2023 New York Laws › ISC - Insurance › Article 14 - Investments › 1401 - Definitions and Rules of General Application.

§  1401.  Definitions  and  rules  of general application. (a) In this
article: (1) "Invested assets" means the admitted assets of  an  insurer
that conform to the requirements of paragraphs one and two of subsection
(a)  of  section  one  thousand  three  hundred one of this chapter, but
excluding the income due or accrued thereon.
(2) "Mortgage-related security" means an obligation that is  rated  AA
or  higher  (or  the  equivalent  thereto)  by  a  nationally recognized
securities rating agency and either:
(A)  represents  ownership  of  one  or  more  promissory   notes   or
certificates  of  interest or participation in such notes (including any
rights designed to assure servicing of, or the receipt or timeliness  of
receipt  by the holders of such notes, certificates, or participation of
amounts payable under,  such  notes,  certificates,  or  participation),
which notes:
(i)  are  directly  secured by a first lien on a single parcel of real
estate, including stock allocated to a dwelling unit  in  a  residential
cooperative  housing  corporation,  upon  which is located a dwelling or
mixed  residential  and  commercial  structure,  or  on  a   residential
manufactured  home  as  defined  in  section  5402(6) of Title 42 of the
U.S.C.A., whether such manufactured home is considered real or  personal
property under the laws of the state in which it is to be located; and
(ii)  were originated by a savings and loan association, savings bank,
commercial bank, credit union, insurance company, or similar institution
which is supervised and examined by a federal or state authority, or  by
a  mortgage  approved  by the secretary of housing and urban development
pursuant to sections 1709 and 1715-b of Title 12 of  the  U.S.C.A.,  or,
where  such  notes  involve a lien on the manufactured home, by any such
institution or by any financial institution approved  for  insurance  by
the  secretary of housing and urban development pursuant to section 1703
of Title 12 of the U.S.C.A.; or
(B) is secured by one or more  promissory  notes  or  certificates  of
interest  or  participations  in such notes (with or without recourse to
the issuer  thereof)  and,  by  its  terms,  provides  for  payments  of
principal   in  relation  to  payments,  or  reasonable  projections  of
payments, or notes meeting the requirements of items  (i)  and  (ii)  of
subparagraph  (A)  of  this  paragraph  or  certificates  of interest or
participation in promissory notes meeting such requirements.
For the purpose of this paragraph the  term  "promissory  note",  when
used  in connection with a manufactured home, shall also include a loan,
advance or credit  sale  as  evidence  by  a  retail  installment  sales
contract or other instrument.
(3) "Partnership   interests"   when   used  in  connection  with  the
permissible types of investments made by  any  domestic  insurer,  other
than a domestic life insurer, means, an interest as a limited partner in
a  limited  partnership.  A  "limited  partnership"  means a partnership
formed by two  or  more  persons  pursuant  to  the  provisions  of  the
applicable  law,  having as members one or more general partners and one
or more limited partners. The limited partners  as  such  shall  not  be
bound by the obligations of the partnership.
(4) "United States" means, when used to signify place, only the states
of  the  United States, the Commonwealth of Puerto Rico, the District of
Columbia and includes lands and waters adjacent  to  the  foregoing  and
under the jurisdiction of the United States.
(5) "Cap" means an agreement obligating the seller to make payments to
the  buyer  with  each  payment based on the amount by which a reference
price or level or the performance or value of  one  or  more  underlying
interests  exceeds  a  predetermined number, sometimes called the strike
rate or strike price.
(6) "Collar" means an agreement to receive payments as the buyer of an
option, cap or floor and to make payments as the seller of  a  different
option, cap or floor.
(7)  "Derivative instrument" means an agreement, option, instrument or
a series or combination thereof:
(A) to make or take delivery of, or assume or relinquish, a  specified
amount of one or more underlying interests, or to make a cash settlement
in lieu thereof; or
(B)  that has a price, performance, value or cash flow based primarily
upon the actual or expected price, level,  performance,  value  or  cash
flow of one or more underlying interests.
