REPORT ON EXAMINATION
OF
AXA ART INSURANCE CORPORATION
AS OF
DECEMBER 31, 2017
DATE OF REPORT DECEMBER 28, 2018
EXAMINER MARIBEL C. NUNEZ, C.P.C.U
TABLE OF CONTENTS
ITEM PAGE NO.
1. Scope of examination 2
2. Description of Company 3
A. Corporate governance 3
B.
Territory and plan of operation
4
C. Reinsurance ceded 6
D.
Holding company system
7
E. Significant operating ratios 11
3. Financial statements 12
A. Balance sheet 12
B.
Statement of income
13
C. Capital and surplus account 14
4. Losses and loss adjustment expenses 15
5. Subsequent events 15
6. Compliance with prior report on examination 16
7. Summary of comments and recommendations 17
One State Street, New York, NY 10004-1511 │ (212) 480-6400│ www.dfs.ny.gov
ANDREW M. CUOMO
Governor
LINDA A. LACEWELL
Acting Superintendent
April 1, 2019
Honorable Linda A. Lacewell
Acting Superintendent
New York State Department of Financial Services
Albany, New York 12257
Madam:
Pursuant to the requirements of the New York Insurance Law, and in compliance with the instructions
contained in Appointment Number 31791 dated July 5, 2018, attached hereto, I have made an examination
into the condition and affairs of AXA Art Insurance Corporation as of December 31, 2017, and submit the
following report thereon.
Wherever the designation “the Company” appears herein without qualification, it should be understood to
indicate AXA Art Insurance Corporation.
Wherever the term “Department” appears herein without qualification, it should be understood to mean the
New York State Department of Financial Services.
The examination was conducted at the Department.
2
1. SCOPE OF EXAMINATION
The Department has performed an examination of the Company, a multi-state insurer. The previous
examination was conducted as of December 31, 2012. This examination covered the five-year period from
January 1, 2013 through December 31, 2017. Transactions occurring subsequent to this period were
reviewed where deemed appropriate by the examiner.
This examination was conducted in accordance with the National Association of Insurance
Commissioners (“NAIC”) Financial Condition Examiners Handbook (“Handbook”), which requires that
we plan and perform the examination to evaluate the financial condition of the Company by obtaining
information about the Company including corporate governance, assessing the principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation, management’s compliance with New York Laws, statutory accounting principles, and annual
statement instructions.
All financially significant accounts and activities of the Company were considered in accordance
with the risk-focused examination process. The Examiner relied upon audit work performed by the
Company’s independent public accountants.
This examination report includes, but is not limited to, the following:
Company history
Management and control
Territory and plan of operation
Holding company description
Reinsurance
Financial statement presentation
Loss review and analysis
Significant subsequent events
Summary of recommendations
This report on examination is confined to financial statements and comments on those matters that
involve departures from laws, regulations or rules, or that are deemed to require explanation or description.
3
2. DESCRIPTION OF COMPANY
AXA Art Insurance Corporation was incorporated under the laws of the State of New York on
September 17, 1986, as Nordstern Insurance Company of America. It became licensed on February 9, 1987
and commenced business the same date. The Department approved the present name on April 2, 2001.
On January 1, 2014, the Company effectively ceased the writing of insurance business and sold the
right to renew all its U.S. policies to AXA Art Americas Corporation, a related party, for $12.7 million.
