NY State Senate Bill 2023-S3612

Senate Bill S3612

Signed By Governor

2023-2024 Legislative Session

Relates to financial guaranty insurance single risk limits for municipal obligation bonds, special revenue bonds and similar obligations of debt issuers

download bill text pdf

Current Bill Status Via A6164 - Signed by Governor

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Oct 25, 2023	signed chap.568
Oct 13, 2023	delivered to governor
May 31, 2023	returned to assembly passed senate 3rd reading cal.1184 substituted for s3612
May 31, 2023	substituted by a6164
May 24, 2023	advanced to third reading
May 23, 2023	2nd report cal.
May 22, 2023	1st report cal.1184
Feb 01, 2023	referred to insurance

Votes

- May 31, 2023 - Floor Vote
  A6164
  
  58
  
  Aye
  
  0
  
  Nay
  
  0
  
  Absent
  
  5
  
  Excused
  
  0
  
  Abstained
  - - Floor Vote: May 31, 2023
      
      aye (58)
      
      Addabbo Jr.
      
      Bailey
      
      Borrello
      
      Breslin
      
      Brisport
      
      Brouk
      
      Canzoneri-Fitzpatrick
      
      Chu
      
      Cleare
      
      Comrie
      
      Fernandez
      
      Gallivan
      
      Gianaris
      
      Gonzalez
      
      Gounardes
      
      Griffo
      
      Harckham
      
      Helming
      
      Hinchey
      
      Hoylman-Sigal
      
      Jackson
      
      Kavanagh
      
      Kennedy
      
      Krueger
      
      Lanza
      
      Liu
      
      Mannion
      
      Martinez
      
      Mattera
      
      May
      
      Mayer
      
      Murray
      
      Myrie
      
      O'Mara
      
      Oberacker
      
      Ortt
      
      Palumbo
      
      Parker
      
      Persaud
      
      Ramos
      
      Rhoads
      
      Rivera
      
      Rolison
      
      Ryan
      
      Salazar
      
      Sanders Jr.
      
      Scarcella-Spanton
      
      Sepúlveda
      
      Serrano
      
      Skoufis
      
      Stavisky
      
      Stec
      
      Stewart-Cousins
      
      Tedisco
      
      Thomas
      
      Walczyk
      
      Webb
      
      Weber
      
      excused (5)
      
      Ashby
      
      Cooney
      
      Felder
      
      Martins
      
      Weik
  May 22, 2023 - Insurance Committee Vote
  S3612
  
  11
  
  Aye
  
  0
  
  Nay
  
  0
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Insurance Committee Vote: May 22, 2023
      
      aye (11)
      
      Addabbo Jr.
      
      Borrello
      
      Breslin
      
      Cooney
      
      Harckham
      
      Helming
      
      Kennedy
      
      Martinez
      
      O'Mara
      
      Sanders Jr.
      
      Scarcella-Spanton

2023-S3612 (ACTIVE) - Details

See Assembly Version of this Bill:: A6164
Law Section:: Insurance Law
Laws Affected:: Amd §§6901, 6902 & 6904, Ins L

2023-S3612 (ACTIVE) - Summary

Relates to financial guaranty insurance single risk limits for municipal obligation bonds, special revenue bonds and similar obligations of debt issuers in highly rated member countries of the Organisation of Economic Co-operation and Development; makes certain technical corrections.

2023-S3612 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S3612

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law, in relation to financial guaranty
insurance single risk limits for municipal obligation bonds, special
revenue bonds and similar obligations of debt issuers in highly rated
member countries of the Organisation of Economic Co-operation and Devel-
opment

 
PURPOSE:

To (i) eliminate a "ratings cliff' in the single risk limits that finan-
cial guaranty insurers may insure for municipal obligation bonds,
special revenue bonds and similar obligations of debt issuers in certain
highly rated OECD member countries, and (ii) make certain technical
corrections.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1: Replaces the term "securities rating agency" with the term

"nationally recognized statistical rating organization" because the
latter term is recognized and used by the U.S. Securities and Exchange
Commission and is the preferred term of the New York State Department of
Financial Services for describing credit rating agencies in New York
insurance laws and regulations.

Section 2: Corrects a typographical error.

Section 3: Expands the definition of "Governmental unit" to include a
member country of the OECD rated in the single-A (A+, A, A- or Al, A2,
A3) category by a securities rating agency acceptable to the Superinten-
dent, plus municipalities therein and political subdivisions, public
agencies and instrumentalities thereof.

Section 4: Same as Section 1.

Section 5: Same as Section 1.

Section 6: Same as Section 1.

Section 7. Creates graduated single risk limits (as a percentage of a
financial guaranty insurer's capital), for municipal obligation bonds,
special revenue bonds and similar obligations of debt issuers in OECD
member countries, based on the grade (AA- (or higher), A+, A, A- or Aa3
(or higher), A 1 , A2, A3) of the country's single-A category sovereign
rating.

