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

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on January 13, 2006, representing the position of the New York State Insurance Department.

Re: Placement of Business with an Unauthorized Alien Insurer through an Excess Line Broker.

Questions Presented:

1. May an excess line broker procure liability insurance for a New York insured from an unauthorized alien insurer that is not eligible to issue insurance coverage through the excess line market?

2. If the answer to question no. 1 is no, may the unauthorized alien insurer directly provide insurance to a person in New York, without the use of a New York licensed insurance broker or excess line broker?

3. May the unauthorized alien insurer provide insurance to a person in New York through a foreign insurance broker that is not licensed in New York?

Conclusions:

1. No. An excess line broker may not procure liability insurance from an unauthorized alien insurer that is not eligible to issue insurance coverage through the excess line market.

2. No. An unauthorized alien insurer may not directly provide insurance to a person in New York, without the use of a New York licensed insurance broker or excess line broker.

3. No. An unauthorized alien insurer may not provide insurance to a person in New York through a foreign insurance broker that is not licensed in New York.

Facts:

A New York insured wants to obtain substantial professional liability insurance coverage, spread across several layers, and the nature of the insured's business is such that the capacity is not available from New York authorized insurers who are either unable or unwilling to participate. Although some coverage will be placed with authorized insurers and some with eligible excess line insurers, the coverage will not be sufficient. In order to provide the client with the requested limits, the inquirer would like to obtain additional coverage from unauthorized alien insurers, who are not eligible to issue insurance coverage through the excess line market. The inquirer also stated that for purposes of this question, we can assume that: (1) the unauthorized alien insurer is licensed in its country of domicile; (2) the coverage is to be obtained by the New York licensed excess line broker via a properly licensed foreign broker in London/Bermuda; and (3) the policies are to be issued by the foreign broker to the New York insured via the New York excess line broker.

Analysis:

N.Y. Ins. Law § 1102(a) (McKinney 2000 and Supp. 2006) 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. 2006) defines the term "doing an insurance business", in pertinent part, as:

(A) making, or proposing to make, as 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. 2006) 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. 2006) 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:

* * * *

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

* * * *

Section 1101(b)(2)(F) provides an exception for insurance coverage placed through the excess line market and concomitantly, N.Y. Ins. Law § 2105(a) (McKinney 2000 and Supp. 2006) authorizes excess line brokers to procure insurance coverage from unauthorized insurers. In placing the insurance, however, the excess line broker must comply with the requirements of N.Y. Comp. Codes R. & Regs. tit. 11, Part 27 (Regulation 41) and N.Y. Ins. Law §§ 2105, 2118 and 2130 (McKinney 2000 and Supp. 2006). The onus is on the excess line broker to ensure that the unauthorized insurer satisfies the financial and other requirements contained in N.Y. Comp. Codes R. & Regs. tit. 11, Part 27 (Regulation 41). If the insurer does not meet these requirements, the excess line broker may not place insurance with the unauthorized insurer.

Moreover, the unauthorized insurer may not directly provide insurance under these circumstances in New York, without the use of a New York licensed excess line broker, as this activity would not fall within any of the other mail order exceptions listed in Section 1102(b)(2). Under the proposed scenario, the unauthorized insurer would be doing an insurance business in this state in making the insurance contracts directly with the insureds, in violation of Section 1102. See OGC Opinion No. 03-06-26, dated June 26, 2003, entitled "Direct Placement of New York Insured with an Alien Insurer."

Additionally, if the unauthorized alien insurer were to place insurance through a foreign insurance broker that is not licensed in New York, not only would the insurer be in violation of Section 1102, but the insurance broker would be in violation of Section 2102, which prohibits acting as an insurance producer in New York without a license.1 The foreign insurance broker would also be in violation of Section 2117(a), which provides as follows:

(a) No person, firm, association or corporation shall in this state act as agent for any insurer or health maintenance organization which is not licensed or authorized to do an insurance or health maintenance organization business in this state, in the doing of any insurance or health maintenance organization business in this state or in soliciting, negotiating or effectuating any insurance, health maintenance organization or annuity contract or shall in this state act as insurance broker in soliciting, negotiating or in any way effectuating any insurance, health maintenance organization or annuity contract of, or in placing risks with, any such insurer or health maintenance organization, or shall in this state in any way or manner aid any such insurer or health maintenance organization in effecting any insurance, health maintenance organization or annuity contract.

For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.


1  Pursuant to N.Y. Ins. Law § 2101(k) (McKinney Supp. 2006) the term "insurance producer" is defined as "an insurance agent, insurance broker, reinsurance intermediary, excess lines broker or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance."  Although Section 2101 provides certain exemptions, they are not relevant herein.