A. Corporate Governance
Pursuant to the Company’s charter and by-laws, management of the Company is vested in a board
of directors consisting of not less than thirteen nor more than twenty-one members. The board meets four
times during each calendar year. At December 31, 2017, the board of directors was comprised of the
following thirteen members:
Name and Residence
Principal Business Affiliation
Roland Augustine
New York, New York
President,
Luhring Augustine Gallery
Christiane Fischer
New York, New York
President and Chief Executive Officer,
AXA Art Insurance Corporation and
AXA Art Americas Corporation
Janine Wolf Hill
New York, New York
Director,
Fellowship Affairs and Studies Strategic
Planning of the Council on Foreign Relations
Alexander Kemper
Kansas City, Missouri
Chairman,
The Collectors Fund and
the Board of Pollenware
Kai Kuklinski
Cologne, Germany
Chief Executive Officer,
AXA Art Versicherung AG
Ana Carmen Longobardi
Sao Paulo, Brazil
Creative Vice President and Partner,
Talent Communication
Aaron Milrad
Toronto, Canada
Counsel,
Dentons Canada, LLP
4
Name and Residence
Principal Business Affiliation
Ernest Riefenhauser
New York, New York
Chief Financial Officer and Treasurer,
AXA Art Americas Corporation and
AXA Art Insurance Corporation
Alan Schwartz
Toronto, Canada
Managing Director,
Terraplan Landscape Architects and
Owner of Lonsdale Holdings
Dorit Straus
New York, New York
Independent Consultant and advocate for artists
and the arts
Marc Mitchell Tract
New York, New York
Partner,
Katten Muchin Rosenman, LLP
Dr. Alexander Wiebe
Cologne, Germany
Chief Financial Officer and Board Member,
AXA Art Versicherung AG
Anthony Williams
New York, New York
Partner,
Dentons US LLP
As of December 31, 2017, the principal officers of the Company were as follows:
Name
Title
Christiane Fischer
President & Chief Executive Officer
Ernest Riefenhauser Chief Financial Officer & Treasurer
Gary Albert Kerr
Corporate Secretary
Colin Quinn Vice President, Director of Claims Management
Note: All directors and officers, except for Ernest Riefenhauser, resigned as of July 13, 2018 as result of
the acquisition of control.
B. Territory and Plan of Operation
As of December 31, 2017, the Company was licensed to write business in all fifty states and the
District of Columbia.
As of the examination date, the Company was authorized to transact the kinds of insurance as
defined in the following numbered paragraphs of Section 1113(a) of the New York Insurance Law:
5
Paragraph Line of Business
4
Fire
5 Miscellaneous property
6
Water damage
7 Burglary and theft
8
Glass
9 Boiler and machinery
10
Elevator
12 Collision
14
Property damage liability
15 Workers' compensation and employers' liability
16
Fidelity and surety
19 Motor vehicle and aircraft physical damage
20
Marine and inland marine
21 Marine protection and indemnity
Based upon the lines of business for which the Company is licensed and the Company’s current
capital structure, and pursuant to the requirements of Articles 13 and 41 of the New York Insurance Law,
the Company is required to maintain a minimum surplus to policyholders in the amount of $3,200,000.
The following schedule shows the direct and assumed premiums written by the Company for the
period under examination:
Calendar
Year
Direct
Premiums
Assumed
Premiums
Total Gross
Premiums
2013 $45,058,072 $3,277,147 $48,335,219
2014 2,575,909 2,287,597 4,863,506
2015 2,501,487 (257,373) 2,244,114
2016 2,596,091 (3,007) 2,593,084
2017 614,228 0 614,228
The Company specialized in writing inland marine and related lines of business, with an emphasis
on personal and commercial fine art coverage and other insurance floaters. The majority of the Company’s
business was generated through brokers.
6
C. Reinsurance Ceded
At December 31, 2017, the Company had the following ceded reinsurance program in effect:
Type of Contract
Treaties with AXA Art Versicherung AG
100% Unauthorized
Cession
Terrorism Excess of Loss
2 layers
$385,500,000 excess of $14,500,000 ultimate net loss,
each loss occurrence.
Reporter Excess of Loss
$385,500,000 excess of $14,500,000 each risk and
$348,000,000 excess of $14,500,000 for warehouse
and storage risks.
1
st
Lower Excess of Loss Layer
Lower CAT Excess of Loss Layer
$12,000,000 excess of $2,500,000 each risk, each loss
occurrence.
