Relates to authorization to set certain insurance rates for risk-based capital and property/casualty and insurance and health maintenance organizations.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10013
SPONSOR: Rules (Cahill) TITLE OF BILL: An act to amend the insurance law, in relation to
expanding the definition of a domestic insurer and the applicability of
risk-based capital to certain health organizations (Part A); and to
amend the insurance law, in relation to extending prior approval for
certain motor vehicle insurance rates, adding an additional date for the
superintendent to collect, analyze and compile periodic reports regard-
ing certain property/casualty insurance policies, extending the date for
exemptions on certain property/casualty insurance policies, and extend-
ing certain rate periods, in relation to extending additional powers of
the New York property insurance underwriting association and in relation
to extending the authority for certain domestic property/casualty insur-
ers to write in the free trade zone; and to repeal section 2341 of such
law relating to the consumers advisory council; business advisory coun-
cil (Part B)
PURPOSE: The purpose of this bill is to: (1) apply the risk-based
capital ("RBC") requirements to organizations organized pursuant to
Insurance Law Article 43 ("Article 43 corporations") and certain health
maintenance organizations ("HMOs") (Part A); (2) amend the Insurance Law
in order to extend several important provisions of the law that promote
the stability of the property/casualty insurance market (Part B)
SUMMARY OF PROVISIONS:
Part A
Section 1 of the bill would amend Insurance Law section 1 109(a) to
apply Insurance Law section 1322 to HMOs that are domiciled in New York
and certified or operating in at least one other state (a "domestic
multi-state HMO").
Section 2 would amend the title of Insurance Law section 1322 to include
Article 43 corporations and domestic multi-state lIMOs.
Section 3 would amend Insurance Law section 1322(a)(3) to include within
the definition of "domestic insurer" an Article 43 corporation and
domestic multi-state HMO.
Section 4 would amend Insurance Law section 1322(b) to state that
section 1322 applies to Article 43 corporations and domestic multi-state
HMOs.
Section 4 also would amend Insurance Law section 1322(c)(1) to require a
domestic multi-state IIMO to submit an RBC report to the Superintendent
of Financial Services on or prior to each April 15.
Section 5 would amend Insurance Law section 1322(c)(2)(D) to con:ect a
typographical error.
Section 6 would amend Insurance Law section 1322(d)(1) to increase the
RBC trend test trigger from 2.5 times the authorized control level RBC
to 3.0 times. Section 6 also would amend Insurance Law section
1322(d)(1) to make grammatical changes.
Section 7 would amend Insurance Law section 1322 to make grammatical
changes.
Section 8 would provide for an immediate effective date.
Part B
Section 1 of the bill would amend Insurance Law sections 2328 and 2329
to extend through June 30, 2017 provisions regarding the prior approval
of premium rates for insurance of certain motor vehicles and provisions
regarding excess profits.
Section 2 would amend Insurance Law section 3425(1)(2) to extend through
June 30, 2017 the report that the Superintendent of Financial Services
("Superintendent") must provide to the Legislature, with respect to
noncommercial property/casualty insurance, regarding the number of new
insureds, non-renewed insureds, and business written by each insurer in
each rating territory of each such insurer and, in each case, the class
of insureds (including age and sex) affected.
Section 3 would amend Insurance Law section 3425(m) to extend through
June 30, 2017 the "2% rule" and "2-for-I credit," which pertain to non-
renewal requirements for non-commercial automobile insurance.
Section 4 would amend Insurance Law section 2305(f) to extend through
June 30, 2017 the provisions in Insurance Law section 2305(a) relating
to exceptions from prior approval for certain insurance rates.
Section 5 would repeal Insurance Law section 2341, which pertains to the
consumers advisory council and business advisory council.
Section 6 would amend Insurance Law section 2342 to extend through June
30, 2017, the sunset date for Insurance Law sections 2307(c), 2308,
2310(a), 2316, 2320, 2323, 2326, 2335, and 2336(b) to June 30, 2017.
Section 7 would amend Insurance Law section 2344(h) to extend through
June 30, 2017, the applicability of the flexible rate limitations in
problem markets for certain commercial property/casualty insurance
rates.
Section 8 would amend Insurance Law section 5412(g) to extend through
June 30, 2017, provisions that allow the New York Property Insurance
Underwriting Association ("NYPIUA") to write certain coverage upon a
determination by the Superintendent that coverage is unavailable in a
particular market.
Section 9 would amend Insurance Law section 6302(c)(3) to extend until
December 31, 2016, the Superintendent's ability to issue a special
license to write insurance in the free trade zone to a domestic
property/casualty insurance company that maintains at all times a
surplus to policyholders of at least twice the minimum surplus to poli-
cyholders required to be maintained for the kinds of insurance that it
is authorized to write in this state, or an insurer licensed pursuant to
Insurance Law Article 61 as a reciprocal insurer that maintains at all
times a surplus to policyholders of at least the minimum surplus to
policyholders required to be maintained for the kinds of insurance that
it is authorized to write in this state, provided that the domestic
property/casualty insurance company or reciprocal insurer: (A) has total
direct premiums comprised of at least ninety percent medical malpractice
insurance; (B) assumes reinsurance premiums in an amount that is less
than five percent of total direct premiums written; and (C) writes nine-
ty percent of its total direct premiums in this state.
Section 10 would provide that this bill is effective immediately.
JUSTIFICATION: Part A would amend the insurance Law to conform to the
National Association of Insurance Commissioners' ("NAIC's") RBC for
Health Organizations Model Act. Specifically, this bill would make
domestic multi-state HMOs and Article 43 corporations subject to the RBC
requirements set forth in Insurance Law section 1322. The bill also
would increase the RBC trend test trigger from 2.5 times the authorized
control level RBC to 3.0 times. Effective January 1, 2015, the NAIC's
RI3C for Health Organizations Model Act will become an accreditation
standard and conformance therewith will be necessary for the Department
of Financial Services ("Department") to maintain its accreditation
status with the NAIC.
Many of the provisions included in Part B are important consumer
protections that have been in place for years regarding rate regulation
in certain areas of insurance. Several provisions of the bill also
enable insurers to continue making certain types of insurance readily
available in New York.
Extending the sunset dates for -the Article 23 provisions assures the
insurance industry that the file-and-use and flexible rating provisions
will remain in effect. These file-and-use and flexible rating approaches
enable insurers to respond to changing market conditions in a more expe-
dited manner than the prior approval approach, to which the law would
revert back if these key provisions of Article 23 are permitted to
sunset.
Insurance Law section 3425 provides an equitable balance among the often
competing forces of policyholders' expectations, insurers' legitimate
prerogatives in evaluating and assuming risk, and the realities of the
private passenger automobile insurance marketplace. It provides the
foundation for a reliable automobile insurance market that promotes
stability and protects consumers against arbitrary cancellation or
nonrenewal of coverage. The 2% rule is also an essential component of
ongoing efforts to depopulate the New York Automobile Insurance Plan
("NYAIP").
Furthermore, the bill extends the sunset date for Insurance Law section
5412(g) which will promote the availability and affordability of
property/casualty insurance and the stability of the property/casualty
insurance market in New York by extending the Superintendent's authority
to authorize NYPIUA to write coverage for an underserved voluntary
market.
The bill also extends the sunset date for Insurance Law section
6302(c)(3) to continue the expanded ability of New York-authorized
insurers to compete more effectively with London and out-of-state
markets.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
