N.Y. Insurance Law § 1405: Investments of life insurers

§ 1405. Investments of life insurers. (a) The assets of a domestic

insurer that is authorized to make investments under this section may be

invested in the following types of investments, in addition to

investments otherwise authorized, subject in the case of investments

made under this section to the limitations set forth below and the

provisions of subsections (c), (d) and (e) of this section:

(1) Governmental obligations. Obligations, not in default, issued,

assumed, guaranteed or insured by (i) the United States of America or by

any agency or instrumentality thereof, (ii) any state of the United

States of America, (iii) the District of Columbia, (iv) any territory or

possession of the United States of America or any other governmental

unit in the United States, or (v) any agency or instrumentality of any

governmental unit referred to in items (ii), (iii) and (iv) above,

provided that, in the case of obligations issued, assumed, guaranteed or

insured by any governmental unit referred to in item (iv) above or any

agency or instrumentality referred to in item (v) above, such

obligations are 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 and preferred shares of American institutions. (i)

Obligations, not in default, whether or not secured and with or without

recourse, issued, assumed, guaranteed, insured or accepted by American

institutions (or trustees or receivers therefor) and (ii) preferred

shares of any such institution, provided, however, that after giving

effect to any such investment in preferred shares of any institution,

the aggregate amount of investments in preferred shares of such

institution made under this section shall not exceed two percent of the

insurer's admitted assets.

(3) Obligations secured by real property or interests therein.

Obligations, or participations therein, secured by liens on real

property or interests therein located within the United States and not

eligible under paragraph one or two of this subsection, provided that no

insurer making investments under the authority of this section shall

invest in or loan upon the security of any one property, under the

authority of this paragraph, more than thirty thousand dollars or two

percent of admitted assets, whichever is the greater.

(4) Real property or interests therein. Investments in real property

or interests therein located in the United States, held directly or

evidenced by partnership interests, stock of corporations (including,

without limitation, subsidiaries engaged or organized to engage

exclusively in the ownership and management of real property or

interests therein), trust certificates or other instruments, and

acquired (i) as an investment for the production of income or to be

improved or developed for such investment purpose, or (ii) for the

convenient accommodation of the insurer's business; provided that, after

giving effect to any such investment, (I) the aggregate amount of such

investments made under this paragraph and then held by such insurer

shall not exceed twenty-five percent of the insurer's admitted assets,

(II) the aggregate amount of investments made under item (i) of this

paragraph and then held by such insurer shall not exceed twenty percent

of the insurer's admitted assets, and (III) investments held under item

(i) above in each property constituting such investment (including

improvements thereon) shall not in the aggregate exceed two percent of

the insurer's admitted assets, and provided, further, that no investment

in real property may be made under item (ii) herein, (aa) if, after

giving effect thereto, the aggregate amount of such investments then

held by the insurer would exceed ten percent of the insurer's admitted

assets, (bb) without the prior approval of the superintendent, if, after

giving effect thereto, the aggregate amount of such investments in each

property constituting such investment (including improvements thereon)

then held by such insurer would exceed two percent of the insurer's

admitted assets, and (cc) without the prior approval of the

superintendent, in the case of an investment by a domestic insurer in

real property located outside this state, if, after giving effect

thereto, the aggregate amount of such investments in the property

constituting such investment (including improvements thereon) would

exceed one-fifth of one percent of the insurer's admitted assets.

(5) Personal property or interests therein. Investments in personal

property or interests therein located or used wholly or in part within

the United States, held directly or evidenced by partnership interests,

stock of corporations (including, without limitation, subsidiaries

engaged or organized to engage exclusively in the ownership and

management of personal property or interests therein), trust

certificates or other instruments, provided that, after giving effect to

any such investment, (i) the aggregate amount of such investments made

under this paragraph and then held by such insurer shall not exceed ten

percent of the insurer's admitted assets and (ii) investments held under

this paragraph in the item of personal property constituting such

investment shall not in the aggregate exceed one percent of the

insurer's admitted assets.

(6) Equity interests. Investments (in addition to investments of the

types described in this paragraph but made or acquired under article

seventeen, section one thousand four hundred three, paragraphs four and

five of this subsection or section four thousand two hundred forty of

this chapter) in common shares, partnership interests, trust

certificates or other equity interests (other than preferred shares) of

American institutions, provided that, after giving effect to any

investment made under this paragraph, (i) the aggregate amount of

investments made under this paragraph in the institution in which such

investment is then being made and then held by such insurer shall not

exceed two percent of the insurer's admitted assets and (ii) the

aggregate amount of all investments made under this paragraph and then

held by such insurer shall not exceed twenty percent of the insurer's

admitted assets.

