Relates to increasing the aggregate cap on liabilities for life insurers under the life insurance guaranty corporation for the purposes of determining assessments on insurers.
TITLE OF BILL: An act to amend the insurance law, in relation to the life insurance company guaranty corporation of New York
PURPOSE: This amendment to Article 77 of the insurance law (the Life Insurance Company Guaranty Corporation of New York -- "LICGC") is necessary to ensure that the LICGC will have sufficient statutory authority to fund the guaranty association benefits required in connection with the insolvency of Executive Life Insurance Company of New York (ELNY). This insolvency is expected to be declared by court order in March of 2012 and will require the imposition of assessments on life insurers in an amount greater than the current guaranty law limit of $500 million. This amendment would increase that assessment limit to $575 million and thereby provide the LICGC sufficient authority to cover the statutory obligations to ELNY beneficiaries contained in the current life insurance guaranty law.
SUMMARY OF PROVISIONS: This bill would amend paragraph (1) of subsection (e) of section 7709 of the insurance law to increase the aggregate, total authority to assess members of the Life Insurance Company Guaranty Corporation of New York (life insurance companies licensed to do business in New York) to $575 million.
EXISTING LAW: Current law caps the total, aggregate assessment amount at $500 million.
JUSTIFICATION: Article 77 of the insurance law (Life Insurance Company Guaranty Corporation of New York - "LICGC") was enacted in 1985 for the purpose of providing a mechanism for the funding of protections to New York residents insured under a life insurance policy or annuity contract due to losses that they may incur because of the insolvency of the life insurer which issued such policies or contracts. Every life insurance company which is licensed to do business in New York is a member of the Corporation and is assessed upon the insolvency of a member life insurer to cover certain losses to the policy or contract holder of that insolvent insurer (up to $500,000 per policy or contract under most circumstances). The current law also caps the total, aggregate amount that life insurers may be assessed pursuant to the law at $500 million.
This bill seeks to amend Article 77 to increase the aggregate, total assessment amount by $75 million, thus making the new limit $575 million. The amendment is necessary at this time to ensure that the
policy and contract holder benefits provided for under the current life insurance guaranty law can be fully funded with respect to the impending insolvency of the Executive Life Insurance Company of New York (ELNY). ELNY has been in rehabilitation under the operational control of the New York Liquidation Bureau for over twenty years. During that time, the assets of the company have deteriorated to the extent that the total obligations to policy and contract holders that the LICGC will be required to pay once ELNY is declared insolvent by the court will exceed $500 million. Without this increase in the aggregate amount that the LICGC can assess life insurers, the limit in the current law will be exhausted before the policy and contract holder coverage required under the guaranty law can be satisfied.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: No current year fiscal impact. Fiscal impact in subsequent years to be determined.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 6507 IN SENATE February 17, 2012 ___________Introduced by Sen. SEWARD -- 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 the life insurance company guaranty corporation of New York THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 1 of subsection (e) of section 7709 of the insur- ance law, as added by chapter 802 of the laws of 1985, is amended to read as follows: (1) The total assessment against all member insurers for all impair- ments and insolvencies, less the amount of refunds (not including inter- est) to member insurers pursuant to subsection (f) of this section, shall not exceed five hundred SEVENTY-FIVE million dollars. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14723-01-2