New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter B - Property and Casualty Insurance
Part 63 - Reserve Requirements For Financial Guaranty Insurance In-force Prior To The Effective Date Of Article 69 Of The Insurance Law
Section 63.1 - Reserve requirements for financial guaranties in force prior to may 14, 1989 for insurers not authorized to write financial guaranty insurance pursuant to section 6902 of the insurance law
Universal Citation: 11 NY Comp Codes Rules and Regs ยง 63.1
Current through Register Vol. 46, No. 12, March 20, 2024
An authorized insurer that wrote financial guaranty insurance prior to May 14, 1989, but which is not authorized to write financial guaranty insurance in this State pursuant to section 6902 of the Insurance Law, shall, for all guaranties in force prior to May 14, 1989, establish reserves as follows:
(a) Contingency reserve.
(1) A contingency reserve shall be
established and consist of allocations of sums representing 50 percent of the
earned premiums on policies insuring financial guaranties.
(2) Allocations to such reserve made during
each calendar year shall be maintained for a period of at least 240 months,
except that withdrawals may be made by the insurer in any year in which the
actual paid losses on the said type of policy exceed 35 percent of the earned
premiums thereon, but no such releases shall be made without the prior written
approval of the superintendent. A part of the reserve may be released
proportional to the reduction in aggregate net lability resulting from
reinsurance, provided that the assuming insurer shall, on the effective date of
the reinsurance, establish a reserve in an amount equal to the amount released.
The insurer may apply to the superintendent for a release of a reasonable
percentage of the reserve upon demonstration that the amount carried is
excessive in relation to the insurer's obligations on such policies.
(3) An insurer may invest the contingency
reserve in tax and loss bonds (or similar securities) purchased pursuant to
section 832(e) of the Internal Revenue Code (or any successor provision), only
to the extent of the tax savings resulting from the deduction for federal
income tax purposes of a sum equal to the annual contributions to the
contingency reserve. The contingency reserve shall otherwise be invested only
in classes of securities or types of investments specified in sections
1402(b)(1) through (3) and
1404(a)(1) through (3) of
the Insurance Law.
(b) Loss and loss adjustment expense reserve.
(1)
Reserves for unpaid losses and loss adjustment expenses shall be computed in a
manner consistent with the provisions of sections
4117 and
1303 of the Insurance Law, and shall be
based upon the case basis method. No deduction shall be made for anticipated
salvage in computing claim reserves.
(2) If the insured principal and interest on
a defaulted obligation due and payable over the period of the next three years
exceeds 10 percent of the insurer's capital, surplus and contingency reserve,
its reserve so established shall be supported by a report from an independent
source acceptable to the Superintendent.
(3) In meeting the requirements of section
4117(b)(2) of the
Insurance Law, the contingency reserve set forth in subdivision (a) of this
section shall be added to the incurred but not reported loss reserve in order
to determine compliance.
(4) If the
contingency reserve is not an amount equal to that required by section
4117(b)(2) of the
Insurance Law, then the insurer shall establish an incurred but not reported
loss reserve in an amount sufficient to make the total of the combined
contingency reserve and incurred but not reported loss reserve equal to five
percent of net premiums in force. For the purpose of this paragraph, net
premiums in force include annual premiums on noncancellable installment type
policies.
(c) Unearned premium reserve. The reserve for unearned premiums shall be computed as required by the provisions of section 1305 of the Insurance Law.
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