in which to commence action for the forfeiture of the bond. A bill has been passed at this session of the Legislature and signed by the Governor reducing the period from three to two years. Comparatively few of these actions are commenced before the expiration of the bond, although in many cases licenses have been revoked and saloons closed up, and as the unearned premium liability runs off on October 1st, some reserve should be charged on account of the many claims of which the companies have not yet been notified. If the amount of these claims would not be in excess of the amount left in the reserve and current loss funds, already referred to, the situation could be met by deducting the amount of each company's share of these funds as an unadmitted asset. The fact is, however, that the funds have usually been less than the total amount subsequently paid on these claims. The best solution of the difficulty is to let each company have credit in assets for its share of these funds and charge an extra reserve for the unreported claims, a method similar to that adopted for the credit business. In order to ascertain what this extra reserve should be, the Department is preparing a schedule in which the companies will report the amounts paid by calendar years on the excise bonds issued in each year.

Section 9 of the agreement provides that no company, party to the agreement, shall issue excise bonds in the State of New York, except those pursuant to the terms of the agreement, or by express consent of the Executive Committee.

Respectfully submitted,

CHARLES HUGHES,

Chief Examiner

Amortization as Applied to Bonds or Other Evidences of Debt Owned by Insurance Corporations

UNDER SECTION 18 OF THE INSURANCE LAW AS AMENDED

[1311]

Extract from New York Insurance Law

§ 18. Stocks, bonds and other evidences of debt. If any domestic insurance corporation shall have invested any of its funds in or loaned any of its funds upon the stock, bonds or other evidences of debt of other corporations or of any nation, state, county, city, town, village, school district, municipality or other civil division of any State pursuant to the laws of this State, and the superintendent shall have reason to believe that such stock, bonds or other evidences of debt are not amply secured or are not yielding an income, he may direct it to report to him under oath the amount thereof, the security therefor and its market value. No stock and no bond or other evidence of debt if in default as to principal or interest, or if not amply secured, shall be valued as an asset of the corporation above its market value. All bonds or other evidences of debt held by any life insurance corporation authorized to do business in this State shall, if amply secured and if not in default as to principal or interest, be valued as follows: If purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield meantime the effective rate of interest at which the purchase was made; provided that the purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase, and provided further that the Superintendent of Insurance shall have full discretion in determining the method of calculating values according to the foregoing rule, and the values found by him in accordance with such methods shall be final and binding; provided, also, that any such corporation may return such bonds or other evidences of debt at their market value or their book value, but in no event at an aggregate value exceeding the aggregate of the values calculated according to the foregoing rule.

[1312]

Amortization as Applied to Bonds or Other Evidences

of Debt Owned by Insurance Corporations

STATE OF NEW YORK-INSURANCE DEPARTMENT

ALBANY, N. Y., November 3, 1909.

To Domestic Insurance Companies and Life Insurance Companies of Other States and Countries Doing Business in the State of New Yor

The following is in answer to many inquiries received by the Superintendent of Insurance regarding the application of amended section 18 of the Insurance Law of the State of New York providing for "amortization" of fixed term securities:

1. Companies affected. All life, fire, surety, casualty and other insurance companies, organized under the laws of New York, and all life companies of other States and countries authorized to do business in New York, must amortize their bonds returned in the annual statements showing their condition as of December 31, 1909; but any such company, other than a life company, may avail itself of the proviso quoted in the footnote.* No other company authorized to do business in New York need amortize its bonds.

2. Securities affected. The section applies to all bonds and securities" amply secured and not in default as to principal or interest" having a fixed date of maturity. As to bonds subject to call or optional redemption, see page 10 of Department pamphlet letter of July 22, 1909. The section does not apply to stocks, real estate, loans on bonds and mortgages or other investments not in

* The nature of the business done by companies other than life companies suggests to the department that,, instead of amortizing their bonds, they return them as provided in the following clause quoted from section 18, as amended, viz.:

"provided, also, that any such corporation may return such bonds or other evidences of debt at their market value or their book value, but in no event at an aggregate value exceeding the aggregate of the values calculated according to the foregoing rule."

If companies avail themselves of this suggestion, it must be made clear in the statement that the aggregate value returned does not exceed the aggre gate of amortized values.