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Opposition mounts to New York state's recasting of excess lines regulation.

Opposition to the New York Insurance Departments efforts to rewrite rules for excess lines operations included testimony of the Professional Wholesalers Association of New York State on the proposed re-promulgation of Regulation 41.

Some 15 insurance representatives testified last month at the Department's hearing on the re promulgator., which was dictated by the enactment of revisions to Section 2118 of the Insurance Law aimed at simplifying procedures for excess tine brokers in the unauthorized market by reducing paper work as well as the number of required declinations by primary market insurers.

Industry representative & argued that the changes were illegal, inconsistent with legislative intent, short-sighted, anti-consumer, impractical and a roadblock to the conduct of a necessary alternative marketplace.

Mark Smith, president of the wholesalers group, charged that the regulation "totally disregards the legislative intent by making it literally impossible for New York excess line brokers to practically place business in non-admitted markets and comply with proposed changes of Regulation 41." Smith noted that all members of his association are licensed as excess line brokers.


Smith charged that the Department was "overzealous" when it repromulgated Reg. 41 to implement legislative changes reducing the number of declinations from five to three; eliminating the requirement that the admitted market keep written records of the declinations and eliminating the three-year seasoning requirement for new non-admitted carriers.

Smith argued the proposed Reg. 41 changes the definition of which authorized companies one can get a declination form, and requires that all affidavits must be in the possession of the excess line broker before coverage can be placed.

In a statement submitted to Insurance Superintendent James P Corcoran, Smith said the affidavit requirement "is practically impossible as much of the information necessary to complete the form is unavailable until coverage can be placed."

Smith said the Department's handling of the section pertaining to "illegal coverage" was another example of its over-zealousness. "Paragraph(c) of Section 27.6 would require any policy placed with an unauthorized insurer to conform to the minimum requirements of the N. Y. Insurance Law and Insurance Department regulations ... This basically eliminates the concept of a non-admitted marketplace and in effect, would make placement with an unauthorized insurer no different from placing a line with an admitted carrier (except for Guaranty Fund Protection) promoting competition between the two markets. The non-admitted market exists to complement the admitted market, not compete with it. The past two years have practically demonstrated the value of a solid, well-established, excess and surplus marketplace When the admitted market's capacity dried up prior to 1985, the non-admitted market responded to the demand from the consumer for insurance protection and provided additional capacity and specifically wrote the different lines that the admitted market would not."

Smith charged that Reg. 41 will force insurance buyers to either deal directly with foreign or alien insurers or deal with brokerage houses located outside of New York State. "In any event, we lose," he said.

The Department, according to Smith, failed to take into account that most excess line licensees do not not deal directly with the insured's broker, "a fact not incorporated into the wording of Reg. 41."

Smith said the wholesalers association does not disagree with everything proposed by the Department. "We support the Department's increase of surplus requirements. The strength of our industry lies, in (he strength of the non-admitted markets we place business with. Presently, 1 firmly believe there exists a nucleus of domestic non-admitted insurers writing business in New York State that is financially sound and practically as professional as any admitted market," he stated.

Smith urged the Department to appoint a committee, comprised of Department members and industry representatives, to review the new regulation "line by line, for practical and legal purposes, and to come up with a workable Regulation."

Richard Bouhan, government relations director for the National Association of Professional Surplus Lines Offices. Ltd., also took issue with the requirements pertaining to "illegal coverage." The thrust of the requirements in the area, he said, "is to cut the heart and soul out of the excess line market. By definition, the excess line carriers write free from rate and form restrictions. If excess line carriers are required to write on the same basis as authorized or admitted carriers, they are, m reality not excess line carriers and the market in which they operate is not an excess line market."

Bouhan, commenting on the superintendent's authority to establish a commercial risk JUX. said: "Should this SUA be implemented, we would urge that it be structured in a manner that allows the excess line market to have the opportunity to accept a risk before it is offered to the Joint Underwriting Association."

Commenting on the provision putting the number of required declinations at three, Bouhan said the legislation also gives the superintendent authority to adjust the number of declinations up or down from three, depending on the particular coverage. "We would urge the superintendent to look closely at those coverages in which availability is limited or non-existent in the admitted market and reduce the number of declinations required in these situations to a minimum," he said.

Bouhan also urged the superintendent to determine whether or not an "export list" could be established. "Coverages on such a list, which have been determined unavailable, could be placed in the excess line market with
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Title Annotation:LOOKING BACK ... Insurance Advocate, 25 years ago
Publication:Insurance Advocate
Geographic Code:1U2NY
Date:Nov 28, 2011
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