BILL NUMBER:S1380

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
insurance companies.

SUMMARY OF PROVISIONS:

Subsection (a) of § 4207 of the insurance law authorizes domestic
stock life insurers to distribute shareholder dividends 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 immediately
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 Association of Insurance Commissioners (NAIC) Insurance
Holding Company System Regulatory Act, most other states have not
followed this provision and have, instead, authorized domestic stock
life insurers 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 California, Connecticut, Illinois, Iowa, Maine, Massachusetts,
Michigan, Minnesota, New Jersey and Texas.

This bill amends the insurance law in New York regarding the
distribution 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:

S.6508 of 2014

FISCAL IMPLICATIONS:

None

EFFECTIVE DATE:

Immediately

                                BILL NUMBER:S1380A

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. This bill also
amends § 4207(a)(i) by prohibiting an ordinary dividend distribution by
a domestic stock life company in a year following one where such company
had an operating loss; and limiting permissible ordinary dividend
distributions to 10-25% of surplus, depending on the recent financial
history of the company; companies that have had a sustained period of
              

gain from operations, looking back three years or more, could make the
largest ordinary dividend distribution (25% of surplus), where their net
gain from operations is greater than 10% of surplus; companies which
have had an operating loss over the past two - three years would be
limited to an ordinary dividend of not more than 15% of surplus, again,
where their net gain from operations in the previous calendar year is
greater than 10% of surplus and where they did not have an operating
loss in the previous calendar year; companies operating under circum-
stances where 10% of their surplus is a larger number than net gain from
operations would be limited to a 10% of surplus ordinary dividend
distribution, so long as they did not have an operating loss in the
immediately preceding calendar year.

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 poli-
cyholders; 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 Commissioners (NAIC) Insurance Holding Company System
Regulatory Act, most other states have not followed this provision and
have, instead, authorized domestic stock life insurers 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 California, Connecticut, Illi-
nois, Iowa, Maine, Massachusetts, Michigan, Minnesota, 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
insurer's 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: S.6508 of 2014

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately