N.Y. Insurance Law § 4310: Investments; financial conditions; reserves

§ 4310. Investments; financial conditions; reserves. (a) Every

corporation subject to the provisions of this article shall annually on

or before the first day of March file in the office of the

superintendent a statement, verified by at least two of the principal

officers of such corporation, showing its condition on the thirty-first

day of December then next preceding which shall be in such form and

shall contain such matters as the superintendent shall prescribe.

(b) No such corporation shall invest in any securities other than

those permitted by the provisions of paragraph two of subsection (a) of

section one thousand four hundred three of this chapter, except as

provided in paragraphs one and two of this subsection.

(1) A corporation (or two or more such corporations under common

management) with admitted assets of greater than eighty million dollars

and maintaining cash and reserve investments under subsection (a) of

section one thousand four hundred four of this chapter (except

paragraphs eight and ten of subsection (a) of such section) free from

any lien or pledge, which, when valued in accordance with the provisions

of this chapter, seven percent or more of net premium income for the

most recent twelve month period, as shown by its last sworn statement,

annual or quarterly, on file with the superintendent, may also invest

its funds or otherwise acquire or loan upon investments permitted under

paragraphs eight and ten of subsection (a) of section one thousand four

hundred four of this chapter without having to meet the otherwise

applicable qualitative standards and the otherwise applicable aggregate

limitation for such investments, provided that the aggregate amount of

all such investments shall not exceed the lesser of surplus to

policyholders or fifteen percent of its admitted assets as shown by its

last statement on file with the superintendent. Any corporation subject

to the provisions of this article may jointly exercise control of a

subsidiary by acting together with one or more other corporations,

provided that such other corporations are either corporations subject to

this article, foreign corporations which perform similar functions in

other states or which belong to a national association comprised of

similar corporations to which one or more corporations organized under

this article also belong, or an institution controlled by any such

foreign corporation. No such corporation 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. Notwithstanding any other

provision of this chapter, including, but not limited to, section one

thousand four hundred seven of this chapter, any corporation subject to

the provisions of this article may also invest, in the aggregate, not

more than three percent of its admitted assets in obligations, shares or

other securities (including certificates of deposit) issued by a parent

corporation which is organized as a not for profit entity or a

corporation which is an affiliate or will be an affiliate after direct

or indirect acquisition by the parent corporation; provided, however,

that the board of directors of the parent organization is constituted in

accordance with the requirements of subsection (k) of section four

thousand three hundred one of this article and, provided further

however, that the investments of the corporation organized under this

article in its own subsidiaries shall not be included in that

limitation.

(2) A corporation maintaining cash and reserve investments under

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

(except paragraphs eight and ten of subsection (a) of such section),

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

provisions of this chapter, equal ten percent or more of net premium

income for the most recent twelve month period, as shown by such

corporation's last sworn statement, annual or quarterly, on file with

the superintendent, may, in addition to the investments permitted by

paragraph one of this subsection, invest up to fifteen percent of its

admitted assets in investments permitted under paragraph two of

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

chapter, provided however that such investments need not meet the

otherwise applicable qualitative standards of such paragraph two so long

as all such investments are rated at BBB or higher (or the equivalent

thereto) by a security rating agency recognized by the superintendent.

(c) Any such corporation shall be deemed insolvent whenever it is

presently or prospectively unable to fulfill its outstanding contracts

and other liabilities and reserves.

(d) Every such corporation shall maintain a reserve, to be designated

as the statutory reserve fund, which shall from time to time during each

calendar year be increased in an amount equal to at least one per centum

of the net premium income of such corporation during such whole calendar

year, provided however, that:

(1) if such corporation reinsures part of its risk under any or all of

its contracts by means of reinsurance approved by the superintendent as

an appropriate substitute for the statutory reserve fund, then the

required increase to the statutory reserve fund at the end of any

calendar year shall be reduced by the amount of the premium paid by such

corporation for such reinsurance during such calendar year or by one per

centum of the net premium income received by such corporation during

such calendar year on its contracts so reinsured for the period during

which they are so reinsured, whichever amount is the lesser;

(2) the statutory reserve fund at the end of any calendar year shall

not exceed twelve and one-half per centum of the net premium income of

such calendar year;

(3) every such corporation shall, after the first full calendar year

of doing business, accumulate and maintain a statutory reserve fund

which shall from time to time during each calendar year be increased in

an amount equal to at least five per centum of the net premium income of

such corporation during such whole calendar year until such reserve

shall be at least equal to fifty thousand dollars and thereafter such

reserve shall be accumulated and maintained in the manner prescribed.

(e) (1) Such statutory reserve fund may, after application therefor by

the corporation and approval thereof by the superintendent, be reduced

below the amount required to be maintained by subsection (d) hereof,

provided that no such reduction, except in the event of an epidemic or

other catastrophe resulting in extraordinary hospital or medical

utilization, shall, in the case of a corporation having a net premium

income for the preceding calendar year of (i) less than ten million

dollars or (ii) ten million dollars or more, reduce the statutory

reserve below an amount equal to seventy-five per centum and fifty per

centum, respectively, of the amount required to be maintained by

subsection (d) hereof. Any reduction so authorized by the superintendent

shall be restored within a period of not more than three years, or six

years in the case of a corporation with a combined premium volume

exceeding two billion dollars annually as of December thirty-first,

nineteen hundred ninety-six, in accordance with a plan submitted by the

corporation and approved by the superintendent which shall provide that

such restoration shall be in addition to, and not in lieu of, the

increase in the statutory reserve fund hereinabove required, which

increase must be made in every year except the year in which a reduction

in the statutory reserve fund is authorized by the superintendent.

