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A10532 Summary:

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A10532 Floor Votes:

A10532 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                        10532--A
 
                   IN ASSEMBLY
 
                                      June 4, 2012
                                       ___________
 
        Introduced  by COMMITTEE ON RULES -- (at request of M. of A. Morelle) --
          read once and referred to the Committee on Insurance --  reported  and
          referred to the Committee on Rules -- Rules Committee discharged, bill
          amended, ordered reprinted as amended and recommitted to the Committee
          on Rules
 
        AN  ACT  to  amend  the  insurance law, in relation to derivative trans-

          actions and derivative instruments
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.    Subsection (f) of section 1410 of the insurance law, as
     2  added by chapter 650 of the laws of 1998, is amended to read as follows:
     3    (f)(1) The counterparty exposure under [a] an over the counter deriva-
     4  tive instrument entered into by an insurer authorized to engage in tran-
     5  sactions pursuant to this section shall be deemed to be an obligation of
     6  the institution to which the insurer is exposed to credit risk and shall
     7  be included in determining compliance with any single or aggregate quan-
     8  titative limitation on investments made by an insurer under  this  chap-
     9  ter.
    10    (2) Notwithstanding any single or aggregate quantitative limitation on

    11  investments  made  by an insurer under this chapter, an insurer may only
    12  transact an over the counter derivative instrument with:
    13    (A) a qualified counterparty; or
    14    (B) a counterparty other than a  "qualified  counterparty"  if,  after
    15  giving  effect  to that transaction, the aggregate counterparty exposure
    16  of the insurer under one or more over  the  counter  derivative  [trans-
    17  actions] instruments to:
    18    [(A)  any  single counterparty, other than a "qualified counterparty",
    19  shall be limited to one] (i) that non-qualified  counterparty  does  not
    20  exceed one percent of [an] the insurer's admitted assets; and

    21    [(B)]  (ii)  all  counterparties, other than qualified counterparties,
    22  [are limited to] does not exceed three percent  of  [an]  the  insurer's
    23  admitted assets.
    24    (3) For purposes of this section:
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD15578-05-2
        A. 10532--A                         2
 
     1    (A) a "qualified counterparty" is a ["qualified broker or dealer" or a
     2  "qualified  bank"  or  other  counterparty  rated AA-/Aa3 or higher by a
     3  nationally recognized statistical rating  organization  if  it  is  also
     4  approved by the superintendent;

     5    (B)  a  "qualified  broker or dealer" means a broker or dealer that is
     6  organized under the laws of a state and is registered under the  Securi-
     7  ties Exchange Act of 1934, 15 U.S.C. §§ 78a-78kk, and has net capital in
     8  excess of two hundred fifty million dollars;
     9    (C) a "qualified bank" means a bank or trust company that:
    10    (i) is organized and existing, or in the case of a branch or agency of
    11  a foreign banking organization is licensed, under the laws of the United
    12  States or any state thereof;
    13    (ii) is regulated, supervised and examined by United States federal or
    14  state  authorities  having  regulatory  authority  over  banks and trust
    15  companies;
    16    (iii) has assets in excess of five billion dollars;

    17    (iv) has senior obligations outstanding, or has a  parent  corporation
    18  that  has  senior  obligations  outstanding,  rated AA or better (or the
    19  equivalent thereto) by two independent nationally recognized statistical
    20  rating organizations; and
    21    (v) has a ratio of primary capital to total assets of  at  least  five
    22  and  one-half percent and a ratio of total capital to total assets of at
    23  least six percent; and
    24    (D)] counterparty which has an investment grade rating from  at  least
    25  one  nationally  recognized  statistical rating organization or a desig-
    26  nation of one from the Securities Valuation Office of the National Asso-
    27  ciation of Insurance Commissioners, or any successor office  established

    28  by  the  National Association of Insurance Commissioners, and with which
    29  the insurer has entered into a master agreement, together with a  credit
    30  support annex or other documentation providing for the collateralization
    31  of the counterparty's obligations to the insurer under the master agree-
    32  ment, if that collateral documentation provides for (i) daily margin and
    33  collateral  settlement,  in cash or investment grade securities, between
    34  the parties, (ii) a minimum transfer amount of no more than one  million
    35  dollars,  and  (iii)  a  requirement  that collateral be provided by the
    36  counterparty from the first dollar of exposure, subject to  the  minimum
    37  transfer amount;
    38    (B) "aggregate counterparty exposure" means the sum of: (i) the aggre-

    39  gate  statement  value of options, swaptions, caps, floors, and warrants
    40  purchased; and (ii) the aggregate potential exposure of collars,  swaps,
    41  forwards and futures entered into[.];
    42    (C)  "over  the  counter  derivative  instrument"  means  a derivative
    43  instrument which is authorized under this chapter other than  a  deriva-
    44  tive  instrument  (i) cleared through a United States or foreign deriva-
    45  tives clearinghouse, or (ii) traded on or through  a  United  States  or
    46  foreign exchange providing derivatives clearing services;
    47    (D) "derivatives clearinghouse" means a derivatives clearing organiza-
    48  tion  registered  with  the  Commodity Futures Trading Commission or the
    49  Securities and Exchange Commission  or,  if  not  so  registered,  is  a

    50  foreign clearinghouse regulated, supervised and examined by a regulatory
    51  authority in a foreign jurisdiction approved by the superintendent;
    52    (E)  "master  agreement"  means a written master agreement relating to
    53  derivatives transactions that provides for netting of payments  owed  by
    54  the respective parties, and the domiciliary jurisdiction of the counter-
    55  party  is  either  within  the United States or if not within the United
        A. 10532--A                         3
 
     1  States, within a jurisdiction approved by the superintendent as eligible
     2  for netting; and
     3    (F)  "minimum  transfer  amount"  means  an amount below which a daily
     4  margin and collateral settlement is not required.

     5    § 2. This act shall take effect immediately;  provided,  however  that
     6  the documentation requirements set forth in items (i), (ii) and (iii) of
     7  subparagraph  (A)  of paragraph (3) of subsection (f) of section 1410 of
     8  the insurance law as added by section one of this act shall take  effect
     9  on January 1, 2013.