N.Y. Insurance Law § 4207: Dividends to shareholders of life, and accident and health insurance companies

§ 4207. Dividends to shareholders of life, and accident and health

insurance companies. (a)(1) For purposes of this subsection, "earned

surplus" means an amount equal to an insurer's positive unassigned

funds, excluding eighty-five percent of the change in net unrealized

capital gains or losses less capital gains tax, for the immediately

preceding calendar year as set forth in the insurer's most recent annual

statutory financial statement filed with the superintendent pursuant to

section three hundred seven of this chapter.

(2) Notwithstanding paragraph five of this subsection, any domestic

stock life insurance company may distribute a dividend to its

shareholders out of earned surplus where the aggregate amount of such

dividends in any calendar year does not exceed the greater of:

(A) ten percent of its surplus to policyholders as of the immediately

preceding calendar year; or

(B) its net gain from operations for the immediately preceding

calendar year, not including realized capital gains, not to exceed

thirty percent of its surplus to policyholders as of the immediately

preceding calendar year; provided, however, that, notwithstanding this

paragraph, in no event may a dividend be distributed without approval of

the superintendent, in accordance with paragraph five of this

subsection, in the calendar year immediately following a calendar year

for which its net gain from operations, not including realized capital

gains, was negative.

(3) Notwithstanding paragraph five of this subsection, any domestic

stock life insurance company may distribute a dividend to its

shareholders where the aggregate amount of such dividends in any

calendar year does not exceed the lesser of:

(A) ten percent of its surplus to policyholders as of the immediately

preceding calendar year; or

(B) its net gain from operations for the immediately preceding

calendar year, not including realized capital gains.

(4) An insurer shall not distribute a dividend pursuant to both

paragraph two and paragraph three of this subsection.

(5) Except as provided in paragraphs two and three of this subsection,

no domestic stock life insurance company shall distribute any dividend

to its shareholders unless a notice of its intention to declare such

dividend and the amount thereof shall have been filed with the

superintendent not less than thirty days in advance of such proposed

declaration. The superintendent may disapprove such distribution by

giving written notice to such company within thirty days after such

filing that the superintendent finds that the financial condition of the

company does not warrant such distribution.

(6) With respect to dividends to shareholders distributed pursuant to

paragraph two of this subsection, every domestic stock life insurance

company shall report to the superintendent all such dividends within

five business days following the declaration thereof and at least ten

days prior to the payment thereof.

(7) A domestic stock life insurance company's surplus to policyholders

following any distribution of dividends to its shareholders under

paragraph two of this subsection shall be reasonable in relation to the

company's outstanding liabilities and adequate to meet its financial

needs.

(8) With respect to dividends to shareholders distributed pursuant to

paragraph two of this subsection, the superintendent may limit or

disallow dividends if the superintendent determines that the:

(A) domestic stock life insurance company's surplus to policyholders

is not reasonable in relation to the company's outstanding liabilities

and not adequate to meet its financial needs; or

(B) domestic stock life insurance company is financially distressed or

troubled.

(b) (1) Except as provided in paragraph three hereof, no domestic

stock accident and health insurance company shall declare or distribute

any dividend on its capital stock, except out of earned surplus, as

defined in subsection (a) of section four thousand one hundred five of

this chapter. Notwithstanding the forgoing, the superintendent may

permit a domestic stock accident and health 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 accident and health insurance company shall declare or

distribute any dividend to shareholders which, together with all such

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

for such period unless, upon prior application therefor, the

superintendent approves a greater dividend payment based upon his

finding that the insurer will retain sufficient surplus to support its

obligations and writings. Within the meaning of this section, "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; "surplus" means

the amount of the insurer's admitted assets in excess of its capital and

its liabilities; and both "surplus" and "surplus to policyholders" shall

include any voluntary reserves, or any part thereof, which are not

required by law.

(2) If the superintendent finds, after notice to and hearing of such

company, that any such company has distributed any dividend in violation

of this subsection, he may order such company to cease doing any new

business until the amount of such dividend has been restored to such

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 such company to the extent of the

dividend so declared and paid, and every shareholder receiving any such

dividend shall be liable to such creditors of such company to the extent

of the dividend received by such shareholder.

(3) Any domestic stock accident and health insurance company may

declare and distribute a stock dividend to its shareholders whenever it

shall have a surplus as defined in paragraph one hereof, in an amount at

least equal to the sum of such dividend and thirty percent of its

unearned premium liability as shown by its last statement on file in the

office of the superintendent and, for such purpose, such 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 such additional or increased stock to its shareholders in

proportion to the stock held by each, respectively.

(c) Any stock accident and health insurance company authorized to do

business in this state may include in its charter a provision

authorizing the board of directors to permit its policyholders from time

to time to participate in the profits of its operations through the

payment of dividends to policyholders. For the purpose of carrying into

effect any such provision, the board of directors may from time to time

make reasonable classifications of policies. Every such classification

of risks shall be filed with the superintendent and shall not be

effective as to policies issued or delivered in this state unless

approved by the superintendent as fair and equitable and not unfairly

discriminatory. Any such classification approved by the superintendent

shall remain in effect in this state until disapproved by him or until

withdrawn or modified with his approval by the company filing the same.

No dividends to policyholders shall be declared or paid by any such

company except out of its earned surplus, as defined in subsection (a)

of section four thousand one hundred five of this chapter.