Section 8. Corrects two cross-references.

 
JUSTIFICATION:

The bill is necessary to facilitate the provision of financial guaranty
insurance on municipal obligation bonds, special revenue bonds and simi-
lar obligations of debt issuers in certain highly rated OECD member
countries.


The law presently features a "ratings cliff" under which the single risk
limit (measured by insured principal) for a municipal obligation bond,
special revenue bond or similar obligation of a debt issuer in an OECD
member country drops from 75% of the aggregate of the insurer's surplus
to policyholders and contingency reserves (together, "Capital") if the
OECD member country is rated double-A-minus (AA- or Aa3) to 10% of the
insurer's Capital if the OECD member country is rated single-A-plus (A+
or Al) or lower. In short, under the current law, the single risk limit
declines by 7.5 times for only a one-grade drop in the OECD member coun-
try's rating.

This "cliff' is not supported by default histories of municipal obli-
gation bonds, special revenue bonds or similar obligations.  Financial
guaranty insurers write to a zero-loss underwriting standard and this
bill would facilitate the diversification of their insured portfolios
with municipal obligation bonds, special revenue bonds and similar obli-
gations of debt issuers in highly rated OECD member countries like
Japan, Spain, and Chile.

The bill would replace the current "cliff' with a scale that preserves
the current 75% par-based single risk limit for municipal obligation
bonds, special revenue bonds and similar obligations issued by a debt
issuer in a double-A (AA+, AA, AA- or Aal, Aa2, Aa3) category-rated (or
higher) OECD member country, but adds respective 59%, 43% and 26% par-
based single risk limits for the same obligations of debt issuers in a
OECD member country rated A+ (or A 1), A (or A2) or A- (or A3).

 
LEGISLATIVE HISTORY:

None.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.

2023-S3612 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   3612
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                             February 1, 2023
                                ___________
 
 Introduced  by  Sen. BRESLIN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Insurance
 
 AN ACT to amend the insurance law, in  relation  to  financial  guaranty
   insurance  single  risk limits for municipal obligation bonds, special
   revenue bonds and similar obligations of debt issuers in highly  rated
   member  countries  of  the  Organisation  of Economic Co-operation and
   Development
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Subparagraph  (I)  of  paragraph  4  of subsection (g) of
 section 6901 of the insurance law, as amended by chapter 672 of the laws
 of 2005, is amended to read as follows:
   (I) is issued by a bank, trust company, or savings  and  loan  associ-
 ation that:
   (i)  is  organized and existing under the laws of the United States or
 any state thereof or, in the case of a non-domestic  financial  institu-
 tion,  has  a  branch  or  agency  office licensed under the laws of the
 United States or any state thereof and is domiciled in a member  country
 of  the  Organisation for Economic Co-operation and Development having a
 sovereign rating in one of the top two generic lettered  rating  classi-
 fications  by  a  [securities]  NATIONALLY RECOGNIZED STATISTICAL rating
 [agency] ORGANIZATION acceptable to the superintendent;
   (ii) has (or is the principal  operating  subsidiary  of  a  financial
 institution  holding  company  that  has)  a long-term debt rating of at
 least investment grade; and
   (iii) is not a parent, subsidiary  or  affiliate  of  the  trustee  or
 paying  agent,  if  any,  with respect to the insured obligation if such
 trustee [of] OR paying agent is the named beneficiary of the  letter  of
 credit; or
   §  2.  Subsections  (k),  (n) and (s) of section 6901 of the insurance
 law, subsection (k) as amended by chapter  605  of  the  laws  of  2004,

