The New Jersey Senate passed legislation sponsored by Senator Steven Oroho that would increase financial safeguards for state domiciled insurance companies.

Sen. Steven Oroho’s legislation that would increase financial safeguards for state domiciled insurance companies was passed by the New Jersey Senate. (Pixabay)

“At a time when banks and insurance companies are facing steep economic challenges, we must find ways to maintain economic resiliency,” said Oroho (R-24). “By closely aligning state laws with federal regulations we can foster greater financial stability and safeguard the integrity of security agreements made between federal home loan banks and their member insurance companies. This legislation would not only benefit policyholders, but it would also ensure greater protection of our financial system.”

Under current state law, a delinquent insurance company that is a member of a federal home loan bank can have their transfers of money and property canceled or invalidated when the company enters receivership.

Senator Oroho’s bill, S-2947, substituted by A-1746, aligns New Jersey State law more closely with federal regulations by restricting the ability of a receiver from voiding or suspending transactions arising from a federal home loan bank security agreement. The bill clarifies that a receiver would have the ability to void transfers of money or property in cases where the transactions were fraudulent or made with the intention of harming or defrauding the federal home loan bank.

Under the bill, federal home loan banks would be required to work with appointed receivers to establish a plan to help stabilize the delinquent insurance company.

Additionally, the changes proposed in this bill would only impact insurance companies that are members of the Federal Home Loan Bank of New York.

“Aligning state laws with federal regulations will also allow insurer-members of federal home loan banks to borrow money on more favorable terms,” Oroho added. “This bill will improve the stabilization of troubled insurance companies and promote greater opportunities for insurer-members to thrive.”