N.Y. Insurance Law § 7403: Order of rehabilitation; advances from property/casualty insurance security fund; termination

§ 7403. Order of rehabilitation; advances from property/casualty

insurance security fund; termination. (a) An order to rehabilitate a

domestic insurer shall direct the superintendent and his successors in

office, as rehabilitator, forthwith to take possession of the property

of such insurer and to conduct the business thereof, and to take such

steps toward the removal of the causes and conditions which have made

such proceeding necessary as the court shall direct.

* (b) (1) If: (i) provision is made therefor in an order to

rehabilitate a domestic insurer, (ii) more than fifty percent of the

insurer's net direct premiums in the preceding three calendar years were

derived from business in this state which is protected by the

property/casualty insurance security fund, and (iii) such insurer has

consented to rehabilitation, the commissioner of taxation and finance

shall advance monies of such fund, in such amounts as specified in the

court's order, to the rehabilitator to enable the insurer to comply with

any surplus requirement or other requirement of this chapter.

(2) Before issuing such order, the court shall determine that the

insurer has the potential and capability, pursuant to a plan submitted

by the rehabilitator, of complying with all surplus and other

requirements of this chapter and repaying such advance to the fund

within two years after termination of the rehabilitation proceeding, at

a rate of interest approved by the superintendent to be determined

annually which shall not be less than the average rate of return of the

fund as determined by the superintendent for the preceding calendar

year.

(3) The plan shall include: (i) an explanation of the factors leading

to the insurer's condition requiring rehabilitation and the procedures

proposed to improve its condition, and (ii) a provision for posting

collateral with the rehabilitator as security for the advance, to the

extent that the insurer's assets permit.

(4) The court shall not order any advance to the rehabilitator without

his specific request or if the insurer's required capital or surplus is

impaired in an amount exceeding the greater of thirty million dollars or

fifteen percent of the insurer's net direct premium writings in the

previous calendar year. Total advances to an insurer shall not exceed

the greater of forty million dollars or twenty percent of such net

direct premium writings. No advance shall be made on or after July

first, two thousand which would lower the amount of assets in the fund

below one hundred ninety-five million dollars.

(5) Advances shall, in all respects except as to rate of interest, be

subject to the provisions of section one thousand three hundred seven of

this chapter, provided that in the event that an insurer which has

received an advance pursuant to this subsection is subsequently the

subject of an order of liquidation, the claim of the fund for the

advance and any accrued interest shall be paid to the fund in accordance

with the provisions of section seven thousand four hundred thirty-four

of this article.

(6) This subsection shall expire July first, two thousand, provided

that the insurer's obligation to repay to the fund moneys advanced to it

under this subsection, and the fund's claim for the advance, and any

accrued interest, as a priority over all non-secured creditors, shall

survive such expiration date.

* NB Expired July 1, 2000

(c) If at any time the superintendent deems further efforts to

rehabilitate such insurer would be futile, he may apply to the court

under this article for an order of liquidation.

(d) The rehabilitator or any interested person upon due notice to the

superintendent, at any time, may apply for an order terminating any

rehabilitation proceeding and permitting such insurer to resume

possession of its property and the conduct of its business, but no such

order shall be granted except when, after a full hearing, the court

shall determine that the purposes of the proceeding have been fully

accomplished.