Relates to increasing the aggregate cap on liabilities for life insurers under the life insurance guaranty corporation

1 Co-sponsor

• Martin J. Golden

BILL NUMBER:S6507A

Title of bill

An act to amend the insurance law and the tax law, in relation to the life insurance company guaranty corporation of New York

Purpose

This amendment to Article 77 of the insurance law (the Life Insurance Company Guaranty Corporation of New York -- "LICGC") is necessary to ensure that the LICGC will have sufficient statutory authority to fund the guaranty association benefits required in connection with the insolvency of Executive Life Insurance Company of New York (ELNY). This insolvency is expected to be declared by court order in March of 2012 and will require the imposition of assessments on life insurers in an amount greater than the current guaranty law limit of $500 million. This amendment would increase that assessment limit to $558 million and thereby provide the LICGC sufficient authority to cover the statutory obligations to ELNY beneficiaries contained in the current life insurance guaranty law.

Summary of provisions

This bill would amend paragraph (1) of subsection (e) of section 7709 of the insurance law to increase the aggregate, total authority to assess members of the Life Insurance Company Guaranty Corporation of New York (life insurance companies licensed to do business in New York) to $558 million.

This bill further makes a technical amendment to paragraph 1 of subdivision (f) of section 1511 of the tax law.

Existing law

Current law caps the total, aggregate assessment amount at $500 million.

Justification

Article 77 of the insurance law (Life Insurance Company Guaranty Corporation of New York - "LICGC") was enacted in 1985 for the purpose of providing a mechanism for the funding of protections to New York residents insured under a life insurance policy or annuity contract due to losses that they may incur because of the insolvency of the life insurer which issued such policies or contracts. Every life insurance company which is licensed to do business in New York is a member of the Corporation and is assessed upon the insolvency of a member life insurer to cover certain losses to the policy or contract holder of that insolvent insurer (up to $500,000 per policy or contract under most circumstances). The current law also caps the total, aggregate amount that life insurers may be assessed pursuant to the law at $500 million.

This bill seeks to amend Article 77 to increase the aggregate, total assessment amount by $58 million, thus making the new limit $558 million. The amendment is necessary at this time to ensure that the policy and contract holder benefits provided for under the current life insurance guaranty law can be fully funded with respect to the impending insolvency of the Executive Life Insurance Company of New York (ELNY). ELNY has been in rehabilitation under the operational

control of the New York Liquidation Bureau for over twenty years. During that time, the assets of the company have deteriorated to the extent that the total obligations to policy and contract holders that the LICGC will be required to pay once ELNY is declared insolvent by the court will exceed $500 million. Without this increase in the aggregate amount that the LICGC can assess life insurers, the limit in the current law will be exhausted before the policy and contract holder coverage required under the guaranty law can be satisfied.

Legislative history

New bill.

Fiscal implications

No current year fiscal impact. Fiscal impact in subsequent years to be determined.

Effective date

Immediately.