Relates to the distribution of dividends by any domestic life insurance company and limits the aggregate amount of such dividends in any calendar year.
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 Commissioner's (NAIC) Insurance Holding Company System Regulatory Act, most other states have not followed this provision and have, instead, authorized domestic stock life insurer's 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: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 6508 IN SENATE January 31, 2014 ___________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 distribution of divi- dends by domestic stock life insurers THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 1 of subsection (a) of section 4207 of the insur- ance law, as added by chapter 442 of the laws of 2000, is amended to read as follows: (1) Notwithstanding paragraph two of this subsection, any domestic stock life insurance company may distribute a dividend to its sharehold- ers where the aggregate amount of such dividends in any calendar year does not exceed the
[lesser]GREATER of: (A) ten percent of its surplus to policyholders as of the immediately preceding calendar year; or (B) its net gain from operations for the immediately preceding calen- dar year, not including realized capital gains. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13609-01-4