§ 4310. Investments; financial conditions; reserves. (a) Every
corporation subject to the provisions of this article shall annually on
or before the first day of March file in the office of the
superintendent a statement, verified by at least two of the principal
officers of such corporation, showing its condition on the thirty-first
day of December then next preceding which shall be in such form and
shall contain such matters as the superintendent shall prescribe.

(b) No such corporation shall invest in any securities other than
those permitted by the provisions of paragraph two of subsection (a) of
section one thousand four hundred three of this chapter, except as
provided in paragraphs one and two of this subsection.

(1) A corporation (or two or more such corporations under common
management) with admitted assets of greater than eighty million dollars
and maintaining cash and reserve investments under subsection (a) of
section one thousand four hundred four of this chapter (except
paragraphs eight and ten of subsection (a) of such section) free from
any lien or pledge, which, when valued in accordance with the provisions
of this chapter, seven percent or more of net premium income for the
most recent twelve month period, as shown by its last sworn statement,
annual or quarterly, on file with the superintendent, may also invest
its funds or otherwise acquire or loan upon investments permitted under
paragraphs eight and ten of subsection (a) of section one thousand four
hundred four of this chapter without having to meet the otherwise
applicable qualitative standards and the otherwise applicable aggregate
limitation for such investments, provided that the aggregate amount of
all such investments shall not exceed the lesser of surplus to
policyholders or fifteen percent of its admitted assets as shown by its
last statement on file with the superintendent. Any corporation subject
to the provisions of this article may jointly exercise control of a
subsidiary by acting together with one or more other corporations,
provided that such other corporations are either corporations subject to
this article, foreign corporations which perform similar functions in
other states or which belong to a national association comprised of
similar corporations to which one or more corporations organized under
this article also belong, or an institution controlled by any such
foreign corporation. No such corporation shall hold a direct or indirect
ownership interest in a risk retention group, as defined in article
fifty-nine of this chapter, other than in a risk retention group all of
whose members are insurance companies. Notwithstanding any other
provision of this chapter, including, but not limited to, section one
thousand four hundred seven of this chapter, any corporation subject to
the provisions of this article may also invest, in the aggregate, not
more than three percent of its admitted assets in obligations, shares or
other securities (including certificates of deposit) issued by a parent
corporation which is organized as a not for profit entity or a
corporation which is an affiliate or will be an affiliate after direct
or indirect acquisition by the parent corporation; provided, however,
that the board of directors of the parent organization is constituted in
accordance with the requirements of subsection (k) of section four
thousand three hundred one of this article and, provided further
however, that the investments of the corporation organized under this
article in its own subsidiaries shall not be included in that
limitation.

(2) A corporation maintaining cash and reserve investments under
subsection (a) of section one thousand four hundred four of this chapter
(except paragraphs eight and ten of subsection (a) of such section),
free from any lien or pledge, which, when valued in accordance with the
provisions of this chapter, equal ten percent or more of net premium
income for the most recent twelve month period, as shown by such
corporation's last sworn statement, annual or quarterly, on file with
the superintendent, may, in addition to the investments permitted by
paragraph one of this subsection, invest up to fifteen percent of its
admitted assets in investments permitted under paragraph two of
subsection (a) of section one thousand four hundred four of this
chapter, provided however that such investments need not meet the
otherwise applicable qualitative standards of such paragraph two so long
as all such investments are rated at BBB or higher (or the equivalent
thereto) by a security rating agency recognized by the superintendent.

(c) Any such corporation shall be deemed insolvent whenever it is
presently or prospectively unable to fulfill its outstanding contracts
and other liabilities and reserves.

(d) Every such corporation shall maintain a reserve, to be designated
as the statutory reserve fund, which shall from time to time during each
calendar year be increased in an amount equal to at least one per centum
of the net premium income of such corporation during such whole calendar
year, provided however, that:

(1) if such corporation reinsures part of its risk under any or all of
its contracts by means of reinsurance approved by the superintendent as
an appropriate substitute for the statutory reserve fund, then the
required increase to the statutory reserve fund at the end of any
calendar year shall be reduced by the amount of the premium paid by such
corporation for such reinsurance during such calendar year or by one per
centum of the net premium income received by such corporation during
such calendar year on its contracts so reinsured for the period during
which they are so reinsured, whichever amount is the lesser;

(2) the statutory reserve fund at the end of any calendar year shall
not exceed twelve and one-half per centum of the net premium income of
such calendar year;

(3) every such corporation shall, after the first full calendar year
of doing business, accumulate and maintain a statutory reserve fund
which shall from time to time during each calendar year be increased in
an amount equal to at least five per centum of the net premium income of
such corporation during such whole calendar year until such reserve
shall be at least equal to fifty thousand dollars and thereafter such
reserve shall be accumulated and maintained in the manner prescribed.

(e) (1) Such statutory reserve fund may, after application therefor by
the corporation and approval thereof by the superintendent, be reduced
below the amount required to be maintained by subsection (d) hereof,
provided that no such reduction, except in the event of an epidemic or
other catastrophe resulting in extraordinary hospital or medical
utilization, shall, in the case of a corporation having a net premium
income for the preceding calendar year of (i) less than ten million
dollars or (ii) ten million dollars or more, reduce the statutory
reserve below an amount equal to seventy-five per centum and fifty per
centum, respectively, of the amount required to be maintained by
subsection (d) hereof. Any reduction so authorized by the superintendent
shall be restored within a period of not more than three years, or six
years in the case of a corporation with a combined premium volume
exceeding two billion dollars annually as of December thirty-first,
nineteen hundred ninety-six, in accordance with a plan submitted by the
corporation and approved by the superintendent which shall provide that
such restoration shall be in addition to, and not in lieu of, the
increase in the statutory reserve fund hereinabove required, which
increase must be made in every year except the year in which a reduction
in the statutory reserve fund is authorized by the superintendent.