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD08656-01-3

 S. 3612                             2
 
 subsection  (n)  as  amended  by  chapter  529  of the laws of 1996, and
 subsection (s) as amended by chapter  672  of  the  laws  of  2005,  are
 amended to read as follows:
   (k)  "Governmental unit" means the United States of America, Canada, a
 member country of the Organisation for Economic Co-operation and  Devel-
 opment  having  a sovereign rating in one of the top [two] THREE generic
 lettered rating classifications by a [securities] NATIONALLY  RECOGNIZED
 STATISTICAL  rating  [agency] ORGANIZATION acceptable to the superinten-
 dent, a state, territory or possession of the United States of  America,
 the  District  of  Columbia,  a province of Canada, a municipality, or a
 political subdivision of any of the foregoing, or any public  agency  or
 instrumentality thereof.
   (n) "Investment grade" means that:
   (1)  the  obligation  or parity obligation of the same issuer has been
 determined to be in one of the top four generic lettered rating  classi-
 fications  by  a  [securities]  NATIONALLY RECOGNIZED STATISTICAL rating
 [agency] ORGANIZATION acceptable to the superintendent;
   (2) the obligation or parity obligation of the same  issuer  has  been
 identified  in  writing by such NATIONALLY RECOGNIZED STATISTICAL rating
 [agency] ORGANIZATION to be of investment grade quality; or
   (3) if the obligation or parity obligation of the same issuer has  not
 been  submitted  to  any  such  NATIONALLY RECOGNIZED STATISTICAL rating
 [agency] ORGANIZATION, the obligation is  determined  to  be  investment
 grade  (as  indicated  by a rating in category 1 or 2) by the Securities
 Valuation Office of the National Association of Insurance Commissioners.
   (s) "Utility first mortgage obligation" means  any  obligation  of  an
 issuer secured by a first priority mortgage on utility property owned by
 or  leased to an investor-owned or cooperative-owned utility company and
 located in the United States, Canada or a member country of the  Organi-
 sation  for  Economic  Co-operation  and  Development having a sovereign
 rating in one of the top two generic lettered rating classifications  by
 a  [securities] NATIONALLY RECOGNIZED STATISTICAL rating [agency] ORGAN-
 IZATION acceptable to the superintendent; provided that the  utility  or
 utility  property  or  the  usage fees or other similar utility rates or
 charges are subject to regulation or oversight by a governmental unit.
   § 3. Paragraph 4 of subsection (a) of section 6902  of  the  insurance
 law,  as  amended by chapter 605 of the laws of 2004, is amended to read
 as follows:
   (4) a financial guaranty insurance corporation's  investments  in  any
 one  entity insured by that corporation shall not exceed four percent of
 its admitted assets at last year-end, except that this limit  shall  not
 apply  to  investments  payable or guaranteed by a United States govern-
 mental unit or New York state if such investments payable or  guaranteed
 by  the United States governmental unit or New York state shall be rated
 in one of the top two  generic  lettered  rating  classifications  by  a
 [securities] NATIONALLY RECOGNIZED STATISTICAL rating [agency] ORGANIZA-
 TION acceptable to the superintendent.
   § 4. Subparagraph (B) of paragraph 1 of subsection (d) of section 6904
 of  the insurance law, as amended by chapter 605 of the laws of 2004, is
 amended to read as follows:
   (B) the insured unpaid principal issued by a single entity and  backed
 by a single revenue source shall not exceed [seventy-five] THE FOLLOWING
 percent  of  the aggregate of the insurer's surplus to policyholders and
 contingency  reserve  BASED  ON  THE  HIGHEST  SOVEREIGN  RATING,  BY  A
 NATIONALLY  RECOGNIZED STATISTICAL RATING ORGANIZATION ACCEPTABLE TO THE
 SUPERINTENDENT, OF THE COUNTRY OF THE APPLICABLE GOVERNMENTAL UNIT:
 S. 3612                             3
 
   (I) SEVENTY-FIVE PERCENT: ANY RATING IN ONE OF  THE  TOP  TWO  GENERIC
 LETTERED RATING CLASSIFICATIONS;
   (II)  FIFTY-NINE PERCENT: AN A+, A1, OR EQUIVALENT RATING AT THE HIGH-
 EST GRADE OF THE THIRD GENERIC LETTERED RATING CLASSIFICATION;
   (III) FORTY-THREE PERCENT: AN A,  A2,  OR  EQUIVALENT  RATING  AT  THE
 MIDDLE GRADE OF THE THIRD GENERIC LETTERED RATING CLASSIFICATION; AND
   (IV) TWENTY-SIX PERCENT: AN A-, A3, OR EQUIVALENT RATING AT THE LOWEST
 GRADE OF THE THIRD GENERIC LETTERED RATING CLASSIFICATION;
   §  5.  Subsection (e) of section 6904 of the insurance law, as amended
 by chapter 89 of the laws of 1989, is amended to read as follows:
   (e) Except as provided in subsection (f) of this section, if an insur-
 er at any time exceeds any limitation prescribed by  subsection  (c)  or
 (d)  of  this  section  or [the last sentence of] paragraph [one] TWO of
 subsection (b) of this section, the insurer  shall  within  thirty  days
 after  the limitations are breached, submit a written plan to the super-
 intendent detailing the steps that it will take or has taken  to  reduce
 its exposure to loss to no more than the permitted amounts, and if after
 notice  and  hearing  the  superintendent determines that an insurer has
 exceeded any limitation prescribed by this section, he  may  order  such
 insurer  to cease transacting any new financial guaranty insurance busi-
 ness until its exposure to loss no longer exceeds  said  limitations  or
 with  respect  to  the  limitations prescribed in [the last sentence of]
 paragraph [one] TWO of subsection (b) of this section,  may  order  such
 insurer  to limit its writing of the types of guaranties permitted under
 subparagraphs (A), (B) and (C) of paragraph one  of  subsection  (b)  of
 this section to investment grade obligations until such time as it shall
 be in compliance with such limitations.
   § 6. This act shall take effect immediately.

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