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

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on November 18, 2005 representing the position of the New York State Insurance Department.

Re: Capital Contribution from Corporate Parent.

Question:

Would the proposed capital contribution from a corporate parent to its New York licensed subsidiary constitute a transaction to which the notification requirements of New York Insurance Law § 1505(d) would apply?

Conclusion:

Yes, the proposed capital contribution from a corporate parent to its New York licensed subsidiary constitutes a transaction to which the notification requirements of New York Insurance Law § 1505(d) would apply.

Facts:

Company A (the"subsidiary") is considering receiving a capital contribution from Company B (the "parent"). The transaction would be arranged as a cash infusion from parent to the subsidiary. The inquirer asked whether the reporting requirements of N.Y. Ins. Law § 1505(d) would apply.

Analysis:

Article 15 of the New York Insurance Law sets forth the various rules governing holding companies. Company B and its wholly owned subsidiary, Company A, are members of the same "holding company system" and are thus subject to the provisions of the Article 15. The inquiry particularly involves the operation of N.Y. Ins. Law § 1505(d), which provides as follows:

The following transactions between a domestic controlled insurer and any person in its holding company system may not be entered into unless the insurer has notified the superintendent in writing of its intention to enter into any such transaction at least thirty days prior thereto, or such shorter period as he may permit, and he has not disapproved it within such period:

(1) sales, purchases, exchanges, loans or extensions of credit, or investments, involving more than one-half of one percent but less than five percent of the insurer's admitted assets at last year-end;

(2) reinsurance treaties or agreements;

(3) rendering of services on a regular or systematic basis; or

(4) any material transaction, specified by regulation, which the superintendent determines may adversely affect the interests of the insurer's policyholders or shareholders. Nothing herein contained shall be deemed to authorize or permit any transaction which, in the case of a non-controlled insurer, would be otherwise contrary to law.

N.Y. Ins. Law § 1505(d)(McKinney 2000).

The transaction described in the inquiry (a capital contribution in the form of a cash infusion) is regarded by the Department as an "investment" by the parent. Accordingly, the transaction (assuming it fits the size parameters of more than one-half of one percent but less than five percent of the insurer's admitted assets at last year-end) must be reported to the superintendent in advance under N.Y. Ins. Law § 1505(d)(1). Should the transaction’s size exceed this limit, then the prior approval requirement contained in N.Y. Ins. Law § 1505(c) would apply.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City office.