The Office of General Counsel issued the following informal opinion on November 27, 2001, representing the position of the New York State Insurance Department.

Re: N.Y. Ins. Law § 1405 (McKinney 2000) - Life Insurer Investment in Real Estate

Question Presented:

Are there any New York State Insurance Department statutes or regulations that would prohibit or restrict the ability of a New York life insurer to invest in a luxury residential real estate property?


Such an investment would be authorized pursuant to N.Y. Ins. Law § 1405(a)(4) (McKinney 2000). The same statute establishes quantitative limitations on the insurer's ability to make such investments.


Prior to 1946, domestic insurers lacked broad authority to acquire real property as an investment. Chapter 33 of the Laws of 1909 added N.Y. Ins. Law § 20 (recodified as § 81 by Chapter 882 of the Laws of 1939), providing the basic authority for the making of reserve investments by all domestic insurers, including both property/ casualty and life insurers. Pursuant to Section 20 real estate investments were limited to company-used buildings and real estate acquired through foreclosure or voluntary deed. Chapter 658 of the Laws of 1922 added a new Section 20-a to the Insurance Law, giving foreign and domestic life insurers authority to build apartments, tenements or other dwelling houses, but put a ceiling on the average net rental value per room. The materials in support of the legislation make clear that the ceiling was intended to insure that such housing would be for persons of low and moderate income. See New York State Insurance Department Diary of Insurance Legislation (1922). The statute included a "sunset" clause providing that it would to be effective only so long as the legislature certified (by other legislation) that an "emergency in housing conditions" existed. The statute was still in effect as of 1938.

Chapter 25 of the Laws of 1938 added a new Section 20-b to the Insurance law, entitled "Temporary additional powers as to investments in real property for low rental housing in certain cities of the state". The statute was only applicable for cities having a population of 300,000 or more, which in effect made it applicable only to New York City.

Section 20-b was recodified as Section 84 of the Insurance Law in 1939. Chapter 577 of the Laws of 1941 amended Section 84, extending the authority to allow a life insurer to invest in low income housing built within 15 miles of any city of 100,000 or more (this made Albany, Utica, Syracuse and Yonkers eligible). See New York State Insurance Department Diary of Insurance Legislation (1941).

Chapter 507 of the Laws of 1946 first gave domestic insurers broad authority to acquire real property as an investment for income, adding a new paragraph (h) to Section 81(7) of the Insurance Law. The statute included a limitation on such investment to not more then 3% of the insurer's admitted assets, with no more then .25% of admitted assets to be invested in any single property. See New York State Insurance Department Diary of Insurance Legislation (1946).

Chapter 557 of the Laws of 1946 further extended life insurers authority to invest in housing. It eliminated the "sunset" provision from Section 84 and broadened the permissible range of projects that could be invested in by a life insurer. The geographical limitation was removed and insurers were given authority to "acquire" such projects, whereas previously they were only authorized to build them. Section 81 was amended by adding a new paragraph 81(7)(i) authorizing investment in properties acquired pursuant to the Redevelopment Companies Law (Chapter 243 of the Laws of 1943). In addition, a new subsection 81(9) was added to extend investment authority to include certain housing developed under the laws of states other than New York. See New York State Insurance Department Diary of Insurance Legislation (1946).

Chapter 567 of the Laws of 1983 added a new Section 81-a to the Insurance Law, governing reserve investments of domestic life insurers, making Section 81 inapplicable to them. The authority that had formerly been granted domestic life insurers by section 81(7)(h) was placed in a new section § 81-a(d) and was broadened by increasing the percentage limits of admitted assets that an insurer could invest in real estate, both overall and with respect to any one project. N.Y. Ins. Law § 81-a(d)(current version at § 1405(a)(4)(McKinney 2000)). Section 84 was repealed and the provision granting authority for investment in low-income housing was incorporated in the new section 81-a(h)(4) ("the basket provision"))(current version at § 1405(d)(McKinney 2000). See New York State Insurance Department Diary of Insurance Legislation (1983).

Chapter 367 of the Laws of 1984 recodified Section 81-a as Section 1405 of the present Insurance Law. The present N.Y. Ins. Law § 1405(a)(4)(McKinney 2000) establishes the requirements for life insurers making real estate investments, including ceilings on the percentages of assets permitted to be placed in such investments. The statute goes on to provide that the ceiling on investment in real property for the production of income may be increased if the insurer makes such investments in certain types of enterprises, including the development of housing in New York State for families and persons of low income. N.Y. Ins. Law § 1405(d)(McKinney 2000).

With regard to the July 1952 edition of Architectural Forum article, I can only surmise that the statement concerning a prohibition on domestic life insurers investment in the building of high-rent structures was an error, although it would have been accurate before the 1946 amendments to the Insurance Law.

For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.