N.Y. Insurance Law § 1324: Risk-based capital for property/casualty insurance companies

§ 1324. Risk-based capital for property/casualty insurance companies.

(a) Definitions. In this section:

(1) "Adjusted RBC report" means an RBC report which has been adjusted

by the superintendent in accordance with paragraph two of subsection (c)

of this section.

(2) "Corrective order" means an order issued by the superintendent

specifying corrective actions which the superintendent has determined

are required.

(3) "Domestic insurer" means any authorized property/casualty

insurance company either incorporated or organized under any law of this

state or, in the case of a United States branch of an alien insurer,

entered into the United States through this state.

(4) "Foreign insurer" means any authorized property/casualty insurance

company either incorporated or organized under the laws of any state,

other than this state, or in the case of a United States branch of an

alien insurer, entered into the United States through any state other

than this state.

(5) "Property/casualty insurance company" means any property/casualty

insurance company or United States branch of an alien insurer licensed

under article forty-one of this chapter, any reciprocal insurer licensed

under article sixty-one of this chapter or any advance premium

corporation or assessment corporation organized and licensed under

article sixty-six of this chapter.

(6) "RBC" means risk-based capital.

(7) "RBC instructions" means the RBC report including risk-based

capital instructions in effect as of December thirty-first, two thousand

four as issued by the national association of insurance commissioners,

and which in addition to any other matter which may be required to be

stated therein, either by law or by the superintendent pursuant to law,

shall conform substantially to the form of the report and instructions

adopted from time to time for such purpose by, or by the authority of,

the national association of insurance commissioners, together with such

additions, omissions, or modifications, similarly adopted from time to

time, as may be approved by the superintendent.

(8) "RBC level" means an insurer's company action level RBC,

regulatory action level RBC, authorized control level RBC, or mandatory

control level RBC where:

(A) "Company action level RBC" means the product of 2.0 and the

insurer's authorized control level RBC;

(B) "Regulatory action level RBC" means the product of 1.5 and the

insurer's authorized control level RBC;

(C) "Authorized control level RBC" means the number determined under

the risk-based capital formula in accordance with the RBC instructions;

and

(D) "Mandatory control level RBC" means the product of .70 and the

insurer's authorized control level RBC.

(9) "RBC plan" means a comprehensive financial plan containing the

elements specified in paragraph two of subsection (d) of this section.

If the superintendent rejects the RBC plan, and it is revised by the

insurer, with or without the superintendent's recommendation, the plan

shall be called the "revised RBC plan".

(10) "RBC report" means the report required in subsection (c) of this

section.

(11) "Total adjusted capital" means the sum of:

(A) An insurer's statutory capital and surplus; and

(B) Such other items, if any, as the RBC instructions may provide.

(b) Applicability. (1) This section shall apply to every

property/casualty insurance company, unless exempted under paragraph two

of this subsection.

(2) Except as set forth in subparagraph (C) of this paragraph, with

prior written approval, the superintendent may exempt from the

provisions of this section a non-stock domestic property/casualty

insurance company which:

(A)(i) Writes no direct business outside of this state;

(ii) Writes direct annual premiums of twenty million dollars or less;

and

(iii) Assumes reinsurance premiums in an amount that is less than five

percent of total direct premiums written; or

(B)(i) Has total direct premiums comprised of at least ninety percent

medical malpractice liability insurance, as that term is defined in

subsection (b) of section five thousand five hundred one of this

chapter;

(ii) Assumes reinsurance premiums in an amount that is less than five

percent of total direct premiums written; and

(iii) Writes ninety percent of its total direct premiums in this

state.

(C) The exemptions permitted under subparagraphs (A) and (B) of this

paragraph shall not apply to an insurer which:

(i) Is controlled by another insurer;

(ii) Owns or controls another insurer, unless the insurer that is

owned or controlled is subject to the provisions of this section,

section one thousand three hundred twenty-two or section one thousand

three hundred twenty-five of this article, as added by a chapter of the

laws of 2007, or a substantially similar provision in another

jurisdiction;

(iii) Is under common control of a person that controls another

insurer; or

(iv) Is a party to a pooling agreement wherein risks underwritten by

parties to the agreement are apportioned to the parties in a

predetermined manner.

