Bill Text: NY A10532 | 2011-2012 | General Assembly | Amended
Bill Title: Relates to derivative transactions and over the counter derivative instruments.
Spectrum: Strong Partisan Bill (Democrat 11-1)
Status: (Passed) 2012-08-17 - signed chap.398 [A10532 Detail]
Download: New_York-2011-A10532-Amended.html
S T A T E O F N E W Y O R K
________________________________________________________________________
10532--A
I N A S S E M B L Y
June 4, 2012
___________
Introduced by COMMITTEE ON RULES -- (at request of M. of A. Morelle) --
read once and referred to the Committee on Insurance -- reported and
referred to the Committee on Rules -- Rules Committee discharged, bill
amended, ordered reprinted as amended and recommitted to the Committee
on Rules
AN ACT to amend the insurance law, in relation to derivative trans-
actions and derivative instruments
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Subsection (f) of section 1410 of the insurance law, as
2 added by chapter 650 of the laws of 1998, is amended to read as follows:
3 (f)(1) The counterparty exposure under [a] AN OVER THE COUNTER deriva-
4 tive instrument entered into by an insurer authorized to engage in tran-
5 sactions pursuant to this section shall be deemed to be an obligation of
6 the institution to which the insurer is exposed to credit risk and shall
7 be included in determining compliance with any single or aggregate quan-
8 titative limitation on investments made by an insurer under this chap-
9 ter.
10 (2) Notwithstanding any single or aggregate quantitative limitation on
11 investments made by an insurer under this chapter, AN INSURER MAY ONLY
12 TRANSACT AN OVER THE COUNTER DERIVATIVE INSTRUMENT WITH:
13 (A) A QUALIFIED COUNTERPARTY; OR
14 (B) A COUNTERPARTY OTHER THAN A "QUALIFIED COUNTERPARTY" IF, AFTER
15 GIVING EFFECT TO THAT TRANSACTION, the aggregate counterparty exposure
16 OF THE INSURER under one or more OVER THE COUNTER derivative [trans-
17 actions] INSTRUMENTS to:
18 [(A) any single counterparty, other than a "qualified counterparty",
19 shall be limited to one] (I) THAT NON-QUALIFIED COUNTERPARTY DOES NOT
20 EXCEED ONE percent of [an] THE insurer's admitted assets; and
21 [(B)] (II) all counterparties, other than qualified counterparties,
22 [are limited to] DOES NOT EXCEED three percent of [an] THE insurer's
23 admitted assets.
24 (3) For purposes of this section:
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD15578-05-2
A. 10532--A 2
1 (A) a "qualified counterparty" is a ["qualified broker or dealer" or a
2 "qualified bank" or other counterparty rated AA-/Aa3 or higher by a
3 nationally recognized statistical rating organization if it is also
4 approved by the superintendent;
5 (B) a "qualified broker or dealer" means a broker or dealer that is
6 organized under the laws of a state and is registered under the Securi-
7 ties Exchange Act of 1934, 15 U.S.C. SS 78a-78kk, and has net capital in
8 excess of two hundred fifty million dollars;
9 (C) a "qualified bank" means a bank or trust company that:
10 (i) is organized and existing, or in the case of a branch or agency of
11 a foreign banking organization is licensed, under the laws of the United
12 States or any state thereof;
13 (ii) is regulated, supervised and examined by United States federal or
