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reported on that basis and that reported in the annual statutory statement filed with the superintendent.

§ 3. Subparagraph (A) of paragraph 1 of subsection (e) of section 1102 of the insurance law is amended to read as follows: (A) If such corporation be a stock corporation, cause an examination to be made into its affairs in accordance with the provisions of this chapter; and if it appears from the report upon such examination that the amount of capital and surplus required by law has been paid in and is possessed by the corporation in cash or in investments permitted by this chapter as minimum capital or minimum surplus to policyholder investments under section one thousand four hundred two of this chapter, the superintendent shall file such report in his office and notify the corporation thereof;

$94. Subsection (b) of section 1110 of the insurance law is amended to read as follows:

(b). Every such domestic corporation or association shall maintain admitted assets at least equal to the

greater

of (i) the sum of its reserves its outstanding agreements, calculated in accordance with section four thousand two hundred seventeen of this chapter, and a surplus of ten per centum of such reserves, or (ii) the amount of one hundred thousand dollars. In determining such reserves a deduction shall be made for all or any portion of an annuity risk which is reinsured by a life insurance company authorized to do business in this state. The required admitted assets shall be invested only in securities permitted by the provisions of subsection (f) of this section, and subsection (b) of section one thousand four hundred three of this chapter, and such assets shall be segregated as separate and distinct funds, independent of all other funds of such corporation or association, and shall not be applied to pay its debts and obligations or for any

purpose except the aforesaid annuity benefits.

§ 5. Section 1110 of the insurance law is amended by adding a new subsection (f) to read as follows:

(f)(1) For purposes of section one thousand four hundred four of this chapter, the term "institution" shall only include a corporation joint-stock association, and business trust, and the term "obligations" shall only include bonds, debentures, notes, or other evidences of indebtedness.

(2) Investments in loans secured by real property and investments in real property made pursuant to the provisions of paragraphs four

and five of subsection (a) of such section shall be permitted only to the extent that such investments are acquired or held directly by such poration or association.

(3), Foreign investments made pursuant to the provisions of paragraph six of such subsection shall only consist of the following: (A) InvestDents in Canada which are substantially of the same kinds, classes and investment grades as those eligible for investment under other provisions of such subsection. The aggregate amount of such investment's held at any time shall not exceed ten

percent

of the corporation's association's admitted assets as shown by its last statement on file with the superintendent.

(B). Investments in any foreign country, in addition to investments permitted under subparagraph (A) hereof, which are substantially of the same kinds, classes and investment grades as those eligible for investBent under other provisions of such subsection. The aggregate amount

of such investments made pursuant to this paragraph shall not exceed one percent of the corporation's or association's admitted assets shown by its last statement on file with the superintendent.

(4) Investments in equity interests made pursuant to paragraph eight of such subsection shall be limited to investments in common shares and shall not include investments in partnership interests or other equity interests.

§ 6. Paragraphs 1 and 9 of subsection (a) of section 1301 of the insurance law are amended to read as follows:

(1), Cash, including legal tender or the equivalent in any office of such' insurer or in transit under its control and the true balance of any deposit in a solvent bank [or], trust company or thrift institution.

(9) The unaccrued portion of taxes paid prior to due date on real property acquired or used pursuant to paragraph (seven] five of subsection (a) of section one thousand four hundred four paragraph

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subsection (a) of section one thousand four hundred five of this chapter, as the case may be.

§ 7. Paragraph 5 of subsection (a) of section 1302 of the insurance law is amended to read as follows: (5) Tangible personal

personal property, fixtures and printed matter except such as an insurer is permitted to hold pursuant to paragraph five of subsection (a) of section

thousand four hundred four of this chapter.

§ 7-a. Paragraph 3 of subsection (a) of section 1401 of the insurance law is renumbered paragraph 4 and a new paragraph 3 is added to read follows:

(3) "Partnership interests' when used in connection with the permissible types of investments made by any domestic insurer, other than a domestic life insurer, means, an interest as a limited partner in a limited partnership. A "limited partnership' means a partnership formed by two or

persons pursuant to the provisions of the applicable law, having as members one or more general partners and one or

limited partners. The limited partners as such' shall not be bound by the obligations of the partnership.