$7,250,000 excess of $14,500,000 each loss
occurrence. The Lower CAT-XL only operates if two
or more risks are involved in one loss occurrence,
regardless of the number or type of policies.
Per Occurrence Excess of Loss
4 layers
$113,250,000 excess of $21,750,000 ultimate net loss,
each occurrence. 2
nd
layer excludes Flood UK; 3
rd
layer excludes European windstorm and Flood UK; 4
th
layer covers natural Catastrophe, but excludes bush
fires, California Earthquake, European windstorm,
and UK Flood.
Non-Art Excess of Loss
3 layers
$27,550,000 excess of $1,450,000 ultimate net loss,
each risk.
Jewelry Excess of Loss $14,000,000 excess of $500,000 ultimate net loss,
each risk.
Warehouse Excess of Loss
$125,000,000 excess of $362,500,000 all risks and
$125,000,000 excess of $400,000,000 for terrorism
ultimate net loss, each risk, each loss occurrence.
Quota-Share
100% Authorized
60% quota share of all business written.
7
The majority of the Company’s premiums written was ceded to an authorized reinsurer AXA
Insurance Company, an affiliated entity, via a 60% quota share agreement effective January 1, 2008. The
Company has received approval to do so, pursuant to the provisions of Section 1308(e)(1) of the New York
Insurance law.
Reinsurance agreements with affiliates were reviewed for compliance with Article 15 of the New
York Insurance Law. It was noted that all affiliated reinsurance agreements were filed with the Department
pursuant to the provisions of Section 1505(d)(2) of the New York Insurance Law.
All ceded reinsurance agreements in effect as of the examination date were reviewed and found to
contain the required clauses, including an insolvency clause meeting the requirements of Section 1308 of
the New York Insurance Law.
Examination review found that the Schedule F data reported by the Company in its filed annual
statement accurately reflected its reinsurance transactions. Examination review indicated that the Company
was not a party to any finite reinsurance agreements. All ceded reinsurance agreements were accounted for
utilizing reinsurance accounting as set forth in SSAP No. 62R.
During the period under examination, the Company did not commute any reinsurance agreements.
D. Holding Company System
The Company is a member of the AXA Art Versicherung AG Group. The Company is a wholly-
owned subsidiary of AXA Art Holdings, Inc., a New York corporation, which is ultimately controlled by
AXA SA, a publicly-traded company based in France.
A review of the Holding Company Registration Statements filed with this Department indicated that
such filings were complete and were filed in a timely manner pursuant to Article 15 of the New York
Insurance Law and Department Regulation 52.
8
The following is an abridged chart of the holding company system at December 31, 2017:
AXA SA
(France)
100%
AXA Konzern AG
(Germany)
100%
AXA Art Versicherung, AG
(Germany)
100%
AXA Art Holdings, Inc.
(New York)
100%
AXA Art
Insurance
Corporation
(New York)
Fine Art Services
International (US),
Inc.
(Delaware)
AXA Art Americas
Corporation
AXA Equitable Holdings, Inc.
(New York)
100%
AXA America Corporate
Solutions, Inc.
(New York)
100%
Coliseum Reinsurance Company
(New York)
100%
AXA Delaware LLC.
(New York)
100%
AXA Insurance Company
(New York)
9
At December 31, 2017, the Company was party to the following agreements with other members of
its holding company system:
Service and Expense Allocation Agreement
Effective September 1, 2005, the Company entered into a Service and Expense Allocation
Agreement with Fine Art Services International (US), Inc. (“Fine Art”). Pursuant to the agreement, the
Company has agreed to provide Fine Art with facilities, equipment, office and other space as it may require
for the conduct of its business and operations. Fine Art has agreed to provide to the Company, personnel to
provide services including, but not limited to, claims handling, consulting, clerical, administrative and
management information systems. The agreement and amendment were filed with the Department pursuant
to Section 1505(d) of the New York Insurance Law.
