Revises the standards relating to incorporation of stock/mutual insurance companies in New York state

Summary of specific provisions

This bill would amend §1201(a)(3) of the insurance law to remove the requirement that the proposed incorporators of a New York insurance corporation must publish in a newspaper their residence address and require, instead, that they need only publish their city and state of residence. Section 1201 (a)(5)(B)(v), (vi) & (vii) of the insurance law would be amended to: reduce the minimum size of the Board of Directors for insurance corporations in New York to seven; to reduce the New York State residency requirement for insurance corporations in New York from two to one director; and to require that only the city and state of residence of the incorporators of an insur- ance corporation must be contained in the corporate charter. This bill would also amend §1202(a)(2) of the insurance law to make consistent the reduced minimum board size of seven and clarify the rules for increasing or decreasing the number of board members on insurance corporations in New York. Lastly, §1209(b) &(c) of the insurance law is being amended to authorize a minimum board size of seven for mutual insurance corpo- rations in New York and to reduce the requisite number of principal officers (inside directors) required for such corporations from the current two to one.

Justification

The requirement that the incorporators of a new insurance corporation in New York must publicize their home addresses has been a potential impediment to the formation of new companies in the state. It is understandable that these individuals would be uncomfortable with disclosing their home addresses in the newspaper and that information is not essential for the public to know. Publication of the city and state of residence would seem sufficient for this purpose.

Likewise, there seems to be no rationale for requiring that at least two of the board members must be New York state residents or that the mini- mum board size must be thirteen, especially when the average board size in corporate America is approximately ten. Many insurers in New York are now global enterprises and, given the increased demands for improved corporate governance being placed upon financial services corporations, it does not seem necessary to require that two directors must be state

residents or that they must have an overly-large board of directors. The primary consideration for selecting members of a company's Board of Directors should be to identify individuals with superior intelligence and high values who have an understanding of the business at hand, regardless of their location or size.

Existing law

Section 1201 (a)(3) and (5) of the insurance law currently require that the proposed incorporators of an insurance corporation in New York must publish their resident addresses in the newspaper and in the company charter. Sections 1201 (a)(5)(B)(v), 1202(a)(2), and 1209(b) of the insurance law require that the minimum size of insurance corpo- ration boards of directors in New York must be thirteen, unless the corporation meets a small company threshold, in which case the minimum board size will be nine. Section 1201 (a)(5)(B)(vi) of the insurance law currently requires that at least two of the members of the boards of directors of insurance corporations in New York must be New York State residents. Lastly, § 1209(b) of the insurance law requires that mutual insurance corporations in New York must have at least two principal officers (inside directors) on their Board of Directors.

Legislative history

2007-08: A8767 Referred to Insurance/S.2085-A Passed Senate.

Fiscal implications

None

Effective date

This act will take effect immediately.