2023 New York Laws › ISC - Insurance › Article 43 - Non-Profit Medical and Dental Indemnity, or Health and Hospital Service Corporations › 4310 - Investments; Financial Conditions; Reserves.

§   4310.  Investments;  financial  conditions;  reserves.  (a)  Every
corporation subject to the provisions of this article shall annually  on
or   before   the  first  day  of  March  file  in  the  office  of  the
superintendent a statement, verified by at least two  of  the  principal
officers  of such corporation, showing its condition on the thirty-first
day of December then next preceding which shall  be  in  such  form  and
shall contain such matters as the superintendent shall prescribe.
(b)  No  such  corporation  shall  invest in any securities other than
those permitted by the provisions of paragraph two of subsection (a)  of
section  one  thousand  four  hundred  three  of this chapter, except as
provided in paragraphs one and two of this subsection.
(1) A corporation (or two  or  more  such  corporations  under  common
management)  with admitted assets of greater than eighty million dollars
and maintaining cash and reserve investments  under  subsection  (a)  of
section   one  thousand  four  hundred  four  of  this  chapter  (except
paragraphs eight and ten of subsection (a) of such  section)  free  from
any lien or pledge, which, when valued in accordance with the provisions
of  this  chapter,  seven  percent or more of net premium income for the
most recent twelve month period, as shown by its last  sworn  statement,
annual  or  quarterly,  on file with the superintendent, may also invest
its funds or otherwise acquire or loan upon investments permitted  under
paragraphs  eight and ten of subsection (a) of section one thousand four
hundred four of this  chapter  without  having  to  meet  the  otherwise
applicable  qualitative standards and the otherwise applicable aggregate
limitation for such investments, provided that the aggregate  amount  of
all  such  investments  shall  not  exceed  the  lesser  of  surplus  to
policyholders or fifteen percent of its admitted assets as shown by  its
last  statement on file with the superintendent. Any corporation subject
to the provisions of this article may  jointly  exercise  control  of  a
subsidiary  by  acting  together  with  one  or more other corporations,
provided that such other corporations are either corporations subject to
this article, foreign corporations which perform  similar  functions  in
other  states  or  which  belong  to a national association comprised of
similar corporations to which one or more corporations  organized  under
this  article  also  belong,  or  an  institution controlled by any such
foreign corporation. No such corporation shall hold a direct or indirect
ownership interest in a risk retention  group,  as  defined  in  article
fifty-nine  of this chapter, other than in a risk retention group all of
whose  members  are  insurance  companies.  Notwithstanding  any   other
provision  of  this  chapter, including, but not limited to, section one
thousand four hundred seven of this chapter, any corporation subject  to
the  provisions  of  this article may also invest, in the aggregate, not
more than three percent of its admitted assets in obligations, shares or
other securities (including certificates of deposit) issued by a  parent
corporation  which  is  organized  as  a  not  for  profit  entity  or a
corporation which is an affiliate or will be an affiliate  after  direct
or  indirect  acquisition  by the parent corporation; provided, however,
that the board of directors of the parent organization is constituted in
accordance with the requirements  of  subsection  (k)  of  section  four
thousand  three  hundred  one  of  this  article  and,  provided further
however, that the investments of the corporation  organized  under  this
article   in  its  own  subsidiaries  shall  not  be  included  in  that
limitation.
(2) A corporation  maintaining  cash  and  reserve  investments  under
subsection (a) of section one thousand four hundred four of this chapter
(except  paragraphs  eight  and  ten of subsection (a) of such section),
free from any lien or pledge, which, when valued in accordance with  the
provisions  of  this  chapter,  equal ten percent or more of net premium

income for the most  recent  twelve  month  period,  as  shown  by  such
corporation's  last  sworn  statement, annual or quarterly, on file with
the superintendent, may, in addition to  the  investments  permitted  by
paragraph  one  of  this subsection, invest up to fifteen percent of its
admitted  assets  in  investments  permitted  under  paragraph  two   of
subsection  (a)  of  section  one  thousand  four  hundred  four of this
chapter, provided however  that  such  investments  need  not  meet  the
otherwise applicable qualitative standards of such paragraph two so long
as  all  such  investments are rated at BBB or higher (or the equivalent
thereto) by a security rating agency recognized by the superintendent.
