TITLE OF BILL: An act to amend the insurance law, in relation to
domestic excess line insurance companies
PURPOSE: The purpose of this legislation is to facilitate the
formation and operation of domestic excess line insurance companies
within New York State.
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: 2011/2012: A9783 - reported referred to ways and
means; passed Senate
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: 120 days after it shall have become a law
S T A T E O F N E W Y O R K
2013-2014 Regular Sessions
I N A S S E M B L Y
March 4, 2013
Introduced by M. of A. MORELLE -- read once and referred to the Commit-
tee on Insurance
AN ACT to amend the insurance law, in relation to domestic excess line
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. The insurance law is amended by adding a new article 58 to
2 read as follows:
3 ARTICLE 58
4 DOMESTIC EXCESS LINE INSURANCE COMPANIES
5 SECTION 5801. PURPOSE AND APPLICABILITY OF ARTICLE.
6 5802. DEFINITIONS.
7 5803. ORGANIZATION AND APPROVAL.
8 5804. TAXATION.
9 5805. POLICY RATE AND FORMS.
10 5806. APPLICABILITY OF OTHER INSURANCE LAWS.
11 5807. EXEMPTIONS.
12 5808. PRINCIPAL PLACE OF BUSINESS.
13 5809. MANDATORY DISCLOSURE NOTICE.
14 S 5801. PURPOSE AND APPLICABILITY OF ARTICLE. THE PURPOSE OF THIS
15 ARTICLE IS TO FACILITATE THE FORMATION AND OPERATION OF DOMESTIC EXCESS
16 LINE INSURANCE COMPANIES WITHIN THE STATE OF NEW YORK WHICH SHALL BE
17 SUBJECT TO REGULATION AND OVERSIGHT, WITH RESPECT TO FINANCIAL SOLVENCY,
18 INVESTMENTS, CORPORATE GOVERNANCE, REPORTING AND DISCLOSURE, AS PROVIDED
19 FOR IN THIS ARTICLE.
20 S 5802. DEFINITIONS. FOR THE PURPOSES OF THIS ARTICLE, THE FOLLOWING
21 TERMS SHALL HAVE THE FOLLOWING MEANINGS:
22 (A) "CERTIFICATE OF ELIGIBILITY" MEANS A WRITTEN AUTHORIZATION FROM
23 THE SUPERINTENDENT PERMITTING A DOMESTIC EXCESS LINE INSURANCE COMPANY
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
A. 5631 2
1 (1) ENTER INSURANCE TRANSACTIONS THROUGH EXCESS LINE LICENSEES PROCUR-
2 ING EXCESS LINE INSURANCE;
3 (2) SELL INSURANCE DIRECTLY TO INSUREDS WHO INDEPENDENTLY PROCURE
4 INSURANCE WHERE PERMITTED BY LAW BUT IN NO EVENT TO AN INSURED WHOSE
5 HOME STATE IS NEW YORK FROM ANY OFFICE OF SUCH INSURER LOCATED IN NEW
6 YORK STATE; AND
7 (3) CONDUCT AN EXCESS LINE AND/OR SURPLUS LINE BUSINESS IN ANY OTHER
8 STATE WHICH GRANTS THE INSURER ELIGIBILITY.
9 (B) "DOMESTIC EXCESS LINE INSURANCE COMPANY" MEANS:
10 (1) AN INSURER ORGANIZED AND INCORPORATED IN NEW YORK AS AN INSURER
11 WHICH IS NOT AN AUTHORIZED INSURER AS DEFINED IN SECTION ONE HUNDRED
12 SEVEN OF THIS CHAPTER BUT WHICH IS GRANTED A CERTIFICATE OF ELIGIBILITY
13 BY THE SUPERINTENDENT TO:
14 (A) INSURE RISKS PLACED BY EXCESS LINE LICENSEES OF THE KINDS OF
15 INSURANCE SET FORTH IN SECTION TWO THOUSAND ONE HUNDRED FIVE OF THIS
17 (B) SELL INSURANCE DIRECTLY TO INSUREDS WHO INDEPENDENTLY PROCURE
18 INSURANCE WHERE PERMITTED BY LAW BUT IN NO EVENT TO AN INSURED WHOSE
19 HOME STATE IS NEW YORK FROM ANY OFFICE OF SUCH INSURER LOCATED IN NEW
20 YORK STATE; AND
21 (C) INSURE EXCESS LINE AND/OR SURPLUS LINE RISKS FOR ANY INSURED WHOSE
22 HOME STATE IS A STATE OTHER THAN NEW YORK PROVIDED THE INSURER IS ELIGI-
23 BLE TO WRITE SUCH RISKS IN SUCH STATE.
24 (2) A DOMESTIC EXCESS LINE INSURANCE COMPANY IS DEEMED A NONADMITTED
25 INSURER FOR PURPOSES OF THE DODD FRANK WALL STREET REFORM AND CONSUMER
26 PROTECTION ACT, PUB. L. NO. 111-203.
27 S 5803. ORGANIZATION AND APPROVAL. (A) A DOMESTIC EXCESS LINE INSUR-
28 ANCE COMPANY MAY BE INCORPORATED AND ORGANIZED IN THE MANNER SET FORTH
29 IN SECTION ONE THOUSAND TWO HUNDRED ONE OF THIS CHAPTER, EXCEPT AS MODI-
30 FIED BY THE PROVISIONS OF THIS ARTICLE.
31 (B) UPON INCORPORATION AND COMPLETION OF THE REQUIREMENTS OF ORGANIZA-
32 TION UNDER SECTION ONE THOUSAND TWO HUNDRED ONE AND SUBJECT TO ALL
33 PROVISIONS OF THIS ARTICLE, UNLESS THE SUPERINTENDENT, UPON A WRITTEN
34 RECORD DETERMINES THAT ANY INCORPORATOR, DIRECTOR, OFFICER, PROPOSED
35 SHAREHOLDER OR MEMBER OF THE PROPOSED HOLDING COMPANY SYSTEM, IS
36 UNTRUSTWORTHY, IN A FINANCIALLY HAZARDOUS CONDITION OR OTHERWISE COULD
37 NOT QUALIFY TO OBTAIN A CERTIFICATE OF AUTHORITY IN NEW YORK, THE SUPER-
38 INTENDENT SHALL, WITHIN NINETY DAYS OF RECEIPT OF A CERTIFIED COPY OF A
39 RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS DECLARING THAT THE INSURER
40 INTENDS TO ACT AS A DOMESTIC EXCESS LINE INSURANCE COMPANY, ISSUE A
41 CERTIFICATE OF ELIGIBILITY.
42 (C) EVERY DOMESTIC EXCESS LINE INSURANCE COMPANY MUST HAVE AND MAIN-
43 TAIN PRIOR TO ISSUANCE OF A CERTIFICATE OF ELIGIBILITY AND AT ALL TIMES
44 THEREAFTER A MINIMUM CAPITAL AND PAID IN SURPLUS IN AN AMOUNT EQUAL TO
45 OR EXCEEDING THE GREATER OF FORTY-FIVE MILLION DOLLARS OR THE MINIMUM
46 AMOUNT REQUIRED BY NEW YORK FOR FOREIGN AND ALIEN INSURER EXCESS LINE
47 ELIGIBILITY AS SET FORTH IN A REGULATION PROMULGATED BY THE SUPERINTEN-
49 (D) TRANSACTIONS UNDER THIS ARTICLE SHALL NOT CONSTITUTE DOING AN
50 INSURANCE BUSINESS WITHOUT A LICENSE IN VIOLATION OF SUBSECTION (A) OF
51 SECTION ONE THOUSAND ONE HUNDRED TWO OF THIS CHAPTER.
52 (E) UPON ISSUANCE OF A CERTIFICATE OF ELIGIBILITY THE DIRECTORS AND
53 INCORPORATORS SHALL HAVE NO FURTHER LIABILITY FOR THE DEBTS AND LIABIL-
54 ITIES OF THE INSURER.
