Relates to domestic excess line insurance companies

Summary of provisions

This bill amends insurance law by adding a new article 58 to create domestic excess line insurance companies. Specif- ically, the bill authorizes the superintendent to provide a certificate of eligibility permitting domestic excess line insurers to enter insur- ance transactions through excess line licensees, procuring excess line insurance, provide independently procured insurance to the extent permitted by law and conduct an excess line and/or surplus line business in any other state which grants the insurer eligibility. The bill would allow a New York-domiciled insurer to be treated as non-admitted in New York for the purposes of writing surplus lines policies in New York. Further, the legislation defines a domestic lines insurance company and provides that a domestic excess line insurance company is deemed a non- admitted insurer for the purposes of the Dodd Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203.

Existing law

The insurance law currently does not provide for the formation and operation of a domestic excess line insurance company within New York State.

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 situ- ations involving hard-to-place risks that the licensed market cannot or will not write. Historically, an insurance group would have two surplus line insurers. The first would underwrite excess and surplus business in 49 states, but could not do so in its state of incorporation where it is licensed. This required a second surplus line insurer to be incorporated in a different state, so it could underwrite excess and surplus risk in the on other state where the other insurer could not. Six states (Illi- nois, Arkansas, Delaware, New Hampshire, New Jersey and Oklahoma) have enacted laws to permit an insurance company to incorporate an insurer under their laws for the purposes of underwriting excess and surplus line risks through excess and surplus line brokers.

Under current law, excess line admitted carriers are not permitted to write coverage on the New York portion of a multistate surplus line policy. It then becomes necessary for such company to obtain that portion of coverage from another insurer through a separate policy. domiciled outside New York State, solely to write surplus lines business in New York.

Further, insurer which underwrite an excess and surplus line multistate risk under the excess and surplus line laws of the insurers home state,

but which has risk exposures in a state where the insurer is licensed, have exposure that a court located where the insurer is licensed will not apply the excess and surplus law, but may apply the law relating to licensed insurers. The bill if enacted would avoid inconsistent court interpretations which occasionally apply the law. which applies only to licensed insurers to a policy issued as an excess line policy.

In enacting this legislation New York would maintain a competitive edge and join the six other states which now authorize such incorporations. Domestic excess line insurer legislation would create operational cost savings and efficiencies for such insurers and permit these insurers to operate exclusively as excess and surplus lines. In addition to effi- ciencies, reductions in cost and better service for policyholders, allowing a New York domestic insurer to offer surplus lines coverage in all fifty states, including its state of domicile, would spur economic growth in the New York marketplace by helping to attract new businesses and jobs to New York and prevent the movement of businesses and jobs away from New York.

Legislative history

New bill.

Fiscal implications

None.

Effective date

120 days after it shall have become a law.