NEW YORK STATE
INSURANCE DEPARTMENT

SECOND AMENDMENT TO REGULATION NO. 118
11 NYCRR PART 89

AUDITED FINANCIAL STATEMENTS

I, GREGORY V. SERIO, Acting Superintendent of Insurance, pursuant to the authority granted by sections 201, 301, 307(b) and 4710(a)(2) of the Insurance Law of the State of New York, do hereby promulgate the following Second Amendment to Part 89 of Title 11 of the Official Compilation of Codes, Rules and Regulations (Regulation No. 118) to take effect May 9, 2001.

(NEW MATTER IS UNDERSCORED. MATTER IN BRACKETS IS DELETED)

Section 89.1 Applicability and filing requirements.

The following licensed insurers shall be subject to this Part and shall, on or before [June 30th] May 31st of each year make a filing in satisfaction of section 307(b) of the Insurance Law. Life insurance companies and fraternal benefit societies shall file with the New York City office of the Life [Insurance and Companies] Bureau. [Accident and health insurance companies, property/casualty] Property/casualty insurance companies, financial guaranty insurance companies, [Article 43 Corporations,] reciprocal insurers [and Lloyds underwriters], title insurance corporations and mortgage guaranty insurance companies shall file with the New York City office of the Property [Companies] Bureau. Accident and health insurance companies, Article 43 Corporations and Municipal Cooperative Health Benefit Plans shall file with the New York City office of the Health Bureau. Co-operative property/casualty insurance companies shall file with the Albany office of the Property [Companies] Bureau.

Section 89.2 Requirement for independent certified public accountant.

Every insurer subject to this Part shall retain an independent Certified Public Accountant (CPA) who agrees by written contract with such insurer to comply with the provisions of section 307(b) of the Insurance Law, this Part and the Code of [Ethics and] Professional [Standards] Conduct adopted by the American Institute of Certified Public Accountants (AICPA). Such contract must specify that:

(a) on or before [June 30th] May 31st, the CPA shall provide an audited financial statement of such insurer and of any subsidiary required by section 307(b)(1) of the Insurance Law [and] together with an opinion on the financial statements of such insurer and any such subsidiary for the prior calendar year and an evaluation of the insurer’s and any such subsidiary’s accounting procedures and internal control systems as are necessary to the furnishing of the opinion;

(b) any determination by the CPA that the insurer has materially misstated its financial condition as reported to the superintendent or that the insurer does not meet minimum capital [and] or surplus to policyholder requirements set forth in the Insurance Law shall be given by the CPA, in writing, to the superintendent within 15 calendar days following such determination; and

(c) the workpapers and any communications between the CPA and the insurer relating to the audit of the insurer shall be made available for review by the superintendent at the offices of the insurer, at the Insurance Department or at any other reasonable place designated by the superintendent. The CPA must retain for review such workpapers and communications [for a period of not less than five (5) years] in accordance with the provisions of Part 243 of this Title (Regulation 152). More specifically, such workpapers and communications must be retained by the CPA for the period specified in sections 243.2(b)(7) and (c) of this Title. For the purposes of this subdivision, the workpapers and communications shall be deemed to have been created on the date the filing required by section 89.2(a) of this Part was submitted to the superintendent.

Section 89.3 Exemptions.

(a) [Any] An assessment co-operative property/casualty insurer otherwise subject to this Part with less than $250,000 in direct premiums written in New York State during the subject calendar year and less than 500 policyholders or reinsurance contract holders at the end of such calendar year shall, in lieu of the required filing, submit an affidavit sworn to by a responsible officer of the insurer specifying the amount of direct premiums written in New York State and number of policyholders or reinsurance contract holders.

(b) Any insurer otherwise subject to this Part and not eligible for an exemption under subdivision (a) of this section may submit to the superintendent an exemption application, demonstrating that compliance with sections 89.1 and 89.2 of this Part would cause a financial or organizational hardship. Applications for hardship exemptions must be filed with the department prior to the end of the calendar year for which the exemption is being requested. The superintendent will render a written finding within 60 days after submission of such an application.

I, Gregory V. Serio, Acting Superintendent of Insurance of the State of New York, do hereby certify that the forgoing is the Second Amendment to 11 NYCRR 89 (Regulation 118), promulgated by me on April 12, 2001, pursuant to the authority granted by sections 201, 301, 307(b) and 4710(a)(2) of the Insurance Law, to take effect May 9, 2001.

Pursuant to the provisions of the State Administrative Procedure Act, prior notice of the proposed amendment was published in the State Register on February 14, 2001. No other publication or prior notice is required by statute.

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Gregory V. Serio

Acting Superintendent of Insurance

April 12, 2001