Effective July 1, 2009, this agreement was amended to reflect a new location of its leased premises
to the Company’s current address. This amendment was non-objected to by the Department on May 5, 2009.
Cost Allocation Agreement
Effective December 1, 2003, the Company entered into a cost allocation agreement with its parent,
AXA Art Holding, Inc. (“AAH”), whereby AAH provides services to the Company including equipment,
furniture and fixtures necessary for the operations of the Company. This agreement was filed with the
Department pursuant to Section 1505(d) of the New York Insurance Law and was non-objected to on
January 5, 2004.
Service Agreement
Effective December 1, 2003, the Company entered into a service agreement with AXA Art
Versicherung AG (“AAV”), whereby AAV provides personnel and services to the Company with respect
to the following matters: investment management, knowledge management, information technology,
corporate control and audit, legal, tax, corporate finance, marketing and communication, reinsurance,
accumulation control and underwriting guidelines. This agreement was filed with the Department pursuant
to Section 1505(d) of the New York Insurance Law and was non-objected to on January 5, 2004.
10
Tax Allocation Agreement
Effective October 1, 1994, the Company filed a consolidated federal income tax return with AXA
Art Holdings, Inc., and Fine Art Services International (U.S.), Inc. This agreement was filed with the
Department pursuant to Section 1505 of the New York Insurance Law and was non-objected to on April
13, 1995.
Administrative Service Agreement
Effective January 1, 2013, the Company and AXA Art Americas entered into an administrative
service agreement, whereby AXA Art Americas would provide the following services: claims handling,
premium collection, underwriting, policyholder services, producer management, investments, accounting
and financial, information and technology, and legal and government relations services. This agreement
was filed with the Department pursuant to Section 1505(d) of the New York Insurance Law and was non-
objected to on January 2, 2013.
Sale and Purchase of Rights to Renew Agreement
Effective January 1, 2014, the company and AXA Art Americas Corporation entered into a sale and
purchase of rights to renew agreement, whereby the Company sold the rights to renew its books of business
to AXA Art Americas for a consideration of $12.7 million. This agreement was filed with the Department
pursuant to Section 1505(d) of the New York Insurance Law and was approved on April 8, 2013.
Assumption Reinsurance Agreement
On April 2, 2017, the Company transferred via an assumption reinsurance and business transfer
agreement the entirety of its Canadian book of business to its affiliate, AXA Insurance Company (“AIC”),
thereby ceasing to actively write insurance business.
Effective December 31, 2017, the Company entered into an assumption reinsurance agreement with
its affiliate AIC, whereby, the Company ceded to AIC 100% of its business written in the State of New
York. As consideration, the Company transferred an amount equal to all gross outstanding loss reserves,
loss adjustment expense reserves, unearned premium reserves, and IBNR reserves relating to the policies
as of the effective date of the agreement.
11
E. Significant Ratios
The Company’s operating ratios, computed as of December 31, 2017, fall within the benchmark
ranges set forth in the Insurance Regulatory Information System of the National Association of Insurance
Commissioners, except for the two-year overall operating ratio, which is outside the benchmark range as a
result of the Company’s ceasing to write insurance business and transferring 100% of its losses to AIC.
Operating Ratios Result
Net premiums written to surplus as regards policyholders
0%
Liabilities to liquid assets (cash and invested assets less investments in affiliates) 15%
Two-year overall operating 999%
Underwriting Ratios
The underwriting ratios presented below are on an earned/incurred basis and encompass the five-
year period covered by this examination:
Amounts
Ratio
Losses and loss adjustment expenses incurred $ 6,105,831 27.79%
Other underwriting expenses incurred 14,277,924 64.99
Net underwriting
gain
1,586,930
7.22
Premiums earned
$
21,970,685
100.00%
The Company’s reported risk based capital score (RBC) was 15,205.80% at 12/31/2017. The RBC
is a measure of the minimum amount of capital appropriate for a reporting entity to support its overall
business operations in consideration of its size and risk profile. An RBC of 200 or below can result in
regulatory action.
