N.Y. Insurance Law § 1403: Reserve and other investments; certain requirements

§ 1403. Reserve and other investments; certain requirements. (a) If

the requirements of section one thousand four hundred two of this

article are met:

(1) any domestic life insurance company may invest its funds in, or

otherwise acquire, or loan upon, only the types of investments specified

in section one thousand four hundred two, this section, sections one

thousand four hundred five, one thousand four hundred six, one thousand

four hundred ten, four thousand two hundred forty and article seventeen

of this chapter, subject to the limitations therein contained. The

provisions of section one thousand four hundred four of this article

shall not have any application to investments of life insurance

companies, except to the extent provided in paragraph four of subsection

(b) of section one thousand four hundred two of this article;

(2) any domestic corporation subject to article forty-three or

sixty-four of this chapter and any domestic fraternal benefit society

subject to article forty-five of this chapter may invest its funds in,

or otherwise acquire, or loan upon, only the types of investments

specified in section one thousand four hundred two, this section and

section one thousand four hundred four of this article, except as may be

modified by said article forty-three or sixty-four of this chapter as to

corporations organized thereunder or by article forty-five of this

chapter as to societies organized thereunder. Any such corporation

subject to article forty-three or any such society governed by

subsection (a) of section forty-five hundred twenty-nine of this chapter

may also invest in, or otherwise acquire, subsidiaries to the extent

permitted by subsection (b) of section one thousand seven hundred one of

this chapter. Any such fraternal benefit society may also make policy

loans under section one thousand four hundred six of this article.

(b) A domestic charitable annuity society, the investments of which

are subject to the provisions of section eleven hundred ten of this

chapter, may invest such of its assets (the investment of which is

controlled by section eleven hundred ten) in, or otherwise acquire, or

loan upon, only the types of securities specified in section one

thousand four hundred two, this section and section one thousand four

hundred four of this article. A retirement system subject to the

provisions of article forty-six of this chapter may invest its funds

only as provided in article forty-six of this chapter. In addition, a

retirement system subject to article forty-six may acquire subsidiaries

under article seventeen of this chapter and may establish separate

accounts under section four thousand two hundred forty of this chapter,

in each case to the extent permitted by article forty-six of this

chapter.

(c) If the requirements of section one thousand four hundred two of

this article are met, any domestic insurer, other than an insurer

subject to subsection (a) or (b) of this section, may, except as set

forth below, invest its funds in, or otherwise acquire, or loan upon,

only the types of investments specified in such section, this section

and subsection (a) of section one thousand four hundred four of this

article (except paragraphs eight and ten of subsection (a) of such

section); provided that any such domestic insurer may also invest its

funds in, or otherwise acquire or loan upon investments permitted under

sections one thousand four hundred seven (including investments of the

classes described in paragraphs eight and ten of subsection (a) of

section one thousand four hundred four), section one thousand four

hundred eight of this article and article sixteen of this chapter, so

long as it maintains cash, investments required by section one thousand

four hundred two of this article and reserve investments under

subsection (a) of section one thousand four hundred four of this

article, free from any lien or pledge, which, when valued in accordance

with the provisions of this chapter, shall at least equal fifty percent

of the aggregate amount of its unearned premium, loss and loss

adjustment expense reserves as shown by its last sworn statement, annual

or quarterly, on file with the superintendent. If an insurer, other than

an accident and health insurance company, maintains cash, investments

required by section one thousand four hundred two of this article and

reserve investments under subsection (a) of section one thousand four

hundred four of this article, free from any lien or pledge, which, when

valued in accordance with the provisions of this chapter, shall at least

equal the aggregate of seventy percent of its loss and loss adjustment

expense reserves and fifty percent of its unearned premium reserves as

shown by its last sworn statement, annual or quarterly, on file with the

superintendent, then such insurer, other than an accident and health

insurance company, may in addition enter into the types of transactions

set forth in section one thousand four hundred ten of this article,

subject to the limitations set forth in such section. The term "lien or

pledge" as used in this subsection shall not include any deposit of

securities or cash with any government, nor trusteed assets, held in

trust for the benefit or protection of all or any class of the

policyholders, or policyholders and creditors, of such insurer.

(d) (1) Except for investments referred to in subsection (e) of this

section, investments that are neither interest bearing nor income paying

shall be purchased or acquired only under, and to the extent permitted

by, subsection (b) of section one thousand four hundred four of this

article (in the case of insurers that make investments under section one

thousand four hundred four of this article other than insurers making

investments under the authority of subsection (c) of this section),

paragraph eight of subsection (a) of section one thousand four hundred

five of this article (in the case of insurers that make investments

under section one thousand four hundred five) or section one thousand

four hundred seven of this article (in the case of insurers that make

investments under the authority of subsection (c) of this section),

however, a default in interest or income occurring subsequent to the

purchase or other acquisition of an investment shall not affect the

allowance thereof as an admitted asset at the market value thereof.