(2) Any six year plan submitted by a corporation with a combined
premium volume exceeding two billion dollars annually as of December
thirty-first, nineteen hundred ninety-six shall also be submitted to the
special advisory review panel created pursuant to section four thousand
three hundred nineteen of this chapter. Within sixty days of its receipt
of the six year plan, such panel shall issue a report to the
superintendent analyzing the six year plan and recommending any changes
it deems appropriate. The superintendent shall hold public hearings
regarding any such proposed six year plan and the recommendations of the
panel. The superintendent shall consider the findings of the panel and
the public hearings held on the six year plan during his approval
process for the six year plan.

(f) No such corporation shall invest in any real property, except that
any such corporation may, with the approval of the superintendent,
invest in such real property as it may reasonably expect will be
required for its principal office and the principal office or offices of
any other corporation organized under this article which is affiliated
with and which shares such principal office or offices with such
corporation, or for such purposes as shall be requisite for the
convenient accommodation in the transaction of the business of such
corporations, but in no event in excess of the aggregate of eight per
centum of the net premium income of such corporations and five per
centum of the receipts from any governmental agency for which either of
such corporations acts as fiscal intermediary during the twelve full
months immediately preceding the granting of such approval.

(g) A health service corporation, in addition to the investment in
real estate provided in subsection (f) of this section, may, with the
approval of the superintendent, purchase an interest in real estate for
the purpose of constructing a hospital or other health facility or
center thereon (in accordance with the requirements of chapter seven
hundred ninety-five of the laws of nineteen hundred sixty-five), or may
purchase an existing hospital or facility for the purpose of providing
health services or may make loans to a corporation or corporations under
its control for the purposes heretofore described, or for the purpose of
organizing, managing or promoting a health maintenance organization, as
such term is defined in article forty-four of the public health law
primarily for the benefit of persons covered under contracts issued by
such corporations, but in no event in excess of an amount equal to ten
per centum of its annual net premium income during the twelve full
months immediately preceding the granting of such approval. A health
service corporation may make expenditures and incur liabilities for the
purchase of real estate or for loans in excess of sums provided for in
subsection (f) hereof and this subsection as permitted by the
superintendent pursuant to paragraph five of subsection (e) of section
four thousand three hundred one of this article. A health service
corporation, with the approval of the superintendent of financial
services, also may enter into agreements for the leasing of hospital
facilities.

(h) Notwithstanding any other provisions of this chapter, and in
addition to the provisions for the investment of funds and for the
purchase of real estate as provided for in this article with the
approval of the superintendent, a health service corporation may, with
the approval of the superintendent, expend sums including loans to a
corporation or corporations under its control to implement the program
described herein for the amortization of capital costs for the purchase
or construction of facilities in its operations, including a hospital or
medical service center, and for the implementation of its program, but
not in excess of an amount equal to five percentum of its net premium
income during the twelve full months immediately preceding the granting
of such approval.

(i) If a loan is made with the approval of the superintendent, to a
corporation under the control of a health service corporation, it shall
be made on condition that the superintendent may conduct an examination
pursuant to sections three hundred nine and three hundred ten of this
chapter into the affairs of such corporation.

(j) Every corporation subject to the provisions of this article,
including a health service corporation or any of its instrumentalities
or any hospital, facility or center directly operated by any such health
service corporation, shall be exempt from every state, county, municipal
and school tax.

(k) Notwithstanding the provisions of any other law, a corporation
subject to the provisions of this article which has admitted assets
greater than five hundred million dollars on its last annual report
filed with the superintendent may enter into a transaction for an
interest rate swap in an amount not to exceed the amount of debt on the
books of the corporation on the effective date of this subsection that
was incurred within twelve months of the construction of the
corporation's home office, provided that such interest rate swap shall
provide an initial new interest rate that is at least two hundred basis
points lower than the interest rate on the existing debt. The
counterparty to this transaction shall meet the qualifications of a
qualified counterparty as provided in subparagraph (A) of paragraph
three of subsection (f) of section fourteen hundred ten of this chapter
except that, notwithstanding clause (iv) of subparagraph (C) of such
paragraph, in the event that such counterparty is a qualified bank, such
bank shall be rated A or better (or the equivalent thereto) by two
independent nationally recognized rating organizations. Any such
transaction shall be approved by the corporation's board of directors
prior to its implementation.

(l) Notwithstanding any other provisions of this chapter to the
contrary, in determining the financial condition of corporations subject
to the provisions of this article and not-for-profit corporations
authorized pursuant to article forty-four of the public health law, the
department shall include real estate, including buildings, property,
capital improvements and appurtenances owned and held that are utilized
in the ordinary course of the business of such entities, provided that
such real estate may be valued by the corporation at either its current
amortized book value or at ninety percent of its current market value,
as determined by an independent appraisal undertaken annually and in
accordance with regulations promulgated by the superintendent.