Exempts large commercial insureds from certain rate and policy form requirements.
BILL NUMBER: S7220
TITLE OF BILL : An act to amend the insurance law, in relation to exempting large commercial insureds from certain rate and policy form requirements
PURPOSE OR GENERAL IDEA OF BILL : To exempt from certain regulatory requirements policies written in New York for large, commercial insureds and special risks.
SUMMARY OF SPECIFIC PROVISIONS : The bill amends Article 63 of the Insurance Law to foster the expansion of a speciality licensed insurance market to attract to New York more of the large commercial insurance transactions that, under current law, bypass New York for other more favorable jurisdictions in this country and other nations.
SECTION 6301 - SPECIAL RISKS This section currently permits qualified insurers to write insurance without filing policy forms and rates. As amended, this section would also permit qualified insurers to write authorized kinds of insurance exempt from compliance with policy form and rate restrictions whenever the policy is written for a "Large commercial insured" as defined in the next section. Several exceptions to this exemption are specified.
SECTION 6302 - SPECIAL LICENSE DEFINITIONS This section contains the definition of "large commercial insured". Pursuant to this definition, policyholders qualify as "large commercial insureds" if they meet two of the listed criteria including net worth, gross revenues, gross assets, utilizing a risk manager, number of employees and other comparable indicators of ability to withstand risk of loss. Standards relevant to for profit and not-for-profit entities, respectively, are defined.
SECTION 6303 - LIMITATIONS This section limits the special license privileges of Article 63 to only those insurers that underwrite, transact or service qualifying business from an office within this state. This section also requires a risk to produce in excess of $10,000 in annual premium in order to qualify for the exemption from rate and form requirements. This section also requires disclosure to policyholders that the commercial policy may not comply with, and is not subject to, every provision of the Insurance Law.
JUSTIFICATION : Commercial policyholders do not require the same level of regulatory protection as is warranted for personal lines insurance. Commercial policyholders often have risk management professionals on staff and possess a higher level of knowledge and sophistication relative to insurance options. Rather, commercial insureds need flexibility so that policies can be tailored to their particular needs. Commercial insureds also need to be able to respond rapidly to competitive forces, economic conditions and the needs of their customers. The current system in New York can hinder the ability of insurers to respond to the needs of their commercial customers, which has led many commercial insureds to utilize alternate insurance mechanisms to satisfy their insurance needs. These alternate insurance mechanisms are often unregulated or subject to minimal regulation, leaving commercial insureds utilizing such mechanisms without the protection of the guarantee funds, adequate solvency regulation, or other valuable regulatory protections.
The attached legislation would modernize the regulation of commercial insurance in New York and would help to make New York a more attractive place for insurers to do business. This legislation would also facilitate operations and reduce costs for commercial policyholders because it would promote competition among carriers which would drive down premiums. In addition, this legislation would allow the Insurance Department to focus its resources on solvency and personal lines regulation which will, in turn, speed approvals in those areas.
PRIOR LEGISLATIVE HISTORY : New Bill.
FISCAL IMPLICATIONS : None.
EFFECTIVE DATE : January 1, in the year succeeding the year in which this bill shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 7220 IN SENATE March 24, 2010 ___________Introduced by Sen. BRESLIN -- 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 exempting large commercial insureds from certain rate and policy form requirements THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Sections 6301, 6302, 6303 and 6304 of the insurance law, paragraph 3 of subsection (c) of section 6302 as amended by chapter 534 of the laws of 1985, are amended to read as follows: S 6301. Special risks
[; filing exemption]. (a) (1) Notwithstanding any provision of this chapter, the superintendent shall, pursuant to regu- lations promulgated by him, permit exemption from filing requirements only with respect to rates and policy forms, where applicable, for any of the kinds of insurance authorized to be written in this state. THE EXEMPTION PERMITTED BY THIS PARAGRAPH SHALL NOT APPLY TO POLICIES INSUR- ING LARGE COMMERCIAL INSUREDS AS DEFINED IN SECTION SIX THOUSAND THREE HUNDRED TWO OF THIS ARTICLE. (2) POLICIES INSURING LARGE COMMERCIAL INSUREDS, AS DEFINED IN SECTION SIX THOUSAND THREE HUNDRED TWO OF THIS ARTICLE, SHALL BE EXEMPT FROM ALL RATE AND POLICY FORM REQUIREMENTS EXCEPT FOR SECTIONS TWO THOUSAND THREE HUNDRED ONE, TWO THOUSAND THREE HUNDRED TWO, TWO THOUSAND THREE HUNDRED THREE, TWO THOUSAND THREE HUNDRED SIXTEEN, TWO THOUSAND THREE HUNDRED SEVENTEEN, TWO THOUSAND THREE HUNDRED EIGHTEEN, TWO THOUSAND THREE HUNDRED TWENTY, TWO THOUSAND THREE HUNDRED TWENTY-FOUR, TWO THOUSAND THREE HUNDRED FORTY, TWO THOUSAND THREE HUNDRED FORTY-TWO, THREE THOU- SAND ONE HUNDRED THREE, THREE THOUSAND ONE HUNDRED FIVE, THREE THOUSAND ONE HUNDRED SIX, THREE THOUSAND FOUR HUNDRED ONE, THREE THOUSAND FOUR HUNDRED TWO, THREE THOUSAND FOUR HUNDRED NINE, THREE THOUSAND FOUR HUNDRED TEN, THREE THOUSAND FOUR HUNDRED THIRTEEN, THREE THOUSAND FOUR HUNDRED FOURTEEN, THREE THOUSAND FOUR HUNDRED FIFTEEN, THREE THOUSAND FOUR HUNDRED TWENTY-NINE, THREE THOUSAND FOUR HUNDRED FORTY, THREE THOU- SAND FOUR HUNDRED THIRTY-ONE, THREE THOUSAND FOUR HUNDRED THIRTY-TWO, THREE THOUSAND FOUR HUNDRED THIRTY-THREE, THREE THOUSAND FOUR HUNDRED THIRTY-FIVE AND THREE THOUSAND FOUR HUNDRED THIRTY-SIX OF THIS CHAPTER, FOR ANY OF THE KINDS OF INSURANCE AUTHORIZED TO BE WRITTEN IN THIS STATE.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD16546-01-0 S. 7220 2
(b) No exemption pursuant to subsection (a)
[hereof]OF THIS SECTION shall be permitted in relation to the kinds of insurance set forth in paragraph one, two, three, fifteen, eighteen [or], twenty-three, TWEN- TY-FOUR, TWENTY-FIVE, TWENTY-SIX, TWENTY-EIGHT OR TWENTY-NINE of subsection (a) of section one thousand one hundred thirteen of this chapter, (EXCEPT FOR COVERAGE WRITTEN PURSUANT TO SUBPARAGRAPH (II) OF PARAGRAPH THREE OF SUBSECTION (A) OF SECTION ONE THOUSAND ONE HUNDRED SIXTEEN), TO ANY POLICY ISSUED TO PROVIDE MEDICAL MALPRACTICE INSURANCE AS DEFINED IN SUBSECTION (B) OF SECTION FIVE THOUSAND FIVE HUNDRED ONE OF THIS CHAPTER, or to coverage for personal lines to natural persons for non-business purposes. However, any risk pursuant to paragraph one, two or three of such subsection of such section of this chapter or personal lines risk (except private passenger, non-fleet automobile insurance) shall be exempt pursuant to subsection (a) [hereof]OF THIS SECTION if it is included by the superintendent on the list maintained by him pursuant to subsection (a) of section six thousand three hundred three of this article. (c) An exemption granted pursuant to this section shall apply only to authorized insurers complying with this chapter, except that it shall not apply to insurers subject to article sixty-six of this chapter. The exemption shall not be an exemption for joint underwriting or joint reinsurance transactions pursuant to section two thousand three hundred seventeen of this chapter. S 6302. Special license; DEFINITION. (a) An authorized insurer, as a condition precedent to the obtaining of such exemption, shall obtain a special license from the superintendent. (b) Before such special license shall be issued or renewed the prospective licensee shall file in the office of the superintendent an application in such form and supplements thereto as the superintendent prescribes. Such license shall be subject to annual renewal with an annual fee of one thousand dollars. (c) Such license may only be issued to: (1) an authorized insurer which maintains at all times a surplus to policyholders of at least twice the minimum surplus to policyholders required to be maintained for the kinds of insurance which it is author- ized to write in this state; OR (2) a United States branch which maintains at all times a trusteed surplus of at least twice the minimum trusteed surplus required to be maintained for the kinds of insurance which it is authorized to write in this state; or (3) an insurer initially licensed on or after July first, nineteen hundred eighty-two pursuant to article forty-one of this chapter, or pursuant to article forty-two of this chapter as an accident and health insurer, or pursuant to article sixty-one of this chapter as a recipro- cal insurer, if such insurer is at least meeting the minimum surplus to policyholders requirement or the minimum trusteed surplus requirement imposed upon such insurer by the provisions of the article pursuant to which it was initially licensed. (d) The superintendent may revoke, suspend, or refuse to renew such license if, after notice and a hearing, he finds that such action will protect the best interests of the people of this state. (E) "LARGE COMMERCIAL INSURED" MEANS A COMMERCIAL RISK POLICY INSURED THAT MEETS AT LEAST TWO OF THE FOLLOWING CRITERIA: (1) HAS A NET WORTH OF AT LEAST SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS, AS DETERMINED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT, ASS. 7220 3
OF THE INSURED'S FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (2) HAS GROSS ASSETS EXCEEDING TWENTY-FIVE MILLION DOLLARS AND A NET WORTH OF AT LEAST ONE MILLION FIVE HUNDRED THOUSAND DOLLARS, AS DETER- MINED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT, AS OF THE INSURED'S FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (3) IS A FOR-PROFIT BUSINESS ENTITY THAT GENERATES ANNUAL GROSS REVEN- UES EXCEEDING FIFTEEN MILLION DOLLARS, AS DETERMINED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT, AS OF THE INSURED'S FISCAL YEAR END IMME- DIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (4) IS A FOR-PROFIT BUSINESS ENTITY THAT HAS GROSS ASSETS EXCEEDING TWENTY-FIVE MILLION DOLLARS AND GENERATES ANNUAL GROSS REVENUES EXCEED- ING TWENTY-FIVE MILLION DOLLARS, AS DETERMINED BY AN INDEPENDENT CERTI- FIED PUBLIC ACCOUNTANT, AS OF THE INSURED'S FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (5) IS A NOT-FOR-PROFIT ORGANIZATION OR PUBLIC ENTITY WITH AN ANNUAL BUDGET EXCEEDING TEN MILLION DOLLARS FOR EACH OF ITS THREE FISCAL YEARS IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (6) HAS TWENTY-FIVE EMPLOYEES, OR ONE HUNDRED WITHIN THE CORPORATE STRUCTURE, AS OF THE INSURED'S FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR (7) EMPLOYS OR RETAINS A RISK MANAGER TO ASSIST IN THE NEGOTIATION AND PURCHASE OF A POLICY EXEMPTED UNDER THIS ARTICLE. FOR THE PURPOSE OF THIS PARAGRAPH, "RISK MANAGER" SHALL MEAN AN INDIVIDUAL WHO HOLDS THE PROFESSIONAL DESIGNATION CPCU, ARM, OR CRM WITH AT LEAST FIVE YEARS EXPERIENCE IN THE ANALYSIS AND TREATMENT OF RISK, LOSS EXPOSURE, INSUR- ANCE COVERAGES, AND ALTERNATIVE METHODS AND PROGRAMS, WHO IS NOT EMPLOYED BY THE INSURER ISSUING THE POLICY; OR (8) IS A MUNICIPALITY WITH A POPULATION OF NOT LESS THAN TWENTY-FIVE THOUSAND PERSONS. S 6303. Limitations. (a) The exemption which may be granted pursuant to this article shall apply only if the business is underwritten
[and], transacted, OR SERVICED from an office within this state; and (i) the risk, as defined in regulations of the superintendent, produces a mini- mum annual premium in excess of [one hundred]TEN thousand dollars or such [higher]LOWER amount as the superintendent may prescribe by regu- lation; or (ii) the coverage is for a risk or class of risks which is of an unusual nature, a high loss hazard, or difficult to place, pursuant to a list promulgated or amended by the superintendent. (b) All policies issued pursuant to the provisions of this article shall contain a notice to the policyholder that the rate and policy form are not subject to the filing requirements of this state and such other notices required by the superintendent pursuant to regulation. THE NOTICE IN ALL POLICIES ISSUED TO LARGE COMMERCIAL INSUREDS SHALL ALSO ADVISE THE POLICYHOLDER THAT THE POLICY IS NOT SUBJECT TO ALL PROVISIONS OF THIS CHAPTER. [(c) The superintendent may by regulation prescribe limitations on the total amount of business which an insurer may transact pursuant to this article.]S 6304. Special regulations. The superintendent, by regulation, shall provide for the implementation of the provisions of this article by establishing methods [,]AND procedures [and reports]for licensing and for facilitating, monitoring and verifying compliance with this article. S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law.