The Office of General Counsel issued the following opinion on December 31, 2004, representing the position of the New York State Insurance Department.
Re: Placement of Business with an Unauthorized Alien Insurer
May an unauthorized alien insurer issue a liability insurance policy covering risks located in New York and other states, which policy would be obtained through a licensed New York insurance broker, issued in London and negotiated and delivered to the insured in New York, if neither the broker nor the alien insurer solicited the insured?
No. An unauthorized alien insurer may not issue such a policy for the reasons discussed below.
A New York resident wants to obtain liability insurance from an alien insurer located in Europe, covering risks located in New York and other east coast states and in California (possibly others), through a New York licensed insurance broker with an office located in London. We will assume that the alien insurer is authorized to transact business in its place of domicile. The policy will be issued in London and negotiated and delivered to the insured in New York. There will be no solicitation of the insured by the broker or the alien insurer in New York.
N.Y. Ins. Law § 1102(a)(McKinney 2000 and Supp. 2004) prohibits any person, firm, association, corporation or joint-stock company from doing an insurance business in this state, unless licensed as an insurer or exempted from licensing pursuant to the Insurance Law.
N.Y. Ins. Law § 1101(b)(1)(McKinney 2000 and Supp. 2004) defines the term "doing an insurance business", in pertinent part, as:
(A) making, or proposing to make, as an insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts. .
(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance. . .
(E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter. . . .
N.Y. Ins. Law § 1101(b)(2) (McKinney 2000 and Supp. 2004) provides certain exceptions for transactions performed by an unauthorized foreign or alien insurer if effected by mail from outside of New York, provided that the insurer is licensed by its place of domicile to transact an insurance business. N.Y. Ins. Law § 1101(b)(2) (McKinney 2000 and Supp. 2004) provides, in pertinent part, as follows:
(b)(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:
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(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. . .
The proposal would not be permissible under any of the relevant exceptions for the reasons discussed below:
Subparagraph (D): This exception applies only to transactions occurring subsequent to issue where the policy was issued outside of this state and the policy covered subjects of insurance or risks not resident or located in this state. Since the policy would be negotiated with the insured in New York prior to issuance and the policy would cover New York risks, this exception would not apply.
Subparagraph (E): Under this exception, the policies must be principally negotiated, issued and delivered without this state. This would not be the case here because negotiation would be conducted with the insured in New York and the policy would be delivered to the insured in New York.
Subparagraph (F): This is the exception for excess line placements. However, since an excess line broker would not be utilized, this exception would not apply.
Subparagraph (H): This exception applies to certain placements made by a licensed insurance broker, typically where the risk is located outside of New York. The specific conditions are contained in N.Y. Ins. Law § 2117(b) and (c) (McKinney 2000 and Supp. 2004). Here, although a licensed insurance broker would be used, this exception would not apply since the policy would cover New York risks.
Consequently, the unauthorized alien insurer may not issue the liability insurance policy that the inquirer described, as it would be doing an insurance business without a license in violation of N.Y. Ins. Law §§ 1101 and 1102 (McKinney 2000 and Supp. 2004).
For further information you may contact Senior Attorney Pascale Jean-Baptiste at the New York City Office.