§ 8. Section 1402 of the insurance law is amended to read as follows:

§ 1402. Minimum capital or minimum surplus to policyholder investments. (a) Before investing its funds, in any other investments, every domestic insurer shall invest and maintain amount equal to the greater of the minimum capital required by law or the minimum surplus to policyholders required to be maintained by law for a domestic stock corporation authorized to transact the same kinds of insurance, only in investments of the types specified in this section which are not in default as to principal or interest. Investments equal in value, determined pursuant to section one thousand four hundred fourteen of this article, to such amount and of such types shall at all times be maintained free and clear from any security interest other than as impressed upon a deposit with any government within the United States for the security of all policyholders or all policyholders and creditors of the insurer or upon trusteed assets held in trust for the security of all policyholders and creditors of the insurer.

(b) Not less than sixty percent of the amount of the required minimum capital or surplus to policyholder investments shall consist of the [classes] types specified in paragraphs one and two hereof:

(1) Obligations of the United States or of any agency thereof [if] provided such agency, obligations are guaranteed as to principal and interest by the United States.

(2) Direct obligations of this state or of any county, district or municipality thereof.

(3) Direct obligations of any state of the United States.

14) [Mortgage loans] Obligations secured by first mortgage loans which meet the standards specified in [subparagraph (A) of] paragraph [six] four of subsection (a) of section one thousand four hundred four of this article [or item (i) or (iii) of subparagraph (C) of paragraph six of subsection (a) of section one thousand four hundred four of this article] on property located in this state.

$ 9. Subsection (c) of section 1403 of the insurance law, as amended by chapter 496 of the laws of 1989, is amended to read as follows:

(c) "If the requirements of section one thousand four hundred two of this article are met, any domestic insurer, other than an insurer subject to subsection (á) or (b) above, may, except as set forth below, invest its funds in, or otherwise acquire, or loan upon, only the types of investments specified in such section, this section and subsection (a) of section one thousand four hundred_four of this article (except paragraphs [ten] eight and [thirteen] ten of subsection (a) of such section); provided that any such domestic insurer may also invest its funds in, or otherwise acquire or loan upon investments permitted under sections* one thousand four hundred seven (including investments of the classes described in paragraphs (ten] eight and [thirteen] ten of subsection (a) of section one thousand four hundred four), section thousand four hundred eight of this article and article sixteen of this chapter, so long as it maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from any lien or pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal fifty percent

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of the aggregate amount of its unearned premium, loss and loss ad justbent expense reserves as shown by its last sworn statement,

annual quarterly, on file with the superintendent. If the insurer maintains cash, investments required by section one thousand four hundred two of this article and reserve investments under subsection (a) of section one thousand four hundred four of this article, free from

any lien pledge, which, when valued in accordance with the provisions of this chapter, shall at least equal the aggregate of seventy percent of its loss and loss adjustment expense reserves and fifty percent of its unearned premium reserves as shown by its last sworn statement, annual or quarterly, on file with the superintendent, then such insurer may in addition enter into the types of transactions set forth in paragraph seven of subsection (d) of this section, subject to the limitations set forth in such paragraph. The term "lien or pledge" as used in this subsection shall not include any deposit of securities or cash with any government, nor trusteed assets, held in trust for the benefit protection of all or any class of the policyholders, or policyholders and creditors, of such insurer.

10. Subparagraph (B) of paragraph 6 of subsection (d) of section 1403 of the insurance law, as added by chapter 32 of the laws of 1990, is amended to read as follows:

(B) Subject to the provisions of this subsection, nothing in this chapter shall prohibit a domestic [property/casualty] insurer, other than a domestic life insurer subject to subparagraph (A) above, from selling options to purchase securities if such options are traded securities exchange registered under the laws of the United States and, at all times during which any such option is outstanding, the insurer owns securities of the kind and in the amount that may be purchased by the option holder. The insurer may purchase any such option to offset an outstanding option previously sold by the insurer for the same kind and amount of securities.

