Relates to domestic excess line insurance companies

Summary of provisions

This bill amends the insurance law by adding a new article 58 to create domestic excess line insurance companies. Specifically, the bill authorizes the superintendent to provide a certificate of eligibility permitting domestic excess line insurers to enter insurance transactions through excess line licensees, procuring excess line insurance, provide independently procured insurance to the extent permitted by law and conduct an excess line/surplus line business in New York and any other state which grants the insurer eligibility. The bill would allow a New York-domiciled excess line insurer to be treated as non-admitted in New York for the purposes of writing excess/surplus lines insurance policies in New York. Further, the legislation defines a domestic excess 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 (a/k/a the surplus lines market) is an important segment of New Yorks 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 Historically, an insurance group would have to establish two excess/surplus line insurers. The first would be prepared to underwrite excess/surplus line business in 49 other states, but could not do so in its state of incorporation where it is licensed. This required a second excess/surplus line instruct to be incorporated in a different state, so it could underwrite excess/surplus risks in the domiciliary state of the originally created excess/surplus line insurer Six states (Illinois, Arkansas. Delaware, New Hampshire, New Jersey and Oklahoma) have enacted laws to permit an insurance company to incorporate under their laws for the purpose of underwriting excess/ surplus line risks through excess/surplus line brokers in all fifty states.

Insurers which underwrite an excess and surplus line multistate risk under the excess and surplus line laws of the insureds 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 by applying only the excess or surplus lines law to an insurer which operates as such in all 50 states.

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 efficiencies, 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

S.6808 of 2012

Fiscal implications

None.

Effective date

120 days after it shall have become a law