senate Bill S4068A

Exempts large commercial insureds from certain rate and policy form requirements

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 16 / Mar / 2011
    • REFERRED TO INSURANCE
  • 02 / Jun / 2011
    • AMEND AND RECOMMIT TO INSURANCE
  • 02 / Jun / 2011
    • PRINT NUMBER 4068A
  • 06 / Jun / 2011
    • 1ST REPORT CAL.1023
  • 07 / Jun / 2011
    • 2ND REPORT CAL.
  • 13 / Jun / 2011
    • ADVANCED TO THIRD READING
  • 24 / Jun / 2011
    • COMMITTED TO RULES
  • 04 / Jan / 2012
    • REFERRED TO INSURANCE

Summary

Exempts large commercial insureds from certain rate and policy form requirements.

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Bill Details

Versions:
S4068
S4068A
Legislative Cycle:
2011-2012
Current Committee:
Senate Insurance
Law Section:
Insurance Law
Laws Affected:
Amd ยงยง6301, 6302, 6303 & 2307, Ins L

Votes

15
0
15
Aye
0
Nay
2
aye with reservations
1
absent
0
excused
0
abstained
show Insurance committee vote details

Sponsor Memo

BILL NUMBER:S4068A

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:
To exempt from certain regulatory requirements policies
written in New York for large, commercial insureds and special risks.

SUMMARY OF PROVISIONS:
The bill amends Article 63 of the Insurance Law
to foster the expansion of a specialty 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 one of the listed criteria including net worth, gross
revenues, gross assets, 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.
In addition, all policyholders must have a risk manager that is
licensed by the Insurance Department.

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
$25,000 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.

LEGISLATIVE HISTORY:
Similar to A.3967 of 2011, S.7220/A.10636-A of 2009-10.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4068--A

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                             March 16, 2011
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee  on  Insurance  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

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.  Subsections  (a) and (b) of section 6301 of the insurance
law are amended to read as follows:
  (a) Notwithstanding any provision of this chapter, the  superintendent
shall,  pursuant to regulations promulgated by [him] THE SUPERINTENDENT,
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] SPECIFIED IN SUBSECTION (B) OF
THIS SECTION.
  (b) [No] AN 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]
PARAGRAPHS  FOUR  THROUGH FOURTEEN, SIXTEEN, SEVENTEEN, NINETEEN THROUGH
TWENTY-TWO, TWENTY-SEVEN AND TWENTY-NINE of subsection  (a)  of  section
one  thousand  one  hundred  thirteen  of this chapter[, or to] AND SUCH
INSURANCE AS THE SUPERINTENDENT DEEMS TO BE SUBSTANTIALLY SIMILAR TO ONE
OF THE FOREGOING KINDS, EXCEPT NO EXEMPTION MAY BE  PERMITTED  FOR:  (1)
coverage   for  personal  lines  to  natural  persons  for  non-business
purposes; (2) INSURANCE SPECIFIED IN SUBSECTION (B) OF SECTION TWO THOU-
SAND  THREE  HUNDRED  FIVE  OR  SECTION  TWO  THOUSAND   THREE   HUNDRED
TWENTY-EIGHT OF THIS CHAPTER EXCEPT MEDICAL MALPRACTICE LIABILITY INSUR-
ANCE;  (3)  INSURANCE  REQUIRED  TO SATISFY ANY FINANCIAL RESPONSIBILITY
REQUIREMENT OF THIS STATE; OR (4) A POLICY WRITTEN  ON  A  GROUP  BASIS.
However,  any  risk  pursuant  to  paragraph one, two or three of [such]