§ 11. Paragraph 2 of subsection (e) of section 1403 of the insurance law is amended to read as follows:

(2) Except as otherwise specifically provided in this chapter, investments in subsidiaries are not subject to the provisions of this section, section one thousand four hundred four (except paragraph nine of subsection (a) thereof) or one thousand four hundred five of this article.

§ 12. The section heading and the opening paragraph of subsection (a) of section 1404 of the insurance law are amended to read as follows: [Classes] Types of reserve investments permitted for non-life insur

In addition to the investments specified in subsection (b) hereof, but excluding any investment prohibited by the provisions of paragraph one, three, four, six, eight, nine or ten of subsection (a) of section one thousand four hundred seven of this article, the reserve investments of a domestic insurer authorized to make investments under the authority of this section shall consist of the following:

§ 13. Paragraphs 1, 2 and 3 of subsection (a) of section 1404 of the insurance, law, subparagraph (D) of paragraph 2 as amended by chapter 805 of the laws of 1984, items (ii) and (iii) of subparagraph (D) of paragraph 2 as amended and item (iv) of subparagraph (D) of paragraph 2 added by chapter 344 of the laws of 1988, are amended to read as follows:

(1) Government obligations. Obligations[, ) which are not in default as to principal or interest, which are valid and legally authorized, and which are issued, assumed (or guaranteed by the United States, any state, territory or possession thereof, the District of Columbia, any county, city, town, village, municipality, district or other polítical subdivision in the United States, its states, territories or possessions or any civil division or public instrumentality of one or more of the foregoing, if, by statutory other legal requirements applicable thereto, such obligations payable, as to both principal and interest, from (i) taxes levied or by law required to be levied upon all

or all taxable income within the jurisdiction of such governmental unit, or (ii) adequate special revenues pledged otherwise appropriated or required to be provided for the purpose of such payment, excluding obligations], guaranteed or insured by:

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(C) any territory or possession of the United States or any other governmental unit in the United States, or

(D) any agency or instrumentality of any governmental unit referred to in subparagraphs (B) and (C) of this paragraph, provided that obligations to be eligible under this paragraph shall be by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but in no event shall obligations be eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements.

(2) Obligations of American institutions.

(A) Obligations which are issued[, assumed or guaranteed] by any solvent American institution [existing under the laws of the United States or of any state, district or territory thereof,] or which are assumed or guaranteed by any solvent American institution' other than an insurance company) and which are not in default as to principal or interest [and meet the requirements of subparagraph (A), (B), (C) (D) hereof] provided such obligations:

[(A)] (i) [obligations which] are adequately secured by collateral security having a market value not less than the principal amount thereof and have investment qualities and characteristics wherein the speculative elements are not predominant, or

(ii) [obligations which are secured by adequate collateral security, bear fixed interest, and are issued, assumed or guaranteed by an institution whose net earnings available for fixed charges were at least one and one-fourth times its fixed charges for each of any three, including either of the last two, fiscal years of its latest period of not less than three nor more than five fiscal years. In determining the adequacy of required collateral not more than one-third of its total value may consist of shares not meeting the requirements of paragraph three hereof.

(B) Fixed interest obligations issued, assumed or guaranteed by an institution whose net earnings available for fixed charges for its last five fiscal years averaged per year not less than one and one-half times its average annual fixed charges for such five years, and for either

of the last two years of such five years were at least one and one-half times its fixed charges for such year.

(C) Adjustment, income or other contingent interest obligations issued, assumed or guaranteed by an institution whose net earnings available for fixed charges for its last five fiscal years averaged per year at least one and one-half times the sum of its average

annual fixed charges and its average annual maximum contingent interest for such five years and for either of the last two years of such five years were at least one and one-half times the sum of its fixed charges and maximum contingent interest for such year.

