OGC Op. No. 04-01-18

The Office of General Counsel issued the following opinion on January 21, 2004 representing the position of the New York State Insurance Department.

Re: Holding Company Act Requirements Regarding Reinsurance Between Affiliates

Question Presented:

What provisions of the New York State Insurance Law ("Insurance Law" or "N.Y. Ins. Law") affecting holding companies, and Regulations promulgated thereunder, contain the law applicable to the required filing with the New York State Superintendent of Insurance ("Superintendent") of reinsurance treaties or agreements subject to his disapproval?


N.Y. Ins. Law § 1505(d)(2) (McKinney 2000), a provision of N.Y. Ins. Law Article 15 (McKinney 2000) (HOLDING COMPANIES-- copy of Article enclosed), as implemented by N.Y. Comp. Codes R. & Regs. tit. 11, § 80-1.5(a) & (b) (1991) (Subpart 80-1 of Regulation 52) (HOLDING COMPANIES--copy enclosed), sets forth such required filing.


The inquirer requested a general response regarding the contents of New York State law applicable to an insurer's reinsurance transaction with a holding company affiliate.


The inquirer’s general question regarding the contents of New York State law applicable to an insurer's reinsurance transaction with an affiliate member of a holding company requires an examination of the statutory and regulation provisions that were cited above. These provisions, quoted below, are components of the Insurance Department's supervision of transactions involving a holding company system.

Please see N.Y. Ins. Law § 1501 (McKinney 2000), which contains definitions of terms used in N.Y. Ins. Law Article 15 (McKinney 2000). We also enclosed a copy of N.Y. Ins. Law § 107 (McKinney Supp. 2004), which contains definitions of terms used in the Insurance Law; however, note that for the purpose of examining Article 15, the term "Control" and similar terms are defined by Section 1501.

N.Y. Ins. Law § 1505(d)(2) (McKinney 2000) states:

(d) 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: . . .

(2) reinsurance treaties or agreements . . . .

N.Y. Ins. Law § 1505(e) (McKinney 2000) states: "The superintendent, in reviewing transactions pursuant to subsections (c) and (d) hereof, shall consider whether they comply with the standards set forth in subsections (a) and (b) hereof and whether they may adversely affect the interests of policyholders." (Emphasis added)

N.Y. Ins. Law § 1505(a) & (b) state:

(a) Transactions within a holding company system to which a controlled insurer is a party shall be subject to the following:

(1) the terms shall be fair and equitable;

(2) charges or fees for services performed shall be reasonable; and

(3) expenses incurred and payments received shall be allocated to the insurer on an equitable basis in conformity with customary insurance accounting practices consistently applied.

(b) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties.

As described below, notice of a proposed transaction pursuant to N.Y. Ins. Law § 1505(d)(2) (McKinney 2000), requires submission of a description of the essential features of the transaction including a copy of the reinsurance treaty or agreement. N.Y. Comp. Codes R. & Regs. tit. 11, § 80-1.5(a) & (b) (1991) (Subpart 80-1 of Regulation 52) states:

(a) Requests for approval of transactions pursuant to Insurance Law, section 1505(c), and notices of proposed transactions pursuant to section 1505(d), shall be accompanied by descriptions of the essential features of such transactions which are reasonably adequate to permit proper evaluation thereof by the superintendent.

(b) Such descriptions shall in all cases include at least the following: the nature and purpose of the transaction; the nature and amounts of any payments or transfers of assets between the parties, the identities of all parties to such transaction and whether any officers or directors of a party are pecuniarily interested therein, and copies of any contracts, agreements or memoranda of understanding between the parties relating to the transaction.

For further information you may contact Senior Attorney Robert Freedman at the New York City Office.