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10253-04-1

S. 4068--A                          2

subsection (A) of [such] section ONE THOUSAND ONE  HUNDRED  THIRTEEN  of
this  chapter,  MEDICAL  MALPRACTICE  INSURANCE,  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]  THE
SUPERINTENDENT  pursuant to subsection (a) of section six thousand three
hundred three of this article.
  S 2. Section 6302 of the insurance law, paragraph 3 of subsection  (c)
as  amended  by  chapter  534 of the laws of 1985, is amended to read as
follows:
  S 6302. Special license. (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] TWO thousand dollars.
  (c) Such license may only be issued to:
  (1) an authorized insurer  [which]  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 which it
is authorized to write in this state] THE AUTHORIZED  CONTROL  LEVEL  AS
SET FORTH IN ARTICLE THIRTEEN OF THIS CHAPTER;
  (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]  THE AUTHORIZED CONTROL LEVEL AS SET FORTH IN ARTICLE THIR-
TEEN OF THIS CHAPTER PROVIDED, HOWEVER, THAT A  DOMESTIC  INSURER  WHOSE
PRIMARY  LIABILITIES  ARISE  FROM THE BUSINESS OF MEDICAL MALPRACTICE AS
THAT TERM IS DEFINED IN SUBSECTION (B) OF  SECTION  FIVE  THOUSAND  FIVE
HUNDRED ONE OF THIS CHAPTER SHALL INSTEAD BE REQUIRED TO MAINTAIN AT ALL
TIMES TWICE THE MINIMUM SURPLUS TO POLICY HOLDERS REQUIRED TO BE AUTHOR-
IZED TO WRITE MEDICAL MALPRACTICE 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] THE SUPERINTENDENT finds
that such action will protect the best interests of the people  of  this
state.
  S 3. Section 6303 of the insurance law is amended to read as follows:
  S  6303.  Limitations.  (a)  The exemption [which] THAT may be granted
pursuant to this article shall apply only [if the business is underwrit-
ten and transacted from an] TO AN AUTHORIZED INSURER  THAT  MAINTAINS  A
BONA  FIDE office within this state WHICH HAS ACCESS TO THE UNDERWRITING
FILES FOR POLICIES ISSUED UNDER THIS ARTICLE; and [(i)]:
  (1) the risk, as defined in regulations of the superintendent, produc-
es a minimum annual premium in excess of one hundred thousand dollars or
such higher amount as the superintendent may  prescribe  by  regulation;
[or (ii)]

S. 4068--A                          3

  (2) the coverage is for a risk or class of risks which is of an unusu-
al nature, a high loss hazard, or difficult to place, pursuant to a list
promulgated or amended by the superintendent; OR
  (3) THE POLICY IS ISSUED TO A LARGE COMMERCIAL INSURED THAT EMPLOYS OR
RETAINS  A  RISK  MANAGER TO ASSIST IN THE NEGOTIATION AND PURCHASE OF A
POLICY EXEMPTED UNDER THIS ARTICLE.   POLICY FORMS  ISSUED  PURSUANT  TO
THIS PARAGRAPH WHICH HAVE NOT BEEN PREVIOUSLY FILED WITH THE SUPERINTEN-
DENT  SHALL BE PROVIDED TO THE SUPERINTENDENT FOR INFORMATIONAL PURPOSES
