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 opinion on February 7, 2003, representing the position of the New York State Insurance Department.

RE: Doing an Insurance Business

 Questions Presented:

1) What is the definition of "doing an insurance business" in New York State?

2) How can an alien insurer become authorized to do an insurance business in New York State?

3) On what basis does the New York Insurance Department determine the amount of statutory deposits that must be maintained by an alien insurer with a New York branch operation?

Conclusions:

1) N.Y. Ins. Law § 1101 (McKinney 2000 and Supp. 2003) defines "doing an insurance business" in New York. The statute also specifies acts which, when effected by mail from outside the state, will or will not constitute doing an insurance business in the state.

2) An alien insurer may be licensed in New York through a business unit known as a "United States branch". N.Y. Ins. Law § 107(a)(5) and (44) (McKinney 2000 and Supp. 2003). Specific requirements relating to licensing of an alien insurer are found in N.Y. Ins. Law § 1106 (McKinney 2000).

3) In order to be authorized to write one or more lines of insurance in New York, an insurer must establish and maintain statutory deposits. The amount of such deposits is determined based upon the lines of insurance to be written. See N.Y. Ins. Law Article 41 (McKinney 2000) for Property/Casualty Insurance companies and N.Y. Ins. Law Article 42 (McKinney 2000 and Supp. 2003) for Life Insurance companies, Health Insurance companies, and Legal Services Insurance companies.

Facts:

An advisory opinion not related to any specific fact situation was requested. Accordingly, one may wish to contact this department in the future to further elucidate the details of any specific matter that may arise.

Analysis:

The New York Insurance Law defines an "Alien insurer" as "... any insurer incorporated or organized under the laws of any foreign nation, or of any province or territory not included under the definition of

foreign insurer." N.Y. Ins. Law § 107(a)(5) (McKinney 2000 and Supp. 2003). A Canadian insurer would be classified as an alien insurer.

The statute defines a "United States branch" as "... the business unit through which business is transacted within the United States by an alien insurer, or the assets and liabilities of such insurer within the United States pertaining to such business or the management powers pertaining to such business and to such assets and liabilities or any combination of these three." N.Y. Ins. Law § 107(a)(44) (McKinney 2000 and Supp. 2003).

N.Y. Ins. Law § 1101 (McKinney 2000 and Supp. 2003) defines "doing an insurance business" in New York as follows:

(a) In this article: (1) "Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.

(2) "Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.

(3) "Contract of warranty, guaranty or suretyship" means an insurance contract only if made by a warrantor, guarantor or surety who or which, as such, is doing an insurance business.

The statute goes on to specify certain acts that, if effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of Section 302 of the New York Civil Practice Law and Rules. N.Y. Ins. Law § 1101(b)(1) (McKinney 2000 and Supp. 2002).

Of more relevance to this inquiry, the statute further states as follows:

(2) Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state, but section one thousand two hundred thirteen of this chapter shall nevertheless be applicable to such insurers:

(A) transactions by any life insurance company organized and operated, without profit to any private shareholder or individual, exclusively for the purpose of aiding any charitable, religious, educational or scientific institution organized and operated, without profit to any private shareholder or individual, by issuing insurance or annuity contracts directly from its home office, without agents or representatives in this state, only to or for the benefit of such institutions and to individuals engaged in their service;

(B) transactions with respect to group life, group annuity, group accident and health or blanket accident and health insurance (other than any transaction with respect to a group annuity contract funding individual retirement accounts or individual retirement annuities, as defined in section four hundred eight of the

Internal Revenue Code, funding annuities in accordance with subdivision (b) of section four hundred three of such code or providing a plan of retirement annuities under which the payments are derived wholly from funds contributed by the persons covered):

(i) where such groups conform to the definitions of eligibility

contained in;

(I) the following paragraphs of subsection (b) of section four

thousand two hundred sixteen of this chapter:

(aa) paragraph (1) or (2);

(bb) paragraph (3), if, with respect to those credit transactions entered into in this state, the policy fully conforms with the requirements of sections three thousand two hundred one, three thousand two hundred twenty and four thousand two hundred sixteen of this chapter;

(cc) paragraphs (4), (5), (6), (7), (8), (9) and (10).

(II) the following subparagraphs of paragraph (1) of subsection (c) of section four thousand two hundred thirty-five of this chapter:

(aa) subparagraph (A), (B), (C) or (D);

(bb) subparagraph (E), if, with respect to those credit transactions entered into in this state, the policy fully conforms with the requirements of sections three thousand two hundred one, three thousand two hundred twenty-one and four thousand two hundred thirty-five of this chapter;

(cc) subparagraphs (F), (G) and (H).

