Relates to procurement of insurance coverage

Section 1 also relieves an excess line broker's diligent effort obligation to obtain three declinations of coverage from authorized insurers where the insured is sophisticated and meets the definition of an "exempt commercial purchaser." Falling within this category are insurance policies procured from the excess line market providing coverage to a publicly traded entity or an insured that otherwise qualifies as a large commercial risk, i.e., the aggregate annual premium for insurance carried by a commercial entity totals at least $100,000 exclusive of workers' compensation and health insurance costs and meets any of the following standards: (1) the insured's net worth is at least $25 million; (2) the insured is a for-profit business generating annual gross revenues of $50 million; (3) the insured is a not-for-profit organization or public entity with an annual budget exceeding $25 million dollars; or (4) the insured is a municipality with a population of not less than fifty thousand persons. Rounding out the circumstances in which the diligent effort standard would not apply is where a policy is renewed with the same insurer for a second or third consecutive one-year term.

Finally, Section 1 expands the authority of the Superintendent of Insurance to waive the diligent effort requirement and declare certain coverages eligible for export to the excess line market based upon the best interests of the insureds seeking coverage, the necessity for a manuscripted policy where standard forms are inadequate or unavailable, or where particular coverages are not reasonably and readily available.

Section 2 of the bill provides for an effective date of ninety days subsequent to the bill being signed into law.

Existing law

The Insurance Law currently grants the Superintendent discretion to waive the diligent effort, but in limited circumstances. Expanding the authority of the Superintendent to waive the diligent effort will confer a degree of commercial flexibility required for excess line brokers to meet New York insurance consumers' coverage needs in an efficient manner. This bill amends the Insurance Law to remediate redundancies that add expenses and unnecessary delay to the procurement of insurance from the excess line market.

Justification

The excess line market is an important segment of New York's insurance marketplace. The excess line market provides a source of additional insurance capacity and an avenue for coverage in situations involving hard-to-place risks that the licensed market cannot or will not write. This bill seeks to modernize the excess line law with tailored reforms aimed at ameliorating the burdens and costs of certain reporting requirements that are currently an unnecessary element of New York's regulatory compliance regime, but in a manner that preserves consumer protections extant in the Insurance Law. The bill's provisions eliminate, pursuant to targeted circumstances, diligent effort procedures requiring excess line brokers to obtain three declinations of coverage from authorized insurers in most cases, even where, given the commercial setting of the risk, the process of obtaining such declinations is not only unwarranted, but actually impedes the expedient effectuation of coverage, which can disrupt the business interests of the entities seeking insurance.

Legislative history

New bill.

Fiscal implications

None.

Local fiscal implications

None.

Effective date

This act shall take effect on the ninetieth day after it shall have become a law.