AS SOON AS PRACTICABLE WITHIN THIRTY DAYS OF THE  DATE  UPON  WHICH  THE
POLICY FORM IS DELIVERED TO THE POLICYHOLDER.
  (b) [All policies] FOR THE PURPOSES OF THIS SECTION:
  (1)  "LARGE  COMMERCIAL INSURED" MEANS AN ENTITY THAT GENERATES ANNUAL
COMMERCIAL RISK INSURANCE PREMIUM  IN  EXCESS  OF  TWENTY-FIVE  THOUSAND
DOLLARS  WITH  RESPECT TO THE KINDS OF INSURANCE SPECIFIED IN PARAGRAPHS
FOUR THROUGH FOURTEEN, SIXTEEN, SEVENTEEN, NINETEEN  THROUGH  TWENTY-TWO
AND  TWENTY-SEVEN  OF SUBSECTION (A) OF SECTION ONE THOUSAND ONE HUNDRED
THIRTEEN OF THIS CHAPTER AND:
  (I) HAS A NET WORTH OF AT LEAST SEVEN MILLION  FIVE  HUNDRED  THOUSAND
DOLLARS  AS  OF  THE INSURED'S FISCAL YEAR END IMMEDIATELY PRECEDING THE
POLICY'S EFFECTIVE DATE;
  (II) HAS GROSS ASSETS EXCEEDING TEN MILLION DOLLARS AND A NET WORTH OF
AT LEAST ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AS OF  THE  INSURED'S
FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE;
  (III)  IS  A  FOR-PROFIT  BUSINESS  ENTITY THAT GENERATES ANNUAL GROSS
REVENUES EXCEEDING FIFTEEN MILLION DOLLARS, AND HAS A NET  WORTH  OF  AT
LEAST  ONE  MILLION  FIVE  HUNDRED  THOUSAND DOLLARS AS OF THE INSURED'S
FISCAL YEAR END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE;
  (IV) IS A FOR-PROFIT BUSINESS ENTITY THAT HAS GROSS  ASSETS  EXCEEDING
TEN  MILLION  DOLLARS  AND  GENERATES  ANNUAL  GROSS  REVENUES EXCEEDING
FIFTEEN MILLION DOLLARS AS OF THE INSURED'S FISCAL YEAR END  IMMEDIATELY
PRECEDING THE POLICY'S EFFECTIVE DATE;
  (V)  IS  A NOT-FOR-PROFIT ORGANIZATION OR PUBLIC ENTITY WITH AN ANNUAL
BUDGET EXCEEDING TWENTY MILLION DOLLARS FOR EACH  OF  ITS  THREE  FISCAL
YEARS IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE;
  (VI)  HAS  FIFTY  EMPLOYEES OR, TOGETHER WITH ITS PARENT, SUBSIDIARIES
AND AFFILIATES, ONE HUNDRED EMPLOYEES, AS OF THE INSURED'S  FISCAL  YEAR
END IMMEDIATELY PRECEDING THE POLICY'S EFFECTIVE DATE; OR
  (VII)  IS  A  MUNICIPALITY WITH A POPULATION OF FIFTY THOUSAND OR MORE
PERSONS.
  (2) "RISK MANAGER" MEANS A PERSON  WHO  MEETS  ALL  OF  THE  FOLLOWING
REQUIREMENTS:
  (A)  THE  PERSON IS AN EMPLOYEE OF, OR THIRD-PARTY CONSULTANT RETAINED
BY, THE COMMERCIAL POLICYHOLDER;
  (B) THE PERSON PROVIDES SKILLED  SERVICES  IN  LOSS  PREVENTION,  LOSS
REDUCTION,  OR  RISK  AND  INSURANCE  COVERAGE ANALYSIS, AND PURCHASE OF
INSURANCE;
  (C) THE PERSON:
  (I)(I) HAS A BACHELOR'S DEGREE OR HIGHER FROM AN ACCREDITED COLLEGE OR
UNIVERSITY IN RISK MANAGEMENT, BUSINESS ADMINISTRATION, FINANCE, ECONOM-
ICS, OR ANY OTHER FIELD DETERMINED BY THE SUPERINTENDENT TO  DEMONSTRATE
MINIMUM COMPETENCE IN RISK MANAGEMENT; AND
  (II)(AA)  HAS  THREE  YEARS  OF  EXPERIENCE  IN RISK FINANCING, CLAIMS
ADMINISTRATION,  LOSS  PREVENTION,  RISK  AND  INSURANCE  ANALYSIS,   OR
PURCHASING COMMERCIAL LINES OF INSURANCE; OR
  (BB) HAS:

