N.Y. Insurance Law § 4105: Domestic stock companies; declaration and payment of dividends

§ 4105. Domestic stock companies; declaration and payment of

dividends. (a) Except as provided in subsection (c) of this section no

domestic stock property/casualty insurance company shall declare or

distribute any dividend to shareholders except out of earned surplus.

Notwithstanding the foregoing, the superintendent may permit a domestic

stock property/casualty insurance company to restate its earned surplus

under a plan of quasi-reorganization in accordance with regulations as

may be promulgated by the superintendent. No domestic stock

property/casualty insurance company shall declare or distribute any

dividend to shareholders which, together with all dividends declared or

distributed by it during the next preceding twelve months, exceeds the

lesser of ten percent of its surplus to policyholders as shown by its

last statement on file with the superintendent, or one hundred percent

of adjusted net investment income during such period unless, upon prior

application therefor, the superintendent approves a greater dividend

distribution based upon his finding that the insurer will retain

sufficient surplus to support its obligations and writings.

In this section, (1) "earned surplus" means the portion of the surplus

that represents the net earnings, gains or profits, after deduction of

all losses, that have not been distributed to the shareholders as

dividends, or transferred to stated capital or capital surplus or

applied to other purposes permitted by law but does not include

unrealized appreciation of assets;

(2) "adjusted net investment income" means net investment income for

the twelve months immediately preceding the declaration or distribution

of the current dividend increased by the excess, if any, of net

investment income over dividends declared or distributed during the

period commencing thirty-six months prior to the declaration or

distribution of the current dividend and ending twelve months prior

thereto; and

(3) "surplus" means the amount of the insurer's admitted assets in

excess of its capital and liabilities, and both "surplus" and "surplus

to policyholders" include any voluntary reserves, or any part thereof,

which are not required by law.

(b) If the superintendent finds, after notice and hearing, that any

such company has distributed any dividend in violation of this section,

he may order the company to cease doing any new business until the

amount of the dividend has been restored to the company. The directors

of any such company who vote in favor of the declaration and

distribution of any dividend in violation of this section shall, in

addition to all other liabilities or penalties prescribed by law, be

jointly and severally liable to the creditors, including policyholder

creditors, of the company to the extent of the dividend so declared and

distributed, and every shareholder receiving any such dividend shall be

liable to the creditors of the company to the extent of the dividend

received by such shareholder.

(c) Such company may declare and distribute a stock dividend to its

shareholders whenever it shall have a surplus, as defined in subsection

(a) hereof, in an amount at least equal to the sum of the dividend and

thirty percent of its unearned premium liability as shown by its last

statement on file with the superintendent and, for such purpose, the

company may increase its capital stock from such surplus in the manner

prescribed in section one thousand two hundred six of this chapter, and

it shall distribute the additional or increased stock to its

shareholders in proportion to the stock held by each, respectively.