The Office of General Counsel issued the following opinion on December 9, 2003, representing the position of the New York State Insurance Department.
Re: Company-Owned Life Insurance as an Admitted Asset
Questions Presented:
1. Does the New York Insurance Law place any limitation on the total amount of Company-Owned Life Insurance ("COLI") coverage that may be issued to (i.e., owned by) an employer?
2. If an insurer owns COLI, what amount of such COLI may be treated as an admitted asset of the insurer?
Conclusions:
1. Yes. N.Y. Ins. Law § 3205(d)(2) (McKinney Supp. 2003) limits the total amount of employee benefit plan COLI coverage that may be issued to an employer.
2. The amount of COLI (i.e., keyperson COLI and employee benefit plan COLI) that may be treated as an admitted asset is limited to the current cash value of such COLI. N.Y. Comp. Codes R. & Regs. tit. 11, §§ 83.2, 83.3 (2003) (Regulation 172) (which adopt the Statements of Statutory Accounting Principles of the Accounting Practices and Procedures Manual, as published by the National Association of Insurance Commissioners).
Facts:
No further facts are provided.
Analysis:
The Insurance Law recognizes two forms of Company-Owned Life Insurance (COLI): "keyperson COLI," which is issued for the purpose of indemnifying employers against monetary losses resulting from the untimely death of an insured employee, N.Y. Ins. Law § 3205(a)(1)(B) (McKinney Supp. 2003); and "employee benefit plan COLI," which is issued to employers for the purpose of funding broad-based employee benefit plans, N.Y. Ins. Law § 3205(d) (McKinney Supp. 2003).
The total amount of employee benefit plan COLI coverage that may be issued to an employer (or trust) is limited by N.Y. Ins. Law § 3205(d)(2) (McKinney Supp. 2003), which states that:
(2) At the time coverage is issued, the total amount of insurance coverage issued to date to the employer or trust under authority of this subsection shall not exceed the costs of employee and/or retiree benefits already incurred in connection with such employee benefit plan since the earliest date coverage on an employee or retiree was issued under this subsection, plus the projected future cost of such benefits as established by the employer.
An insurer may own keyperson COLI or employee benefit plan COLI, or both, as admitted assets pursuant to N.Y. Ins. Law § 1301(a)(22), 2002 N.Y. Laws 599, § 2, which provides the following:
(a) In determining the financial condition of a domestic or foreign insurer or the United States branch of an alien insurer for the purposes of this chapter, there may be allowed as admitted assets of such insurer, unless otherwise specifically provided in this chapter, only the following assets owned by such insurer:
. . . .
(22) Other assets, not inconsistent with the foregoing provisions, deemed by the superintendent available for the payment of losses and claims, at values determined by him.
However, please note that the amount of COLI that may be treated as an admitted asset is limited to its cash value. N.Y. Comp. Codes R. & Regs. tit. 11, §§ 83.2, 83.3 (2003) (Regulation 172) (which adopt the Statements of Statutory Accounting Principles of the Accounting Practices and Procedures Manual, as published by the National Association of Insurance Commissioners).
For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.