2023 New York Laws › ISC - Insurance › Article 14 - Investments › 1404 - Types of Reserve Investments Permitted for Non-Life Insurers.

§  1404. Types of reserve investments permitted for non-life insurers.
(a) In addition to the investments specified in subsection  (b)  hereof,
but  excluding  any investment prohibited by the provisions of paragraph
one, three, four, six, eight, nine or ten of subsection (a)  of  section
one thousand four hundred seven of this article, the reserve investments
of a domestic insurer authorized to make investments under the authority
of this section shall consist of the following:
(1) Government obligations. Obligations which are not in default as to
principal or interest, which are valid and legally authorized, and which
are issued, assumed, guaranteed or insured by:
(A) the United States or by any agency or instrumentality thereof,
(B) any state of the United States,
(C)  any  territory  or  possession  of the United States or any other
governmental unit in the United States, or
(D) any agency or instrumentality of any governmental unit referred to
in  subparagraphs  (B)  and  (C)  of  this  paragraph,   provided   that
obligations  to  be  eligible  under  this  paragraph  shall  be  by law
(statutory or otherwise) payable, as to  both  principal  and  interest,
from  taxes  levied  or  by  law  required to be levied or from adequate
special revenues pledged or otherwise appropriated or by law required to
be provided for the purpose of such  payment,  but  in  no  event  shall
obligations  be  eligible for investment under this paragraph if payable
solely out of special  assessments  on  properties  benefited  by  local
improvements.
(2) Obligations of American institutions.
(A)  Obligations  which are issued by any solvent American institution
or which are assumed or guaranteed by any solvent  American  institution
(other  than  an  insurance  company) and which are not in default as to
principal or interest provided such obligations:
(i) are adequately secured by  collateral  security  having  a  market
value  not  less  than  the principal amount thereof and have investment
qualities and characteristics wherein the speculative elements  are  not
predominant, or
(ii) are rated A or higher (or the equivalent thereto) by a securities
rating  agency recognized by the superintendent, or if not so rated, are
similar in structure and in all material respects to  other  obligations
of the same institution which are so rated, or
(iii) are insured by one or more authorized insurance companies (other
than  the  investing  insurer  or any parent, subsidiary or affiliate of
such insurer) who are licensed to insure obligations in this state  and,
after  considering  such  insurance,  are  rated  Aaa (or the equivalent
thereto) by a securities rating agency recognized by the superintendent,
or
(iv) have been given the highest quality designation by the Securities
Valuation Office of the National Association of Insurance Commissioners.
(B) No investment in or loan upon the obligations of any  institution,
other  than an institution which issues mortgage related securities, and
no investment in any one mortgage related security, made pursuant to the
provisions of this  paragraph  shall  exceed  five  per  centum  of  the
admitted  assets  of such insurer as shown by its last statement on file
with the superintendent.
(3) Preferred or  guaranteed  shares  of  American  institutions.  (A)
Preferred  or  guaranteed  shares  issued  or  guaranteed  by  a solvent
American  institution  if  all  of  the  institution's  obligations  are
eligible  as  investments under item (ii) or (iv) of subparagraph (A) of
paragraph two of this subsection.
(B) No investment  in  the  preferred  or  guaranteed  shares  of  any
institution  made  pursuant  to  the  provisions of this paragraph shall

exceed two percent of such insurer's admitted assets  as  shown  by  its
last statement on file with the superintendent.
(4)  Loans  secured  by  real  property. (A) Loans secured by first or
second mortgages which are liens on improved real property in the United
States (including leasehold estates having an unexpired term of not less
than twenty years, inclusive of the term or terms which may be  provided
by enforceable terms of renewal) meeting the following requirements:
(i)  Priority of mortgages. The mortgaged property shall be subject to
no prior lien, except a first  mortgage  and  liens  for  non-delinquent
ground  rents, taxes, assessments and similar charges. There shall be no
condition or right of re-entry or forfeiture not insured  against  under
which  the mortgage can be cut off, subordinated or otherwise disturbed.
No loan secured by a second mortgage shall  be  made  if  the  principal
amount  secured  by  a prior first mortgage can be increased without the
insurer's consent unless the amount of increase is applied to reduce the
second mortgage.
