BILL NUMBER:S6508

TITLE OF BILL:  An act to amend the insurance law, in relation to
distribution of dividends by domestic stock life insurers

PURPOSE: This bill would amend § 4207(a) of the insurance law to revise
the standard for determining when domestic stock life insurers may
distribute dividends to the shareholders of domestic stock life insur-
ance companies.

SUMMARY OF PROVISIONS: Subsection (a) of § 4207 of the insurance law
authorizes domestic stock life insurers to distribute shareholder divi-
dends when such insurer does not exceed the specified threshold test
provided for in the law. This bill amends § 4207(a)(1) to provide that
the standard for the threshold test should be that the aggregate amount
of such insurer's dividends in any calendar year must not exceed the
"greater of" either: 10% of surplus to policyholders, as of the imme-
diately preceding calendar year, or; its net gain from operations for
the immediately preceding calendar year, excluding realized capital
gains. Current law establishes this test using the "lesser of" either
10% of surplus to policyholders or net gain from operations.

JUSTIFICATION: Contrary to the law in 33 other states, current New York
insurance law provides that New York stock life insurers may only
distribute dividends to shareholders when the aggregate amount of such
dividends does not exceed the "lesser of" either: 10% of surplus to
              

policyholders; or net gain from operations in the immediately preceding
calendar year, excluding realized capital gains. Although New York law
is consistent with the provisions of section 5.B of the National Associ-
ation of Insurance Commissioner's (NAIC) Insurance Holding Company
System Regulatory Act, most other states have not followed this
provision and have, instead, authorized domestic stock life insurer's in
their states to utilize this same threshold test using a "greater of"
standard. The "greater of" standard is provided for in the laws of
states that have a substantial presence of domestic life insurance
companies and a history of strong insurance regulation, such as Califor-
nia, Connecticut, Illinois, Iowa, Maine, Massachusetts, Michigan, Minne-
sota, New Jersey and Texas.

This bill amends the insurance law in New York regarding the distrib-
ution of shareholder dividends by New York stock life insurers to bring
it into conformance with the laws of the vast majority of the rest of
the country. This change will allow New York stock life insurers to be
regulated and reviewed by credit rating organizations on the matter of
shareholder distributions in the same manner as their competitors in
other states. The amendments provided for in this bill have been the law
in most other states with a substantial domestic life insurance presence
for many years, with no negative financial consequences to stock life
insurers or their policyholders.  Therefore, it would seem logical to
place New York domestic insurers on the same competitive playing field
as their out-of-state competitors by enacting this legislation.

LEGISLATIVE HISTORY: New bill.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately.