What's happening
This bill excludes certain regulatory compliance expenses from the management expense cap for domestic mutual property and casualty insurance companies.
Why it matters
Eases pressure on insurers’ operating budgets. By excluding specific regulatory compliance expenses from the management expense cap, domestic mutual property and casualty insurers can spend more on meeting state and federal regulatory requirements without risking violations of expense limits.
Supports compliance with evolving regulations. The bill specifically references compliance costs for cybersecurity (NYCRR Part 500) and other regulatory filings, acknowledging the growing complexity and expense of staying compliant in the insurance sector, especially as regulations expand.
Potential for improved policyholder protection. Allowing insurers to allocate necessary resources for regulatory compliance (like cybersecurity) without penalizing their management expense ratios may help ensure robust consumer protections and operational soundness.
May enhance insurer financial stability. By removing these compliance costs from the cap, companies have more flexibility to respond to regulatory changes without needing to cut critical business functions or risk financial penalties, potentially contributing to a stronger, more resilient insurance market.
Albany, before your first meeting.
Every bill that moved yesterday, summarized in a sentence and ranked by impact. The Albany Scorecard follows on Sundays.
Free. Unsubscribe in one click. Want alerts on specific bills? Create an account.
Who cares
Headline styles
Update Insurance Expense Rules
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.444
- Referred to insurance
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
7540
IN SENATE
January 22, 2018
Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to enhancing the financial condition of domestic mutual property and casualty insurance companies
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (a) of section 4110 of the insurance law, as amended by chapter 1 of the laws of 2015, is amended to read as follows:
(a) No domestic mutual property/casualty insurance company licensed to write a kind of insurance specified in paragraph seven, eight, nine, ten, eleven, thirteen, fourteen, fifteen, sixteen or seventeen of subsection (a) of section one thousand one hundred thirteen of this chapter shall expend in any one calendar year for management expenses a greater amount than thirty percent of the sum of its net premium income and seventy-five percent of its investment income for such year; provided that any insurer whose principal line of business is medical malpractice liability insurance or any insurer who is the subject of a proceeding pursuant to article seventy-four of this chapter shall not expend in any one calendar year for management expenses, a greater amount than thirty percent of its net premium income for such year. Management expenses shall be held to include all expenses of the company except expenses incurred in the investigation, adjustment and settlement of claims, taxes, fees and expenses of examination, expenses incurred in complying with subsection (b) of section three hundred seven of this chapter, subsection (g) of section four thousand one hundred seventeen of this article and part five hundred of title twenty-three of the New York Codes, Rules and Regulations, and taxes, repairs and expenses on real estate. In applying the provisions of this section the net premium income of, and expenses of, boiler and machinery insurance or elevator insurance shall not be included. In the event expenses incurred in making a new system upgrade result in this subsection's management expenses limit being exceeded, then the insurer shall inform the superintendent sixty days in advance of the expense limit being exceeded.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14038-02-8
S. 7540 2
Subject to approval by the superintendent, the limit shall be temporarily raised to the amount necessary to encompass the aforestated new system upgrade, provided that in no event shall the limit be raised more than five percentage points and shall not be in effect for more than three years, and provided further that an insurer may submit to the superintendent, for the superintendent's prior approval, a written request to temporarily raise the limit for up to an additional three years, for a total of no more than six years. An insurer shall submit such written request to the superintendent at least sixty days but not more than one hundred twenty days before the expiration of the initial period during which the limit was raised. The insurer shall not increase premiums solely as a result of the management expenses cap limit being exceeded. For purposes of this subsection, a new system upgrade is defined as the acquisition of electronic data processing apparatus and related equipment constituting a data processing, record keeping or accounting system and operating and non-operating software.