14 state authorities having regulatory authority over banks and trust
15 companies;
16 (iii) has assets in excess of five billion dollars;
17 (iv) has senior obligations outstanding, or has a parent corporation
18 that has senior obligations outstanding, rated AA or better (or the
19 equivalent thereto) by two independent nationally recognized statistical
20 rating organizations; and
21 (v) has a ratio of primary capital to total assets of at least five
22 and one-half percent and a ratio of total capital to total assets of at
23 least six percent; and
24 (D)] COUNTERPARTY WHICH HAS AN INVESTMENT GRADE RATING FROM AT LEAST
25 ONE NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR A DESIG-
26 NATION OF ONE FROM THE SECURITIES VALUATION OFFICE OF THE NATIONAL ASSO-
27 CIATION OF INSURANCE COMMISSIONERS, OR ANY SUCCESSOR OFFICE ESTABLISHED
28 BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, AND WITH WHICH
29 THE INSURER HAS ENTERED INTO A MASTER AGREEMENT, TOGETHER WITH A CREDIT
30 SUPPORT ANNEX OR OTHER DOCUMENTATION PROVIDING FOR THE COLLATERALIZATION
31 OF THE COUNTERPARTY'S OBLIGATIONS TO THE INSURER UNDER THE MASTER AGREE-
32 MENT, IF THAT COLLATERAL DOCUMENTATION PROVIDES FOR (I) DAILY MARGIN AND
33 COLLATERAL SETTLEMENT, IN CASH OR INVESTMENT GRADE SECURITIES, BETWEEN
34 THE PARTIES, (II) A MINIMUM TRANSFER AMOUNT OF NO MORE THAN ONE MILLION
35 DOLLARS, AND (III) A REQUIREMENT THAT COLLATERAL BE PROVIDED BY THE
36 COUNTERPARTY FROM THE FIRST DOLLAR OF EXPOSURE, SUBJECT TO THE MINIMUM
37 TRANSFER AMOUNT;
38 (B) "aggregate counterparty exposure" means the sum of: (i) the aggre-
39 gate statement value of options, swaptions, caps, floors, and warrants
40 purchased; and (ii) the aggregate potential exposure of collars, swaps,
41 forwards and futures entered into[.];
42 (C) "OVER THE COUNTER DERIVATIVE INSTRUMENT" MEANS A DERIVATIVE
43 INSTRUMENT WHICH IS AUTHORIZED UNDER THIS CHAPTER OTHER THAN A DERIVA-
44 TIVE INSTRUMENT (I) CLEARED THROUGH A UNITED STATES OR FOREIGN DERIVA-
45 TIVES CLEARINGHOUSE, OR (II) TRADED ON OR THROUGH A UNITED STATES OR
46 FOREIGN EXCHANGE PROVIDING DERIVATIVES CLEARING SERVICES;
47 (D) "DERIVATIVES CLEARINGHOUSE" MEANS A DERIVATIVES CLEARING ORGANIZA-
48 TION REGISTERED WITH THE COMMODITY FUTURES TRADING COMMISSION OR THE
49 SECURITIES AND EXCHANGE COMMISSION OR, IF NOT SO REGISTERED, IS A
50 FOREIGN CLEARINGHOUSE REGULATED, SUPERVISED AND EXAMINED BY A REGULATORY
51 AUTHORITY IN A FOREIGN JURISDICTION APPROVED BY THE SUPERINTENDENT;
52 (E) "MASTER AGREEMENT" MEANS A WRITTEN MASTER AGREEMENT RELATING TO
53 DERIVATIVES TRANSACTIONS THAT PROVIDES FOR NETTING OF PAYMENTS OWED BY
54 THE RESPECTIVE PARTIES, AND THE DOMICILIARY JURISDICTION OF THE COUNTER-
55 PARTY IS EITHER WITHIN THE UNITED STATES OR IF NOT WITHIN THE UNITED
A. 10532--A 3
1 STATES, WITHIN A JURISDICTION APPROVED BY THE SUPERINTENDENT AS ELIGIBLE
2 FOR NETTING; AND
3 (F) "MINIMUM TRANSFER AMOUNT" MEANS AN AMOUNT BELOW WHICH A DAILY
4 MARGIN AND COLLATERAL SETTLEMENT IS NOT REQUIRED.
5 S 2. This act shall take effect immediately; provided, however that
6 the documentation requirements set forth in items (i), (ii) and (iii) of
7 subparagraph (A) of paragraph (3) of subsection (f) of section 1410 of
8 the insurance law as added by section one of this act shall take effect
9 on January 1, 2013.