The  term  "derivative  instrument"  includes options, warrants, caps,
floors, collars, swaps, swaptions, forwards, and futures.
(8) "Derivative transaction" means a transaction involving the use  of
one or more derivative instruments.
(9)  "Floor" means an agreement obligating the seller to make payments
to the buyer in which each payment is based on the  amount  by  which  a
predetermined  number, sometimes called the floor rate or price, exceeds
a reference price, level, performance or value of one or more underlying
interests.
(10) "Forward" means an agreement (other than a  future)  to  make  or
take  delivery  in  the  future  of one or more underlying interests, or
effect a cash settlement, based on the actual or expected price,  level,
performance or value of such underlying interests, but shall not mean or
include  spot transactions effected within customary settlement periods,
when-issued purchases, or other similar cash market transactions.
(11) "Future" means agreement traded on a futures exchange, to make or
take delivery of, or effect a cash settlement based  on  the  actual  or
expected  price,  level, performance or value of, one or more underlying
interests.
(12) "Hedging transaction" means a  derivative  transaction  which  is
entered into and at all times maintained to reduce:
(A)  the  risk  of  economic loss due to a change in the value, yield,
price, cash flow or quantity of assets or liabilities which the  insurer
has acquired or incurred or anticipates acquiring or incurring; or
(B)  the risk of economic loss due to changes in the currency exchange
rate or the degree of exposure as to assets or  liabilities  denominated
in  a  foreign  currency  which  an  insurer has acquired or incurred or
anticipates acquiring or incurring.
(13) "Option" means an agreement giving the buyer the right to buy  or
receive (a "call option"), sell or deliver (a "put option"), enter into,
extend  or  terminate or effect a cash settlement based on the actual or
expected price, spread, level, performance  or  value  of  one  or  more
underlying interests.
(14)  "Swap"  means an agreement to exchange or to net payments at one
or more times based on the  actual  or  expected  price,  yield,  level,
performance or value of one or more underlying interests.
(15)  "Swaption" means an option to purchase or sell a swap at a given
price and time or at a series of prices and times. A swaption  does  not
mean a swap with an embedded option.
(16)  "Underlying  interest"  means  the  assets,  liabilities,  other
interests, or a combination thereof, underlying a derivative instrument,
such  as  any  one  or  more  securities,  currencies,  rates,  indices,
commodities or derivative instruments.
(17)  "Warrant" means an instrument that gives the holder the right to
purchase or sell the underlying interest at a given price and time or at
a series of prices and times outlined in the warrant agreement.
(18) "Replication  transaction"  means  a  derivative  transaction  or
combination  of derivative transactions effected either separately or in
conjunction with cash  market  investments  included  in  the  insurer's
investment portfolio in order to replicate the investment characteristic
of  another  authorized  transaction,  investment  or  instrument and/or
operate as a substitute  for  cash  market  transactions.  A  derivative
transaction  entered  into  by  the  insurer as a hedging transaction or
income generation transaction authorized pursuant to this section  shall
not be considered a replication transaction.
(b)  All  financial tests and other requirements for the making of any
investment are satisfied if complied with on the date of acquisition  by
the  insurer,  except  as  otherwise  permitted  by  this  chapter or by
regulation.
(c) None of the financial tests or other requirements for  the  making
of  any  investment under this article, or as otherwise required by this
chapter or by regulation promulgated pursuant thereto, are preempted  by
the  provisions  of  section  106  of  Title I of the Secondary Mortgage
Market Enhancement  Act  of  1984  (15  U.S.C.  §  77r-1)("SMMEA").  The
provisions  of  this  chapter  and  any  regulation promulgated pursuant
thereto that pertain to investments  in  the  categories  of  securities
specified  in paragraphs one and two of subsection (a) of section 106 of
such act shall remain in  full  force  and  effect  notwithstanding  the
enactment of SMMEA.