(D) Fixed interest obligations issued, assumed or guaranteed by a financial institution:

(i) whose net earnings available for fixed charges for its last five fiscal years averaged per year at least one and one-fourth times its average annual fixed charges for such five fiscal years and were for each of any four of such five fiscal years, and for each of any seven of its last ten fiscal years, at least one and one-fourth times its fixed charges for such year, and whose liquid assets were at least one hundred five percent

of its liabilities at the end of its latest fiscal year covered by a regular financial statement prepared as of a date within fifteen months before the date of acquisition by the insurer, or

(ii) whose net earnings available for fixed charges averaged per year at least one and one-fourth times its average annual fixed charges for its last five fiscal years, and were for each of its last three fiscal years, at least one and one-fourth times its fixed charges for such year, and whose liquid assets were at least ninety-five percent of its liabilities at the end of its latest fiscal year covered by а regular financial statement prepared as of a date within fifteen months before such acquisition and at the end of each of

the next preceding four fiscal years, or

(iii) whose net earnings available for fixed charges for its last five fiscal years averaged per year one and ten one-hundredths times its average annual fixed charges for such five fiscal years and were for each of such five fiscal years at least equal to its fixed charges for such year, and whose liquid assets were at least one hundred five percent of its liabilities at the end of its latest fiscal year covered by

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a regular financial statement prepared of a date within fifteen months before such acquisition and at the end of each of the next preceding, four fiscal years, or

(iv) whose obligations are rated A higher (or the equivalent thereto) by a securities rating agency recognized by the superintendent, or if not so rated are similar in structure and in all material respects to other obligations of the same institution which are so rated. In this subparagraph: "Financial institution" means an institution whose net earnings (including, earnings from subsidiaries) for its last five fiscal years from the business of wholesale, retail, installment, mortgage, commercial, industrial or consumer financing, or from banking factoring, or from similar or related lines of business, averaged per year at least fifty percent of such net earnings from all lines of business for such last five fiscal years. "Liquid assets" means the sum of cash, readily marketable securities and such portion of receivables are payable on demand or within ten years in the case of item (i) hereof or twelve years in the case of items (ii) and (iii) hereof, after the date of the applicable financial statement, and minus, with respect to any such assets, applicable reserves and unearned income. "Liabilities" shall not include deferred income taxes or deferred investment tax cred its and, in the case of items (ii), and (iii) hereof, shall be reduced by the aggregate amount of debt obligations of the issuing, assuming or guaranteeing institution payable more than twelve years following the close of the applicable fiscal year, to the extent such amount does not exceed the aggregate amount of receivables payable to such institution more than twelve years, following the close of the applicable year. "Liquid assets" and "liabilities" shall be determined in reliance upon the applicable regular financial statement of the issuing, assuming or guaranteeing institution. If net earnings are determined in reliance upon a consolidated earnings statement, "liquid assets" and "liabilities" shall be determined in reliance upon consolidated financial statement after treating any minority stock interest in consolidated subsidiaries as a liability.

(E) In this section: "Obligations" shall include bonds debentures, notes or other evidences of indebtedness. "Institution" shall include corporation, a joint-stock association and a business trust. "Net earnings available for fixed charges" means net income after deducting operating and maintenance expenses, taxes other than federal, state and other income taxes, except to the extent stated below the

of consolidated subsidiaries, depreciation and depletion, but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of the issuing, assuming or guaranteeing institutions. "Fixed charges" includes interest on debt, amortization of debt discount, and rentals for leased properties, except rentals under leases having a term of one year or less or determined by the superintendent not to be a fixed charge, but, except for purposes of item (i) of subparagraph (D) hereof, interest or other cost of funds paid or crued in accordance with' generally accepted accounting principles by a bank or trust company upon any deposit, any certificate other evidence of a deposit any

federal funds transaction or contract to repurchase securities shall not be deemed fixed charge of such institution. For purposes

of item (i) of subparagraph (D) hereof interest paid by a bank or trust company upon any deposit or any certificate or other evidence of a deposit shall not be deemed a fixed charge of such institution. (F) In determining net earnings, fixed charges and contingent interest on a consolidated basis, all intercompany items and the portions of earnings allocable to minority interests in consolidated subsidiaries shall be eliminated, provision for or refund of income taxes of consolidated subsidiaries in which the parent institution owns directly or indirectly less than ninety percent of all classes of voting stock shall be deducted or added, and fixed charges shall include fixed charges and preferred dividends of consolidated subsidiaries that are not intercompany items, except that if the minority interest in the subsidiary corporation is substantial, the fixed charges and preferred dividends

may be apportioned in accordance with regulations prescribed by the superintendent.

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