New Jersey Assembly Bill A1746

New Jersey 2022-2023 Regular Session

• Introduced: 1/11/22
• Refer: 1/11/22
• Report Pass: 10/13/22
• Engrossed: 11/21/22
• Enrolled: 5/22/23
• Chaptered: 11/20/23
• Passed: 11/20/23

Caption

Revises effects of delinquency and insolvency proceedings against insurer-members of federal home loan banks.

Impact

The legislation introduces several provisions regarding the handling of collateral and financial dealings between insurers and federal home loan banks during insolvency procedures. For instance, it restricts a receiver's ability to void transfers made under federal home loan bank security agreements unless specific conditions are met. These adjustments aim to align state laws with federal regulations, thereby improving the terms under which federal home loan banks offer collateral to New Jersey-domiciled insurance members, which has been a concern particularly given the more stringent collateral requirements imposed by federal regulations compared to other states.

Summary

A1746 revises the effects of delinquency and insolvency proceedings specifically as they pertain to insurer-members of federal home loan banks. The bill's primary aim is to ensure that the initiation of a delinquency proceeding does not impede a federal home loan bank's rights concerning collateral pledged by the insurer-member. This is crucial for maintaining liquidity and operational stability for insurers that may experience financial difficulties, especially during insolvency events.

Contention

One point of contention surrounding A1746 is the balance it seeks to maintain between state and federal oversight in financial proceedings for insurers. Critics may argue that while the bill enhances operational capabilities for federally chartered banks within New Jersey, it simultaneously limits the authority of state receivers in managing distressed insurance companies, potentially leading to preferential treatment for federal entities over local regulations. The bill could raise questions about the autonomy of state-level regulations when federal interests are involved, which may provoke debate among legislators and stakeholders in the insurance industry.