(2) Any six year plan submitted by a corporation with a combined

premium volume exceeding two billion dollars annually as of December

thirty-first, nineteen hundred ninety-six shall also be submitted to the

special advisory review panel created pursuant to section four thousand

three hundred nineteen of this chapter. Within sixty days of its receipt

of the six year plan, such panel shall issue a report to the

superintendent analyzing the six year plan and recommending any changes

it deems appropriate. The superintendent shall hold public hearings

regarding any such proposed six year plan and the recommendations of the

panel. The superintendent shall consider the findings of the panel and

the public hearings held on the six year plan during his approval

process for the six year plan.

(f) No such corporation shall invest in any real property, except that

any such corporation may, with the approval of the superintendent,

invest in such real property as it may reasonably expect will be

required for its principal office and the principal office or offices of

any other corporation organized under this article which is affiliated

with and which shares such principal office or offices with such

corporation, or for such purposes as shall be requisite for the

convenient accommodation in the transaction of the business of such

corporations, but in no event in excess of the aggregate of eight per

centum of the net premium income of such corporations and five per

centum of the receipts from any governmental agency for which either of

such corporations acts as fiscal intermediary during the twelve full

months immediately preceding the granting of such approval.

(g) A health service corporation, in addition to the investment in

real estate provided in subsection (f) of this section, may, with the

approval of the superintendent, purchase an interest in real estate for

the purpose of constructing a hospital or other health facility or

center thereon (in accordance with the requirements of chapter seven

hundred ninety-five of the laws of nineteen hundred sixty-five), or may

purchase an existing hospital or facility for the purpose of providing

health services or may make loans to a corporation or corporations under

its control for the purposes heretofore described, or for the purpose of

organizing, managing or promoting a health maintenance organization, as

such term is defined in article forty-four of the public health law

primarily for the benefit of persons covered under contracts issued by

such corporations, but in no event in excess of an amount equal to ten

per centum of its annual net premium income during the twelve full

months immediately preceding the granting of such approval. A health

service corporation may make expenditures and incur liabilities for the

purchase of real estate or for loans in excess of sums provided for in

subsection (f) hereof and this subsection as permitted by the

superintendent pursuant to paragraph five of subsection (e) of section

four thousand three hundred one of this article. A health service

corporation, with the approval of the superintendent of financial

services, also may enter into agreements for the leasing of hospital

facilities.

(h) Notwithstanding any other provisions of this chapter, and in

addition to the provisions for the investment of funds and for the

purchase of real estate as provided for in this article with the

approval of the superintendent, a health service corporation may, with

the approval of the superintendent, expend sums including loans to a

corporation or corporations under its control to implement the program

described herein for the amortization of capital costs for the purchase

or construction of facilities in its operations, including a hospital or

medical service center, and for the implementation of its program, but

not in excess of an amount equal to five percentum of its net premium

income during the twelve full months immediately preceding the granting

of such approval.

(i) If a loan is made with the approval of the superintendent, to a

corporation under the control of a health service corporation, it shall

be made on condition that the superintendent may conduct an examination

pursuant to sections three hundred nine and three hundred ten of this

chapter into the affairs of such corporation.

(j) Every corporation subject to the provisions of this article,

including a health service corporation or any of its instrumentalities

or any hospital, facility or center directly operated by any such health

service corporation, shall be exempt from every state, county, municipal

and school tax.

(k) Notwithstanding the provisions of any other law, a corporation

subject to the provisions of this article which has admitted assets

greater than five hundred million dollars on its last annual report

filed with the superintendent may enter into a transaction for an

interest rate swap in an amount not to exceed the amount of debt on the

books of the corporation on the effective date of this subsection that

was incurred within twelve months of the construction of the

corporation's home office, provided that such interest rate swap shall

provide an initial new interest rate that is at least two hundred basis

points lower than the interest rate on the existing debt. The

counterparty to this transaction shall meet the qualifications of a

qualified counterparty as provided in subparagraph (A) of paragraph

three of subsection (f) of section fourteen hundred ten of this chapter

except that, notwithstanding clause (iv) of subparagraph (C) of such

paragraph, in the event that such counterparty is a qualified bank, such

bank shall be rated A or better (or the equivalent thereto) by two

independent nationally recognized rating organizations. Any such

transaction shall be approved by the corporation's board of directors

prior to its implementation.

(l) Notwithstanding any other provisions of this chapter to the

contrary, in determining the financial condition of corporations subject

to the provisions of this article and not-for-profit corporations

authorized pursuant to article forty-four of the public health law, the

department shall include real estate, including buildings, property,

capital improvements and appurtenances owned and held that are utilized

in the ordinary course of the business of such entities, provided that

such real estate may be valued by the corporation at either its current

amortized book value or at ninety percent of its current market value,

as determined by an independent appraisal undertaken annually and in

accordance with regulations promulgated by the superintendent.