55 S 5804. TAXATION. (A) THE TAX SET FORTH IN SECTION TWO THOUSAND ONE
56 HUNDRED EIGHTEEN OF THIS CHAPTER SHALL APPLY TO THE GROSS PREMIUMS
A. 5631 3
1 CHARGED LESS THE AMOUNT OF PREMIUM RETURNED TO SUCH INSUREDS ON EVERY
2 POLICY PROCURED BY AN EXCESS LINE LICENSEE WHEN NEW YORK IS THE HOME
3 STATE OF THE INSURED. IT IS THE DUTY OF THE EXCESS LINE LICENSEE TO PAY
4 SUCH TAX.
5 (B) EVERY DOMESTIC EXCESS LINE INSURANCE COMPANY IS EXEMPT FROM ARTI-
6 CLE NINETY-ONE OF THIS CHAPTER, SECTION TWO HUNDRED SIX OF THE FINANCIAL
7 SERVICES LAW EXCEPT SUBSECTION (F) OF SUCH SECTION, AND ARTICLES NINE,
8 NINE-A AND THIRTY-THREE OF THE TAX LAW.
9 S 5805. POLICY RATE AND FORMS. DOMESTIC EXCESS LINE INSURANCE COMPA-
10 NIES ARE EXEMPT FROM ARTICLE TWENTY-THREE OF THIS CHAPTER AND SHALL NOT
11 BE REQUIRED TO FILE NOR SEEK APPROVAL FOR ANY FORM, CONTRACT OR OTHER
12 DOCUMENT WHICH EXPRESSES COVERAGE TERMS AND CONDITIONS.
13 S 5806. APPLICABILITY OF OTHER INSURANCE LAWS. (A) EXCEPT AS MODIFIED
14 BY THE PROVISIONS OF THIS ARTICLE DOMESTIC EXCESS LINE INSURANCE COMPA-
15 NIES ARE SUBJECT TO THE PROVISIONS OF:
16 (1) ARTICLE ONE OF THIS CHAPTER. GENERAL PROVISIONS.
17 (2) ARTICLE TWO OF THIS CHAPTER. ORGANIZATION OF THE DEPARTMENT OF
18 FINANCIAL SERVICES.
19 (3) ARTICLE THREE OF THIS CHAPTER. ADMINISTRATIVE AND PROCEDURAL
21 (4) ARTICLE FOUR OF THIS CHAPTER. INSURANCE FRAUDS PREVENTION.
22 (5) ARTICLE ELEVEN OF THIS CHAPTER. LICENSING OF INSURERS.
23 (6) ARTICLE TWELVE OF THIS CHAPTER. ORGANIZATION AND CORPORATE PROCE-
25 (7) ARTICLE THIRTEEN OF THIS CHAPTER. ASSETS AND DEPOSITS.
26 (8) ARTICLE FOURTEEN OF THIS CHAPTER. INVESTMENTS.
27 (9) ARTICLE FIFTEEN OF THIS CHAPTER. HOLDING COMPANIES.
28 (10) ARTICLE SIXTEEN OF THIS CHAPTER. SUBSIDIARIES OF DOMESTIC
29 PROPERTY/CASUALTY INSURANCE COMPANIES AND CERTAIN OTHER ENTITIES.
30 (11) ARTICLE SEVENTY-ONE OF THIS CHAPTER. MERGER, CONSOLIDATION, REDO-
31 MESTICATION, ACQUISITION OF ASSETS AND ACQUISITION OF CERTAIN SHARES OF
33 (12) ARTICLE SEVENTY-FOUR OF THIS CHAPTER. REHABILITATION, LIQUI-
34 DATION, CONSERVATION AND DISSOLUTION OF INSURERS.
35 (B) NOTWITHSTANDING SUBSECTION (A) OF THIS SECTION:
36 (1) NO LICENSE TO ACT AS AN AUTHORIZED INSURER IS REQUIRED FOR ANY
37 INSURER TO WHICH A CERTIFICATE OF ELIGIBILITY HAS BEEN ISSUED.
38 (2) SECTION ONE THOUSAND TWO HUNDRED THIRTEEN OF THIS CHAPTER SHALL
39 NOT APPLY TO DOMESTIC EXCESS LINE INSURERS.
40 (C) EXCEPT AS MODIFIED BY THIS ARTICLE, DOMESTIC EXCESS LINE INSURERS
41 ARE SUBJECT TO EACH PROVISION OF THIS CHAPTER WHICH:
42 (1) APPLY BROADLY TO INSURANCE POLICIES ISSUED OR DELIVERED IN NEW
43 YORK AND NOT EXCLUSIVELY TO AUTHORIZED INSURERS; OR
44 (2) EXPRESSLY APPLY TO OR EXEMPT EXCESS LINE INSURANCE POLICIES OR
45 COVERAGE PROVIDED, IN SUCH POLICIES; AND
46 (3) ARE SET FORTH IN ANY OF THE FOLLOWING:
