The Office of General Counsel issued the following opinion on October 30, 2003, representing the position of the New York State Insurance Department.
Re: Authorized Insurance Carrier
1. Is ABC Insurance Company ("ABC Co.") authorized to do business in the State of New York?
2. Is the holding of an insurance license synonymous with being authorized to do business as an insurer in the State of New York?
1. No, ABC Co. is not authorized to do business in the State of New York in that it is not licensed as an insurer by the State of New York.
2. Yes, the term "authorized insurer" includes an insurer that is licensed to do the business of insurance in New York State.
The inquiry stems from contractual language that apparently requires an organization to obtain insurance from an "admitted carrier in the State of New York." This organization desires clarification as to any relevant definitions under the New York Insurance Law.
ABC Co. is, according to the records of this Department, not a licensee of the Department and is therefore not authorized to engage in the business of insurance in this state. The Departments directory of licensed insurers may be accessed through the Departments website at the following address: www.ins.state.ny.us.
The New York Insurance Law generally requires that only licensed companies may engage in the business of insurance in this state. As defined in N.Y. Insurance Law § 107(a)(10), an "authorized insurer" is:
[A]n insurer authorized as such to do an insurance business in this state in compliance with this chapter, by reason of a license so to do issued and in force pursuant to the laws of this state or of a corporate charter granted and in force pursuant to the laws of this state, but not including any insurer herein exempted from compliance with the requirement that it obtain a license to do business.
N. Y. Ins. Law § 107(a)(10) (McKinney 2003).
The licensure requirement is set forth in N.Y. Ins. Law § 1102, which provides, in pertinent part, as follows:
(a) No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, or exempted by the provisions of this chapter from such requirement. Any person, firm, association, corporation or joint-stock company which transacts any insurance business in this state while not authorized to do so by a license issued and in force pursuant to this chapter, or exempted by this chapter from the requirement of having such license, shall, in addition to any other penalty provided by law, forfeit to the people of this state the sum of one thousand dollars for the first violation and two thousand five hundred dollars for each subsequent violation.
(b) No corporation organized under any law of this state shall do an insurance business outside this state unless so authorized pursuant to the provisions of this chapter or exempted by the provisions of this chapter from such requirement.
. . . .
(d) . . . the superintendent may issue a license to any insurer to do in this state the kinds of insurance business for which such insurer is qualified under the provisions of this chapter and under its charter. Every such license shall contain the name of the licensee, its home office address, the state or country under whose laws it was organized, the kinds of insurance business, as defined in this chapter, which it is authorized to do in this state, and the term of such license.
N.Y. Ins. Law § 1102 (McKinney 2000).
Although an unauthorized insurer may not engage in the business of insurance in this state, there are often occasions where risks in this state are insured by unauthorized insurers. This is known as "excess line" coverage. N.Y. Ins. Law § 2118 (McKinney 2000) recognizes that in certain prescribed situations, an excess line broker may procure insurance from an unauthorized insurer. The excess line market is intended to provide coverage when no coverage is available from an authorized insurer. When an excess line broker desires to place business with an unauthorized insurer, the broker must comply with the provisions of N.Y. Ins. Law § 2118(b) (McKinney Supp. 2003) and N.Y. Comp. R. & Regs. tit. 11, Part 27 (1999) (Regulation 41), which require that a diligent effort be made to procure insurance from an authorized insurer and permit placement with an unauthorized insurer only when coverage can not be procured from the authorized-insurer market. These provisions require that the broker first obtain three declinations from authorized insurers prior to placing the coverage with an unauthorized insurer.
For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.