(7) Foreign investments. (A) Canadian investments substantially of the

same types as those eligible for investment under paragraphs one through

six of this subsection, provided that, after giving effect to any

investment made under this subparagraph, the aggregate amount of

investments made under this subparagraph and then held by such insurer

shall not exceed ten percent of the insurer's admitted assets, except

where a greater amount is permitted under subparagraph (B) below (in

which case the provisions of this subparagraph shall not be applicable).

(B) In the case of any domestic insurer that is authorized to do

business in a foreign country or possession of the United States of

America or that has outstanding insurance, annuity or reinsurance

contracts on lives or risks resident or located in such foreign country

or possession, investments in such foreign country or possession that

are substantially of the same types as those eligible for investment

under paragraphs one through six of this subsection; provided that,

except where a greater amount is permitted under subparagraph (A) above,

after giving effect to any investment in such foreign country or

possession made under this subparagraph, the aggregate amount of cash in

the currency of such foreign country or possession and of investments in

such foreign country or possession made under this subparagraph and then

held by such insurer shall not exceed one and one-half times the amount

of such insurer's reserves and other obligations under such contracts or

the amount which such insurer is required by law to invest in such

country or possession, whichever shall be greater.

(C) Investments in foreign countries, in addition to Canadian

investments and investments permitted by subparagraph (B) of this

paragraph, that are substantially of the same types as those eligible

for investment under paragraphs one through six of this subsection,

provided that, after giving effect to any investment made under this

subparagraph, the aggregate amount of investments qualified under this

subparagraph and then held by such insurer shall not exceed twenty

percent of the insurer's admitted assets; and

(i) the issuer or obligor is (I) a jurisdiction, which is rated in one

of the four highest rating categories by an independent, nationally

recognized United States rating agency, (II) any political subdivision

or other governmental unit of any such jurisdiction, or any agency or

instrumentality of any such jurisdiction, political subdivision or other

governmental unit or (III) an institution which is organized under the

laws of any such jurisdiction or, in the case of such paragraphs three

and four of this subsection, the real property is located in any such

jurisdiction; and

(ii) an insurer shall not make any investment in any foreign country

pursuant to this subparagraph, if such investment, together with all

other investments in the same foreign country so made and then held by

such insurer, would exceed seven percent of the insurer's admitted

assets.

(D) In addition to the foreign investments permitted under the

preceding subparagraphs of this paragraph, foreign investments that are

substantially of the same types as those eligible for investment under

paragraphs one through six of this subsection, provided that, after

giving effect to any investment made under this subparagraph, the

aggregate amount of investments made under this subparagraph and then

held by such insurer shall not exceed six percent of the insurer's

admitted assets, and provided further that an insurer shall not make any

investment in any foreign country pursuant to this subparagraph, if such

investment, together with all other investments in the same foreign

country so made and then held by such insurer, would exceed three

percent of the insurer's admitted assets.

(8) Other investments. Investments that do not qualify or are not

permitted under any other paragraph of this subsection, provided that,

after giving effect to any such investment, (i) if such investment is of

a type described in paragraph three or five or item (i) of paragraph

four or paragraph six of this subsection, the aggregate amount of

investments of such type made under this paragraph and then held by such

insurer shall not exceed five percent of the insurer's admitted assets,

(ii) if such investment is of a type described in paragraph six of this

subsection, the aggregate amount of such investments made under this

paragraph in the institution in which such investment is then being made

and then held by such insurer shall not exceed two percent of the

insurer's admitted assets, (iii) if such investment is of a type

described in paragraph seven of this subsection, the aggregate amount of

investments of all types described in said paragraph seven and made

under this paragraph and then held by such insurer shall not exceed two

percent of the insurer's admitted assets, and (iv) the aggregate amount

of all investments made under this paragraph and then held by such

insurer shall not exceed fourteen percent (but not more than ten percent

in investments in institutions not having their principal operations in

this state and in real and personal property and interests therein

located outside this state and in mortgages and security interests with

respect to real and personal property located outside this state) of the

insurer's admitted assets. Investments that are neither interest bearing

nor income paying, made under this paragraph as provided in paragraph

one of subsection (d) of section one thousand four hundred three of this

article, shall be subject to all the provisions of this paragraph and

may not be acquired if the aggregate amount thereof immediately after

such acquisition would exceed three percent of the insurer's admitted

assets.

