Summary of Fourteenth Amendment to 11 NYCRR 27 (Insurance Regulation 41)

 On July 21, 2010, President Obama signed into law the federal Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), which contains the Nonadmitted and Reinsurance Reform Act of 2010 ("NRRA"). The NRRA prohibits any state, other than the home state of an insured, from requiring a premium tax payment for excess (or "surplus") line insurance. The NRRA also subjects the placement of excess line insurance solely to the statutory and regulatory requirements of the insured's home state, and declares that only an insured's home state may require an excess line broker to be licensed to sell, solicit, or negotiate excess line insurance with respect to such insured.

In addition, the NRRA provides that an excess line broker seeking to procure or place excess line insurance for an exempt commercial purchaser ("ECP") need not satisfy any state requirement to make a due diligence search to determine whether the full amount or type of insurance sought by the ECP may be obtained from admitted insurers if: (1) the broker procuring or placing the excess line insurance has disclosed to the ECP that the insurance may be available from the admitted market, which may provide greater protection with more regulatory oversight; and (2) the ECP has subsequently requested in writing that the broker procure the insurance from or place the insurance with an excess line insurer.

On March 31, 2011, Governor Andrew M. Cuomo signed into law Chapter 61 of the Laws of 2011, Part I of which amended the Insurance Law to conform to the NRRA.

Insurance Regulation 41 (11 NYCRR Part 27) currently consists of 24 sections and one appendix addressing the regulation of excess line insurance placements.

The Department of Financial Services ("Department") amended Section 27.0 to discuss the NRRA and Chapter 61 of the Laws of 2011.

The Department amended Section 27.1 to delete language in the definition of "eligible", delete "qualified United States financial institution" and "letter of credit" as defined terms, and to add three new defined terms: "exempt commercial purchaser," "insured's home state," and "United States."

The Department amended Section 27.2(a) to change a reference from "Insurance Department" to "Department of Financial Services."

The Department amended Section 27.3 to provide an exception for an ECP consistent with Insurance Law Section 2118(b)(3)(F), clarify that the requirements set forth in this section apply when the insured's home state is New York, and change a reference from "Insurance Department" to "Department of Financial Services."

The Department amended Section 27.4 to clarify that the requirements set forth in this section apply when the insured's home state is New York.

The Department amended Section 27.5 to: (1) clarify that the requirements set forth in this section apply when the insured's home state is New York; (2) with regard to an ECP, require an excess line broker or the producing broker to affirm in part A or part C of the affidavit that the ECP was specifically advised in writing, prior to placement, that insurance may or may not be available from the authorized market that may provide greater protection with more regulatory oversight; (3) require an excess line broker to identify the insured's home state in part A of the affidavit; and (4) clarify that the premium tax is to be allocated in accordance with Section 27.9 of Insurance Regulation 41 for insurance contracts that have an effective date prior to July 21, 2011.

The Department amended Section 27.6 to clarify that the requirements set forth in this section apply when the insured's home state is New York.

The Department amended Section 27.7(b) to revise the address to which reports required by Section 27.7 should be submitted and to change a reference from "Insurance Department" to "Department of Financial Services."

The Department amended Section 27.8 to: (1) require a licensed excess line broker to file electronically an annual premium tax statement, unless the Superintendent of Financial Services (the "Superintendent") grants the broker an exemption pursuant to Section 27.21 of Insurance Regulation 41; (2) acknowledge that payment of the premium tax may be made electronically; and (3) change a reference to "Superintendent of Insurance" to "Superintendent of Financial Services."

The Department amended Section 27.9 to clarify how an excess line broker must calculate the taxable portion of the premium for: (1) insurance contracts that have an effective date prior to July 21, 2011; and (2) insurance contracts that have an effective date on or after July 21, 2011 and that cover property or risks located both inside and outside the United States.

The Department amended Sections 27.10, 27.11, and 27.12 to clarify that the requirements set forth in these sections apply when the insured's home state is New York. The Department also amended Section 27.11 to prohibit an unauthorized insurer from providing coverage if the coverage is prohibited by law, when the insured's home state is New York.

The Department amended Section 27.13 to: (1) clarify that the requirements set forth in this section apply when the insured's home state is New York; (2) remove certain information from the list of information that an excess line broker must obtain and review prior to placing insurance with an unauthorized insurer; and (3) delete the prohibition against an excess line broker placing business with an excess line insurer unless the insurer has filed with the Superintendent a current listing that sets forth certain individual policy details.

The Department repealed current Section 27.14 and added a new Section 27.14 entitled, "Duty of Unauthorized Insurers," which would affirmatively require an excess line insurer to file electronically with the Superintendent a current listing that sets forth certain individual policy details.

The Department repealed Sections 27.15 and 27.16.

The Department renumbered Sections 27.17, 27.18, 27.19, 27.20, and 27.21 as Sections 27.15, 27.16, 27.17, 27.18, and 27.19, and amended these sections to clarify that the requirements set forth in this section apply when the insured's home state is New York.

The Department renumbered Section 27.22 as Section 27.20.

The Department repealed current Section 27.23 and added a new Section 27.21 entitled, "Exemptions from electronic filing and submission requirements."

The Department renumbered Section 27.24 as Section 27.22.

The Department amended the excess line premium tax allocation schedule set forth in appendix four to apply to insurance contracts that have an effective date prior to July 21, 2011.

The Department added a new appendix five, which sets forth an excess line premium tax allocation schedule to apply to insurance contracts that have an effective date on or after July 21, 2011 and that cover property and risks located both inside and outside the United States.