(III) section four thousand two hundred thirty-seven (except subparagraph (F) of paragraph three of subsection (a) thereof) or four thousand two hundred thirty-eight (except paragraphs six and seven of subsection (b) thereof) of this chapter; and

(ii) where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business;

(C) transactions involving the continuance or servicing of life or accident and health insurance policies or annuity contracts lawfully issued or delivered in this state by an authorized insurer and occurring subsequent to the termination of such insurer's authority to do an insurance business in this state;

(D) transactions with respect to policies or annuity contracts lawfully issued without this state occurring subsequent to issue, if, at the time of issue, such policies or contracts covered subjects of insurance or risks not resident or located in this state;

(E) transactions with respect to policies of insurance on risks located or resident within or without this state (except master policies or contracts of group insurance which are subject to the requirements of subparagraph (B) hereof), which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business;

(F) transactions authorized by section two thousand one hundred five of this chapter with respect to excess lines insurance;

(G) transactions with respect to the reinsurance of risks of authorized insurers to the extent that such reinsurance is permitted by this chapter;

(H) transactions with respect to insurance contracts negotiated or placed pursuant to subsection (b) or (c) of section two thousand one hundred seventeen of this chapter;

(I) transactions with respect to any policy of insurance or annuity contract issued prior to September first, nineteen hundred seventy.

N.Y. Ins. Law § 1101(b)(2) (McKinney 2000 and Supp. 2002)(emphasis added).

The statute also contains specific provisions relating to service contracts, and treats issues relating to insurance coverage provided without compensation being paid by the insured party, "gap" coverage, and in-state back office operations provided by unauthorized insurers providing coverage on an excess lines basis. N.Y. Ins. Law § 1101(b)(3) through (5)(McKinney 2000 and Supp. 2003).

In order to transact an insurance business in this state, any person firm, association, corporation or joint-stock company must have a license issued and in force. The requirements for licensing are specified in N.Y. Ins. Law § 1102 (McKinney 2000). Additional requirements are established for alien insurers seeking a license to do business in this state. N.Y. Ins. Law § 1106 (McKinney 2000).

In conjunction with the other licensing requirements, insurers must maintain minimum capital and surplus deposits in New York. These minimum requirements are based upon the kinds of insurance that the company is licensed to write in New York and are not related to the volume of business to be written. There are separate requirements for Property/Casualty insurance companies, see N.Y. Ins. Law Art. 41 (McKinney 2000) and for Life Insurance Companies, Accident and Health Insurance Companies and Legal Services Insurance Companies, see N.Y. Ins. Law Art. 42 (McKinney 2000 and Supp. 2002). Specific rules governing the maintenance of statutory deposits by alien insurers are established in N.Y. Ins. Law § 1320(McKinney 2000).

In addition to the minimum deposits required to do business in New York, insurers may be required to maintain additional deposits based upon the anticipated or actual volume of business written in New York. This is determined by the Department's financial examiners when the insurer submits a "plan of operation" regarding its New York business.

One of the queries submitted concerns the writing of different New York "risks" by a company located in Canada. The issue was posed with respect to life insurance, property insurance and motor vehicle insurance. With regard to coverage on a motor vehicle registered in New York, statutory liability coverage must be obtained from a company licensed in New York pursuant to the requirements of the Motor Vehicle Financial Security Act. N.Y. Veh. & Traf. Law § 310 et al. (McKinney 1996). The policy could not be written by an unlicensed alien insurer. It would have to be issued by the New York branch.

With regard to life insurance or property insurance not required by law, N.Y. Ins. Law § 1101(b)(2) (McKinney 2000 and Supp. 2003), quoted above, should be focused upon. That section establishes that it shall not constitute doing an insurance business in New York if an alien insurer, duly licensed to transact the business of insurance in and by the laws of its domicile, effects by mail from outside the state:

(E) transactions with respect to policies of insurance on risks located or resident within or without this state (except master policies or contracts of group insurance which are subject to the requirements of subparagraph (B) hereof), which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business;

N.Y. Ins. Law § 1101(b)(2)(E)(McKinney 2000 and Supp. 2003).

If a New York resident went to Canada to obtain insurance from an alien insurer and the policy was principally negotiated, issued and delivered outside of New York, then the transaction would not be doing an insurance business in New York, regardless of whether the alien insurer maintained a New York branch.

For further information you may contact Associate Attorney Samuel Wachtel at the New York City Office.