(b) (1) For the purposes of this section, article seventeen of this

chapter and section one thousand four hundred three of this article,

(A) "aggregate amount" of investments means, subject to the provisions

of the final sentence of this subsection, the aggregate depreciated cost

thereof, in the case of investments of the types described in paragraphs

four and five of subsection (a) of this section, and the aggregate cost

thereof in the case of investments of other types;

(B) "admitted assets" means the amount thereof as of the last day of

the most recently concluded annual statement year subject to the

following adjustments;

(i) assets held in separate accounts established under section four

thousand two hundred forty of this chapter shall be included only to the

extent of amounts allocated to such separate accounts pursuant to

paragraph three of subsection (a) of said section four thousand two

hundred forty; and

(ii) investments in subsidiaries referred to in subsection (c) of

section one thousand seven hundred four of this chapter shall be

excluded; and

(C) the eligibility of any investment under any paragraph of

subsection (a) of this section shall be determined at the time of

acquisition thereof, except that (i) any investment qualified pursuant

to item (ii) of subparagraph (C) of paragraph seven of such subsection

(a) shall remain so qualified only at such time or times as the hedging

requirements of such item (ii) are met with respect thereto; and (ii)

investments qualified under paragraph eight of said subsection (a) may

be requalified at a later date under another paragraph of said

subsection (a), if the relevant conditions are satisfied at the time of

such requalification. In computing depreciated cost of investments of

the types described in paragraphs four and five of subsection (a) of

this section, depreciation may be computed at a rate no greater than

that permitted for federal income tax purposes and, in the case of

investments described in said paragraph four, the cost of an investment

shall be depreciated over its estimated useful life, not to exceed fifty

years.

(2) In computing the "aggregate amount" of investments, as provided in

the first sentence of paragraph one of this subsection, (A) valuation of

investments acquired under paragraph four of subsection (a) of this

section shall also be subject to any regulation with respect to such

valuation that the superintendent may prescribe and (B) investments of

investment subsidiaries as defined in section one thousand seven hundred

two of this chapter shall be valued as though the parent corporation

owned the assets of such subsidiaries directly instead of the stock of

such subsidiaries and shall be subject to the provisions of subsection

(d) of section one thousand seven hundred four of this chapter.

(c) In addition to other requirements of law (statutory or otherwise)

that affect the standard of care of directors and officers of

corporations, in making investments under this section, directors and

officers shall perform their duties in good faith and with that degree

of care that an ordinarily prudent individual in a like position would

use under similar circumstances. In the case of investments made under

paragraphs two and six of subsection (a) of this section and investments

that are substantially of the same types as those eligible for

investment under such paragraphs, but are made under paragraph seven of

such subsection, the institution that determines the eligibility of any

such investment shall be a solvent institution whose obligations, if

any, are not in default as to principal or interest, unless such

investment is necessary to protect an investment theretofore made in the

securities of such institution.

(d) After giving effect to any investment of a type described in item

(i), (ii) or (iii) below, the aggregate amount of (i) investments in

subsidiaries charged against the limit contained in paragraph one of

subsection (a) of section one thousand seven hundred five of this

chapter, (ii) investments made under item (i) of paragraph four and

paragraphs five and six of subsection (a) of this section, and (iii)

investments of the types described in said item (i) of paragraph four

and such paragraphs five and six but made under paragraph seven or eight

of subsection (a) of this section, shall not exceed forty percent of the

insurer's admitted assets plus, to the extent permitted by the

superintendent, investments (not exceeding five percent of the insurer's

admitted assets) of the types referred to above in (I) new business

enterprises located in the state; (II) technologically oriented

businesses located in the state; (III) minority-owned businesses located

in the state; (IV) businesses located in areas in the state that have

experienced a high rate of chronic unemployment; and (V) development of

housing in the state for families and persons of low income. If, at the

time of the making of any investment of a type described in item (i),

(ii) or (iii) of the first sentence of this subsection, the aggregate

amount of investments of the types described in clauses (I), (II),

(III), (IV) and (V) of such sentence made by the insurer on or after the

date on which this subdivision becomes effective and then held by the

insurer is one percent or more of its admitted assets, then the forty

percent figure in such sentence shall be deemed to be increased by an

equal amount up to a maximum of forty-five percent, thus providing for a

maximum of investments described in items (i), (ii) and (iii) herein of

fifty percent of total admitted assets.

(e) No domestic life insurer shall hold a direct or indirect ownership

interest in a risk retention group, as defined in article fifty-nine of

this chapter, other than in a risk retention group all of whose members

are insurance companies.

(f) Any investment may be denominated in a currency other than United

States dollars, provided that the aggregate amount of all such

investments (other than investments made pursuant to subparagraphs (A)

and (B) of paragraph seven of subsection (a) of this section) that are

not effectively hedged, substantially in their entirety, against the

United States dollar, reduced, on a currency by currency basis, by the

amount of foreign-currency denominated insurance liabilities may not

exceed four percent of the insurer's admitted assets. An investment

shall be deemed to be effectively hedged, substantially in its entirety,

if it has been hedged:

(1) for an insurer that has an approved derivative use plan under

section one thousand four hundred ten of this article, pursuant to

contracts or agreements entered into under and in accordance with that

derivative use plan and subject to the counterparty exposure limits

thereunder; or

(2) for any other insurer, pursuant to contracts or agreements

(derivative transactions) which are cleared through a "derivatives

clearinghouse" or entered into with a "qualified counterparty", as those

terms are defined pursuant to subsection (f) of section one thousand

four hundred ten of this article.