Enacts the fraternal benefit society risk based capital act of 2009; establishing risk-based capital requirements applicable to fraternal benefit societies; repealer

1 Co-sponsor

• William T. Stachowski

Title of bill

An act to amend the insurance law, in relation to establishing risk-based capital requirements applicable to fraternal benefit societies and to repeal paragraph 2 of subsection (b) of section 4530 of such laws relating thereto

Purpose or general idea of bill

This bill would amend the law to make all authorized fraternal benefit societies subject to the risk-based capital ("RBC") requirements of Insurance Law §1322. Currently, a fraternal benefit society must file an RBC report only if it provides the benefits set forth in Insurance Law §4527, or makes optional investments set forth in Insurance Law §4530. Only four fraternal benefit societies are currently subject to the RBC requirements set forth in Insurance Law §1322.

Summary of provisions

Section 1 of the bill would enact the "fraternal benefit risk-based capital act of 2009".

Section 2 would amend subsection (c) of Insurance Law §4525 to make the RBC reporting requirements in Insurance Law § 1322 applicable to all authorized fraternal benefit societies.

Section 3 would amend subsection (b) of Insurance Law §4527 to delete the current RBC requirement language for authorized fraternal benefit societies that obligate these societies to provide the benefits set forth in that statute.

Section 4 would amend paragraph (2) of subsection (b) of Insurance Law §4530 to delete the current RBC requirement language for authorized fraternal benefit societies with optimal additional investment authority.

Justification

RBC is an important tool for evaluating whether an insurer's (or fraternal benefit society's) capital is sufficient to support its insurance business and operations. The RBC calculation takes into account the entity's size and the types of operational risks that it faces, including underwriting risk, credit risk and investment risk. RBC reports are used by state insurance departments to evaluate the financial condition of reporting entities and to respond to signs of weakness or deterioration by instituting regulatory requirements and corrective actions to address the specific problem.

At present, all accident and health insurers and life insurers licensed to do business in New York State - and those fraternal benefit societies that offer insurance products and have qualified for expanded or additional authority under Article 45 of the Insurance Law - are required to file RBC reports with the State Department of Insurance. In turn, depending upon the level of risk-based capital held by these companies, the Insurance Department may require them to file a remedial plan or otherwise be subject to regulatory controls over their activities to ensure their customers' policies are not at risk.

However, many fraternal benefit societies are not subject to the RBC filing requirement. The bill would amend the law to make all authorized fraternal benefit societies subject to the risk-based capital requirements of Insurance Law § 1322. This would facilitate the Insurance Department's ability to assess their capitalization levels as related to their insurance operations and to require implementation of remedial actions, if appropriate. As is the case for societies that are currently subject to the RBC reporting requirements pursuant to Insurance Law §§ 4527 and 4530, filings would be made using a form approved by the Superintendent, which may include the form and instructions developed and approved by the National Association of Insurance Commissioners specifically for fraternal benefit societies.

Prior legislative history

None.

Fiscal implications

There are no known costs to the State associated with this bill.

Effective date

This act shall take effect immediately.