2023 New York Laws › ISC - Insurance › Article 65 - Mortgage Guaranty Insurance Companies › 6502 - Financial Requirements.

§  6502.  Financial  requirements.  (a)  A  mortgage insurer shall not
transact business unless:
(1) if a stock insurance company, it has paid-in capital of  at  least
one  million dollars and paid-in surplus of at least one million dollars
or, if a mutual insurance company, a  minimum  initial  surplus  of  two
million  dollars. A stock company shall at all times thereafter maintain
a minimum surplus of at least five hundred thousand  dollars,  a  mutual
company  shall  at all times thereafter maintain a minimum surplus of at
least one million five hundred thousand dollars;
(2) it establishes a contingency reserve out of  net  premiums  (gross
premiums  less  premiums  returned  to  policyholders)  remaining  after
establishing the unearned premium reserve. The company shall  contribute
to  the  contingency  reserve  an  amount equal to fifty percent of such
remaining earned premiums.   Contributions to  the  contingency  reserve
made  during  each calendar year shall be maintained for a period of one
hundred and twenty months, except that withdrawals may be  made  by  the
company  with  the  prior  approval of the superintendent in any year in
which the actual incurred  losses  exceed  thirty-five  percent  of  the
corresponding  earned  premiums.  The  unearned premium reserve shall be
computed as required by section one thousand three hundred five of  this
chapter  except that on policies covering a risk period of more than one
year it shall be computed in accordance with  standards  promulgated  by
the superintendent; and
(3)  in  addition to the contingency reserve, the case basis method or
other method as may be prescribed by the superintendent shall be used to
determine the loss reserve in  a  manner  consistent  with  section  one
thousand three hundred three of this chapter. It shall include a reserve
for  claims  reported  and  unpaid and claims incurred but not reported,
including:
(A) estimated losses on insured  loans  which  have  resulted  in  the
conveyance of property which remains unsold;
(B) insured loans in the process of foreclosure; and
(C) insured loans in default for four or more months.
(b) A mortgage insurer shall not:
(1)  have  outstanding a total liability under its aggregate insurance
policies  exceeding  twenty-five  times  its   policyholders'   surplus,
computed  on  the basis of the company's liability under its election as
provided in subsection (c) of section six thousand five hundred three of
this article. Total liability shall  be  calculated  net  of  applicable
reinsurance.  No company which has outstanding total liability exceeding
twenty-five times its policyholders' surplus shall transact new business
until its total  liability  no  longer  exceeds  twenty-five  times  its
policyholders' surplus;
(2)  declare dividends except from undivided profits remaining on hand
above  the  aggregate  of  its  paid-in  capital,  paid-in  surplus  and
contingency  reserve  or,  if  a  mutual  insurance company, its initial
surplus and contingency reserve; or
(3) invest its contingency  reserve  except  in  tax  and  loss  bonds
purchased  pursuant  to  §  832(e)  of the Internal Revenue Code, to the
extent of the tax savings  resulting  from  the  deduction  for  federal
income tax purposes equal to the annual contributions to the contingency
reserve.  The  contingency  reserve  shall  otherwise be held in cash or
invested  only  in  the  types  of  reserve  investments  specified   in
paragraphs  one  and  two of subsection (a) of section one thousand four
hundred four of this chapter.