(c) RBC reports. (1) Every domestic insurer shall, on or prior to each

March first (the "filing date"), prepare and submit to the

superintendent a report of its RBC levels as of the end of the calendar

year just ended, in a form and containing such information as is

required by the RBC instructions. In addition, the insurer shall file

the RBC report:

(A) With the National Association of Insurance Commissioners in

accordance with the RBC instructions; and

(B) With the insurance commissioner in any state in which the insurer

is authorized to do business, upon the written request of the insurance

commissioner. The insurer shall file the RBC report by the later of:

(i) The filing date; or

(ii) Fifteen days after the date of the request.

(2) If a domestic insurer files an RBC report which the superintendent

determines is inaccurate, then the superintendent shall adjust the RBC

report to correct the inaccuracy and shall notify the insurer of the

adjustment. The notice shall contain a statement of the reason for the

adjustment. An RBC report as so adjusted is referred to as an "adjusted

RBC report".

(d) Company action level event. (1) "Company action level event"

means, with respect to a domestic insurer:

(A) The filing by the insurer of an RBC report indicating that the

insurer's total adjusted capital is greater than or equal to its

regulatory action level RBC but less than its company action level RBC;

(B) The notification by the superintendent to the insurer of an

adjusted RBC report that indicates the occurrence of an event described

in subparagraph (A) of this paragraph, provided the insurer does not

challenge the adjusted RBC report under subsection (h) of this section;

(C) If, under subsection (h) of this section, the insurer challenges

an adjusted RBC report that indicates the occurrence of an event

described in subparagraph (A) of this paragraph, the notification by the

superintendent to the insurer that the superintendent has, after a

hearing, rejected the insurer's challenge; or

(D) The filing by the insurer of an RBC report indicating that the

insurer has total adjusted capital that is greater than or equal to its

company action level RBC, but less than the product of three point zero

and its authorized control level RBC, and with a combined ratio greater

than one hundred twenty percent as determined in accordance with the

trend test calculation in the RBC instructions.

(2) If there is a company action level event, the domestic insurer

shall prepare and submit to the superintendent an RBC plan which:

(A) Identifies the conditions which contribute to the company action

level event;

(B) Contains proposals of corrective actions which the insurer intends

to take and would be expected to result in the elimination of the

company action level event;

(C) Provides projections of the insurer's financial results in the

current year and at least the four succeeding years, both in the absence

of proposed corrective actions and giving effect to the proposed

corrective actions, including projections of statutory operating income,

net income, and capital and surplus. The projections for both new and

renewal business may include separate projections for each major line of

business and separately identify each significant income, expense and

benefit component;

(D) Identifies the key assumptions impacting the insurer's projections

and the sensitivity of the projections to the assumptions; and

(E) Identifies the quality of, and problems associated with, the

insurer's business, including its assets, liabilities, anticipated

business growth and associated surplus strain, extraordinary exposure to

risk, mix of business, and use of reinsurance.

(3) The RBC plan shall be submitted within forty-five days after the

occurrence of the company action level event.

(4)(A) Within sixty days after the submission by an insurer of an RBC

plan to the superintendent, the superintendent shall notify the insurer

whether the RBC plan is satisfactory or unsatisfactory.

(B) If the RBC plan is satisfactory, the insurer shall implement it.

(C) If the RBC plan is unsatisfactory, the notification to the insurer

shall set forth the reasons for the determination, and may set forth

proposed revisions which will render the RBC plan satisfactory to the

superintendent. Upon notification from the superintendent, the insurer

shall prepare a revised RBC plan, which may incorporate by reference any

revisions proposed by the superintendent, and shall submit the revised

RBC plan to the superintendent:

(i) Within forty-five days after the notification from the

superintendent; or

(ii) If, under subsection (h) of this section, the insurer challenges

the notification from the superintendent, within forty-five days after a

notification to the insurer that the superintendent has, after a

hearing, rejected the insurer's challenge.

