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 22, 2005 representing the position of the New York State Insurance Department.

RE: Interpretation of Ins. Law § 3222(b)(v)

Question Presented

What is the meaning of the term "assets" as it is used in N.Y. Ins. Law § 3222(b)(v) (McKinney 2000) with respect to the $25 million threshold for an eligible holder of a funding agreement?

Conclusion

The term assets as it is used in N.Y. Ins. Law § 3222(b)(v) (McKinney 2000) refers to the total assets on an institution’s balance sheet with no reduction for the institution’s liabilities.

Facts

The inquiry is of a general nature. The inquirer has asked whether the term "assets" as used in N.Y. Ins. Law § 3332(b)(v) "refers to the holder’s gross assets (i.e. without reduction for the holder’s liabilities) or its net assets . . . "

Analysis

N.Y. Ins. Law § 3222 (b) (McKinney 2000) provides, in relevant part, as follows:

(b) Such funding agreements may be issued to persons authorized by a state or foreign country to engage in an insurance business or subsidiaries of such persons. Such funding agreements may also be issued to entities other than persons authorized to engage in an insurance business (and subsidiaries of such persons) and to individuals for the following purposes: . . . (v) to fund any program of an institution which has assets in excess of twenty-five million dollars.

N.Y. Ins. Law § 107(24) (McKinney Supp. 2005) defines an institution as "a corporation, a joint-stock company, an association, a trust, a business partnership, a business joint venture, or any similar entity." By the express language of N.Y. Ins. Law § 3222(b)(v), it may be inferred that an institution is an entity other than an insurer or an insurer’s subsidiary.

However, there is no definition of the term "assets" in the N.Y. Insurance Law.1  In addition, a search of legislative history provides no guidance on the meaning of the term "assets" as used in N.Y. Ins. Law

§ 3222(b)(v) (McKinney 2000).

In the absence of a statutory definition or case law interpreting the term "assets", the term must be given its ordinary meaning. Merriam Webster’s Collegiate Dictionary (10th ed. 1993) defines the plural form "asset" as "the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts." Blacks Law Dictionary (7th ed. 1999) defines the plural form of "asset" as "[t]he entries on a balance sheet showing the items of property owned, including cash, inventory, equipment, real estate, accounts receivable, and goodwill." Both of these definitions provides for total assets without any deduction for liabilities.

In addition, since N.Y. Ins. Law § 3222(b)(v) applies to entities other than insurers or their subsidiaries, Generally Accepted Accounting Principles (GAAP) is relevant to evaluating the meaning of the term "assets". Under GAAP, assets, liabilities and owners’ equity are all separate and distinct categories. On a balance sheet prepared pursuant to GAAP, deducting total liabilities from total assets results in a figure equal to total owner’s equity. Therefore, in light of GAAP, the term "assets" refers to total assets from a balance sheet without any deduction for liabilities.

Furthermore, if the drafters had intended the term "assets" as used in N.Y. Ins. Law § 3222(b)(v) to mean anything other than total assets on an institution’s balance sheet, they could have used terms, including but not limited to, "net assets" or "net worth". For example, N.Y. Ins. Law § 7002(e) (McKinney Supp. 2005) provides a definition for "industrial insured" which includes the term "net worth." Also, various provisions of the N.Y. BCL make use of the term "net assets", which is defined in N.Y. BCL § 102(9) (McKinney 2003), in relevant part, as "the amount by which the total assets exceed the total liabilities."

Therefore, it is the Department’s opinion that the term "assets" as it is used in N.Y. Ins. Law § 3222(b)(v) (McKinney 2000) refers to the total assets on an institution’s balance sheet with no reduction for the institution’s liabilities.

For further information one may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.


1   Although there is a definition of the term “admitted assets” in N.Y. Ins. Law § 107(a)(3) (McKinney Supp. 2005), that definition is not applicable since it defines the assets of an insurer which conform to N.Y. Ins. Law § 1301.  N.Y. Ins. Law § 3222 (b)(v) pertains to institutions other than insurers.