Exempts large commercial insureds from certain rate and policy form requirements

BILL NUMBER:S7220A

Title of bill

An act to amend the insurance law, in relation to exempting large commercial insureds from certain rate and policy form requirements

Purpose or general idea of bill

To exempt from certain regulatory requirements policies written in New York for large, commercial insureds and special risks.

Summary of specific provisions

The bill amends Article 63 of the Insurance Law to foster the expansion of a specialty licensed insurance market to attract to New York more of the large commercial insurance transactions that, under current law, bypass New York for other more favorable jurisdictions in this country and other nations.

SECTION 6301 - SPECIAL RISKS This section currently permits qualified insurers to write insurance without filing policy forms and rates. As amended, this section would also permit qualified insurers to write authorized kinds of insurance exempt from compliance with policy form and rate restrictions whenever the policy is written for a "Large commercial insured" as defined in the next section. Several exceptions to this exemption are specified.

SECTION 6302 - SPECIAL LICENSE DEFINITIONS This section contains the definition of "large commercial insured". Pursuant to this definition, policyholders qualify as "large commercial insureds" if they meet one of the listed criteria including net worth, gross revenues, gross assets, number of employees and other comparable indicators of ability to withstand risk of loss. Standards relevant to for profit and not-for-profit entities, respectively, are defined. In addition, all policyholders must have a risk manager that is licensed by the Insurance Department.

SECTION 6303 - LIMITATIONS This section limits the special license privileges of Article 63 to only those insurers that underwrite, transact or service qualifying business from an office within this state. This section also requires a risk to produce in excess of $25,000 in annual premium in order to qualify for the exemption from rate and form requirements. This section also requires disclosure to policyholders that the commercial policy may not comply with, and is not subject to, every provision of the Insurance Law.

Justification

Commercial policyholders do not require the same level of regulatory protection as is warranted for personal lines insurance. Commercial policyholders often have risk management professionals on staff and possess a higher level of knowledge and sophistication relative to insurance options. Rather, commercial insureds need flexibility so that policies can be tailored to their particular needs. Commercial insureds also need to be able to respond rapidly to competitive

forces, economic conditions and the needs of their customers. The current system in New York can hinder the ability of insurers to respond to the needs of their commercial customers, which has led many commercial insureds to utilize alternate insurance mechanisms to satisfy their insurance needs. These alternate insurance mechanisms are often unregulated or subject to minimal regulation, leaving commercial insureds utilizing such mechanisms without the protection of the guarantee funds, adequate solvency regulation, or other valuable regulatory protections.

The attached legislation would modernize the regulation of commercial insurance in New York and would help to make New York a more attractive place for insurers to do business. This legislation would also facilitate operations and reduce costs for commercial policyholders because it would promote competition among carriers which would drive down premiums. In addition, this legislation would allow the Insurance Department to focus its resources on solvency and personal lines regulation which will, in turn, speed approvals in those areas.

Prior legislative history

New Bill.

Fiscal implications

None.

Effective date

January 1, in the year succeeding the year in which this bill shall have become a law.