(5) If there is a company action level event, the superintendent may

limit the premium writings of the insurer.

(6)(A) Every domestic insurer that files an RBC plan or revised RBC

plan with the superintendent shall file a copy with the insurance

commissioner of any state in which the insurer is authorized to do

business, upon the written request of the insurance commissioner, if the

state has an RBC provision substantially similar to paragraph one of

subsection (i) of this section.

(B) The insurer shall file a copy of the RBC plan or revised RBC plan

in that state by the later of:

(i) The date on which the RBC plan or revised RBC plan is filed under

paragraph three or four of this subsection; or

(ii) Fifteen days after the date of the request.

(e) Regulatory action level event. (1) "Regulatory action level event"

means, with respect to a domestic insurer:

(A) The filing by the insurer of an RBC report indicating that the

insurer's total adjusted capital is greater than or equal to its

authorized control level RBC but less than its regulatory action level

RBC;

(B) The notification by the superintendent to the insurer of an

adjusted RBC report that indicates the occurrence of an event described

in subparagraph (A) of this paragraph, provided the insurer does not

challenge the adjusted RBC report under subsection (h) of this section;

(C) If, under subsection (h) of this section, the insurer challenges

an adjusted RBC report that indicates the occurrence of an event

described in subparagraph (A) of this paragraph, the notification by the

superintendent to the insurer that the superintendent has, after a

hearing, rejected the insurer's challenge;

(D) The failure of the insurer to timely file an RBC report, unless

the insurer provides the superintendent with a satisfactory explanation

for the failure or cures the failure within ten days after the filing

date;

(E) The failure of the insurer to timely submit an RBC plan or a

revised RBC plan to the superintendent;

(F) Notification by the superintendent that the revised RBC plan is

unsatisfactory, provided the insurer does not challenge the

determination under subsection (h) of this section;

(G) If, under subsection (h) of this section, the insurer challenges a

determination by the superintendent under subparagraph (F) of this

paragraph, the notification by the superintendent to the insurer that

the superintendent has, after a hearing, rejected the challenge;

(H) Notification by the superintendent to the insurer that the insurer

has failed to adhere to its RBC plan or revised RBC plan or that the

insurer has failed to attain the amount of capital projected in the RBC

plan or revised RBC plan, and that the failure of either has a

substantial adverse effect on the insurer's ability to eliminate the

company action level event, provided the insurer does not challenge the

determination under subsection (h) of this section; or

(I) If, under subsection (h) of this section, the insurer challenges a

determination by the superintendent under subparagraph (H) of this

paragraph, the notification by the superintendent to the insurer that

the superintendent has, after a hearing, rejected the challenge.

(2) If there is a regulatory action level event, the superintendent

shall:

(A) Require the insurer to prepare and submit an RBC plan or, if

applicable, a revised RBC plan;

(B) Perform such examination or analysis as the superintendent deems

necessary of the assets, liabilities, and operations of the insurer,

including a review of the RBC plan or revised RBC plan; and

(C) Subsequent to the examination or analysis, issue a corrective

order.

(3) In determining corrective actions, the superintendent may take

into account such factors as are deemed relevant, based upon the

superintendent's examination or analysis of the assets, liabilities and

operations of the insurer.

(4) The RBC plan or revised RBC plan shall be submitted:

(A) Within forty-five days after the occurrence of the regulatory

action level event; or

(B) If, under subsection (h) of this section, the insurer challenges

the superintendent's determination that an RBC plan is unsatisfactory,

within forty-five days after notification to the insurer that the

superintendent has, after a hearing, rejected the insurer's challenge.

(5) The superintendent may retain actuaries, investment experts, and

other consultants as the superintendent deems necessary to review the

insurer's RBC plan or revised RBC plan, examine or analyze the assets,

liabilities and operations of the insurer, and formulate the corrective

order. The fees, costs and expenses relating to consultants shall be

borne by the affected insurer as directed by the superintendent.

