New York Regulation 41 Revisions Affecting Insurer Eligibility Standards and Excess Line Brokers Duty of Due Care Now Effective
Oct 29, 2014
The Excess Line Association of New York (“ELANY”) has advised via Bulletin No. 2014-21 that the final adopted version of the 14th Amendment to New York Regulation 41 (“14th Amendment”) became effective October 8, 2014.
Click here to view ELANY’s complete summary of the 14th Amendment revisions, which primarily pertain to eligibility standards for insurers and the duty of due care owed by excess line brokers. The summary also includes provisions that remain unchanged.
The revisions include:
- Neither ELANY nor excess line brokers will be required to obtain:
- an insurer’s prospective three-year business plan;
- an executed copy of the insurer’s trust agreement and periodic “funds in trust statement” from the trustee;
- alien insurer International Insurers Department Standard Financial Statements
- Foreign insurers will no longer be required to put up a $2.5 million trust fund. Such trust funds that currently exist may be terminated in accordance with the terms of the trust agreement.
- Service of Process/Consent to Jurisdiction.
- §27.16 of Regulation 41 is deleted. This removes from the regulation–but not from the insurance law–requirements regarding consent to service of process and appointing the superintendent as agent for service of process. Eligible insurers should note that New York Insurance Law §1213(e) exempts unauthorized insurers fromposting collateral or pre-answer security in litigation on risks placed through excess line brokers when the policy designates the superintendent as the lawful attorney upon whom lawful process may be served.
- The following obligations are now directed at insurers, where previously the excess line broker was responsible to verify the insurers conduct:
- Insurers will be directly required to file an electronic EL-1 report on March 15th each year setting forth each New York excess line transaction bound in the prior calendar year;
- Unauthorized insurers will be directly prohibited from selling 1) types of coverage which the excess line law bars excess line brokers from selling, 2) coverages which are not recognized as legal types of insurance in New York, 3) coverages which are prohibited by public policy;
- Insurers will be directly required to treat payment of premium to the excess line broker as payment to the insurer.
The 14th Amendment was originally promulgated by the New York State Insurance Department on an emergency basis on July 22, 2011 and re-adopted several times thereafter in order to implement the provisions of the Non-Admitted and Reinsurance Reform Act of 2010 (“NRRA”) and New York legislation conforming New York Law to the NRRA. (See ELANY Bulletin No. 2011-22)
On July 17, 2013 the New York Department of Financial Services (“DFS”) published proposed changes to the 14th Amendment in the State Register (See ELANY Bulletin 2013-33). As a result of public comments received by the DFS, additional revisions were proposed to the 14th Amendment to the regulation and were published in the State Register on July 9, 2014.
The ELANY has compiled and consolidated Regulation 41 (11 NYCRR 27), inclusive of Amendments 1 through 14. To review the consolidated Regulation, please visit www.elany.org and refer to the Regulations navigation bar, then click on “Regulation 41.”