Specifies requirements for licensees to have exercised due care in selecting unauthorized insurers.
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: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: 90 days
STATE OF NEW YORK ________________________________________________________________________ 7551 IN SENATE May 15, 2014 ___________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 the duties of excess line brokers THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 1 of subsection (a) of section 2118 of the insur- ance law, as amended by chapter 220 of the laws of 1986, is amended to read as follows: (1) (A) Every licensee licensed pursuant to section two thousand one hundred five of this article shall be required to use due care in selecting the unauthorized insurer from whom policies are procured under his license. (B) A LICENSEE IS PRESUMED TO HAVE EXERCISED DUE CARE IN SELECTING AN UNAUTHORIZED INSURER IF AT THE TIME OF PLACEMENT, THE EXCESS LINE ASSO- CIATION ESTABLISHED PURSUANT TO SECTION TWO THOUSAND ONE HUNDRED THIRTY OF THIS ARTICLE HAS PUBLISHED THE NAME OF SUCH INSURER ON A LIST OF ELIGIBLE UNAUTHORIZED INSURERS. THE EXCESS LINE ASSOCIATION WILL LIST NO INSURER UNLESS IT HAS CONDUCTED AN ANALYSIS OF SUCH INSURER UPDATED NO LESS THAN ANNUALLY AND DETERMINED SUCH INSURER, (I) IS FINANCIALLY SOLVENT AND STABLE; (II) MAINTAINS ADEQUATE CAPACITY AND POLICYHOLDER'S SURPLUS TO MEET ITS OBLIGATIONS TO POLICYHOLDERS, AND ALL OTHER LIABILITIES; (III) IS MANAGED BY INDIVIDUALS WHO ARE TRUSTWORTHY AND COMPETENT; AND (IV) MAINTAINS CLAIMS PRACTICES IN A SATISFACTORY MANNER. S 2. Subparagraph (C) of paragraph 3 of subsection (b) of section 2118 of the insurance law, as amended by chapter 684 of the laws of 1993, is amended to read as follows: (C) Every licensee, or affirming broker, in connection with the place- ment of each risk pursuant to this section, shall record on the affida- vit required pursuant to subparagraph (A) of this paragraph
[the infor- mation]THE NAME OF THE INSURER DECLINING SUCH RISK AND AN IDENTIFICATION NUMBER FOR SUCH INSURER ISSUED BY THE NATIONAL ASSOCI- ATION OF INSURANCE COMMISSIONERS OR DEPARTMENT OF FINANCIAL SERVICES.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15141-02-4 S. 7551 2
INFORMATION relied upon
[that]WHICH formed the basis of such licensee's or affirming broker's reason to believe that the authorized insurer might consider writing the type of coverage or class of insurance involved SHALL BE MAINTAINED BY SUCH LICENSEE OR AFFIRMING BROKER IN WRITING FOR A PERIOD OF THREE YEARS FROM THE EXPIRATION OF SUCH POLICY. S 3. Paragraph 4 of subsection (b) of section 2118 of the insurance law, as amended by chapter 630 of the laws of 1988, is amended to read as follows: (4) (A) The number of declinations constituting diligent effort in regard to placement of coverage with authorized insurers for purposes of paragraph three of this subsection shall be three, unless the super- intendent after a hearing, on a record, upon findings and conclusions, determines that another number of such declinations is appropriate in regard to particular coverages. In making such determinations, the superintendent shall consider relevant market conditions, including unavailability of particular coverages from authorized insurers, and may conduct market surveys. Any such determination shall be reviewed at least annually by the superintendent. (B) THE DILIGENT EFFORT MADE BY A LICENSEE OR AFFIRMING BROKER FOR ANY POLICY THAT PROVIDES COVERAGE FOR A ONE YEAR PERIOD, SHALL BE DEEMED A VALID DILIGENT EFFORT FOR THE FIRST AND SECOND ANNUAL RENEWAL THEREOF WHEN THE SAME INSURER PROVIDES SUCH RENEWAL COVERAGE. S 4. This act shall take effect on the ninetieth day after it shall have become a law and apply to insurance policies placed or procured on and after such date, provided, however, that the amendments to subsection (b) of section 2118 of the insurance law made by sections two and three of this act shall not affect the expiration and reversion of such subsection and shall be deemed to expire therewith.