New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following informal opinion on March 10, 2005, representing the position of the New York State Insurance Department.

RE: Custodians for Insurance Company Assets

Question Presented

May an out of state trust company, a New Hampshire licensed company with a New York office located in Rochester, act as custodian of assets of a New York licensed insurer?

Conclusion:

There is no Insurance Law prohibition against an out-of-state trust company holding securities, cash, and other property for a New York licensed insurer where such custody does not concern securities that are required to be held by the New York Superintendent of Insurance on behalf of a New York domestic insurer pursuant to N.Y. Ins. Law § 1314 (McKinney 2000) or funds held pursuant to a trust agreement authorized by 11 NYCRR § 126 (2005).

Facts:

A New Hampshire licensed trust company headquartered in New Hampshire, wishes to act as a custodian through its out of state branch for New York licensed insurers to hold securities, cash, and other property as may be from time to time deposited with the custodian as well as the proceeds from the sale of all such securities or other property and reinvested income derived from such securities and other property.

Analysis:

There is no Insurance Law prohibition against an out-of-state trust company holding securities, cash, and other property for a New York licensed insurer where such custody does not concern securities that are required to be held by the New York Superintendent of Insurance on behalf of a New York domestic insurer pursuant to N.Y. Ins. Law § 1314 (McKinney 2000) or funds held pursuant to a trust agreement authorized by 11 NYCRR § 126 (2005).

There must be a custodial agreement between the bank and the insurer, containing safeguards and provisions that must be assessed according to the guidelines followed by Department examiners as set forth in Part 1, Section IV(H) of the NAIC Examiner’s Handbook (copy enclosed). They require, among other things, that securities held under custodial or safekeeping arrangements be in a bank or trust company licensed by the United States, or any state thereof, if such institutions are regularly examined by the licensing authority. There are also new and expanded general interrogatories that relate to an insurer’s custodial agreement attached to the annual financial statement (copy enclosed).

For further information one may contact Associate Attorney Sam Wachtel at the New York City Office.