BILL NUMBER: S5347A
SPONSOR: COMRIE
 
TITLE OF BILL:
An act to amend the insurance law, in relation to certain voidable
transfers affecting a federal home loan bank
 
PURPOSE:
This bill amends the Insurance Law to ensure that if a proceeding under
Article 74 is commenced with respect to an insurer member of a Federal
Home Loan Bank, the proceeding shall not operate as a stay, injunction,
or prohibition of exercise by a FHLB of its rights regarding collateral
pledged by that insurer member.
This bill will ensure a Federal Home Loan Bank will be able to offer New
York-domiciled insurance company members loans with more favorable
collateral terms. Currently, due to differences between federal and
state law, federal home loan banks require more stringent and burdensome
collateral terms from New York-domiciled insurance companies, even if
the credit worthiness of a New York-domiciled insurance company is supe-
rior to other members of the bank.
 
SUMMARY OF PROVISIONS:
This bill would add a new subdivision e (1) - (5) to Section 7425 of the
Insurance Law. A receiver should not void the transfer of money or prop-
erty in connection with an FHLB security agreement before the formal
commencement of a formal proceeding unless transfer was made with intent
to defraud the member or a member's receiver. This bill allows a receiv-
er access to stable, on-demand, reliable FHLB funding in the event of
market disruption.
 
JUSTIFICATION:
Federal Home Loan Banks are government sponsored entities created by
Congress during the Great Depression to provide liquidity and promote
stability. Federal Home Loan Banks provide advances (i.e., secured
loans) to insurance companies, commercial banks and credit unions. In
addition, pursuant to federal law, a Federal Home Loan Bank must dedi-
cate 10% of its net income to support low-income housing projects. The
Federal Home Loan Bank is, on an annual basis, the biggest provider of
private affordable housing funding in New York.
New York-domiciled insurance companies, among other financial insti-
tutions such as banks and credit unions are eligible to become members
of the FHLB in order to reliably borrow on a fully secured basis at
low-cost. New York law governing FHLB lending to insurance companies,
however, differs from federal banking law governing FHLB (and Federal
Reserve Bank) lending to depository institutions. This legislation will
align New York Insurance Law with Federal law applicable to FDIC insured
commercial banks and NCUA insured credit unions, by amending the Insur-
ance Law to ensure that if a proceeding under Article 74 is commenced
with respect to an insurer member of a Federal Home Loan Bank, the
proceeding shall not operate as a stay, injunction, or prohibition of
exercise by a FHLB of its rights regarding collateral pledged by that
insurer-member.
This bill will also ensure the FHLB will be able to offer healthy insur-
ance company members loans with more favorable collateral terms. Due to
differences between federal and current State law, federal home loan
banks require more stringent and burdensome collateral terms from New
York-domiciled insurance companies, even if the credit worthiness of a
New York-domiciled insurance company is superior to other members of the
bank. Healthy and troubled insurance companies will likely not have
access to needed liquidity to help stabilize them in market disruptions
while insurance companies in other states where the bill has passed,
will have access to that liquidity.
Similar legislation following the National Association of Insurance
Commissioners (NAIC) guidelines has passed in 32 states (including New
Jersey and Massachusetts within the past two years) Puerto Rico and the
U.S. Virgin Islands. The legislation was also endorsed by the National
Council of Insurance Legislators (NCOIL) in July 2023
 
LEGISLATIVE HISTORY:
2019-20 A.8040 (Cymbrowitz) Referred to Insurance/S.7329 Breslin
2021-22 A3573 (Cymbrowitz) Passed Assembly/S.4282 Breslin
2023-24: A4925 - Passed Assembly/S.6827 Breslin
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S5347: 7425 insurance law, 7419 insurance law, 7409 insurance law
S5347A: 7425 insurance law, 7419 insurance law, 7409 insurance law