Relates to the incorporation of co-operative property/casualty insurance keeping of records by such companies

BILL NUMBER:S2874B

Title of bill

An act to amend the insurance law, in relation to incorporation of co-operative property/casualty insurance companies and the keeping of records by such companies

Purpose

Co-operative property/casualty insurance companies (co-ops) are exclusively domiciled here in New York. They write business that tends not to be offered by the larger national insurers and regional non-co-op insurance companies. This legislation is aimed at streamlining the corporate governing structure and operations of these co-ops to ensure that they continue to have the tools necessary to thrive and provide their unique insurance services in New York.

Summary of provisions

Section 1. Amends section 6603(a) (5) (E) and (F) of the insurance law to streamline the minimum number of directors required for a co-operative property/casualty insurance company's board of directors from nine to seven. In addition, this proposed amendment to the law would clarify that a majority of the directors must be citizens and residents of the United States and that not less than one director of the cooperative property/casualty insurance corporation shall be a New York resident.

Section 2. Provides for an immediate effective date.

Justification

Cooperative insurance companies are the major insurance writers of coverage for farm owners, agricultural-related small businesses, seasonal businesses, small diners/taverns, as well as small contractors' liability insurance. Co-ops also provide employment for over 2,200 professional and clerical staff in New York State, with the vast bulk of these jobs spread throughout Upstate New York. In addition, New York cooperative insurance companies provide necessary property/casualty coverage to over 70,000 New York State small businesses.

Co-ops are required by current law to always maintain a minimum of nine directors. Given that Chapter 293 of 2009 modified the minimum number of directors required for New York domestic mutual property/casualty insurance companies who are not cooperatives from thirteen to seven, it only seems fair and equitable to permit the much smaller co-operative companies to have the same number of directors. This reduction in the board size will help coops because many small co-ops are having difficulty attracting directors.

In order to provide parity in legal treatment between non-cooperative property/casualty insurance companies' board of directors and cooperatives' boards, this bill uses Chapter 293's residency requirements for non-cooperative insurers and applies them to the requirements for a cooperative director. More specifically, the

legislation stipulates that a majority of a cooperative's directors must be United States citizens and residents with at least one of the directors being a New York State resident. The current law, which requires all directors to be residents of the co-op, can be problematic. The reality is that, as directors age, many are moving to warmer climates on a part-time basis, yet they are still desirous of serving as directors. Again, the problem of attracting and retaining a sufficient number of qualified, intelligent directors for these small co-ops is exacerbated by the current law's overly stringent residency requirement.

Legislative history

Passed Senate in 2011.

Fiscal implications

None.

Effective date

Immediately.