Guidance on Maximum Surplus Calculation Established Under Section 4219 of the Insurance Law

The Department has recently been asked to clarify in writing that surplus notes authorized under Section 1307 of the Insurance Law need not be included in the calculation of the maximum surplus limitation provided under Section 4219 of the Insurance Law.

Although afforded equity treatment in an insurer’s filed statements, surplus notes are unsecured debt subordinated to all claims by policyholders and creditors, and interest and principal payments that come due on the notes are made only after approval has been granted by the Superintendent. Accordingly, a life insurer subject to the limitation prescribed under Section 4219 of the Insurance Law need not include any surplus notes issued by the company when calculating its surplus limitation.