N.Y. Insurance Law § 1608: Relationships and transactions between parent and subsidiary

§ 1608. Relationships and transactions between parent and subsidiary.

(a) The business operations, corporate proceedings and fiscal and

accounting records of subsidiaries organized or acquired pursuant to

this article shall be conducted or maintained so as to assure the

separate legal and operating identities of the parent and subsidiary,

but nothing herein shall preclude arrangements for common management or

the cooperative or joint use of personnel, property or services

otherwise consistent with this chapter.

(b) All transactions between the insurer and its subsidiaries shall be

fair and equitable, charges or fees for services performed shall be

reasonable and all expenses incurred and payments received shall be

allocated to the insurer on an equitable basis in conformity with

customary insurance accounting practices consistently applied.

(c) The books, accounts and records of each party to all such

transactions shall be so maintained as to clearly and accurately

disclose the nature and details of the transactions, including such

accounting information as is necessary to support the reasonableness of

the charges or fees to the respective parties.

(d) The superintendent may promulgate regulations relating to such

subsidiaries, their management and their relationships and transactions

with their parent insurance companies and their affiliates to the extent

that the same may affect the operations, management or financial

condition of domestic insurers. Subsidiaries that are persons within a

holding company system, as such terms are defined in article fifteen of

this chapter, shall be subject to the provisions of such article.

(e) The following transactions between a domestic insurer and any

subsidiary may not be entered into unless the insurer has notified the

superintendent in writing of its intention to enter into any such

transaction at least thirty days prior thereto, or with regard to

reinsurance treaties or agreements at least forty-five days prior

thereto, or such shorter period as the superintendent may permit, and

the superintendent has not disapproved it within such period:

(1) sales, purchases, exchanges, loans, extensions of credit, or

investments with a subsidy, provided the transactions are equal to or

exceed the lesser of three percent of the insurer's admitted assets or

twenty-five percent of surplus to policyholders at last year-end;

(2) loans or extensions of credit to any person who is not a

subsidiary, where the insurer makes loans or extensions of credit with

the agreement or understanding that the proceeds of such transactions,

in whole or in substantial part, are to be used to make loans or

extensions of credit to, purchase assets of, or make investments in, any

subsidiary of the insurer making the loans or extensions of credit,

provided the transactions are equal to or exceed the lesser of three

percent of the insurer's admitted assets or twenty-five percent of

surplus to policyholders at last year-end;

(3) reinsurance treaties or agreements with a subsidiary that the

insurer has not otherwise submitted to the superintendent, provided,

however, the insurer need not submit a copy of a reinsurance agreement

unless requested by the superintendent where the reinsurance premium or

a change in the insurer's liabilities, or the projected reinsurance

premium or a change in the insurer's liabilities in any of the next

three years, is less than five percent of the insurer's surplus to

policyholders at last year-end. This shall include agreements that may

require, as consideration, the transfer of assets from an insurer to a

non-subsidiary, if an agreement or understanding exists between the

insurer and non-subsidiary that any portion of the assets will be

transferred to one or more subsidiaries of the insurer; and

(4) management agreements, service contracts, tax allocation

agreements, guarantees, and all cost-sharing arrangements.