(6) If there is a regulatory action level event, the superintendent

may limit the premium writings of the insurer.

(f) Authorized control level event. (1) "Authorized control level

event" means, with respect to a domestic insurer:

(A) The filing by the insurer of an RBC report indicating that the

insurer's total adjusted capital is greater than or equal to its

mandatory control level RBC but less than its authorized control level

RBC;

(B) The notification by the superintendent to the insurer of an

adjusted RBC report that indicates the occurrence of an event described

in subparagraph (A) of this paragraph, provided the insurer does not

challenge the adjusted RBC report under subsection (h) of this section;

(C) If, under subsection (h) of this section, the insurer challenges

an adjusted RBC report that indicates the occurrence of an event

described in subparagraph (A) of this paragraph, notification by the

superintendent to the insurer that the superintendent has, after a

hearing, rejected the insurer's challenge;

(D) The failure of the insurer to respond, in a manner satisfactory to

the superintendent, to a corrective order, provided the insurer has not

challenged the corrective order under subsection (h) of this section; or

(E) If, under subsection (h) of this section, the insurer challenges a

corrective order and the superintendent, after a hearing, rejects the

challenge or modifies the corrective order, the failure of the insurer

to respond, in a manner satisfactory to the superintendent, to the

corrective order subsequent to rejection or modification by the

superintendent.

(2) If there is an authorized control level event, the superintendent

shall take such actions as are:

(A) Required under subsection (e) of this section regarding an insurer

with respect to which a regulatory action level event has occurred; or

(B) Necessary to cause the insurer to be placed under rehabilitation

or liquidation under article seventy-four of this chapter.

(g) Mandatory control level event. (1) "Mandatory control level event"

means, with respect to a domestic insurer:

(A) The filing by the insurer of an RBC report, indicating that the

insurer's total adjusted capital is less than its mandatory control

level RBC;

(B) Notification by the superintendent to the insurer of an adjusted

RBC report that indicates the occurrence of an event described in

subparagraph (A) of this paragraph, provided the insurer does not

challenge the adjusted RBC report under subsection (h) of this section;

or

(C) If, under subsection (h) of this section, the insurer challenges

an adjusted RBC report that indicates the occurrence of an event

described in subparagraph (A) of this paragraph, notification by the

superintendent to the insurer that the superintendent has, after a

hearing, rejected the insurer's challenge.

(2)(A) If there is a mandatory control level event, except as set

forth in subparagraph (B) of this paragraph, the superintendent shall

take such actions as are necessary to cause the insurer to be placed

under rehabilitation or liquidation under article seventy-four of this

chapter.

(B) The superintendent may forgo action set forth in subparagraph (A)

of this paragraph after the occurrence of a mandatory control level

event if:

(i) The insurer has demonstrated within a ninety day period that the

mandatory control level event will be eliminated under a plan approved

by the superintendent; or

(ii) No business is being written or renewed, any existing

policyholder obligations are being run-off under a plan approved by the

superintendent and the insurer meets the minimum capital and surplus as

otherwise required under this chapter.

(h) Hearings. (1) An insurer shall have the right to a hearing upon

notification to the insurer by the superintendent:

(A) Of an adjusted RBC report;

(B) That the insurer's RBC plan is unsatisfactory or the revised RBC

plan is unsatisfactory;

(C) That the insurer has failed to adhere to its RBC plan or revised

RBC plan and that the failure has a substantial adverse effect on the

ability of the insurer to eliminate the company action level event; or

(D) Of a corrective order.

(2) If a hearing is requested within five days after the

superintendent gives a notification specified in paragraph one of this

subsection, the superintendent shall give notice and a hearing in

accordance with the provisions of article three of this chapter, except

that the hearing, and any report resulting from such hearing, shall be

kept confidential in accordance with the provisions of paragraph one of

subsection (i) of this section.

