Strike One!

In one of its first opportunities to demonstrate that it “means what it says” by its stated objective “[t]o encourage, promote and assist banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state; . . .” the new Department of Financial Services has taken a called Strike One!

In November 2011, the Superintendent of Financial Services, Benjamin Lawsky, issued a press release touting his newly issued regulation “to implement a law that deregulates most insurance business with large, sophisticated companies or public entities.” In the release, Mr. Lawsky states that “[t]he new law and regulation enhance the ability of insurers to underwrite large commercial insureds in New York, increase speed to market for certain insurance products not currently exempted and eliminate barriers to economic development in New York.”  Unfortunately, the effect of the new law and regulation on the marketplace are unlikely to match the rhetoric.

I have written an article on the new law and regulations that adds a new class of risks -- for large commercial insureds with significant risk management capabilities -- that can be written by domestic New York companies in the "Free Zone."  This article points out the reasons why, in my opinion, the new law and regulations will not deliver on the promised benefits to the market.  If you are interested in reading the full article click here for a link to the Publications page of my website to access a pdf copy of the article titled "Strike One!"

 

A NEW BEGINNING

As of today, October 3, 2011, the New York Insurance Department, believed to be the oldest state regulatory agency in the United States, no longer exists! Today the former insurance and banking departments are merged into the new Department of Financial Services, and the new Superintendent of Financial Services, Benjamin Lawsky, becomes the chief regulator of both the banking and insurance businesses. The picture gallery of past insurance superintendents on the 3^rd floor of 25 Beaver Street, which begins with William Barnes in 1860, will end with James Wrynn 151 years later.

The new agency has the opportunity to demonstrate that this sea change in the regulatory framework in New York is a new beginning, and that it intends to fulfill the stated goals of the merger legislation.  This starts with the first stated goal: “[T]o encourage, promote and assist banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state; . . .”  Nothing could be more in line with this goal than the revival of the insurance exchange!

As many of you are aware, over a year ago the industry working group established by Superintendent Wrynn issued its preliminary recommendations for the reestablishment of an insurance exchange.  After several fits and starts, a draft plan to implement these recommendations was drafted.  However, even though a draft, and with little if any downside to the regulators, release of the draft plan release was repeatedly postponed at the request of the administration.

Today is a new day, and in honor of the old insurance department, and in support of the principal goal of its successor agency, I have posted the draft plan for the implementation of the industry working group preliminary recommendations on the “NY Insurance Risk Exchange (NY-REX)" page of my web site.  Here is the link to that page.  It is my hope that the new agency will embrace the exchange concept under its stated goals, and that it is not too late for its successful reincarnation. 

Farewell Insurance Department! Hello Insurance Bureau of the Department of Financial Services!

A CHALLENGE TO THE CUOMO ADMINISTRATION

One of the hallmarks of the first several months of the administration of New York’s Governor Cuomo was the presentation and adoption of his plan to consolidate the regulation of financial services, including the merger of the banking and insurance departments to be effective on October 3, 2011.  Over the coming months there will be considerable scrutiny by banking and insurance industry participants and observers to see whether or not the merger can or will meet the stated goal of the law “To establish a modern, dynamic, attentive, twenty-first century system of regulation, rule making and adjudication, that is responsive to the needs of the banking and insurance industries, as well as the state's consumers and citizens; . . ."

Understandably, this initial scrutiny will be focused on the routine day-to-day interaction between the regulators, the regulated companies and the service providers to the regulated companies. Will there be the same access to the department as you were accustomed to in the past? Will you be dealing with the same department people? Will former banking regulators be handling insurance regulatory issues and vice versa? Will things that used to take forever now take forever and a day? People dislike having their routines changed, and how the merger will change routines both for the employees of the merged agencies as well as those dealing regularly with the agencies, is of the utmost immediate concern for many. But there is another longer-term issue that needs to be addressed as well: What does the new Financial Services Law portend for the future of the business of insurance in New York? 

Here is a link to my web site page where you can access a copy of my article, "A Challenge to the Cuomo Administration" (Articles Web Page) urging the administration to carry out and support the stated goals of the new merger law, and to demonstrate that these objectives are not just a salve to calm industry skepticism.  The article focuses on three examples where the new department has an opportunity to prove it is prepared to support meaningful alternative market initiatives: the "free zone", captives and the insurance risk exchange. The purpose is to promote a continuing dialogue on the goals of the new law and the intent of the administration in its execution.

The article is also slated to be published in the September 28, 2011 issue of Insurance Advocate magazine.