§ 87. Investment of surplus or reserve. 1. Any of the reserve funds
belonging to the state insurance fund, by order of the commissioners,
approved by the superintendent of financial services, may be invested in
the types of securities described in subdivisions one, two, three, four,
five, six, eleven, twelve, twelve-a, thirteen, fourteen, fifteen,
nineteen, twenty, twenty-one, twenty-one-a, twenty-four, twenty-four-a,
twenty-four-b, twenty-four-c and twenty-five of section two hundred
thirty-five of the banking law or in paragraph two of subsection (a) of
section one thousand four hundred four of the insurance law except that
up to five percent of such reserve funds may be invested in the
securities of any solvent American institution as described in such
paragraph irrespective of the rating of such institution's obligations
or other similar qualitative standards described therein.

2. Any of the surplus funds belonging to the state insurance fund, by
order of the commissioners, approved by the superintendent of financial
services, may be invested in the types of securities described in
subdivisions one, two, three, four, five, six, eleven, twelve, twelve-a,
thirteen, fourteen, fifteen, nineteen, twenty, twenty-one, twenty-one-a,
twenty-four, twenty-four-a, twenty-four-b, twenty-four-c and twenty-five
of section two hundred thirty-five of the banking law or, up to fifty
percent of surplus funds, in the types of securities or investments
described in paragraphs two, three, eight and ten of subsection (a) of
section one thousand four hundred four of the insurance law, except that
up to ten percent of surplus funds may be invested in the securities of
any solvent American institution as described in such paragraphs
irrespective of the rating of such institution's obligations or other
similar qualitative standards described therein, and up to fifteen
percent of surplus funds in securities or investments which do not
otherwise qualify for investment under this section as shall be made
with the care, prudence and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims as provided for the state insurance fund
under this article, but shall not include any direct derivative
instrument or derivative transaction except for hedging purposes.
Notwithstanding any other provision in this subdivision, the aggregate
amount that the state insurance fund may invest in the types of
securities or investments described in paragraphs three, eight and ten
of subsection (a) of section one thousand four hundred four of the
insurance law and as a prudent person acting in a like capacity would
invest as provided in this subdivision shall not exceed fifty percent of
such surplus funds.

3. Any of the surplus or reserve funds belonging to the state
insurance fund, upon like approval of the superintendent of financial
services, may be loaned on the pledge of any such securities. The
commissioners, upon like approval of the superintendent of financial
services, may also sell any of such securities or investments.

4. (a) Any securities belonging to the state insurance fund may, by
order of the commissioners, approved by the superintendent of financial
services, be loaned under a security loan agreement, as defined in
paragraph (b) of this subdivision, entered into with a registered
broker-dealer, or a New York state or national bank or trust company,
with the custodial bank of the state insurance fund or another person or
entity, approved by the commissioner of taxation and finance, which
specializes in security loan transactions acting as the agent in
arranging such agreement. The commissioners shall monitor the market
value of the loaned securities daily. In no event shall the
commissioners allow the value of the collateral posted to fall below the
market value of the loaned securities.

(b) For purposes of this section, "security loan agreement" shall mean
a written contract, the terms of which have been approved by the
commissioner of taxation and finance, whereby the state insurance fund
(the lender) agrees to lend securities to a broker-dealer, bank or trust
company described in paragraph (a) of this subdivision (the borrower)
for a period not to exceed one year. However, such agreement shall be
subject to the following limitations: (i) the lender must retain the
right to collect from the borrower all dividends, interest, premiums,
rights, and any other distributions to which the lender would otherwise
have been entitled; (ii) the lender may waive the right to vote the
securities during the term of such agreement; (iii) the lender must
retain the right to terminate such agreement upon not more than five
business days' notice; (iv) the borrower shall provide as collateral to
the lender cash or direct obligations of the United States of America or
any agency or instrumentality thereof or obligations fully guaranteed by
the United States of America that are eligible for investment by the
state insurance fund under subdivision one of this section, provided
that such obligations may in no event consist of derivative securities;
and (v) such agreement shall provide for payment of additional
collateral on a daily basis, or at such time as the value of the loaned
securities increases to agreed upon ratios.

5. All such securities or evidences of indebtedness shall be placed in
the hands of the commissioner of taxation and finance who shall be the
custodian thereof. He or she shall collect the principal and interest
thereof, when due, and pay the same into the state insurance fund. The
commissioner of taxation and finance shall pay all vouchers drawn on the
state insurance fund for the making of such investments when signed by
the chair of the commissioners, the executive director or a deputy
executive director of the state insurance fund upon delivery of such
securities or evidences of indebtedness to him or her, when there is
attached to such vouchers the approval of the state superintendent of
financial services.

6. For the purposes of this section, the term "reserves" does not
include the estimated value of future discretionary payments that may be
made by the state insurance fund under section ninety of this article.

7. Notwithstanding any provision in this section, the surplus and
reserve funds of the state insurance fund shall not be invested in any
investment that has been found by the superintendent of financial
services to be against public policy or in any investment prohibited by
the provisions of paragraph six of subsection (a) of section one
thousand four hundred four of the insurance law or by the provisions of
paragraph one, two, three, four, six, eight, nine or ten of subsection
(a) of section one thousand four hundred seven of the insurance law.