The Office of General Counsel issued the following opinion on June 8, 2006 representing the position of the New York State Insurance Department.
Re: Windstorm Insurance
1) May a foreign property/casualty insurance company write only windstorm coverage in the State of New York?
2) If the answer to question 1 is "yes," would the insurer be required to participate in the New York Property Insurance Underwriting Association ("NYPIUA") and, if so, to what extent?
1) Yes. An insurer licensed to write fire insurance may also be licensed to write miscellaneous property insurance, including windstorm coverage. The insurer may choose to write only windstorm coverage.
2) Yes. Any insurer writing windstorm coverage would be required to participate in the NYPIUA. Its participation shall be in the proportion that the net direct premiums of the member written in the preceding calendar year bear to the aggregate net premiums written in the state by all members of NYPIUA.
A foreign insurance company ("the insurer") writes only windstorm insurance coverage in its state of domicile. The insurer wishes to become licensed in New York and to write only windstorm insurance coverage.
N.Y. Ins. Law § 4102 (McKinney Supp. 2006) states, in relevant part, as follows:
§ 4102. Powers(a) A property/casualty insurance company may be organized and licensed to write any one or more basic kinds of insurance.
(b) A property/casualty insurance company organized and licensed to write any one or more basic kinds of insurance, may be licensed to write non-basic kinds of insurance, subject to the following requirements (references are to paragraphs of subsection (a) of section one thousand one hundred thirteen of this chapter describing kinds of insurance):
* * *
(2) If licensed to write fire (4), it may be licensed to write miscellaneous property (5), water damage (6), collision (12), motor vehicle and aircraft physical damage (19) and inland marine as specified in marine and inland marine (20);....
Fire insurance is one of the "basic kinds of insurance", N.Y. Ins. Law § 4101(a) (McKinney Supp. 2006). "Miscellaneous property insurance" includes loss of or damage to property resulting from windstorm, N.Y. Ins. Law § 1113(a)(5)(A) (McKinney Supp. 2006).
There is nothing in the Insurance Law requiring an insurer to write all of the kinds of insurance that it is authorized to write, or any particular kind, or all types of any particular kind of insurance. Therefore, an insurer authorized to write fire and miscellaneous property insurance could choose to only write windstorm coverage in New York.
With respect to whether an insurer writing only windstorm coverage would be required to participate in NYPIUA and, if so, to what extent, N.Y. Ins. Law § 5402 (a) (McKinney Supp. 2006) states as follows:
(a) The joint underwriting association known as the New York property insurance underwriting association is continued, consisting of all insurers authorized to write and engaged in writing within this state, on a direct basis, fire and extended coverage insurance, including insurers covering such perils in homeowners and commercial multiple peril package policies but excluding assessment cooperative fire insurance companies transacting business pursuant to article sixty-six of this chapter. Every such insurer shall be and remain a member of the association as a condition of its authority to continue to transact fire, extended coverage and homeowners insurance in this state.
This provision requires participation in NYPUIA by any insurer that writes either fire or extended coverage insurance, or some combination of both types of coverage. Extended coverage insurance includes windstorm coverage. N.Y. Ins. Law § 5401(b) (McKinney Supp. 2006). An insurers responsibility to participate is limited by the provisions of N.Y. Ins. Law § 5405 (McKinney Supp. 2006) which reads, in relevant part, as follows:
§ 5405 Participation
(a) Every member of the association shall participate in its writings, expenses, profits and losses in the proportion that the net direct premiums of the member (but excluding that portion of premiums attributable to the operation of the association) written during the preceding calendar year bear to the aggregate net direct premiums written in this state by all members of the association. Each member's participation in the association shall be determined annually on the basis of such net direct premiums written during the preceding calendar year as disclosed in the annual statements and other reports filed by the member with the superintendent.
(b) No member shall be obligated in any year to reimburse the association on account of its proportionate share in the deficit from operations of the association in that year in excess of one percent of its surplus to policyholders. The aggregate amount not so reimbursed shall be reallocated among the remaining members in accordance with the method of determining participation prescribed in this section, after excluding from the computation the total net direct premiums of all members not sharing in such excess deficit. In the event that the deficit from operations allocated to all members in any calendar year shall exceed one percent of their respective surplus to policyholders, the amount of such deficit shall be allocated to each member in accordance with the method of determining participation prescribed in this section.
A companys participation would be based upon calculation of the net direct premiums it had written during the preceding calendar year as a percentage of the aggregate net direct premiums written in this state by all members of the association, as further limited by the "one percent of surplus to policyholder" limitation in subsection (b) of section 5405.
Please note that Article 54 of the Insurance Law is scheduled to "sunset" (expire) on June 30, 2006, N.Y. Ins. Law § 5411 (McKinney Supp. 2006). Consult the NYPIUA website (http://www.nypiua.com) for information concerning extender legislation.
For further information one may contact Supervising Attorney Sam Wachtel at the New York City Office.