Relates to the duties of excess line brokers

BILL NUMBER:S2348

Title of bill

An act to amend the insurance law, in relation to the duties of excess line brokers

Purpose

To permit excess line brokers to rely on the Excess Line Association of New York ("ELANY") for certain services it provides in complying with the insurance law

Summary of Provisions:

Section one of the bill will permit excess line brokers to rely on the financial analysis and insurer reviews conducted by ELANY by providing a presumption that the excess line broker has used due care in selecting a financially secure insurer when the insurer is listed by ELANY.

Section 2 improves the efficiency of broker operations by removing unnecessary reporting data elements requirements.

Section 3 requires declinations to be acquired at least once every three years. Section 4 provides for 90 day effective date to allow for programming changes.

Justification

The Excess Line Association of New York ("ELANY") just completed 25 years of operation in 2013 ELANY is a statutory not-for-profit organization established under the New York Insurance Law. Since 1989 ELANY has been conducting rigorous financial reviews and oversight of non-admitted markets, it maintains information database for reporting to regulators and to assist members in tax reports, and reviews documents for compliance. This legislation would recognizes the function of ELANY by incorporating reliance upon ELANY as part of a brokers duty of care.

The legislation also removes onerous paperwork on brokers and excess line brokers. Currently brokers must provide 21 data elements as part of the diligent search requirement. No other state requires these elements. This legislation would streamline the reporting requirements, but would require information to be held by the broker. These data elements must be recorded and set forth in an affidavit in most excess line transactions. This is time consuming and inefficient and the data is not analyzed or used. Eliminating the requirement to report this information in an affidavit and permitting it to be maintained in a broker file will save substantial time and reduce broker operating costs. Additionally, the annual declination process would be changed to requiring declinations every three years. Markets often change slowly, and there are already built in incentives to keep business in the admitted market The changes in the legislation would help streamline the process, remove unnecessary burdens on the insurance broker and excess line broker, and improve the business climate in New York.

Legislative history

S.7551 of 2014.

Fiscal implications

None.

Effective date

90 days