all such banks and the  international  finance  corporation shall  not  exceed  fifteen  percent of the insurer's admitted assets as shown by its last statement on file with the superintendent.  (8) Equity interests. (A) Investments in common shares or  partnership interests of any solvent American institution, if:  (i)  all its obligations and preferred shares, if any, are eligible as investments under this subsection and  (ii) such equity interests of any such institution except an insurance company are registered on a national securities exchange, as provided in the Securities Exchange Act of 1934, 15 U.S.C. §§78a-78kk  or  otherwise registered  pursuant  to said act and, if so otherwise registered, price quotations  therefor  are  furnished  through  a  nationwide   automated quotations  system  approved  by  the National Association of Securities Dealers, Inc., provided that an insurer may invest under this  paragraph an  amount not exceeding one percent of the insurer's admitted assets as shown by its last statement on file with the superintendent even  though such  equity  interests  are  not so registered and are not issued by an insurance company.  (B) Investment limitations. (i) No insurer subject to  the  provisions of  paragraph  two  of  subsection  (a) or subsection (b) of section one thousand four hundred three of this article shall invest in or loan upon any one institution's outstanding equity interests an  amount  exceeding one  percent  of  the  insurer's  admitted  assets  as shown by its last statement on file with the superintendent, and  (ii)  the  cost  of  any investment  in  equity  interests, made pursuant to this paragraph, when added to the aggregate cost of all other investments in equity interests then held pursuant to this paragraph, paragraph six and clause  (ii)  of subparagraph (A) of paragraph ten of this subsection shall not exceed:  (I)  in  the  case  of an insurer authorized to make investments under item (i) of this  subparagraph  except  a  retirement  system  organized pursuant to article forty-six of this chapter, the lesser of its surplus to  policyholders  or ten percent of its admitted assets as shown by its last statement on file with the superintendent, and  (II) in the case of a retirement system organized pursuant to  article forty-six  of  this  chapter,  thirty  percent of its admitted assets as shown by its last statement on file with the superintendent.  (9) Investments made by  subsidiaries.  The  net  investment  in  real property and loans secured by real property made by subsidiaries engaged or  organized  to  engage  exclusively in the acquisition, ownership and management of such  investments.  Such  loans  and  real  property  must qualify  as  a  reserve  investment under paragraph four or five of this subsection. The subsidiary's net investment in such  real  property  and loans  shall  be  included  under  such  paragraph  when  computing  any limitations applicable to such real property and loans and excluded when computing the limitations applicable to equity interests under paragraph eight of this subsection. In order to  qualify,  a  subsidiary  must  be wholly-owned either by the insurer or by two or more insurance companies domiciled  in  the  United  States  who  are members of the same holding company system, as such term is  defined  in  article  fifteen  of  this chapter, and each individual insurer's share of the net investments made by  such  subsidiary  shall  be  computed  in  proportion  to its equity interest in such subsidiary.  (10) Investment companies.  (A) Securities of any  investment  company registered  pursuant  to  the federal Investment Company Act of 1940, 15 U.S.C. § 802, if such company:  (i) invests at least ninety percent of its  assets  in  the  types  of securities  which  qualify  as  a  reserve  investment  pursuant  to the provisions of paragraph one, two or three of this  subsection  or  which invest  in  securities  which are determined by the superintendent to be substantively similar to the types  of  securities  set  forth  in  such paragraphs; or  (ii)  invests  at  least  ninety percent of its assets in the types of equity interests which qualify as a reserve investment pursuant  to  the provisions of paragraph eight of this subsection.  (B) Investment limitations.  Investments made by an insurer subject to the  provisions  of paragraph two of subsection (a) or subsection (b) of section one thousand four hundred three of this article shall not exceed the following limitations:  (i)  in  any  investment  company  qualifying  under   item   (i)   of subparagraph  (A)  hereof, ten percent of such insurer's admitted assets as shown by its last statement on file with the superintendent  and  the aggregate  amount  of investment in such qualifying investment companies shall not exceed twenty-five percent of such insurer's  admitted  assets as shown by its last statement on file with the superintendent; and  (ii)   in  any  investment  company  qualifying  under  item  (ii)  of subparagraph (A) hereof, five percent of such insurer's admitted  assets  as  shown  by its last statement on file with the superintendent and the aggregate amount of investment in such qualifying  investment  companies shall  be  included  when calculating the permissible aggregate value of equity  interests  pursuant  to  the  provisions  of subparagraph (B) of paragraph eight of this subsection.  (11) Credit union shares, share certificates and share draft accounts. Shares, share certificates and share draft  accounts  issued  by  credit unions  and  federal  credit  unions not to exceed the amounts which are assumed, guaranteed or insured by the United States  or  any  agency  or instrumentality thereof.  (b)  Leeway  provision.  Investments  which  do not qualify or are not permitted under subsection (a)  hereof,  but  excluding  any  investment prohibited  by the provisions of paragraph six of subsection (a) of this section or by the provisions of paragraph one, two,  three,  four,  six, eight,  nine  or  ten  of  subsection  (a)  of section one thousand four hundred seven of this article, provided that:  (1) the aggregate cost of  such  investments  shall  not  exceed  five percent  of  the  admitted  assets  of  the insurer as shown by its last statement on file with the superintendent, and  (2) investments that are neither interest-bearing  nor  income-paying, made  under  this  subsection as provided in paragraph one of subsection (d) of section one thousand four hundred three of this article shall not in the aggregate exceed three percent of  the  admitted  assets  of  the insurer as shown by its last statement on file with the superintendent.