2023 New York Laws › ISC - Insurance › Article 42 - Life Insurance Companies and Accident and Health Insurance Companies and Legal Services Insurance Companies › 4207 - Dividends to Shareholders of Life, and Accident and Health Insurance Companies.

§  4207.  Dividends  to  shareholders of life, and accident and health
insurance companies. (a)(1) For purposes  of  this  subsection,  "earned
surplus"  means  an  amount  equal  to  an insurer's positive unassigned
funds, excluding eighty-five percent of the  change  in  net  unrealized
capital  gains  or  losses  less  capital gains tax, for the immediately
preceding calendar year as set forth in the insurer's most recent annual
statutory financial statement filed with the superintendent pursuant  to
section three hundred seven of this chapter.
(2)  Notwithstanding  paragraph  five of this subsection, any domestic
stock  life  insurance  company  may  distribute  a  dividend   to   its
shareholders  out  of  earned surplus where the aggregate amount of such
dividends in any calendar year does not exceed the greater of:
(A) ten percent of its surplus to policyholders as of the  immediately
preceding calendar year; or
(B)  its  net  gain  from  operations  for  the  immediately preceding
calendar year, not including  realized  capital  gains,  not  to  exceed
thirty  percent  of  its  surplus to policyholders as of the immediately
preceding calendar year; provided, however, that,  notwithstanding  this
paragraph, in no event may a dividend be distributed without approval of
the   superintendent,   in   accordance  with  paragraph  five  of  this
subsection, in the calendar year immediately following a  calendar  year
for  which  its net gain from operations, not including realized capital
gains, was negative.
(3) Notwithstanding paragraph five of this  subsection,  any  domestic
stock   life   insurance  company  may  distribute  a  dividend  to  its
shareholders where  the  aggregate  amount  of  such  dividends  in  any
calendar year does not exceed the lesser of:
(A)  ten percent of its surplus to policyholders as of the immediately
preceding calendar year; or
(B) its  net  gain  from  operations  for  the  immediately  preceding
calendar year, not including realized capital gains.
(4)  An  insurer  shall  not  distribute  a  dividend pursuant to both
paragraph two and paragraph three of this subsection.
(5) Except as provided in paragraphs two and three of this subsection,
no domestic stock life insurance company shall distribute  any  dividend
to  its  shareholders  unless  a notice of its intention to declare such
dividend  and  the  amount  thereof  shall  have  been  filed  with  the
superintendent  not  less  than  thirty days in advance of such proposed
declaration. The superintendent  may  disapprove  such  distribution  by
giving  written  notice  to  such  company within thirty days after such
filing that the superintendent finds that the financial condition of the
company does not warrant such distribution.
(6) With respect to dividends to shareholders distributed pursuant  to
paragraph  two  of  this subsection, every domestic stock life insurance
company shall report to the superintendent  all  such  dividends  within
five  business  days  following the declaration thereof and at least ten
days prior to the payment thereof.
(7) A domestic stock life insurance company's surplus to policyholders
following any  distribution  of  dividends  to  its  shareholders  under
paragraph  two of this subsection shall be reasonable in relation to the
company's outstanding liabilities and adequate  to  meet  its  financial
needs.
(8)  With respect to dividends to shareholders distributed pursuant to
paragraph two of  this  subsection,  the  superintendent  may  limit  or
disallow dividends if the superintendent determines that the:
(A)  domestic  stock life insurance company's surplus to policyholders
is not reasonable in relation to the company's  outstanding  liabilities
and not adequate to meet its financial needs; or
(B) domestic stock life insurance company is financially distressed or
troubled.
(b)  (1)  Except  as  provided  in paragraph three hereof, no domestic
stock accident and health insurance company shall declare or  distribute
any  dividend  on  its  capital  stock, except out of earned surplus, as
defined in subsection (a) of section four thousand one hundred  five  of
this  chapter.  Notwithstanding  the  forgoing,  the  superintendent may
permit a domestic stock accident and health insurance company to restate
its earned surplus under a plan of  quasi-reorganization  in  accordance
with  regulations  as  may  be  promulgated  by  the  superintendent. No
domestic stock accident and health insurance company  shall  declare  or
distribute  any  dividend  to shareholders which, together with all such
dividends declared or distributed by it during the next preceding twelve
months,  exceeds  the  lesser  of  ten  percent  of   its   surplus   to
policyholders,  as  shown  by  its  last  statement  on  file  with  the
superintendent, or one hundred percent of adjusted net investment income
for  such  period  unless,  upon   prior   application   therefor,   the
superintendent  approves  a  greater  dividend  payment  based  upon his
finding that the insurer will retain sufficient surplus to  support  its
obligations and writings.  Within the meaning of this section, "adjusted
net investment income" means net investment income for the twelve months
immediately  preceding  the  declaration  or distribution of the current
dividend increased by the excess, if any, of net investment income  over
dividends   declared   or   distributed  during  the  period  commencing
thirty-six months prior  to  the  declaration  or  distribution  of  the
current dividend and ending twelve months prior thereto; "surplus" means
the amount of the insurer's admitted assets in excess of its capital and
its liabilities; and both "surplus" and "surplus to policyholders" shall
include  any  voluntary  reserves,  or  any  part thereof, which are not
required by law.
(2) If the superintendent finds, after notice to and hearing  of  such
company, that any such company has distributed any dividend in violation
of  this  subsection,  he  may order such company to cease doing any new
business until the amount of such dividend has  been  restored  to  such
company.  The  directors  of  any  such company who vote in favor of the
declaration and distribution  of  any  dividend  in  violation  of  this
section  shall,  in  addition  to  all  other  liabilities  or penalties
prescribed by law, be jointly and severally  liable  to  the  creditors,
including  policyholder  creditors, of such company to the extent of the
dividend so declared and paid, and every shareholder receiving any  such
dividend shall be liable to such creditors of such company to the extent
of the dividend received by such shareholder.
(3)  Any  domestic  stock  accident  and  health insurance company may
declare and distribute a stock dividend to its shareholders whenever  it
shall have a surplus as defined in paragraph one hereof, in an amount at
least  equal  to  the  sum  of  such  dividend and thirty percent of its
unearned premium liability as shown by its last statement on file in the
office of the superintendent and, for such  purpose,  such  company  may
increase its capital stock from such surplus in the manner prescribed in
section  one  thousand  two  hundred  six  of this chapter, and it shall
distribute such additional or increased stock  to  its  shareholders  in
proportion to the stock held by each, respectively.
(c)  Any  stock accident and health insurance company authorized to do
business  in  this  state  may  include  in  its  charter  a   provision
authorizing the board of directors to permit its policyholders from time
to  time  to  participate  in  the profits of its operations through the
payment of dividends to policyholders. For the purpose of carrying  into
effect  any such provision, the board of directors may from time to time

make reasonable classifications of policies. Every  such  classification
of  risks  shall  be  filed  with  the  superintendent  and shall not be
effective as to policies  issued  or  delivered  in  this  state  unless
approved  by  the  superintendent as fair and equitable and not unfairly
discriminatory. Any such classification approved by  the  superintendent
shall  remain  in effect in this state until disapproved by him or until
withdrawn or modified with his approval by the company filing the  same.
No  dividends  to  policyholders  shall  be declared or paid by any such
company except out of its earned surplus, as defined in  subsection  (a)
of section four thousand one hundred five of this chapter.