Authorizes The Life Insurance Company Guaranty Corporation to incorporate resolution facilities

Summary of specific provisions

This bill adds a new section 7719 to the insurance law to authorize the use of a "resolution facility" to facilitate the operation of an insol- vent, domestic life insurance company under the Life Insurance Company Guaranty Corporation of New York Act. This entity must be established as a type C, not-for-profit corporation to assist in disposing of the busi- ness of an insolvent, domestic life insurance company but may only be utilized for a domestic life insurance company that is currently being rehabilitated by the NY Liquidation Bureau. If the Guaranty Corporation elects to utilize a resolution facility, such facility may, in accord- ance with its plan of operation: 1) guarantee, assume or reinsure the insurance policies, funding agreements or annuity contracts of the insolvent insurer whose business is assumed by or assigned to the resol- ution facility or arrange for replacement by insurance policies, funding agreements or annuity contracts found by the liquidator of such insol- vent insurer to be substantially similar to such insurance policies, funding agreements or annuity contracts of such insolvent insurer or replacement by insurance policies, funding agreements or annuity contracts approved by a court of competent jurisdiction; and 2) other- wise exercise the powers of a domestic life insurance company, but in no case may it issue insurance policies, funding agreements or annuity contracts other than those issued in respect of the contractual obli- gations of the insolvent insurer. In addition to its certificate of incorporation and by-laws, such resolution facility formatted for the purpose of operating the estate in liquidation must adopt a plan of operation necessary or suitable to assure the fair, reasonable and equi- table administration of the assumed business. The plan of operation shall be submitted to the liquidator and shall be effective upon the written approval of such liquidator. The resolution facility must also prepare and file with the Insurance Department an annual financial report summarizing the condition of the facility, no later than August 1 of each year.

Justification

This bill is necessary to establish that the Life Insurance Company Guaranty Corporation of New York, with the approval of the liquidator of a liquidated domestic life insurance company estate, may utilize a special purpose vehicle, called a "resolution facility" to service the policyholders and manage the remaining assets of such company that has entered into liquidation. This bill is limited so as to only apply to any domestic life insurance company that is currently being rehabili- tated by the NY Liquidation Bureau pursuant to Article 74 of the insur- ance law. There is only one company that meets that description, Execu- tive Life of New York or "ELNY." The facility formed for the purpose of managing the assets and administering the obligations of ELNY would be a not-for-profit, type C corporation. The facility would function pursu- ant to a plan of operation that must be approved by the liquidator of the company and, once approved, such facility must file an annual finan- cial report summarizing the condition of the facility by no later than August I of each year.

The establishment of a special purpose vehicle to manage the assets and administer the remaining obligations of the ELNY estate is considered by those who are overseeing its liquidation, including the NY Liquidation Bureau and representatives of the Life Insurance Company Guaranty Asso- ciation of New York, to be an efficient way to unwind the estate. The bill will authorize the establishment of a NYS entity that can be used to receive the remaining assets of the company in liquidation, along with funds obligated to be paid from not only the New York Life Insur- ance Company Guaranty Association, but also the Guaranty Associations of other states. By consolidating all of these assets into one New York entity, the facility will have a bigger pool of assets to invest, which will provide more flexible investment opportunities possibly higher investment returns and more efficient administration, all for the bene- fit of policyholders.

Prior legislative history

None.

Fiscal implications

None to the State.

Effective date

This act would take effect immediately.