Reserve investments of a domestic insurer shall include shares, share certificates and share draft accounts issued by credit unions up to certain amounts

BILL NUMBER:A8557A

Title of bill

An act to amend the insurance law, in relation to including credit union shares, share certificates and share draft accounts as authorized reserve investments for non-life insurers

Purpose or general idea of bill

To authorize non-life insurers, such as property/casualty insurance companies, to purchase shares, share certificates and share draft accounts by state and federally-chartered credit unions.

Summary of provisions

Insurance Law section 1404(a) is amended by adding a new paragraph 11 to clarify that credit union shares, share certificates and share draft accounts are expressly included within the list of authorized investments for non-life insurers.

Justification

In this period of unprecedented financial turmoil when even seemingly "safe" investments such as bonds are decreasing in value, it seems incongruous to not permit non-life insurers to invest in feder- ally-backed share certificates of credit unions. Yet since credit union share certificates are considered "equity" instruments rather than debt instruments such as a bank certificate of deposit, the current Insurance Law is interpreted as not allowing investment by non-life insurers in these federally-guaranteed share certificates. Although the Insurance Department has issued an opinion disallowing such investment based on the equity/debt distinction between credit union share certificates and bank certificates of deposit, the Department in 2007 also found that an insurance agent or broker may maintain a premium account in a federal- ly-insured credit union. Although it is true that different sections of law and a different instrument are involved, the broader policy for permitting both types of investments remains the same, namely the safety and security of a federally-insured credit union. Additionally, in some upstate communities where some of these smaller insurers operate there may be a limited number of available banking services and this measure will simply afford them an additional and convenient option. This meas- ure would provide small and large insurance companies with another safe avenue for investing their precious assets, one that is guaranteed by the Federal government.

Prior legislative history

This is a new bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately after it shall have become a law.