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The Office of General Counsel issued the following opinion on September 29, 2004, representing the position of the New York Sate Insurance Department.

Re: Deposits with a National Chartered Bank Located Outside New York

Question Presented:

May an out of state U.S. Bank, a national chartered bank headquartered in Minnesota, be custodian of book-entry stock securities and bonds for a New York domestic insurer that wished to participate in the certificateless society programs of the Federal Reserve System and of the Depository Trust Company?


Yes. The Insurance Law has no prohibition against the contemplated business activity involving the custody of an insurer’s investment portfolio 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).


The U.S. Bank is a national chartered bank headquartered in Minnesota. It wishes to act as a custodian through its out of state branch for a New York domestic insurer to hold its stocks and bonds in book-entry form, in certificateless society programs of the Federal Reserve System and of the Depository Trust Company.


There is no Insurance Law prohibition against a national chartered bank located outside New York holding these types of securities and bonds in book-entry form with the Federal Reserve System and the Depository Trust Company, as custodian for a New York domestic insurer. There are affidavits required for use as part of Circular Letter 1 (1975), as modified by Circular Letter 13 (1976) and as amended by Circular Letter 2 (1977), at least one of which must be completed by the custodian bank. Such affidavits should be modified, if necessary, by the deponent to reflect the factual circumstances. There must also 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. 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 statement. For convenience, I have enclosed the relevant circular letters, guidelines, and interrogatories.

For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.

Department of Financial Services


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