New Jersey Senate Bill S2947

New Jersey 2022-2023 Regular Session

• Introduced: 6/29/22
• Refer: 6/29/22
• Report Pass: 11/3/22

Caption

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

Impact

This legislation modifies existing state laws to align them more closely with federal requirements, particularly for New Jersey-domiciled insurance companies that have overly stringent collateral terms. By amending the law, the bill facilitates more favorable terms for collateral offered to insurer-members by federal home loan banks, which may help stabilize these financial institutions. Notably, the bill ensures that the ability of federal home loan banks to execute collateral agreements remains intact during delinquency proceedings, potentially helping to enhance liquidity for troubled insurer-members.

Summary

S2947, introduced in New Jersey, revises the effects of delinquency and insolvency proceedings specifically for insurer-members of federal home loan banks. The bill stipulates that when a delinquency proceeding is commenced regarding an insurer-member, this action will not operate as a stay or prohibition of the federal home loan bank's rights concerning the collateral pledged by that insurer. The intent of this provision is to ensure that federal home loan banks can continue their operations without interruption, even if an insurer-member is subject to delinquency proceedings.

Contention

However, the bill's central provisions may raise concerns about the balance of power between state and federal regulations concerning the insurance industry. Critics may argue that the law provides insufficient protection for policyholders and creditors in situations where an insurer is undergoing insolvency. By preventing receivers from voiding transfers under certain conditions, there may be fears that this could prioritize the interests of banks over those of policyholders and creditors. Thus, the bill could spark discussions about the appropriate degree of federal intervention in state-level insurance regulations and the implications for consumer protections.