2023 New York Laws › ISC - Insurance › Article 69 - Financial Guaranty Insurance Corporations › 6902 - Organization; Financial Requirements.

§ 6902. Organization; financial requirements. (a) A financial guaranty
insurance  corporation  may  be  organized  and  licensed  in the manner
prescribed in section one thousand two hundred one of this chapter and a
foreign insurer may be licensed in the manner prescribed in section  one
thousand  one  hundred  six  of  this chapter, except as modified by the
following provisions:
(1) a corporation organized for the purpose of  transacting  financial
guaranty insurance may, subject to all the applicable provisions of this
chapter,  be licensed to transact only the following additional kinds of
insurance:
(A) residual value insurance, as defined in  paragraph  twenty-two  of
subsection  (a)  of  section  one  thousand one hundred thirteen of this
chapter;
(B) surety insurance, as defined in subparagraphs (C), (D), (E),  (F),
(G),  (H)  and (I) of paragraph sixteen of subsection (a) of section one
thousand one hundred thirteen of this chapter; and
(C) credit insurance, as defined  in  subparagraph  (A)  of  paragraph
seventeen of subsection (a) of section one thousand one hundred thirteen
of this chapter;
(2)  a  financial guaranty insurance corporation may only assume those
kinds of insurance for which it is licensed to write direct business;
(3) prior to the issuance of a license, unless a plan of operation has
been previously approved by  the  superintendent,  a  corporation  shall
submit  for  the  approval  of  the  superintendent a plan of operation,
detailing the types and projected  diversification  of  guaranties  that
will  be  issued,  the  underwriting  procedures  that will be followed,
managerial  oversight  methods,  investment  policies,  and  such  other
matters as may be prescribed by the superintendent; and
(4)  a  financial  guaranty insurance corporation's investments in any
one entity insured by that corporation shall not exceed four percent  of
its  admitted  assets at last year-end, except that this limit shall not
apply  to  investments  payable  or  guaranteed  by  a   United   States
governmental  unit  or  New  York  state  if such investments payable or
guaranteed by the United States governmental  unit  or  New  York  state
shall   be  rated  in  one  of  the  top  two  generic  lettered  rating
classifications  by   a   nationally   recognized   statistical   rating
organization acceptable to the superintendent.
(5)  in  addition  to  any  transaction  that  an  insurer meeting the
requirements of subsection (c) of  section  one  thousand  four  hundred
three  of this chapter may effect and maintain under any other provision
of this chapter, a financial guaranty insurance corporation  may  effect
and  maintain  transactions  in (A) contracts for the future delivery or
receipt of the currency of a foreign country, (B) interest rate options,
(C) credit default swaps under which the  insurer  is  acquiring  credit
protection  and  (D)  other products included in the plan referred to in
clause (vii) of this subparagraph, in each case  meeting  the  following
requirements:
(i)  the  transaction is used for the purpose of limiting risk of loss
under financial guaranty insurance  policies  or  reinsurance  contracts
covering such policies due to fluctuations in interest rates or currency
exchange  rates  or,  in  the  case  of  credit default swaps, financial
default, insolvency or other credit events;
(ii) the transaction shall not exceed  a  duration  of  twelve  months
beyond the term of such policies or reinsurance contracts;
(iii)  the  amount  of  foreign  currencies  to be purchased under the
transaction shall not exceed the amount guaranteed under  such  policies
or reinsurance contracts that is denominated in foreign currency;
(iv)  the amount that is subject to interest rate hedging transactions
does not exceed the amount guaranteed under such policies or reinsurance
contracts that is subject to the risk of interest rate fluctuations;
(v)  the  counterparty  to  such  transaction has (or is the principal
operating subsidiary  of  a  holding  company  that  has)  a  long  term
unsecured  debt  rating or claims-paying ability rating that is at least
investment grade;
(vi) the transaction is not conducted for arbitrage purposes; and
(vii) the transaction is entered into pursuant to a plan that has been
approved by the board of directors of the financial  guaranty  insurance
corporation and filed with and approved by the superintendent.
(b)  (1) A financial guaranty insurance corporation shall not transact
business unless it has paid-in capital of  at  least  two  million  five
hundred  thousand  dollars  and  paid-in surplus of at least seventy-two
million five hundred thousand dollars, and shall at all times thereafter
maintain a minimum surplus  to  policyholders  of  at  least  sixty-five
million dollars.
(2)  An insurer transacting only financial guaranty insurance prior to
the effective date of this article which has a  paid-in  capital  of  at
least two million five hundred thousand dollars and maintains surplus to
policyholders   of  at  least  forty-five  million  dollars  shall  have
thirty-six months from the effective  date  of  this  article  to  fully
comply  with the surplus requirements set forth in paragraph one of this
subsection.
(3) A financial guaranty insurance company shall be deemed  to  be  in
compliance  with paragraphs one and two of subsection (b) of section one
thousand four hundred two of this chapter if not less than sixty percent
of the amount of the required minimum  capital  or  minimum  surplus  to
policyholder  investments  shall  consist  of  the  types  specified  in
paragraphs one and two of subsection (b) of section  one  thousand  four
hundred  two  of  this  chapter and direct government obligations of any
state of the United States or of any county,  district  or  municipality
thereof,  provided  such  government  obligations  have  been  given the
highest quality designation of the Securities Valuation  Office  of  the
National  Association  of  Insurance Commissioners. Before investing any
part of the required minimum capital or  surplus  in  direct  government
obligations  of  any  other state of the United States or of any county,
district or municipality  thereof,  such  financial  guaranty  insurance
company  shall  have  invested  at  least  ten  percent of such required
minimum in government obligations of New York state or  of  any  county,
district  or  municipality  thereof.  Only  for  purposes of meeting the
required investment in government obligations of  New  York  state,  the
insurer  may  count investments in any government obligation of New York
state, whether direct or otherwise.