(ii) Leaseholds. If the mortgaged property is a leasehold:
(I) the lease shall provide for a term of at least twenty-one years,
(II) the property underlying the leasehold  shall  be  subject  to  no
prior  lien  except  for  liens  for non-delinquent ground rents, taxes,
assessments and similar charges and there shall be no condition or right
of re-entry or forfeiture not insured against under which the insurer is
unable to continue the lease in force for the duration of the loan, and
(III) the loan shall provide for such payments that at any time during
the period of the loan the aggregate payments of principal  to  be  made
will be sufficient to repay the loan within the lesser of forty years or
a  period  equal  to  eighty  percent  of the term of the lease, through
payments of interest only for five years and equal  payments  applicable
first  to  interest  and  then  to  principal  at  the  end of each year
thereafter. "Term", as used in this paragraph six with  reference  to  a
lease,  means  its unexpired term at the date of the loan, plus any term
which may be provided by options of the lessee to renew.
(iii) Participations. If the investment is a participation in a loan:
(I) all participations shall be held by the insurer, or
(II) the participation held by the insurer shall give it substantially
the rights of a first or second mortgagee, and shall be prior  to  those
of the holders of the other participations, or
(III) each participation shall be of equal rank, and
(aa)  the  loan  shall  comply  with items (i), (ii), and (iv) of this
subparagraph  (A)  and  with   any   regulations   prescribed   by   the
superintendent for investments under this clause (III), and
(bb)  if, when the participation is acquired by the insurer, there are
more than five holders of participations in the loan, or more than three
such holders and such loan is less than five million dollars in original
principal amount, the  mortgagee  shall  be  (and,  in  the  case  of  a
participation  in an obligation, the obligation shall be held by) a bank
or trust company duly authorized and licensed  to  act  as  a  corporate
trustee (with or without a co-trustee). "Participation", as used in this
paragraph  four,  means an obligation forming part of an issue of bonds,
notes or other evidences of indebtedness which are secured by  the  same
mortgage  and  also an instrument evidencing a participating interest in
any such bond, note or other evidence of indebtedness.
(iv) Amount of loan. The  amount  of  the  loan  (excluding  any  part
guaranteed or insured under title three of the Servicemen's Readjustment
Act of 1944, 38 U.S.C. §§ 1801-1827), when added to the amount unpaid on
any  prior first mortgage, shall not exceed the following percentages of
the value of the real  property  or  leasehold  securing  the  loan,  as

determined  by  an appraisal made by an appraiser for the purpose of the
investment:
(I) sixty-six and two-thirds percent,
(II)  seventy-five percent, if the mortgage provides for such payments
of principal that at no time during the period of  the  loan  shall  the
aggregate  payments  of principal required to be made be less than would
have been necessary to reduce the amount of the loan  (plus  the  amount
secured  by any such prior mortgage) to sixty-six and two-thirds percent
of such value by the end  of  thirty-five  years,  through  payments  of
interest  only  for  five  years  and equal payments applicable first to
interest and then to principal at the end of each year thereafter, or
(III) ninety percent, if the loan is secured by a  first  mortgage  on
real  property improved primarily with a residential building, which may
be a condominium unit, for not more than four families and provides  for
monthly  payments of principal and interest sufficient to repay the loan
within the lesser of forty years or the remaining  useful  life  of  the
building as estimated in the appraisal.
(v) Investment limitations.
(I)  Investments  held  by  an  insurer,  except  a  fraternal benefit
society, under this subparagraph (A) shall not exceed:
(aa) in the aggregate twenty-five percent of its  admitted  assets  as
shown  by  its  last statement on file with the superintendent excluding
any amount guaranteed or insured under the Servicemen's Readjustment Act
of 1944, 38 U.S.C. §§ 1801-1827, or
(bb) in the aggregate two percent of its admitted assets as  shown  by
its  last  statement on file with the superintendent in loans secured by
other than first mortgages.