47 (A) ARTICLE TWENTY-ONE OF THIS CHAPTER. AGENTS, BROKERS, ADJUSTERS,
48 CONSULTANTS AND INTERMEDIARIES.
49 (B) ARTICLE TWENTY-FOUR OF THIS CHAPTER. UNFAIR METHODS OF COMPETITION
50 AND UNFAIR AND DECEPTIVE ACTS AND PRACTICES.
51 (C) ARTICLE TWENTY-FIVE OF THIS CHAPTER. PROHIBITIONS AGAINST
52 CONTROLLED BUSINESS.
53 (D) ARTICLE TWENTY-SIX OF THIS CHAPTER. UNFAIR CLAIM SETTLEMENT PRAC-
54 TICES; OTHER MISCONDUCT; DISCRIMINATION.
55 (E) ARTICLE TWENTY-SEVEN OF THIS CHAPTER. HOLOCAUST VICTIMS INSURANCE
56 ACT OF 1998.
A. 5631 4
1 (F) ARTICLE THIRTY-FOUR OF THIS CHAPTER. INSURANCE
3 (G) ARTICLE FORTY-ONE OF THIS CHAPTER. PROPERTY/CASUALTY INSURANCE
5 (H) ARTICLE SEVENTY-FOUR OF THIS CHAPTER. REHABILITATION, LIQUIDATION,
6 CONSERVATION AND DISSOLUTION OF INSURERS.
7 (D) NOTWITHSTANDING SUBSECTION (C) OF THIS SECTION, SECTION FOUR THOU-
8 SAND ONE HUNDRED THREE OF THIS CHAPTER SHALL NOT APPLY TO DOMESTIC
9 EXCESS LINE INSURANCE COMPANIES.
10 S 5807. EXEMPTIONS. DOMESTIC EXCESS LINE INSURANCE COMPANIES ARE
11 EXEMPT FROM THE PROVISIONS OF:
12 (A) ARTICLE FIFTY-TWO OF THIS CHAPTER. MOTOR VEHICLE ACCIDENT INDEMNI-
13 FICATION CORPORATION.
14 (B) ARTICLE FIFTY-THREE OF THIS CHAPTER. MOTOR VEHICLE INSURANCE
15 ASSIGNED RISK PLANS.
16 (C) ARTICLE FIFTY-FOUR OF THIS CHAPTER. NEW YORK PROPERTY INSURANCE
17 UNDERWRITING ASSOCIATION.
18 (D) ARTICLE FIFTY-FIVE OF THIS CHAPTER. MEDICAL MALPRACTICE INSURANCE
20 (E) ARTICLE SEVENTY-SIX OF THIS CHAPTER. PROPERTY/CASUALTY SECURITY
22 S 5808. PRINCIPAL PLACE OF BUSINESS. A DOMESTIC EXCESS LINE INSURER
23 SHALL MAINTAIN ITS PRINCIPAL PLACE OF BUSINESS WITHIN THE STATE OF NEW
25 S 5809. MANDATORY DISCLOSURE NOTICE. THE SUPERINTENDENT SHALL, BY
26 REGULATION, REQUIRE EVERY POLICY AND/OR BINDER ISSUED BY A DOMESTIC
27 EXCESS LINE INSURANCE COMPANY TO BEAR SPECIFIC LANGUAGE CONSPICUOUSLY
28 DISPLAYED, WHICH ADVISES THE INSURED THAT THE INSURER IS NOT LICENSED BY
29 THE STATE OF NEW YORK, THAT IN THE EVENT OF INSOLVENCY OF THE INSURER
30 PROTECTIONS PROVIDED BY THE NEW YORK STATE SECURITY FUNDS DO NOT APPLY
31 AND THAT THE POLICY MAY NOT BE SUBJECT TO ALL OF THE REGULATIONS
32 PERTAINING TO POLICY FORMS.
33 S 2. This act shall take effect on the one hundred twentieth day after
34 it shall have become a law. Effective immediately, the addition, amend-
35 ment and/or repeal of any rule or regulation necessary for the implemen-
36 tation of this act on its effective date is authorized to be made on or
37 before such date.