(2)(A) Notwithstanding any other provision of this article, a domestic

insurer making investments pursuant to paragraph two of subsection (a)

of this section, a domestic charitable annuity society and a retirement

system making investments pursuant to subsection (b) of this section,

and a domestic accident and health insurer making investments pursuant

to subsection (c) of this section may sell call options on securities,

provided that:

(i) such options are traded on a securities exchange registered under

the laws of the United States, and

(ii) the insurer holds, or can immediately acquire through the

exercise of warrants or conversion rights already owned at a

contractually specified price, the underlying securities during the

entire period the option is outstanding.

(B) An insurer selling call options on securities pursuant to

subparagraph (A) of this paragraph may purchase any such option to

offset an outstanding option previously sold by the insurer for the same

kind and amount of securities.

(e) (1) Nothing contained in this chapter shall prohibit the

acquisition by any insurer of other securities or property (i) received

as a dividend or pursuant to a judicial or lawful non-judicial plan of

reorganization or dissolution or pursuant to a lawful and bona fide

agreement of bulk reinsurance or consolidation; or (ii) received through

the exercise of rights of conversion, stock warrants or stock options

acquired by it in accordance with this subsection or section one

thousand four hundred four, one thousand four hundred five, one thousand

four hundred seven or one thousand four hundred ten of this article. Nor

shall anything in this chapter prohibit acquisition of (1) an investment

permitted under section one thousand four hundred four, one thousand

four hundred five, one thousand four hundred seven or one thousand four

hundred ten of this article because such investment is convertible into

other securities in which such insurer is not permitted to invest under

this chapter, or because such insurer receives in connection with such

investment stock warrants, whether detachable or non-detachable, stock

options, stock, property interests or other assets of any kind or (2)

securities or property (real or personal) or any interest therein

received in satisfaction of a debt previously owing to such insurer. If

any securities or other property received by any insurer in accordance

with the first sentence of this paragraph shall consist in whole or in

part of shares of any institution or of obligations or other property

not meeting the requirements specified in section one thousand four

hundred four (in the case of insurers making investments under the

authority of section one thousand four hundred four) or section one

thousand four hundred five (in the case of insurers making investments

under the authority of section one thousand four hundred five) of this

article, then any such shares and any such obligations or property so

received shall be disposed of within five years from the time of

acquisition or before the expiration of such further period or periods

of time as may be prescribed in writing by the superintendent, unless at

any time after such acquisition such shares, obligations or property

shall have met such requirements and the insurer has notified the

superintendent thereof.

(2) Except as otherwise specifically provided in this chapter,

investments in subsidiaries are not subject to the provisions of this

section, section one thousand four hundred four (except paragraph nine

of subsection (a) thereof) or one thousand four hundred five of this

article.

(f) (1) Subsidiaries of domestic life insurance companies, whether

acquired under subsection (e) of this section, sections one thousand

four hundred five, four thousand two hundred forty, or otherwise, shall

be subject to the provisions of article seventeen of this chapter to the

extent therein provided.

(2) Subsidiaries of domestic corporations subject to article

forty-three of this chapter and of domestic retirement systems, whether

acquired under subsection (e) of this section, section one thousand four

hundred four, four thousand two hundred forty (in the case of retirement

systems), or otherwise, shall be subject to the provisions of article

seventeen of this chapter to the extent therein provided.

(g) This section does not prohibit any domestic insurance company from

acquiring shares under article seventy-one of this chapter or any

domestic life insurance company from acquiring shares of its own capital

stock pursuant to section seven thousand three hundred two of this

chapter.

(h) With respect to all transactions between a domestic insurer and

any person, five percent or more of whose voting securities are held,

directly or indirectly, by such insurer, but which is not a subsidiary,

the insurer shall maintain books, accounts and records that disclose

clearly and accurately the nature and detail of such transactions.

(i) (1) Except as provided in subparagraph (A) of paragraph two of

subsection (a) of section four thousand two hundred forty of this

chapter, investments made for separate accounts under the provisions of

section four thousand two hundred forty of this chapter shall be

disregarded, and shall be excluded from admitted assets, in applying the

quantitative investment limitations contained in this chapter to other

investments.

(2) Except as provided in subparagraph (A) of paragraph two of

subsection (a) or paragraph four of subsection (a) of section four

thousand two hundred forty of this chapter, the restrictions,

limitations and other provisions relating to investments specified in

this chapter shall not apply to investments made for separate accounts

under the provisions of section four thousand two hundred forty of this

chapter.