BILL NUMBER: S4960

SPONSOR: BAILEY
 
TITLE OF BILL:

An act to amend the insurance law, in relation to exemption from filing
requirements only with respect to rates and policy forms

 
PURPOSE:

The purpose of the bill is to modernize the insurance law by allowing
insurers to take advantage of the Free Trade Zone regardless of whether
they maintain a physical office in the state.

 
SUMMARY OF PROVISIONS:

The bill amends Section 6303 (a) of the insurance law to repeal the
provision which requires that business must be underwritten and trans-
acted from an office within the state to be eligible for placement in
the Free Trade Zone.

 
              

JUSTIFICATION:

The Free Trade Zone (FTZ) is a useful tool for insurers that provides
some flexibility from the usual rate and form filing process as it
relates. to larger, sophisticated or highly specialized risks.  Unfortu-
nately, the FTZ fails to be utilized to its fullest potential because
current law requires that, in order to be eligible to place a risk in
the FTZ, the business must be underwritten and transacted from an office
within New York State. This means that an insurer must maintain a phys-
ical office location in the state, even though they are duly licensed to
write in the NY admitted market. In the context of today's global econo-
my, this requirement is unnecessary and fails to reflect advancements in
technology and innovation. which makes it possible for business to be
transacted from practically anywhere in the world. The intent of the FTZ
is to allow greater freedom to insureds that are sophisticated enough to
understand and negotiate their own insurance needs. They simply do not
warrant the same level of protection from DFS as an individual consumer
or small business.  If an insured is sophisticated enough to assume
responsibility for their own insurance needs (often working with risk
managers, agents, or brokers), the location in which the policy is
underwritten is irrelevant. In today's era of advancing technology and
innovation, the most important factor for businesses is that they can
readily access enhanced insurance products that keep pace with their
evolving risks. The physical location where the insurance transaction
occurs simply does not come into the equation.

Additionally, the FTZ is beneficial because it makes it possible for
authorized insurers to compete more effectively with the non-admitted
market. However, the physical office requirement has just the opposite
effect, penalizing authorized insurers who do not have a physical pres-
ence and incentivizing them to enter the non-admitted market. The
proposed. legislation will lead to a more dynamic and modernized regula-
tory system that better reflects the current global financial services
marketplace.  This in turn will give businesses purchasing insurance a
broader range of competitive price options and insurance products that
can be readily customized to fit their company's risk profile.

 
LEGISLATIVE HISTORY:
2023-24: Passed Senate

2021-22: Referred to Insurance

2019-20: Passed Senate

2017-18: Passed Senate

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
Immediately.