N.Y. Insurance Law § 6405: Reserves

§ 6405. Reserves. (a) Every title insurance corporation organized and

doing an insurance business under this article shall establish,

segregate and maintain a reinsurance reserve during the period and for

the uses and purposes hereinafter provided which shall at all times and

for all purposes be deemed and shall constitute unearned portions of the

original premiums and shall be charged as a reserve liability of such

corporation in determining its financial condition.

(1) Beginning June first, nineteen hundred forty-five, the amount of

such reserve shall be cumulative and shall consist of (i) one dollar

fifty cents for each risk assumed under a binder or policy of insurance

or any certificate or agreement issued under either of them, plus

one-eightieth of one percent of the face amount of insurance effected

thereby; and (ii) three percent of the gross fees and premiums received

by it for guaranteed certificates of title, guaranteed searches and

guaranteed abstracts of title not included in item (i) of this

paragraph. That portion of the reinsurance reserve established as

required by this paragraph more than one hundred eighty months prior

shall be released and shall no longer constitute part of the reinsurance

reserve and may be used for any corporation purpose.

(2) Beginning January first, nineteen hundred eighty-six, the amount

of such reserve provided shall consist of (i) one dollar fifty cents for

each risk assumed under a binder or policy of insurance or any

certificate or agreement issued under either of them, plus one-eightieth

of one percent of the face amount of insurance effected thereby; and

(ii) three percent of the gross fees and premiums received by it for

guaranteed certificates of title, guaranteed searches and guaranteed

abstracts of title not included in item (i) of this paragraph. "Risk

assumed" and "insurance effected", as used in this paragraph, shall not

include the face amount of a policy insuring a lender to the extent of

the face amount of a policy insuring the owner of an interest in the

same land under an owner's policy which provides that any amount paid

under the lender's policy shall reduce the amount of, and be deemed a

payment under, the owner's policy. A title insurer shall release from

the reinsurance reserve established as required by this paragraph a sum

equal to five percent of the amount added to the reserve during each

year following the year in which the sum was added, until the entire

amount added has been released.

(b) Every title insurance corporation organized or authorized to do

business in this state shall on or before March first each year, file a

report in such form as may be prescribed by the superintendent of all

unpaid losses and claims upon title insurance policies, guaranteed

certificates of title, guaranteed searches and guaranteed abstracts of

title (such policies, certificates, searches and abstracts being

hereafter in this section called "guarantees") of which the corporation

has received due notice in writing from or on behalf of the insured or

the guaranteed and keep such records thereof as may be prescribed by the

superintendent. Every title insurance corporation doing business under

this article shall set up and maintain a loss reserve at least equal to

the aggregate estimated amounts due or to become due on account of all

such unpaid losses and claims.

(c) The reinsurance reserve required by subsection (a) of this section

shall be maintained as follows:

Admitted assets of a value at least equal to the amount required for

such reserve shall be continuously held by the corporation as a

segregated reserve fund at all times distinct and separate from all its

other assets. Cash paid into such fund shall, unless invested, be kept

in legal tender or deposited in a separate account. Securities which are

a part of such fund shall be kept separate from all other securities and

shall be clearly identified as securities belonging to such fund. The

net income and profits derived from such fund investments shall be

transferred to the general assets of the corporation. Such corporation

shall at all times keep a separate record of the cash and securities in

such fund, giving complete identification of the assets belonging at any

time to such fund and showing full particulars as to withdrawals and

additions. No assets of such fund shall be taken or used in satisfaction

of any claim against such corporation except as hereinafter provided and

such fund shall be held solely for the purpose of satisfying such

claims.

(d) The funds constituting the reinsurance reserve required by

subsection (a) of this section shall be held in cash or invested only in

the types of reserve investments that meet the requirements of

paragraphs one, two, and three of subsection (a) of section one thousand

four hundred four of this chapter. In no event shall the investment made

under such paragraph three exceed twenty percent of the reinsurance

reserve at preceding year-end.

(e) If at any time the superintendent finds from the report of any

examiner filed pursuant to section three hundred eleven of this chapter

or otherwise, after reasonable notice to and hearing of such

corporation, that the value of the cash and investments lawfully in the

reserve fund required to be established, segregated and maintained by

subsection (c) of this section is less than the amount required to be

maintained at such time pursuant to subsection (a) of this section, the

superintendent shall determine the amount of such impairment and issue a

written requisition to such corporation to remove, repair or make good

such impairment within such period as he shall designate, not less than

thirty nor more than ninety days from the service of such requisition.