S. 4068--A                          4

  (AAA)  A  DESIGNATION AS A CHARTERED PROPERTY AND CASUALTY UNDERWRITER
(IN THIS CLAUSE REFERRED TO AS A "CPCU") ISSUED BY THE  AMERICAN  INSTI-
TUTE FOR CPCU/INSURANCE INSTITUTE OF AMERICA;
  (BBB) A DESIGNATION AS AN ASSOCIATE IN RISK MANAGEMENT (ARM) ISSUED BY
THE AMERICAN INSTITUTE FOR CPCU/INSURANCE INSTITUTE OF AMERICA;
  (CCC)  A  DESIGNATION  AS  CERTIFIED  RISK MANAGER (CRM) ISSUED BY THE
NATIONAL ALLIANCE FOR INSURANCE EDUCATION & RESEARCH;
  (DDD) A DESIGNATION AS A RISK AND INSURANCE MANAGEMENT SOCIETY  (RIMS)
FELLOW (RF) ISSUED BY THE GLOBAL RISK MANAGEMENT INSTITUTE; OR
  (EEE)  ANY  OTHER DESIGNATION, CERTIFICATION, OR LICENSE DETERMINED BY
THE SUPERINTENDENT TO DEMONSTRATE MINIMUM COMPETENCY IN RISK MANAGEMENT;
  (II) (I) HAS AT LEAST SEVEN YEARS OF  EXPERIENCE  IN  RISK  FINANCING,
CLAIMS  ADMINISTRATION,  LOSS  PREVENTION,  RISK  AND INSURANCE COVERAGE
ANALYSIS, OR PURCHASING COMMERCIAL LINES OF INSURANCE; AND
  (II) HAS ANY ONE OF THE DESIGNATIONS  SPECIFIED  IN  SUBCLAUSES  (AAA)
THROUGH (EEE) OF SUBITEM (BB) OF CLAUSE (II) OF ITEM (I) OF THIS SUBPAR-
AGRAPH;
  (III)  HAS  AT LEAST TEN YEARS OF EXPERIENCE IN RISK FINANCING, CLAIMS
ADMINISTRATION, LOSS PREVENTION, RISK AND INSURANCE  COVERAGE  ANALYSIS,
OR PURCHASING COMMERCIAL LINES OF INSURANCE; OR
  (IV) HAS A GRADUATE DEGREE FROM AN ACCREDITED COLLEGE OR UNIVERSITY IN
RISK  MANAGEMENT,  BUSINESS  ADMINISTRATION,  FINANCE, ECONOMICS, OR ANY
OTHER FIELD DETERMINED BY  THE  SUPERINTENDENT  TO  DEMONSTRATE  MINIMUM
COMPETENCE IN RISK MANAGEMENT.
  (3) "MUNICIPALITY" SHALL MEAN ANY COUNTY, CITY, TOWN OR VILLAGE.
  (C)  EFFECTIVE  ON THE FIFTH JANUARY FIRST OCCURRING AFTER THE DATE OF
THE ENACTMENT OF THIS SUBSECTION AND EACH FIFTH JANUARY FIRST  OCCURRING
THEREAFTER,  THE AMOUNTS SPECIFIED IN PARAGRAPH ONE OF SUBSECTION (B) OF
THIS SECTION MAY BE ADJUSTED TO REFLECT THE PERCENTAGE CHANGE  FOR  SUCH
FIVE-YEAR  PERIOD  IN  THE  CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS
PUBLISHED BY THE BUREAU OF LABOR STATISTICS OF THE DEPARTMENT OF  LABOR.
THE  SUPERINTENDENT  MAY  CONDUCT  A PUBLIC HEARING TO DETERMINE WHETHER
SUCH INCREASE IS NECESSARY.
  (D) EVERY POLICY 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.
  [(c)] (E) The superintendent may by regulation  prescribe  limitations
on  the  total  amount  of business [which] THAT an insurer may transact
pursuant to this article OR REIMPOSE FILING REQUIREMENTS  WHERE  AND  TO
THE EXTENT THAT THE SUPERINTENDENT DEEMS IT IN THE INTEREST OF THE POLI-
CYHOLDERS.
  S  4.  Subsection (b) of section 2307 of the insurance law, as amended
by chapter 508 of the laws of 1998, is amended to read as follows:
  (b) (1) Except as otherwise provided herein, no policy form  shall  be
delivered  or  issued  for  delivery  unless  it has been filed with the
superintendent and either [he] THE SUPERINTENDENT has  approved  it,  or
thirty days have elapsed and [he] THE SUPERINTENDENT has not disapproved
it as misleading or violative of public policy.
  (2)  After notice and hearing to the insurer or rate service organiza-
tion which submitted a policy form for approval, the superintendent  may
withdraw  approval  of such form on finding that the use of such form is
contrary to the legal requirements applicable at the time of withdrawal.
The effective date of the withdrawal of approval shall be prescribed  by
the  superintendent  but shall be not less than ninety days after notice
of withdrawal.

S. 4068--A                          5

  (3) With regard to residual value  insurance,  policy  forms  and  any
amendments  thereto shall be filed with the superintendent within thirty
days of their use by the  insurer.  For  purposes  of  this  subsection,
"residual  value  insurance" shall have the same meaning as set forth in
paragraph  twenty-two  of  subsection  (a)  of  section one thousand one
hundred thirteen of this chapter, provided however, for the purposes  of
this  subsection  such  insurance  shall only be utilized for commercial
purposes, and shall not include personal lines of insurance  as  defined
in  paragraph  two  of  subsection  (a)  of  section three thousand four
hundred twenty-five of this chapter or any  commercial  auto  insurance,
and,  provided  further  that applicants for such insurance shall sign a
statement that the applicant has an appropriate level of  knowledge  and
understanding of the use of residual value insurance.
  (4)  POLICY  FORMS  FOR  INLAND  MARINE RISKS WHERE THE RATES FOR SUCH
RISKS BY GENERAL CUSTOM OF THE BUSINESS ARE  NOT  WRITTEN  ACCORDING  TO
MANUAL  RATES  OR  RATING PLANS SHALL NOT BE FILED PURSUANT TO PARAGRAPH
ONE OF THIS SUBSECTION, UNLESS THE SUPERINTENDENT DIRECTS THAT  THEY  BE
FILED.
  S 5. This act shall take effect immediately.

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