New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

 The Office of General Counsel issued the following informal opinion on December 18, 2002, representing the position of the New York State Insurance Department.

Re: Managing General Agent

Question Presented:

Would a Managing General Agent (hereinafter MGA) who is properly licensed as an insurance agent in New York, be exempt from the requirements of N.Y. Comp. Codes R. & Regs. tit. 11 § 33 et seq. (2002), Regulation 120, if such MGA is a member of the insurer’s holding company system?

CONCLUSION

Yes. A MGA who is properly licensed as an insurance agent in New York would be exempt from the requirements of N.Y. Comp. Codes R. & Regs. tit. 11 § 33 et seq. (2002), Regulation 120, if such MGA is a member of the insurer’s holding company system.

FACTS

The inquirer represents a corporation, which is an MGA for an insurance company. Both of these companies are owned by the holding company. The inquirer wants to know if the MGA is exempt from requirements of Regulation 120. For purposes of this letter, it is assumed that the MGA is properly licensed as an insurance agent by this State.

ANALYSIS

11 NYCRR 33, Regulation 120 sets forth the definitions for Regulation 120. Recently, the Insurance Department promulgated, on an emergency basis, amendments to 11 NYCRR 33, Regulation 120. Changes to the existing regulation are indicated below with underlining. Any print that is enclosed in brackets, [ ], is language that will be deleted from the regulation when it is adopted shortly, as anticipated, on a permanent basis. Pursuant to 11 NYCRR 32.2:

(a) Insurer means an authorized insurer as defined in section 107(a)(10) of the Insurance Law, and, for purposes of this Part, shall also include every group, association or other organization of insurance companies that engages in joint underwriting or joint reinsurance in accordance with section 2317(a) of the Insurance Law.

. . . .

(c) Managing general agent (MGA) means any person, firm, association or corporation [who or which] that:

(1) manages all or part of the insurance business of an insurer (including the management of a separate division, department or underwriting office)[and];

(2) acts as an insurance agent as defined in section 2101(a) of the Insurance Law for such insurer, whether known as a managing general agent, manager, or other similar term, or acts as an insurance broker as defined in section 2101(c) of the Insurance Law; and

(3) with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and accept or reject risks on behalf of the insurer (underwrites) an amount of gross direct written premium equal to or more than five percent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced:

(i) Adjusts or pays claims in excess of $25,000, or

(ii) Negotiates reinsurance on behalf of the insurer.

Pursuant to 11 NYCRR 33.3(a), requirements for MGAs include the following:

No insurer shall appoint or continue to use the services of [any managing general agent] an MGA to act for it in this State, either directly or indirectly through subagents of the [managing general agent] MGA, unless the [managing general agent] MGA has an insurance agent’s license issued by this State to represent said insurer for the appropriate kinds of insurance.

. . . .

(3)] An insurer that appoints [a managing general agent] an MGA to act for it in this State, either directly or through subagents of the [managing general agent] MGA, shall complete and file [Form 1, herein,] the form required by subdivision (c) of this section with this department within 30 days of the appointment. An amended form shall be filed within 30 days after any change including termination of appointment.

. . . .

(c) [Form 1 is repealed in its entirety.] A filing required by subdivision (b) of this section, relative to the appointment of an MGA, shall be in a form prescribed by the superintendent.

. . . .

Pursuant to 11 NYCRR 33.4, there are exceptions to the MGA registration requirement. Pursuant to 11 NYCRR 33.4:

(a) The provisions of this Part shall not apply to:

. . . .

(3)] a person who is a member of the same holding company system (as defined in section 1501(a)(6) of the Insurance Law) as the insurer:

  . . . .

Pursuant to N.Y. Ins. Law § 1501(a)(6) (McKinney 2000), a "’[h]olding company system’ means a holding company together with its controlled insurers and controlled persons." N.Y. Ins. Law § 1501(a)(4) (McKinney 2000) defines a "’[c]ontrolled insurer’" as ". . . an authorized insurer controlled directly or indirectly by a holding company." N.Y. Ins. Law § 1501(a)(5) (McKinney 2000) defines a "’[c]ontrolled person’" as ". . . any person other than a controlled insurer, who is controlled directly or indirectly by a holding company." N.Y. Ins. Law  § 1501(a)(3) (McKinney 2000) defines a "’[h]olding company’" as ". . . any person who directly or indirectly controls any authorized insurer." Pursuant to N.Y. Ins. Law § 1501(a)(2) (McKinney 2000):

"Control", including the terms "controlling", "controlled by" and "under common control with", means the possession direct or indirect of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract (except a commercial contract for goods or non-management services) or otherwise; . . .

If a MGA as defined by 11 NYCRR 33.2, is properly licensed as an insurance agent in New York, and is a member of a holding company system that meets the definitions of N.Y. Ins. Law § 1501 (McKinney 2000), then such MGA is exempted from the requirements of N.Y. Comp. Codes R. & Regs. tit. 11 § 33 et seq. (2002), Regulation 120.

According to the records of the Department, at this time the inquirer’s MGA is a member of such holding company system, and is therefore, in regard to insurers within the holding company system, exempt from the requirements of N.Y. Comp. Codes R. & Regs. tit. 11 § 33 et seq. (2002), Regulation 120. If facts surrounding the inquirer’s situation change, the inquirer will have to re-evaluate the inquirer’s exemption status.

For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.