There were no financial adjustments in this report that impacted the company’s RBC score.
12
3. FINANCIAL STATEMENTS
A. Balance Sheet
The following shows the assets, liabilities and surplus as regards policyholders as of December 31,
2017 as reported by the Company:
Assets
Assets
Assets Not
Admitted
Net Admitted
Assets
Bonds $ 9,103,355 $ 0 $ 9,103,355
Cash, cash equivalents and short
-
term investments
280,216
280,216
Receivables for securities 3,000,000 3,000,000
Investment income due and accrued
48,050
48,050
Current federal and foreign income tax recoverable
and
interest thereon
198,114 198,114
Receivables from parent, subsidiaries and affiliates 104,503 0
104,503
Total
a
ssets
$
12,734,238
$
0
$
12,734,238
Liabilities, surplus and other funds
Liabilities
Other expenses (excluding taxes, licenses and fees) $ 31,673
Net deferred tax liability
1,882,296
Total
liabilities
$
1,913,969
Surplus and Other Funds
Common capital stock
$
3,000,001
Gross paid in and contributed surplus 4,931,809
Unassigned funds (surplus)
$
2,888,459
Surplus as regards policyholders
10,820,269
Total
liabilities, surplus and other funds
$
12,734,238
13
B. Statement of Income
The net income for the examination period as reported by the Company was $15,706,980 as detailed
below:
Underwriting Income
Premiums earned
$21,970,685
Deductions:
Losses and loss adjustment expenses incurred $ 6,105,831
Other underwriting expenses incurred
14,277,924
Total underwriting deductions
20,383,755
Net underwriting gain or (loss)
$
1,586,930
Investment Income
Net investment income earned
$
1,593,579
Net realized capital gain 14,591,578
Net investment gain or (loss)
$
16,185,157
Other Income
Net gain or (loss) from agents' or premium balances charged off
$
301,571
Realized foreign exchange gain/loss (1,261,804)
Gain on sale of reinsurance recoverable
126,145
Total other income
(834,088)
Net income before federal
and foreign income taxes
$
16,937,999
Federal and foreign income taxes incurred
1,231,019
Net
i
ncome
$
15,706,980
14
C. Capital and Surplus
Surplus as regards policyholders decreased $19,061,961 during the five-year examination period
January 1, 2013 through December 31, 2017 as reported by the Company, detailed as follows:
Surplus as regards policyholders
as
report
ed
by the Company as of December 31, 2012
$29,882,230
Gains in
Losses in
Surplus Surplus
Net income
$15,706,980
Net unrealized capital gains or (losses)
2,021,986
Change in net unrealized foreign exchange capital
gain (loss)
111,754
Change in net deferred income tax
1,224,987
Change in non-admitted assets 2,245,218
Cumulative effect of changes in accounting
principles
1,225,878
Surplus adjustments paid in
4,002,990
Dividends to stockholders
27,408,703
Change in status of funded pension
991,097
Correction of errors
551,209
Correction of deferred tax item
3,810,113
Duplication of deferred tax non
-
admitted change
__________
1,200,028
Total gains and losses $20,719,491 $39,781,452
Net increase (decrease) in surplus
$
(19,061,961)
Surplus as regards policyholders
as
report
ed by
the Company as of December 31, 2017
$ 10,820,269
No adjustments were made to surplus as a result of this examination
At December 31, 2017, capital paid in was $3,000,001 consisting of 2,332 Shares of $1,286.45 par
value per share common stock. Gross paid in and contributed surplus decreased by $4,002,990 during the
examination period, as follows:
15
Year Description
Amount
2012 Beginning gross paid in and contributed surplus
$8,934,800
2016 Stock redemption * $(4,002,990)
Net decrease to paid in and contributed surplus (4,002,990)
2017 Ending gross paid in and contributed surplus $4,931,810
* In 2016, the Company entered into a stock redemption plan with its parent, AXA Art Holdings, Inc.,
pursuant to which, the Company reduced the number of its outstanding shares from 3,000 to 2,332 and
increased the par value per share from $1,000 to $1,286.45. The consideration paid by the Company was
$4,002,990.