If at the expiration of such designated period such impairment has not

been removed, repaired or made good, the superintendent shall order such

corporation in writing to cease doing any new business. If such

corporation, or any officer thereof, having notice of such order of the

superintendent, shall thereafter transact or participate in the

transaction of any new business, such corporation or person shall be in

violation of the provisions of this chapter.

(f) The reinsurance reserve fund required to be maintained pursuant to

subsection (c) of this section shall constitute a separate and distinct

trust fund for the security of holders of guarantees of the corporation

as hereinafter provided.

(g) In the event the superintendent, pursuant to the provisions of

article seventy-four of this chapter, obtains an order for the

rehabilitation or liquidation of a title insurance corporation, he shall

have the power:

(1) to pay out of such reinsurance reserve fund, subject to the

approval of the court, the claims for losses sustained by the holders of

guarantees of such corporation pending at the time of the making of such

order or arising subsequently thereto and up to the time reinsurance is

effected, and

(2) to negotiate and enter into a contract with one or more solvent

corporations authorized to transact the business of title insurance,

subject to the approval of the court, for the reinsurance of the

obligations under such outstanding guarantees in accordance with their

terms, covenants and conditions, and

(3) to pay the cost of reinsurance out of said reinsurance reserve

fund of such corporation.

(h) After the payments hereinbefore authorized shall have been made by

the superintendent, he shall transfer any balance in said reinsurance

reserve fund to the general assets of the corporation in rehabilitation

or liquidation. The reinsuring corporation shall segregate and maintain

the reinsurance reserve fund acquired from the superintendent under the

terms of the agreement of reinsurance except that on the first day of

the month next succeeding such acquisition and on the first day of each

month thereafter, one one-hundred-eightieth of the amount of the said

fund so acquired shall be released therefrom and shall no longer

constitute part of the reinsurance reserve fund so acquired and may be

used for any corporate purpose of the reinsuring corporation.

(i) In the event the superintendent shall be unable to effect a

contract for reinsurance as provided in subsection (g) of this section,

for the reinsurance of the outstanding guarantees of a title corporation

in rehabilitation or liquidation, the reinsurance reserve fund of such

corporation shall constitute a separate and distinct trust fund for the

payment therefrom by the superintendent, on the approval of the court,

in the following order of preference, (i) of all expenses of proceedings

incurred under this subsection, (ii) of all allowed claims for losses

sustained by the holders of guarantees of such corporation which are

unpaid or pending at the time fixed by the court for the filing of

claims and (iii) of all allowed claims for losses which shall be

asserted at any time within twenty years from the date of the entry of

such order of rehabilitation or liquidation and which shall be paid in

the order of the date of their allowance by the court. Any balance in

the reinsurance reserve fund of a title insurance corporation after

payment of allowed claims asserted within twenty years from the date of

the entry of the order of rehabilitation or liquidation shall be

transferred to the general assets of such corporation. The

superintendent shall keep and retain for such period of twenty years all

title records of the corporation which he in his discretion shall deem

necessary to effectuate the purposes of this trust.

(j) The payments out of the reinsurance reserve fund which shall have

been made by the superintendent on allowed claims for losses which shall

have been filed within the time fixed by the court for the filing of

claims in a rehabilitation or liquidation proceeding, shall constitute

an allowed claim in favor of the reinsurance reserve fund of such

corporation entitled to share with general creditors in the dividends

directed to be paid and the dividends so paid on such claim shall fall

into such reinsurance reserve fund.

(k) In proceedings for the rehabilitation or liquidation of a title

insurance corporation which shall not have been declared insolvent, no

assets of such corporation shall be distributed to the shareholders of

such corporation (i) until all claims allowed in the rehabilitation or

liquidation proceedings have been paid in full, and (ii) if such

distribution is within twenty years from the date of the entry of the

order of rehabilitation or liquidation such distribution shall not be

made unless prior to or at the time of the making of such distribution

there shall be transferred to the reinsurance reserve fund general

assets of the corporation sufficient to restore such fund to its amount

on the date of the entry of such order. Upon the expiration of twenty

years from the date of the entry of such order of rehabilitation or

liquidation any balance in such reinsurance reserve fund after payment

of all allowed claims asserted within such twenty year period shall be

transferred to the general assets of such corporation.