What's happening
This bill allows insurers to count certain exchange-traded funds, especially bond ETFs, as reserve investments under New York insurance law.
Why it matters
Broadens insurers' investment options. by explicitly allowing them to count bond-focused exchange-traded funds (ETFs) as reserve investments, potentially improving liquidity and diversification in their portfolios.
Aligns insurance investment regulation with modern financial products. , reflecting the growing use and acceptance of ETFs—especially bond ETFs—which can be more transparent and easier to trade than traditional pooled investments.
Imposes safeguards and eligibility standards. by requiring that only bond ETFs with a valid designation from the National Association of Insurance Commissioners' Securities Valuation Office qualify, aiming to ensure investment quality and regulatory oversight.
Adjusts statutory investment limitations. , clarifying how these ETF holdings are treated in calculating insurers’ compliance with existing caps on equity and other reserve investments—potentially allowing for greater investment in such instruments without breaching regulatory limits on equity exposure.
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Who cares
Insurers subject to reserve investment rules
The bill would authorize qualifying bond ETF investments, exclude them from aggregate equity limits and, under section 1404, cap investment in any single qualifying bond ETF at 15 percent of admitted assets.
Bond ETF sponsors and investment companies
Their funds could qualify for insurer reserve investments if they meet the bill’s investment criteria and applicable designation requirements.
National Association of Insurance Commissioners’ Securities Valuation Office
Its designation permitting a bond ETF to be filed on Schedule D-1 would determine eligibility under the bill’s bond ETF provisions.
Headline styles
Let Insurers Invest in ETFs
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to insurance
- Referred to insurance
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
5730
2019-2020 Regular Sessions
IN SENATE
May 13, 2019
Introduced by Sen. BRESLIN -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to reserve investments for certain insurers in exchange-traded funds
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (a) of section 1401 of the insurance law is amended by adding a new paragraph 19 to read as follows:
(19) "Bond exchange-traded fund" means an exchange-traded fund registered under the federal Investment Company Act of 1940, as amended, that has a principal investment strategy of investing primarily in bonds, loans or other debt instruments.
§ 2. Paragraph 10 of subsection (a) of section 1404 of the insurance law, as added by chapter 324 of the laws of 1992, is amended to read as follows:
(10) Investment companies. (A) Securities of any investment company registered pursuant to the federal Investment Company Act of 1940, 15 U.S.C. § 802, as amended, including exchange-traded funds, if such company:
(i) invests at least ninety percent of its assets in the types of securities which qualify as a reserve investment pursuant to the provisions of paragraph one, two or three of this subsection or which invest in securities which are determined by the superintendent to be substantively similar to the types of securities set forth in such paragraphs; [or]
(ii) invests in bond exchange-traded funds, provided that such funds have received a valid designation from the Securities Valuation Office of the National Association of Insurance Commissioners such that it may be filed on the statutory long-term bond obligation Schedule D-1 as promulgated by the Securities Valuation Office; or
[(ii)] (iii) invests at least ninety percent of its assets in the types of equity interests which qualify as a reserve investment pursuant to the provisions of paragraph eight of this subsection.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD11664-01-9
S. 5730 2
(B) Investment limitations. Investments made by an insurer subject to the provisions of paragraph two of subsection (a) or subsection (b) of section one thousand four hundred three of this article shall not exceed the following limitations:
(i) in any investment company qualifying under item (i) of subparagraph (A) hereof, ten percent of such insurer's admitted assets as shown by its last statement on file with the superintendent and the aggregate amount of investment in such qualifying investment companies shall not exceed twenty-five percent of such insurer's admitted assets as shown by its last statement on file with the superintendent and the cost of such investments shall not be included when calculating the permissible aggregate value of equity interests pursuant to the provisions of subparagraph (B) of paragraph eight of this subsection; [and]
(ii) in any single bond exchange-traded fund under item (ii) of subparagraph (A) hereof, fifteen percent of such insurer's admitted assets as shown by its last statement on file with the superintendent and the cost of such investments shall not be included when calculating the permissible aggregate value of equity interests pursuant to the provisions of subparagraph (B) of paragraph eight of this subsection; and
[(ii)] (iii) in any investment company qualifying under item [(ii)] (iii) of subparagraph (A) hereof, five percent of such insurer's admitted assets as shown by its last statement on file with the superintendent and the aggregate amount of investment in such qualifying investment companies shall be included when calculating the permissible aggregate value of equity interests pursuant to the provisions of subparagraph (B) of paragraph eight of this subsection.
§ 3. Subsection (a) of section 1405 of the insurance law is amended by adding a new paragraph 9 to read as follows:
(9) Investment companies. (A) Securities of any investment company registered pursuant to the federal Investment Company Act of 1940, 15 U.S.C. § 802, as amended, including exchange-traded funds, if such company:
(i) invests at least ninety percent of its assets in the types of securities which qualify as a reserve investment pursuant to the provisions of paragraph one, two or three of this subsection or which invest in securities which are determined by the superintendent to be substantively similar to the types of securities set forth in such paragraphs;
(ii) invests in bond exchange-traded funds, provided that such funds have received a valid designation from the Securities Valuation Office of the National Association of Insurance Commissioners such that it may be filed on the statutory long-term bond obligation Schedule D-1 as promulgated by the Securities Valuation Office; or
(iii) invests at least ninety percent of its assets in the types of equity interests which qualify as a reserve investment pursuant to the provisions of paragraph eight of this subsection.
(B) Investments made pursuant to item (iii) of subparagraph (A) of this paragraph shall be included when calculating the permissible aggregate value of equity interests pursuant to this section. Investments made pursuant to items (i) and (ii) of subparagraph (A) of this paragraph shall not be included when calculating the permissible aggregate value of equity interests pursuant to this section.
§ 4. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to reserve investments for certain insurers in exchange-traded funds
Purpose
This bill intends to clarify the insurance law so that insurers' reserve investments in bond exchange traded- funds are classified as any other bond investment and any investments in equity exchange- traded funds are classified as any other equity investment.
Summary of provisions
Section 1 amends section fourteen hundred and one of the insurance law to add a definition for "Bond exchange- traded fund."
Section 2 amends section fourteen hundred and four of the insurance law to clarify that the cost of insurance companies' reserve investments in funds in which the underlying investments are fixed income investments shall not be included when calculating the permissible aggregate value of equity investments.
Sections 3 amends section fourteen hundred and five of the insurance law to permit life insurance companies to make the same reserve investments in investment companies registered pursuant to the federal Investment Company Act of 1940 as non-life insurers.
Justification
New York Insurance Law contains important distinctions between bond investment vehicles and equity investment vehicles. This bill clarifies that the cost of reserve investments in certain bond exchange-traded funds shall not be calculated in an insurer's aggregate equity invest- ments, but rather treated as other fixed income investments. This bill is consistent with the National Association of Insurance Commissioners treatment of investments in bond exchange- traded funds and eliminates ambiguity in New York's insurance law to give the insurance industry needed certainty. Bond exchange-traded funds offer an affordable and efficient mechanism for insurers to achieve portfolio diversification- which is good for the industry and for consumers.
Legislative history
This is a new bill.
Fiscal implications
None.
Effective date
Immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.