The Office of General Counsel issued the following opinion on July 21, 2004, representing the position of the New York State Insurance Department.

Re: Licensing Authority of United States Branches of Alien Insurers

Question Presented:

May a United States branch of an alien insurer, which is entered into the United States through New York, write risks located outside the United States where: 1) the premium is collected from an international company in the United States, 2) the policy is underwritten in the United States and 3) the policy is delivered in the United States?

Conclusion:

Yes, under those circumstances, a United States branch of an alien insurer, which is entered into the United States through New York, may write risks located outside the United States.

Facts:

The inquirer's client is a United States branch of an alien insurer that wishes to write a boiler and machinery insurance policy for an international company that has factories located both within and without the United States. We will assume that the United States branch is licensed to write boiler and machinery insurance. The international company wants one insurance policy that would cover all of its properties with aggregate coverage and deductibles. The premium would be collected from the foreign policyholder in the United States; the policy would be underwritten in the United States and the policy would be delivered in the United States. The policy, as so written, would generate premium taxes as well as the commerce inherent in its issuance. The United States branch has tentatively agreed to write such a policy basing the insurer's authorization on an Office of General Counsel (OGC) Opinion written by Deputy Superintendent and Chief Counsel Raymond Harris on January 8, 1957. The inquirer would like to know whether this opinion reflects the Department's current position on this issue.

Analysis:

N.Y. Ins. Law §107(a)(44) (McKinney 2000) provides as follows:

(a)(44) "United States Branch" means, as the context may require, 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. (emphasis supplied).

The license issued to a United States branch of an alien insurer provides as follows:

[T]he authority conferred by this license shall be limited to the writing of contracts issued for delivery in the United States, insuring risks of policyholders within the United States.

This language was added to all initial and renewal licenses issued to United States branches of alien insurers, effective July 1, 1956, pursuant to a letter, dated June 13, 1956, which stated that the writing powers of United States branches of alien insurers, whether they were licensed pursuant to Section 311(1)(h) 1 or Section 341(1)(d),2   are limited to issuing contracts for delivery in the United States to policyholders within the United States. The letter further stated that this interpretation applies to both direct writings and reinsurance.

In an Office of General Counsel Opinion, issued by Deputy Superintendent and Chief Counsel Raymond Harris, dated January 8, 1957, the Department opined as follows:

As to business produced through production sources in the United States where the policies are issued by United States branches of alien insurers in the United States and delivered to producers in the United States and the premiums are received by the United States branches in the United States for the account of either resident or non-resident policyholders, I am of the opinion that the underwriting of such risks comes within the licensing authority of such branches. . .

This opinion was clarified by a later OGC Opinion, dated October 25, 1973, written by Paul Donohue under Deputy Superintendent and General Counsel John Gemma. In that opinion, the inquirer asked whether the United States Branch of the General Insurance Company of Trieste and Venice (Assicurazioni Generali) may directly write policies of insurance of the kinds specified in its license insuring non-residents of the United States against risks located outside of the United States where: 1) the business is produced through production sources in the United States, 2) the policy is delivered to the producers in the United States and 3) the premiums are received by the branch in the United States. In response to that inquiry, the Department stated as follows:

It has been the policy of this Department that business produced through production sources in the United States where the policies are issued by United States branches of alien companies in the United States and the premiums are received by the U.S. branch in this country for the account of either resident or non-resident policyholders comes within the authority of the license granted by this Department to a U.S. branch of an alien insurer. Such authority would extend to the issuing of policies in the United States on risks located both within or without the United States. . .

When the Department again revisited the issue in 1995, it affirmed the OGC opinion written by Deputy Superintendent and Chief Counsel Raymond Harris, dated January 8, 1957. See OGC Opinion dated November 20, 1995. Thus, in accordance with the Department's longstanding position, a United States branch of an alien insurer may write risks located outside of the United States under the circumstances that you described.

For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.

1  Now Section 4102(c) and 4103(a)(4).

2  Now 4102(c), 4103(a)(4) and 4104(b) and (d).