N.Y. Insurance Law § 1323: Issuance of capital notes by domestic life insurance companies

§ 1323. Issuance of capital notes by domestic life insurance

companies. (a) A domestic life insurance company may at any time or from

time to time issue capital notes pursuant to this section in an

aggregate principal amount not exceeding (1) twenty-five percent of its

total adjusted capital (including the aggregate principal amount of

outstanding notes) as of the end of the immediately preceding calendar

year, less (2) the aggregate principal amount of outstanding notes;

provided, however, that capital notes shall not be issued for an

aggregate principal amount which would cause the aggregate principal

amount of all such insurer's capital notes scheduled to mature in any

calendar year to exceed five percent, or the aggregate principal amount

of all such insurer's capital notes scheduled to mature in any three

consecutive calendar years to exceed twelve percent, of the insurer's

total adjusted capital as of the end of the calendar year immediately

preceding the issuance of such capital notes. For purposes of this

section, outstanding notes shall include the outstanding aggregate

principal amount of capital notes issued pursuant to this section and

the outstanding aggregate principal amount of advances or borrowings

incurred pursuant to section one thousand three hundred seven of this

article.

(b) No such insurer shall issue capital notes pursuant to this section

unless the terms thereof shall have been approved by the superintendent

as not adverse to the interests of the insurer's policyholders.

(c) The insurer shall not pay or redeem the principal amount of any

capital notes, make any sinking fund payment or pay any interest on such

notes, and such principal, payment and interest shall not become due or

payable if, based on the preceding year-end annual statement filed with

the superintendent: (1) (A) the insurer's total adjusted capital is less

than such insurer's company action level RBC or (B) the insurer's total

adjusted capital is less than the product of 2.5 and its authorized

control level RBC and there is a negative trend, as determined in

accordance with section one thousand three hundred twenty-two of this

article or (2) the aggregate of all such payments or redemptions made

during the current calendar year would if made immediately prior to the

preceding year-end have caused (A) the insurer's total adjusted capital

to be less than such insurer's company action level RBC or (B) the

insurer's total adjusted capital at such time to be less than the

product of 2.5 and its authorized control level RBC and there is a

negative trend, as determined in accordance with section one thousand

three hundred twenty-two of this article. Notwithstanding the foregoing,

upon request by the insurer, the superintendent may approve, in whole or

in part, any such payment or redemption on the capital notes if and at

such time or times as in his judgment the financial condition of such

insurer warrants. The amount of such redemptions or payments of

principal amounts of any capital notes which cannot be made as the

result of the provisions of this subsection may accumulate at the rate

of interest of the capital notes.

(d) Capital notes issued pursuant to this section: (1) may provide (A)

for interest payments at fixed or adjustable rates, sinking fund

payments, and payments and redemptions of principal, in each case in

accordance with the terms of the capital note and without the prior

approval of the superintendent except to the extent that such approval

is required pursuant to this subsection or subsection (c) of this

section, (B) that such capital notes automatically become due and

payable in the event the insurer becomes subject to an order of

rehabilitation, liquidation or conservation granted pursuant to a

proceeding under article seventy-four of this chapter, and (C) for such

other features as the superintendent determines are appropriate for

capital notes issued by a life insurance company; and (2) shall provide

that if at the end of any calendar year the total amount of such

insurer's total adjusted capital (including the aggregate principal

amount of outstanding notes) is less than three times the aggregate

principal amount of outstanding notes, the superintendent may notify

such insurer that the financial condition of such insurer does not

warrant the payment or redemption or sinking fund payment, in whole or

in part, on the capital notes. Such action by the superintendent shall,

without any action on the part of the insurer or any other person,

automatically defer such payment or redemption until such time as the

superintendent finds that the financial condition warrants such payment

or redemption. The amount of such redemptions or payments of principal

amounts of any capital notes so deferred may accumulate at the rate of

interest of the capital notes.

(e) Capital notes issued pursuant to this section shall be considered

part of such insurer's total adjusted capital but shall not be

considered part of such insurer's surplus; provided, however, (1) that,

in the case of any capital note maturing fifteen years or less from the

year in which such capital note is issued, one-fifth of the aggregate

principal amount of such capital note shall be subtracted from total

adjusted capital in each year starting with the fifth year immediately

preceding the calendar year in which such capital note is scheduled to

mature; and (2) that, in the case of any capital note maturing more than

fifteen years from the year in which such capital note is issued;

one-tenth of the aggregate principal amount of such capital note shall

be subtracted from total adjusted capital in each year starting with the

tenth year immediately preceding the calendar year in which such capital

note is scheduled to mature, and further provided that, in no event

shall the amount included in total adjusted capital for any capital note

exceed the principal amount, at issue, of such outstanding capital note

less the aggregate of all sinking fund payments made on such capital

note. Such insurer shall be required to disclose the aggregate principal

amount of capital notes then outstanding as a liability on its financial

statements filed with the superintendent pursuant to this article.

(f) As used in this section, the terms "total adjusted capital",

"company action level RBC" and "authorized control level RBC" shall have

the same meanings as set forth with respect to such terms in section one

thousand three hundred twenty-two of this article.