On 12 August 2011, the New York State Insurance Department (the “NYSID”) released Supplement No. 1 (the “Supplement”) to its 2010 Circular Letter No. 10, addressing insurer reporting obligations under Article 15 of the New York Insurance Law (“Article 15”). Among other things, Article 15 generally requires insurers that are controlled by a holding company to file reports with the NYSID, disclosing information about the holding company and its other subsidiaries that may materially affect the operations, management or financial condition of the insurer. New York Insurance Law § 1502(a) exempts insurers that are authorized to do business in New York, including non-US insurers transacting business in New York through US branches, or their subsidiaries, from being treated as “holding companies” for purposes of Article 15. What this means is that if an insurer’s top-tier control person is itself an insurer that is authorized to do business in New York, then Article 15’s requirements, including the reporting requirements, do not apply. Although such insurers are exempt from the provisions of Article 15, they may still be subject to the holding company reporting or registration requirements of other states. In addition, the NYSID possesses the general authority, under New York Insurance Law § 308, to require insurers to submit additional reports. Accordingly, the Supplement directs all insurers domiciled in New York that are exempt from Article 15 to submit the following reports to the NYSID:
- Copies of the insurance holding company system annual registration statement (called “Form B” by the National Association of Insurance Commissioners (the “NAIC”)) and any amendments thereto filed in another state (to be filed with the NYSID contemporaneously with filing in the other state). If an insurer is not required to file the NAIC Form B in another state, the insurer must file the information that is contained in the NAIC Form B with the NYSID within 120 days following the close of the holding company’s fiscal year. Any insurer that had not filed its most recent report with the NYSID was directed to file that report with the NYSID by 22 August 2011.
- A report notifying the NYSID at least 30 days in advance of any activity that would result in the insurer acquiring control of any other New York-domiciled insurer. Control is presumed to arise based on the direct or indirect acquisition of 10% or more of the other insurer’s voting securities.
- A report notifying the NYSID at least 30 days in advance of entering into certain transactions with affiliates. Such transactions include:
- sales, purchases, leases, exchanges, loans, extensions of credit, or investments with an affiliate in an amount that equals or exceeds certain thresholds;
- loans or extensions of credit to non-affiliates that are made with the understanding that the proceeds will be used to make loans or extensions of credit to, purchase assets of, or make investments in, any affiliate of the insurer, if the amount of the transactions equals or exceeds certain thresholds;
- reinsurance agreements (or modifications thereto) with an affiliate that have an economic impact in excess of certain thresholds, if the insurer has not otherwise submitted the agreements to the NYSID;
- all management agreements, service contracts, guarantees or contracts of surety, and any cost-sharing arrangements;
- all guarantees or contracts of surety involving an affiliate, if quantifiable as to amount, if the contract is for an amount in excess of certain thresholds (insurers should submit all guarantees or contracts of surety if such contracts are not quantifiable as to amount);
- with respect to life insurers, direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer (other than a subsidiary) in an amount that together with its present holdings in such investments exceeds 2.5% of the insurer’s policyholder surplus at the prior year-end.
The NYSID’s stated purpose for requiring such reports is to enhance its understanding of the holding company structure of authorized insurers operating in New York and to better assess the current or potential risks to those insurers arising from transactions and relationships with their affiliates.