(II) Investments held  by  a  fraternal  benefit  society  under  this
paragraph shall not exceed:
(aa) in the aggregate fifty percent of its admitted assets as shown by
its last statement on file with the superintendent, excluding any amount
guaranteed  or  insured under the Servicemen's Readjustment Act of 1944,
38 U.S.C. §§ 1801-1827, or
(bb) in the aggregate two percent of its admitted assets as  shown  by
its  last  statement on file with the superintendent in loans secured by
other than first mortgages.
(III) No insurer or society shall invest in or lend upon the  security
of  any one property more than the greater of thirty thousand dollars or
two percent of its admitted assets as shown by  its  last  statement  on
file with the superintendent.
(IV)   Separate   evidences   of  indebtedness  which  are  separately
transferable shall be deemed to constitute separate loans which  may  be
separately  qualified  under  this paragraph whether or not secured by a
single mortgage.
(B)  Purchase  money  mortgages.  Purchase  money  mortgages  or  like
securities  received  by  the  insurer  on  the sale or exchange of real
property held under paragraph five hereof.
(5) Real property or interests therein. (A) The following  investments
in real property (including incidental equipment thereto) located in the
United  States,  if  acquired  and  held directly or through partnership
interests engaged exclusively in the business of  acquiring,  owing  and
managing such property:
(i)  The  land  and  the building thereon in which the insurer has its
principal office.
(ii)  Real   property   requisite   for   the   insurer's   convenient
accommodation in the transaction of its business.
(iii)  Real  property  acquired  in  total  or partial satisfaction of
mortgages, liens, judgments, claims or indebtedness held by the  insurer
in the course of its business.
(iv)  Real  property  acquired  as an investment for the production of
income or to be improved or developed for such investment purpose.
(B) Investments under this paragraph shall be subject to the following
limitations:
(i) The cost of each parcel acquired under item (iv)  of  subparagraph
(A)  of  this  paragraph, including the estimated cost to the insurer of
the improvement or development thereof, shall not exceed one percent  of
the  insurer's  admitted  assets  as shown by its last statement on file
with the superintendent, and when added to the book value of  all  other
real  property  then  held  by  it pursuant to such item (iv), shall not
exceed twelve and one-half  percent  of  such  admitted  assets.  Unless
otherwise required by the superintendent under subsection (b) of section
one  thousand four hundred fourteen of this article, each parcel of real
property  held  under  such  item  (iv)  together  with   each   capital
improvement  or  development  thereof  existing  at  acquisition or made
subsequently shall be valued on the insurer's  books  as  of  each  last
year-end   so  as  to  write  down  the  cost  of  such  improvement  or
development, at  a  rate  averaging  at  least  two  percent  per  annum
commencing on the date of acquisition or completion, as the case may be,
of such improvement or development.
(ii)  The  acquisition of real property serving as the residence of an
employee, except a director or trustee of such insurer, if  acquired  in
connection with the relocation by the insurer of the employee's place of
employment,  including  any  relocation  in  connection with his initial
employment, at a purchase price not exceeding the  property's  value  as
determined   by  an  independent  appraiser  for  the  purpose  of  such
acquisition,  provided  such  employee  has  made   reasonable   efforts
otherwise  to  dispose  of  such  property  during the month before such
acquisition.  Such  property  must  be  acquired  under  item  (ii)   of
subparagraph  (A)  hereof,  and,  in the case of a non-director officer,
such acquisition is subject to  the  provisions  of  subsection  (h)  of
section one thousand four hundred eleven of this article.
(iii)  Real  property  acquired  pursuant  to  items  (i)  and (ii) of
subparagraph (A) hereof shall be disposed of within five years after  it
shall  have  ceased  to be necessary for the convenient accommodation of
such insurer in the transaction  of  its  business,  and  real  property
acquired  pursuant  to  item  (iii)  of subparagraph (A) hereof shall be
disposed of within five years after the date of acquisition, unless  the
superintendent  certifies  that the interests of the insurer will suffer
materially by the forced sale thereof  and  extends  the  time  in  such
certificate.
(iv)  No  real  property  shall  be  acquired  by any domestic insurer
pursuant to items (i) and (ii) of subparagraph (A) hereof if  its  cost,
together  with the book value of all real property then held pursuant to
such items (i) and (ii), exceeds ten percent of the  insurer's  admitted
assets as shown by its last statement on file with the superintendent.
