Relates to the redomestication of insurance companies

Summary of provisions

This bill would amend §7120 to the Insurance Law to more closely conform New York law governing the redomestication of insurance companies to the NAIC Redomestication Model Bill. Specifically, this bill would include provisions governing the redomestication of a domestic insurance company to another state upon the approval of the Superintendent of Insurance. In order to be eligible for redomestication, the insurer would have to demonstrate to the satisfaction of the Superintendent that the redomes- tication would further the regulatory efficiency of the holding company system which controls the insurer. The redomesticating insurer would also be required to demonstrate that, upon redomestication, it will be in compliance with all applicable requirements of the Insurance Law. In addition, the redomesticating insurer would be required to demonstrate to the satisfaction of the Superintendent that the redomestication will not result in a reduction in the number of employees employed by the company in New York State or a reduction in the number of offices or facilities located in New York State.

Upon redomestication, the transferring company would be authorized to transact business in New York State as a foreign company, provided that the insurer meets all of the requirements for operation as a foreign company.

Justification

This bill will improve the efficiency of the regulation and oversight of affiliated groups of insurance companies domiciled in multiple states and will help to preserve the continuation of state regulation of insur- ance. The need for this bill became apparent as insurance regulators in various states attempted to sort out the problems resulting from the downfall of AIG. Due to the complexity of AIG's corporate structure and the fact that AIG had affiliated insurance companies domiciled in nine- teen different states, the NAIC had to form a task force of insurance commissioners from nineteen states to effectively monitor AIG's finan- cial condition. This cumbersome arrangement made it difficult to unravel the problems resulting from the downfall of AIG and ensure appropriate regulation of AIG's insurance entities going forward.

The AIG experience led state regulators to examine the corporate struc- tures of insurance companies within their jurisdictions and they have

found that other insurance companies have similarly complex corporate structures. Some large insurance companies have subsidiaries domiciled in multiple states because as they have grown, they have acquired subsidiaries domiciled in different states. Accordingly, some insurance regulators have urged insurers to simplify their corporate structures so as to increase regulatory effectiveness and efficiency. The Massachu- setts Insurance Commissioner, in particular, has urged holding companies domiciled in Massachusetts to endeavor to reduce the complexity of their corporate structures by reducing the number of states in which subsid- iaries are domiciled.

Forty-one states have adopted a version of the NAIC Redomestication Model Bill, which provides for a redomestication process which is effi- cient, effective and not unduly cumbersome. Unfortunately, however, New York State has not adopted this law and under current New York law, the redomestication process is a very difficult, time consuming, confusing and cumbersome process. Accordingly, insurers seeking to comply with the wishes of their home state regulator to simplify their corporate struc- ture have run into a roadblock if they have a subsidiary domiciled in New York. This bill would remove this roadblock by enacting substantial parts of the NAIC Redomestication Model Bill in New York.

By adopting substantial parts of the NAIC Redomestication Model Bill, this legislation will also further uniformity among states relative to the regulation of insurance companies and would make the current state based system for the regulation of insurance companies more efficient. As the threat of the federal regulation of the insurance industry continues to loom, it is important that states demonstrate their ability to work together and adopt uniform laws where such laws would provide for the more effective regulation of insurance companies. The enactment of this legislation would further this goal.

It is important to note that this bill would only allow an insurance company to redomesticate if the company demonstrates to the satisfaction of the Superintendent of Insurance that the redomestication will increase regulatory efficiency and will not result in a loss of jobs in New York state or a closure of New York offices or facilities, thereby ensuring that this legislation will not have a negative impact on employment in New York State.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

Immediately.