§ 2. Subsection (b) of section 6613 of the insurance law, as amended by chapter 284 of the laws of 1989, is amended to read as follows:
(b) Management expenses shall include all the expenses of such company, except expenses incurred in the investigation, adjustment and settlement of claims, taxes, fees, expenses of examination, expenses incurred in complying with subsection (b) of section three hundred seven of this chapter, subsection (g) of section four thousand one hundred seventeen of this chapter and part five hundred of title twenty-three of the New York Codes, Rules and Regulations, and taxes, repairs, and expenses on real estate.
§ 3. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to enhancing the financial condition of domestic mutual property and casu- alty insurance companies
Purpose
This bill would provide for parity between the treatment of taxes and regulatory compliance expenses in the law governing management expense caps for domestic mutual property and casualty insurers and cooperative insurers.
Summary of provisions
Section 1. Amends subsection (a) of section 4110 of the Insurance Law to add as an expense that is not included within the definition of manage- ment expenses for domestic mutual property and casualty insurance compa- nies the expenses incurred in complying with the laws requiring an insurer to obtain an independent certified public accountant's opinion on the insurer's financial statement, the mandate to obtain an independ- ent qualified actuary's Statement of Actuarial Opinion, and compliance with the cybersecurity regulation.
Read the full memo (769 words)
Section 2. Amends subsection (b) of section 6613 of the Insurance Law to add as an expense that is not included within the definition of manage- ment expenses for cooperative property and casualty insurance companies the expenses incurred in complying with the laws requiring an insurer to obtain an independent certified public accountant's opinion on the insurer's financial statement, the mandate to obtain an independent qualified actuary's Statement of Actuarial Opinion, and compliance with the cybersecurity regulation.
Section 3. The bill shall take effect immediately.
Justification
Domestic mutual property and casualty insurance companies are important drivers of the New York state economy, employing well over 1,500 New Yorkers. In addition, they provide important property and casualty coverage to numerous New York businesses and individuals as well as businesses and individuals in other states. Another group of New York domestic property and casualty insurance companies, cooperatives, are also serving a vital role in the New York property and casualty insur- ance market. Cooperatives are the major insurance writers of farm owners' coverage and agricultural-related small businesses, small contractors' liability insurance, seasonal businesses, as well as small diners and taverns. 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. Furthermore, New York cooperative insurance companies provide necessary property and casualty coverage to over 70,000 New York State small businesses.
Both domestic mutual property and casualty insurers and cooperatives are subject to numerous costly mandates that divert scarce resources away from their primary function to offer essential property and casualty insurance coverage to New Yorkers and New York businesses. Three of these mandates are fees paid to an independent certified public account- ant to render an opinion on the insurer's financial statement, fees paid to an independent actuary for rendering the statement of actuarial opin- ion, and the expenses of complying with the financial services cyberse- curity regulation contained in 23 NYCRR Part 500. Since the management expense cap for these companies already excludes items such as taxes and the fees and expenses of the examination all domestics must undergo. every 3 to 5 years, this legislation would merely add three similar expenses as those that should be excluded from calculating the manage- ment expense cap.
Another factor supporting this legislation is the reality that all of these companies pay almost 1 percent of their premium in Financial Services Law section 206 assessment, with over 50 percent of the expenses paid for from this assessment not going to pay for the operat- ing expenses of the New York Department of Financial Services as the law originally intended but rather is annually diverted to other state agen- cies. By freeing up the ability of these insurers to increase investment of their capital, they can maximize their services to customers and hire more New Yorkers.
These compliance costs are especially harming the smaller cooperatives, who have been covering thousands of homeowners, renters, small busi- nesses and farms in New York for decades and, in many cases, for over a century. Unfortunately, over the last few decades some have had to close up shop or be acquired by other insurers, leading to less competition in the insurance markets of rural and underserved areas of Upstate New York. Failing to recognize these costs in the current management expense cap state laws may result in the market options shrinking considerably with the policyholders very possibly facing price increases due to the lack of options.
In sum, this bill is needed to ensure a stable, competitive and vibrant property and casualty insurance market in New York, a market that will benefit New Yorkers.
Legislative history
New Bill.
Fiscal implications
None.
Effective date
Immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.