(v)  Except  with  the  superintendent's approval, no domestic insurer
shall:
(I) acquire any real property  pursuant  to  items  (i)  and  (ii)  of
subparagraph  (A) of this paragraph, if the real property being acquired
is greater than one percent of the insurer's admitted assets as shown by
its last statement on file with the superintendent, or
(II) with respect to any building which was acquired under  items  (i)
and  (ii)  of  subparagraph  (A) of this paragraph, make any improvement
which should be capitalized according to generally  accepted  accounting

principles  if the annual expenditure for such improvements for any such
building will exceed the greater of ten percent of its book value or one
percent of the insurer's admitted assets as shown by its last  statement
on file with the superintendent.
(6)  Foreign investments. (A) Investments in a foreign country or in a
possession of the United States which  are  substantially  of  the  same
kinds,  classes  and  investment grades as those eligible for investment
under other provisions of  this  subsection.  The  aggregate  amount  of
foreign  investments  including  cash in the currency of such country or
possession, obligations of American institutions payable outside of  the
United  States  and  cash  deposited  in a bank, trust company or thrift
institution located outside of  the  United  States  held  at  any  time
pursuant  to the provisions of this section shall not exceed ten percent
of the insurer's admitted assets as shown by its last statement on  file
with the superintendent.
(B)  Investments  in any one possession of the United States or in any
one foreign country, other than Canada, made pursuant to this  paragraph
shall not exceed (i) in the case of any possession or country having the
highest  sovereign  debt  rating,  as established by a securities rating
agency recognized by the superintendent, three percent of the  insurer's
admitted  assets  as  shown  by  its  last  statement  on  file with the
superintendent, or
(ii) in the case of any other possession or country one percent of the
insurer's admitted assets as shown by its last statement  on  file  with
the superintendent.
(7)  Development bank obligations. Obligations issued or guaranteed by
the  international  bank  for  reconstruction   and   development,   the
inter-American development bank, the Asian development bank, the African
development bank or the international finance corporation; provided that
(i)   obligations   of   such  banks  and  the  international  finance
corporation are rated AA or higher (or  the  equivalent  thereto)  by  a
securities  rating agency recognized by the superintendent, or if not so
rated are similar in structure and in all  material  respects  to  other
obligations of the same institution which are so rated, and
(ii)  the aggregate investment made pursuant to the provisions of this
paragraph in each such bank and the international finance corporation at
any time, shall not exceed five percent of the insurer's admitted assets
as shown by its last statement on file with the superintendent, and
(iii) the aggregate investment made pursuant to the provisions of this
paragraph in all such banks and the  international  finance  corporation
shall  not  exceed  fifteen  percent of the insurer's admitted assets as
shown by its last statement on file with the superintendent.
(8) Equity interests. (A) Investments in common shares or  partnership
interests of any solvent American institution, if:
(i)  all its obligations and preferred shares, if any, are eligible as
investments under this subsection and
(ii) such equity interests of any such institution except an insurance
company are registered on a national securities exchange, as provided in
the Securities Exchange Act of 1934, 15 U.S.C. §§78a-78kk  or  otherwise
registered  pursuant  to said act and, if so otherwise registered, price
quotations  therefor  are  furnished  through  a  nationwide   automated
quotations  system  approved  by  the National Association of Securities
Dealers, Inc., provided that an insurer may invest under this  paragraph
an  amount not exceeding one percent of the insurer's admitted assets as
shown by its last statement on file with the superintendent even  though
such  equity  interests  are  not so registered and are not issued by an
insurance company.
(B) Investment limitations. (i) No insurer subject to  the  provisions
of  paragraph  two  of  subsection  (a) or subsection (b) of section one
thousand four hundred three of this article shall invest in or loan upon
any one institution's outstanding equity interests an  amount  exceeding
one  percent  of  the  insurer's  admitted  assets  as shown by its last
statement on file with the superintendent, and  (ii)  the  cost  of  any
investment  in  equity  interests, made pursuant to this paragraph, when
added to the aggregate cost of all other investments in equity interests
then held pursuant to this paragraph, paragraph six and clause  (ii)  of
subparagraph (A) of paragraph ten of this subsection shall not exceed:
(I)  in  the  case  of an insurer authorized to make investments under
item (i) of this  subparagraph  except  a  retirement  system  organized
pursuant to article forty-six of this chapter, the lesser of its surplus
to  policyholders  or ten percent of its admitted assets as shown by its
last statement on file with the superintendent, and
(II) in the case of a retirement system organized pursuant to  article
forty-six  of  this  chapter,  thirty  percent of its admitted assets as
shown by its last statement on file with the superintendent.