(c) Any such corporation shall be  deemed  insolvent  whenever  it  is
presently  or  prospectively unable to fulfill its outstanding contracts
and other liabilities and reserves.
(d) Every such corporation shall maintain a reserve, to be  designated
as the statutory reserve fund, which shall from time to time during each
calendar year be increased in an amount equal to at least one per centum
of the net premium income of such corporation during such whole calendar
year, provided however, that:
(1) if such corporation reinsures part of its risk under any or all of
its  contracts by means of reinsurance approved by the superintendent as
an appropriate substitute for  the  statutory  reserve  fund,  then  the
required  increase  to  the  statutory  reserve  fund  at the end of any
calendar year shall be reduced by the amount of the premium paid by such
corporation for such reinsurance during such calendar year or by one per
centum of the net premium income received  by  such  corporation  during
such  calendar  year on its contracts so reinsured for the period during
which they are so reinsured, whichever amount is the lesser;
(2) the statutory reserve fund at the end of any calendar  year  shall
not  exceed  twelve and one-half per centum of the net premium income of
such calendar year;
(3) every such corporation shall, after the first full  calendar  year
of  doing  business,  accumulate  and  maintain a statutory reserve fund
which shall from time to time during each calendar year be increased  in
an amount equal to at least five per centum of the net premium income of
such  corporation  during  such  whole  calendar year until such reserve
shall be at least equal to fifty thousand dollars  and  thereafter  such
reserve shall be accumulated and maintained in the manner prescribed.
(e) (1) Such statutory reserve fund may, after application therefor by
the  corporation  and approval thereof by the superintendent, be reduced
below the amount required to be maintained  by  subsection  (d)  hereof,
provided  that  no such reduction, except in the event of an epidemic or
other  catastrophe  resulting  in  extraordinary  hospital  or   medical
utilization,  shall,  in  the case of a corporation having a net premium
income for the preceding calendar year of  (i)  less  than  ten  million
dollars  or  (ii)  ten  million  dollars  or  more, reduce the statutory
reserve below an amount equal to seventy-five per centum and  fifty  per
centum,  respectively,  of  the  amount  required  to  be  maintained by
subsection (d) hereof. Any reduction so authorized by the superintendent
shall be restored within a period of not more than three years,  or  six
years  in  the  case  of  a  corporation  with a combined premium volume
exceeding two billion dollars  annually  as  of  December  thirty-first,
nineteen  hundred ninety-six, in accordance with a plan submitted by the
corporation and approved by the superintendent which shall provide  that
such  restoration  shall  be  in  addition  to,  and not in lieu of, the
increase in the  statutory  reserve  fund  hereinabove  required,  which
increase must be made in every year except the year in which a reduction
in the statutory reserve fund is authorized by the superintendent.
(2)  Any  six  year  plan  submitted  by a corporation with a combined
premium volume exceeding two billion dollars  annually  as  of  December
thirty-first, nineteen hundred ninety-six shall also be submitted to the
special  advisory review panel created pursuant to section four thousand
three hundred nineteen of this chapter. Within sixty days of its receipt
of  the  six  year  plan,  such  panel  shall  issue  a  report  to  the
superintendent analyzing the six year plan and recommending any  changes
it  deems  appropriate.  The  superintendent  shall hold public hearings
regarding any such proposed six year plan and the recommendations of the
panel. The superintendent shall consider the findings of the  panel  and
the  public  hearings  held  on  the  six  year plan during his approval
process for the six year plan.
(f) No such corporation shall invest in any real property, except that
any such corporation may,  with  the  approval  of  the  superintendent,
invest  in  such  real  property  as  it  may  reasonably expect will be
required for its principal office and the principal office or offices of
any other corporation organized under this article which  is  affiliated
with  and  which  shares  such  principal  office  or  offices with such
corporation, or  for  such  purposes  as  shall  be  requisite  for  the
convenient  accommodation  in  the  transaction  of the business of such
corporations, but in no event in excess of the aggregate  of  eight  per
centum  of  the  net  premium  income  of such corporations and five per
centum of the receipts from any governmental agency for which either  of
such  corporations  acts  as  fiscal intermediary during the twelve full
months immediately preceding the granting of such approval.
