Section 87. Investment of surplus or reserve

1. Any of the surplus or
  reserve funds belonging to the state insurance fund,  by  order  of  the
  commissioners,  approved  by  the  superintendent  of  insurance, may be
  invested in the types of securities described in subdivisions one,  two,
  three,  four,  five,  six, eleven, twelve, twelve-a, thirteen, fourteen,
  fifteen,  nineteen,  twenty,  twenty-one,   twenty-one-a,   twenty-four,
  twenty-four-a,  twenty-four-b,  twenty-four-c and twenty-five of section
  two hundred thirty-five of the banking law or, up to  fifty  percent  of
  such surplus or reserve funds, in the types of securities or investments
  described  in  paragraphs two, three, eight and ten of subsection (a) of
  section one thousand four hundred four of the insurance law except  that
  up  to  ten  percent  of  the surplus and reserve funds belonging to the
  state insurance fund that may be  invested  in  the  securities  of  any
  solvent American institution or of an investment company as described in
  such  paragraphs  may  be  invested  irrespective  of the rating of such
  institution's  obligations  or  other  similar   qualitative   standards
  described  in  paragraphs  two, three, eight and ten of such subsection,
  but  shall  not  include  any  derivative   instrument   or   derivative
  transaction  or  any investment found by the superintendent of insurance
  to be against public  policy.  Any  of  the  surplus  or  reserve  funds
  belonging  to  the  state  insurance  fund,  upon  like  approval of the
  superintendent of insurance, may be loaned on the  pledge  of  any  such
  securities.  The commissioners, upon like approval of the superintendent
  of insurance, may also sell any of such securities or investments.
    2. (a) Any securities belonging to the state insurance  fund  may,  by
  order of the commissioners, approved by the superintendent of insurance,
  be  loaned  under a security loan agreement, as defined in paragraph (b)
  of this subdivision, entered into with a registered broker-dealer, or  a
  New  York  state  or  national bank or trust company, with the custodial
  bank of the state insurance fund or another person or  entity,  approved
  by  the  commissioner  of  taxation  and  finance,  which specializes in
  security loan  transactions  acting  as  the  agent  in  arranging  such
  agreement.  The  commissioners  shall  monitor  the  market value of the
  loaned securities daily. In no event shall the commissioners  allow  the
  value  of  the  collateral  posted to fall below the market value of the
  loaned securities.
    (b) For purposes of this section, "security loan agreement" shall mean
  a written contract, the  terms  of  which  have  been  approved  by  the
  commissioner  of  taxation and finance, whereby the state insurance fund
  (the lender) agrees to lend securities to a broker-dealer, bank or trust
  company described in paragraph (a) of this  subdivision  (the  borrower)
  for  a  period  not to exceed one year. However, such agreement shall be
  subject to the following limitations: (i) the  lender  must  retain  the
  right  to  collect  from the borrower all dividends, interest, premiums,
  rights, and any other distributions to which the lender would  otherwise
  have  been  entitled;  (ii)  the  lender may waive the right to vote the
  securities during the term of such  agreement;  (iii)  the  lender  must
  retain  the  right  to  terminate such agreement upon not more than five
  business days' notice; (iv) the borrower shall provide as collateral  to
  the lender cash or direct obligations of the United States of America or
  any agency or instrumentality thereof or obligations fully guaranteed by
  the  United  States  of  America that are eligible for investment by the
  state insurance fund under subdivision one  of  this  section,  provided
  that  such obligations may in no event consist of derivative securities;
  and  (v)  such  agreement  shall  provide  for  payment  of   additional
  collateral  on a daily basis, or at such time as the value of the loaned
  securities increases to agreed upon ratios.

    3. All such securities or evidences of indebtedness shall be placed in
  the hands of the commissioner of taxation and finance who shall  be  the
  custodian  thereof.  He  or she shall collect the principal and interest
  thereof, when due, and pay the same into the state insurance  fund.  The
  commissioner of taxation and finance shall pay all vouchers drawn on the
  state  insurance  fund for the making of such investments when signed by
  the chair of the commissioners,  the  executive  director  or  a  deputy
  executive  director  of  the  state insurance fund upon delivery of such
  securities or evidences of indebtedness to him or  her,  when  there  is
  attached  to  such  vouchers the approval of the state superintendent of
  insurance.