N.Y. Insurance Law § 6502: Financial requirements

§ 6502. Financial requirements. (a) A mortgage insurer shall not

transact business unless:

(1) if a stock insurance company, it has paid-in capital of at least

one million dollars and paid-in surplus of at least one million dollars

or, if a mutual insurance company, a minimum initial surplus of two

million dollars. A stock company shall at all times thereafter maintain

a minimum surplus of at least five hundred thousand dollars, a mutual

company shall at all times thereafter maintain a minimum surplus of at

least one million five hundred thousand dollars;

(2) it establishes a contingency reserve out of net premiums (gross

premiums less premiums returned to policyholders) remaining after

establishing the unearned premium reserve. The company shall contribute

to the contingency reserve an amount equal to fifty percent of such

remaining earned premiums. Contributions to the contingency reserve

made during each calendar year shall be maintained for a period of one

hundred and twenty months, except that withdrawals may be made by the

company with the prior approval of the superintendent in any year in

which the actual incurred losses exceed thirty-five percent of the

corresponding earned premiums. The unearned premium reserve shall be

computed as required by section one thousand three hundred five of this

chapter except that on policies covering a risk period of more than one

year it shall be computed in accordance with standards promulgated by

the superintendent; and

(3) in addition to the contingency reserve, the case basis method or

other method as may be prescribed by the superintendent shall be used to

determine the loss reserve in a manner consistent with section one

thousand three hundred three of this chapter. It shall include a reserve

for claims reported and unpaid and claims incurred but not reported,

including:

(A) estimated losses on insured loans which have resulted in the

conveyance of property which remains unsold;

(B) insured loans in the process of foreclosure; and

(C) insured loans in default for four or more months.

(b) A mortgage insurer shall not:

(1) have outstanding a total liability under its aggregate insurance

policies exceeding twenty-five times its policyholders' surplus,

computed on the basis of the company's liability under its election as

provided in subsection (c) of section six thousand five hundred three of

this article. Total liability shall be calculated net of applicable

reinsurance. No company which has outstanding total liability exceeding

twenty-five times its policyholders' surplus shall transact new business

until its total liability no longer exceeds twenty-five times its

policyholders' surplus;

(2) declare dividends except from undivided profits remaining on hand

above the aggregate of its paid-in capital, paid-in surplus and

contingency reserve or, if a mutual insurance company, its initial

surplus and contingency reserve; or

(3) invest its contingency reserve except in tax and loss bonds

purchased pursuant to § 832(e) of the Internal Revenue Code, to the

extent of the tax savings resulting from the deduction for federal

income tax purposes equal to the annual contributions to the contingency

reserve. The contingency reserve shall otherwise be held in cash or

invested only in the types of reserve investments specified in

paragraphs one and two of subsection (a) of section one thousand four

hundred four of this chapter.