(3) The superintendent shall set a date for the hearing, which date

shall be no less than ten nor more than thirty days after the date of

the insurer's hearing request.

(i) Confidentiality; prohibition on announcements; prohibition on use

in rate making; excess of capital over the amount indicated in the RBC

report. (1) All RBC plans, revised RBC plans, results or reports of any

examination or analysis of an insurer performed pursuant to this

section, corrective orders filed with or issued by the superintendent

and any report resulting from a hearing held pursuant to subsection (h)

of this section contain information that may be damaging to the insurer

if made available to its competitors, and shall be confidential and not

made public or subject to subpoena, except to the extent the

superintendent finds release of information necessary to protect the

public.

(2)(A) The comparison of an insurer's total adjusted capital to any of

its RBC levels is a regulatory tool which may indicate the need for

possible corrective action with respect to the insurer, and is not

intended as a means to rank insurers generally, and the use of the

information to rank insurers may be misleading to the general public.

(B) Except as otherwise required under the provisions of this section,

no authorized insurer, licensed insurance agent, licensed insurance

broker, or any person on behalf of the insurer, agent or broker, or any

other person licensed pursuant to this chapter shall make, publish,

disseminate, circulate, or place before the public or cause, directly or

indirectly, to be made, published, disseminated, circulated or placed

before the public, in a newspaper, magazine, or other publication, or in

the form of a notice, circular, pamphlet, letter or poster, or over any

radio or television station, or in any other way, an advertisement,

announcement or statement containing an assertion, representation or

statement with regard to the RBC levels of any insurer, or of any

component derived in the calculation.

(C) Notwithstanding subparagraph (B) of this paragraph, if a

materially false or inappropriate statement, comparing an insurer's

total adjusted capital or other amount to one or more of its RBC levels,

is published in a written publication, and the insurer is able to

demonstrate to the superintendent the falsity or inappropriateness of

the statement, then the insurer may publish an announcement in a written

publication to rebut the statement.

(3) RBC instructions, RBC reports, adjusted RBC reports, RBC plans and

revised RBC plans shall not be used by the superintendent in determining

whether rates comply with standards set forth in this chapter and shall

not be considered or introduced as evidence in any hearing involving

such standards.

(4) An excess of capital over the amount produced by the RBC

requirements contained in this section is desirable in the business of

insurance. Accordingly, insurers should seek to maintain capital above

the RBC levels required by this section. Additional capital is used and

useful in the insurance business and helps to secure an insurer against

various risks inherent in, or affecting, the business of insurance and

not accounted for or only partially measured by the RBC requirements

contained in this section.

(j) Foreign insurers. (1) A foreign insurer shall, upon the written

request of the superintendent, submit to the superintendent an RBC

report, in the same form as required of a domestic insurer, as of the

end of the calendar year just ended by the later of:

(A) The date an RBC report would be required to be filed by a domestic

insurer under this section; or

(B) Fifteen days after the date of the request.

(2) A foreign insurer shall, upon the written request of the

superintendent, within five days, submit to the superintendent a copy of

its RBC plan or revised RBC plan that is filed with the insurance

commissioner of any other state.

(3)(A) If there is a company action level event, regulatory action

level event, or authorized control level event, and the insurance

commissioner of the state of incorporation or organization of the

insurer does not require the insurer to file an RBC plan, the

superintendent may require the insurer to file an RBC plan, in the same

form as required of a domestic insurer, with the superintendent within

forty-five days of the superintendent's notification.

(B) If the RBC plan is unsatisfactory or if the insurer fails to

timely file the RBC plan with the superintendent, the superintendent may

order the insurer not to issue any new insurance policies or contracts

in this state.

(4) If there is an authorized control level event or a mandatory

control level event, the superintendent may make application under

article seventy-four of this chapter.

(k) Notices. Unless a later date is specified, any notice by the

superintendent to an insurer under this section which may result in

regulatory action hereunder shall be effective upon delivery, except

that, if the notice is mailed, it shall be effective three days after it

is mailed.