4. LOSSES AND LOSS ADJUSTMENT EXPENSES
The examination liability for the captioned items of $0 is the same as reported by the Company as
of December 31, 2017.
On December 31, 2017, the Company transferred via 100% assumption reinsurance agreement all
gross outstanding loss reserves, loss adjustment expense reserves, unearned premium reserves, and IBNR
reserves relating to the policies as of the effective date of the agreement.
5. SUBSEQUENT EVENTS
On July 13, 2018, the Department approved the acquisition of control of the Company by Munich
Re Digital Partners US Holding Corporation (“MRDP”), a Delaware domiciled company whereby, MRDP
acquired 100% of the issued and outstanding common stock of the Company for a consideration of an
amount equal to the sum of:
a) The statutory capital and surplus of the domestic insurer; plus
b) An amount equal to the product of $150,000 multiplied by the number of states or jurisdictions in
which the Company holds an active license; plus
c) An amount equal to the product of $125,000 multiplied by the number of states or jurisdictions in
which the Company holds a restricted license.
The purchase price of $21 million was paid in cash and was funded via a capital contribution to
MRDP from its parent company.
16
As result of the acquisition of control, on July 31, 2018, the Company amended the Restated
Assumption Reinsurance Agreement whereby the Company transferred 100% of its business written in New
York to AXA Insurance Company; at the same time, it entered into and Administrative Services Agreement,
whereby AIC provides the Company administrative services and claim processing of policies.
6. COMPLIANCE WITH PRIOR REPORT ON EXAMINATION
The prior report on examination contained nine recommendations as follows (page numbers refer
to the prior report):
ITEM
PAGE NO.
A. Reinsurance
i. It was recommended that the Company execute a written agreement
before entering into any reinsurance arrangement.
7
ii. It was recommended that the Company comply with Section 1505(b) of
the New York Insurance Law.
7
iii. It was recommended that going forward, the Company adhere to the
provisions of Section 1505(d)(2) of the New York Insurance Law and
notify the Superintendent in writing before entering into any agreements
with affiliates.
9
B. Accounts and Records
i. It was recommended that the Company exercise greater care in the
preparation of its annual statement and file such in compliance with the
NAIC Annual Statement Instructions.
14
ii. It was recommended that the Company’s applications for insurance
contain the language required by Section 403(d) of the New York
Insurance Law.
14
iii. It was recommended that the Company keep records of the methods used
in allocating intercompany expenses and make these records available to
the examination team in accordance with the Department Regulation 30
Part 107.4(e).
14
17
iv. It was recommended that the Company report its salaries and payroll
taxes independently as prescribed in Department Regulation 30, Part
105.9.
15
v. It was recommended that the Company maintains its records as required
by Department Regulation 152(b)(7).
16
C.
Risk Management and Internal Control
i.
It was recommended that the Company put certain control procedures in
place and fully document each risk mitigation strategy in order for
examiners to evaluate the existence of controls in place at the Company
and to determine whether the control procedures are operating as
expected, applied throughout the entire period of reliance, and performed
on a timely basis.
16
Note: The prior report comments are no longer applicable due to the sale of the Company.
7. SUMMARY OF COMMENTS AND RECOMMENDATIONS
This report contains no comments or recommendations.
Respectfully submitted,
/S/
Maribel C. Nuñez, CPCU
Associate Insurance Examiner
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
Maribel C. Nuñez, being duly sworn, deposes and says that the foregoing report, subscribed by her, is true
to the best of her knowledge and belief.
/S/
Maribel C. Nuñez, CPCU
Subscribed and sworn to before me
this day of , 2019.