(g) A health service corporation, in addition  to  the  investment  in
real  estate  provided  in subsection (f) of this section, may, with the
approval of the superintendent, purchase an interest in real estate  for
the  purpose  of  constructing  a  hospital  or other health facility or
center thereon (in accordance with the  requirements  of  chapter  seven
hundred  ninety-five of the laws of nineteen hundred sixty-five), or may
purchase an existing hospital or facility for the purpose  of  providing
health services or may make loans to a corporation or corporations under
its control for the purposes heretofore described, or for the purpose of
organizing,  managing or promoting a health maintenance organization, as
such term is defined in article forty-four  of  the  public  health  law
primarily  for  the benefit of persons covered under contracts issued by
such corporations, but in no event in excess of an amount equal  to  ten
per  centum  of  its  annual  net  premium income during the twelve full
months immediately preceding the granting of  such  approval.  A  health
service  corporation may make expenditures and incur liabilities for the
purchase of real estate or for loans in excess of sums provided  for  in
subsection   (f)   hereof  and  this  subsection  as  permitted  by  the
superintendent pursuant to paragraph five of subsection (e)  of  section
four  thousand  three  hundred  one  of  this  article. A health service
corporation, with  the  approval  of  the  superintendent  of  financial
services,  also  may  enter  into agreements for the leasing of hospital
facilities.
(h) Notwithstanding any other  provisions  of  this  chapter,  and  in
addition  to  the  provisions  for  the  investment of funds and for the
purchase of real estate  as  provided  for  in  this  article  with  the
approval  of  the superintendent, a health service corporation may, with
the approval of the superintendent, expend sums  including  loans  to  a
corporation  or  corporations under its control to implement the program
described herein for the amortization of capital costs for the  purchase
or construction of facilities in its operations, including a hospital or
medical  service  center, and for the implementation of its program, but
not in excess of an amount equal to five percentum of  its  net  premium

income  during the twelve full months immediately preceding the granting
of such approval.
(i)  If  a  loan is made with the approval of the superintendent, to a
corporation under the control of a health service corporation, it  shall
be  made on condition that the superintendent may conduct an examination
pursuant to sections three hundred nine and three hundred  ten  of  this
chapter into the affairs of such corporation.
(j)  Every  corporation  subject  to  the  provisions of this article,
including a health service corporation or any of  its  instrumentalities
or any hospital, facility or center directly operated by any such health
service corporation, shall be exempt from every state, county, municipal
and school tax.
(k)  Notwithstanding  the  provisions  of any other law, a corporation
subject to the provisions of this  article  which  has  admitted  assets
greater  than  five  hundred  million  dollars on its last annual report
filed with the superintendent  may  enter  into  a  transaction  for  an
interest  rate swap in an amount not to exceed the amount of debt on the
books of the corporation on the effective date of this  subsection  that
was   incurred   within   twelve  months  of  the  construction  of  the
corporation's home office, provided that such interest rate  swap  shall
provide  an initial new interest rate that is at least two hundred basis
points  lower  than  the  interest  rate  on  the  existing  debt.   The
counterparty  to  this  transaction  shall  meet the qualifications of a
qualified counterparty as provided  in  subparagraph  (A)  of  paragraph
three  of subsection (f) of section fourteen hundred ten of this chapter
except that, notwithstanding clause (iv) of  subparagraph  (C)  of  such
paragraph, in the event that such counterparty is a qualified bank, such
bank  shall  be  rated  A  or  better (or the equivalent thereto) by two
independent  nationally  recognized  rating  organizations.   Any   such
transaction  shall  be  approved by the corporation's board of directors
prior to its implementation.
(l) Notwithstanding any  other  provisions  of  this  chapter  to  the
contrary, in determining the financial condition of corporations subject
to  the  provisions  of  this  article  and  not-for-profit corporations
authorized pursuant to article forty-four of the public health law,  the
department  shall  include  real  estate, including buildings, property,
capital improvements and appurtenances owned and held that are  utilized
in  the  ordinary course of the business of such entities, provided that
such real estate may be valued by the corporation at either its  current
amortized  book  value or at ninety percent of its current market value,
as determined by an independent appraisal  undertaken  annually  and  in
accordance with regulations promulgated by the superintendent.