(9) Investments made by  subsidiaries.  The  net  investment  in  real
property and loans secured by real property made by subsidiaries engaged
or  organized  to  engage  exclusively in the acquisition, ownership and
management of such  investments.  Such  loans  and  real  property  must
qualify  as  a  reserve  investment under paragraph four or five of this
subsection. The subsidiary's net investment in such  real  property  and
loans  shall  be  included  under  such  paragraph  when  computing  any
limitations applicable to such real property and loans and excluded when
computing the limitations applicable to equity interests under paragraph
eight of this subsection. In order to  qualify,  a  subsidiary  must  be
wholly-owned either by the insurer or by two or more insurance companies
domiciled  in  the  United  States  who  are members of the same holding
company system, as such term is  defined  in  article  fifteen  of  this
chapter, and each individual insurer's share of the net investments made
by  such  subsidiary  shall  be  computed  in  proportion  to its equity
interest in such subsidiary.
(10) Investment companies.  (A) Securities of any  investment  company
registered  pursuant  to  the federal Investment Company Act of 1940, 15
U.S.C. § 802, if such company:
(i) invests at least ninety percent of its  assets  in  the  types  of
securities  which  qualify  as  a  reserve  investment  pursuant  to the
provisions of paragraph one, two or three of this  subsection  or  which
invest  in  securities  which are determined by the superintendent to be
substantively similar to the types  of  securities  set  forth  in  such
paragraphs; or
(ii)  invests  at  least  ninety percent of its assets in the types of
equity interests which qualify as a reserve investment pursuant  to  the
provisions of paragraph eight of this subsection.
(B) Investment limitations.  Investments made by an insurer subject to
the  provisions  of paragraph two of subsection (a) or subsection (b) of
section one thousand four hundred three of this article shall not exceed
the following limitations:
(i)  in  any  investment  company  qualifying  under   item   (i)   of
subparagraph  (A)  hereof, ten percent of such insurer's admitted assets
as shown by its last statement on file with the superintendent  and  the
aggregate  amount  of investment in such qualifying investment companies
shall not exceed twenty-five percent of such insurer's  admitted  assets
as shown by its last statement on file with the superintendent; and
(ii)   in  any  investment  company  qualifying  under  item  (ii)  of
subparagraph (A) hereof, five percent of such insurer's admitted  assets

as  shown  by its last statement on file with the superintendent and the
aggregate amount of investment in such qualifying  investment  companies
shall  be  included  when calculating the permissible aggregate value of
equity  interests  pursuant  to  the  provisions  of subparagraph (B) of
paragraph eight of this subsection.
(11) Credit union shares, share certificates and share draft accounts.
Shares, share certificates and share draft  accounts  issued  by  credit
unions  and  federal  credit  unions not to exceed the amounts which are
assumed, guaranteed or insured by the United States  or  any  agency  or
instrumentality thereof.
(b)  Leeway  provision.  Investments  which  do not qualify or are not
permitted under subsection (a)  hereof,  but  excluding  any  investment
prohibited  by the provisions of paragraph six of subsection (a) of this
section or by the provisions of paragraph one, two,  three,  four,  six,
eight,  nine  or  ten  of  subsection  (a)  of section one thousand four
hundred seven of this article, provided that:
(1) the aggregate cost of  such  investments  shall  not  exceed  five
percent  of  the  admitted  assets  of  the insurer as shown by its last
statement on file with the superintendent, and
(2) investments that are neither interest-bearing  nor  income-paying,
made  under  this  subsection as provided in paragraph one of subsection
(d) of section one thousand four hundred three of this article shall not
in the aggregate exceed three percent of  the  admitted  assets  of  the
insurer as shown by its last statement on file with the superintendent.