Parent companies of insurers doing business in New York would be required to file a "group capital calculation," or GCC, with the Superintendent of Financial Services under legislation introduced in the state Senate on May 3, 2022. The GCC requirement, which parallels efforts by the National Association of Insurance Commissioners (NAIC) across the states, would for the first time require a New York insurer to quantify needed and available capital at its group, rather than individual legal entity, level. The bill was assigned to the Senate floor calendar on May 9, 2022.
GCC has been a controversial topic since its introduction at the NAIC a few years ago, with carriers expressing concern that what started as a regulatory tool would morph into a hard requirement with regulatory teeth, i.e., penalties for perceived capital deficiencies. When the GCC and related liquidity stress test framework was added to the NAIC's Insurance Holding Company System Regulatory Act (Model Act) in 2020, it required insurers for the first time to look beyond their entity-based risk-based capital (RBC) determination and to quantify capital at the level of the holding company group. By the same token, the Model Act amendments did not prescribe any particular consequences or remedies for falling below a required threshold of capital. By contrast, under the 27-year-old RBC regime, an insurer can be subject to regulatory sanction, including receivership in extreme cases, if its entity-level capital is inadequate.
The Senate's official bill summary explains that the addition of a GCC requirement is meant to conform to the "covered agreements" between the U.S. and the EU (2017) and the U.K. (2018), respectively, on reciprocity in insurance regulation. The 60-month timeline for states to conform their laws to the EU covered agreement ends later this year. Among other things, the covered agreement contemplates generally that, in the case of an insurer domiciled in one jurisdiction whose parent is resident in another jurisdiction (where both jurisdictions are parties to the covered agreement), the insurer's jurisdiction should not impose a group capital requirement on the worldwide parent as long as the regulation of the group by the jurisdiction of the parent is sufficiently robust. The bill summary indicates that states must have a "worldwide group capital calculation in place by Nov. 7, 2022 to avoid the EU or U.K. imposing its own GCC on that group and therfore all the U.S. insurers within the group."
The New York legislation, introduced by Sen. Neil D. Breslin (D – Albany), chair of the Senate Insurance Committee, is similar to the Model Act GCC amendments of 2020 in that it introduces the GCC concept and protocols into the existing holding company regulatory framework. However, the New York bill goes further than the Model Act in certain ways. For instance, the Model Act exempts certain categories of parent companies from GCC requirements, such as holding companies located in "reciprocal" jurisdictions (for purposes of the covered agreements). The Model Act also allows the regulator to exempt others. The New York legislation would not categorically exempt any type of company from GCC requirements. The Superintendent would, however, be authorized to exempt holding companies under criteria to be issued by regulation.
The bill would
- Broaden the Superintendent's ability to share insurer
information with other officials, clarify that this might include
"trade secrets" and permit the Superintendent to identify
by regulation any persons or entities with whom she may share such
- Require a holding company that directly or indirectly controls
a New York-authorized insurer to file with the Superintendent an
annual GCC and the results of an annual "liquidity stress
test" in a form prescribed by the Superintendent
- Grant the Superintendent exemptive authority with respect to
the GCC requirement as well as the ability to permit a holding
company to file a "limited" GCC as set out by
- Prohibit any person from disseminating, in an advertisement or
similar publication, the GCC or related ratios of any insurer
- Strengthen the confidentiality provisions afforded to reports
and information submitted under Article 15 (New York's
insurance holding company laws) by providing that such materials
"shall not be subject to subpoena or discovery or admissible
in evidence in any private civil action"
- Require that expenses incurred by the Superintendent in
connection with groupwide supervision of a New York insurer (i.e.,
regulatory oversight of an "internationally active insurance
group" across multiple jurisdictions including New York) must
be borne by the New York insurer
- Empower the Superintendent to promulgate regulations
- Requiring a controlled insurer in a hazardous financial condition to post a deposit or bond for certain transactions within the holding company system
- Requiring certain related parties to be subject to the insurer's receivership proceeding
- Governing records, data, premiums and other funds of a
controlled insurer that are held by a holding company
- Impose requirements that are similar to the foregoing for Article 16 and Article 17 insurers (property/casualty and life insurers, respectively, that control one or more subsidiary companies)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.