General Information:

  1. New York excess lines brokers may only place insurance with those insurers that have made application to and been approved by the Excess Line Association of New York (ELANY) and agree to abide by N.Y. Regulation 41. (Eligibility list available on ELANY website at http://www.elany.org/nyes.aspx?d=1002 (foreign);
  2. New York does have an Excess Line Association (see Other Comments section #5).
  3. New York does have an Export List at www.elany.org (see Other Comments section #11, #13, and #18).
  4. New York does have an industrial insured exemption applicable to captive insurers only (see Appendix C) and also recognizes the exempt NRRA commercial purchaser exemption. (§ 2101(x)(2))
  5. Surplus lines tax: 3.6%, payable by broker to the state, plus 0.17% stamping fee payable to ELANY (reduced from 0.18% effective 1/1/2017). (Additional fee of $25 applies for late/erroneous filing.)
  6. New York has not affiliated with any existing compact but has adopted legislation allowing it to keep 100% of surplus line premium tax where New York is the home state (SB 2811).

Eligibility and Filing Requirements (All Insurers):

The New York law did incorporate NRRA eligibility provisions.

Section 27.13 of New York Regulation 41 requires that prior to placing business with an eligible excess line insurer, when the insured’s home state is New York, an excess line broker must obtain, review and retain at least the following documents [unless ELANY obtains and retains these documents]:

  1. Copy of insurer’s most recent Annual Statement (foreign insurer).
  2. If an alien insurer, evidence that it appears on the most recent NAIC IID list of alien insurers.
  3. Copy of insurer’s latest available report on examination, if applicable.
  4. A certificate of authority from the insurer’s home jurisdiction verifying that such insurer is authorized to write the kinds of insurance sought to be placed.

Although ELANY publishes on its website a list of unauthorized insurers which meet the minimum requirements of eligibility in New York, it remains the non-delegable duty of the excess line broker to use “due care” in the selection of any such insurer.

(Note: Effective January 1, 2016, New York has a $46 million capital and surplus requirement applicable to U.S. excess line insurers; Alien insurers must maintain the minimum capital and surplus requirement by the NAIC).

Types of Insurance Exempted from Surplus Lines Regulation:

  1. Ocean marine insurance, which is limited to vessels engaged in the transportation of goods and merchandise in either foreign or coastwide trades. It does not include yachts, pleasure crafts, fishing vessels and tugs (see Other Comments section #1).
  2. Insurance in connection with ocean going vessels against, or against legal liability of the insured for, loss, damage or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.
  3. Insurance against legal liability arising out of the ownership, operation or maintenance of any motor vehicle or aircraft which is neither principally garaged nor principally used in New York, arising out of any activity carried on wholly outside of New York or arising out of the ownership, operation or maintenance of any property having a permanent situs outside of New York, but in case such property or risk is located in any other state, then exemption applies only if the insurer is authorized to do such business in such state and a licensed insurance broker of such state may lawfully place such insurance.

Other Comments or Requirements:

  1. New York Circular Letter No. 28 (1999) clarifies the Department’s position that if a risk is placed by an unauthorized insurer involving a class of insurance other than ocean marine insurance, it should only be placed through an excess line broker licensed in New York. Such business must also be written pursuant to the surplus lines laws of the State of New York. Circular Letter No. 28 also states that it is the broker’s responsibility to allocate the risk between ocean marine insurance and any other kind of insurance. Part of the risk that is other than ocean marine insurance, when placed with an unauthorized insurer, is subject to the payment of an excess line premium tax for the filing of affidavits and the stamping of the policies by ELANY as well as other applicable regulatory requirements of the Department. Circular Letter No. 22 (2000) opines that ocean marine insurance is “insurance covering damage to ships or vessels and the goods they carry while on the ocean or inland waters.” While Circular Letter No. 22 does not so state, the Department has confirmed that pure marine protection and indemnity insurance is treated in the same manner as ocean marine insurance.
  2. All filings must be submitted to both New York Department of Financial Services (NYDFS) and ELANY unless otherwise stated.
    Electronic filing of broker affidavits as well as the electronic submissions for recording and stamping of declaration pages, cover notes, binders, endorsements, notices of excess line placement and other excess line insurance documents are permitted provided these methods of submitting for recording and stamping purposes are first approved by the Superintendent.
  3. New York no longer requires the completion or filing of insured’s affidavit (Part B) in connection with excess line placements. Instead of the insured’s affidavit requirement, the law substitutes a requirement that such insureds be given notice containing certain information set forth in Section 27.5(e) of Regulation 41.
  4. New York permits binding authority for licensed New York excess line brokers upon written authorization of non-admitted insurers. This binding authority power was extended by chapter amendment to include both in-state and out-of-state risks.
  5. Contact information for ELANY is as follows:
    Daniel F. Maher
    Excess Line Association of New York
    One Exchange Plaza
    55 Broadway, 29th Floor
    New York, New York 10006-3728
    Tel.: (646) 292-5500
    Fax.: (646) 292-5505
    E-mail: dmaher@elany.org.
  6. The following language must be stamped on every excess lines insurance policy, memorandum, certificate or other document evidencing insurance coverage delivered to a New York insured in not less than ten point bold type:
    “THE INSURER(S) NAMED HEREIN IS (ARE) NOT LICENSED BY THE STATE OF NEW YORK, NOT SUBJECT TO ITS SUPERVISION, AND IN THE EVENT OF THE INSOLVENCY OF THE INSURER(S), NOT PROTECTED BY THE NEW YORK STATE SECURITY FUNDS. THE POLICY MAY NOT BE SUBJECT TO ALL OF THE REGULATIONS OF THE DEPARTMENT OF FINANCIAL SERVICES PERTAINING TO POLICY FORMS.”
  7. New York permits excess lines brokers to place malpractice insurance for nursing homes and certain other facilities. For these types of risks, three declinations from insurers writing malpractice insurance are required. For doctors, dentists and general hospitals, a declination must be obtained from the resident market, known as the “MMIP” or the “Pool,” before placing primary coverage with an excess line insurer.
  8. The Office of General Counsel of the NYDFS issued two opinions in 2007 which state that policy fees charged by an excess line insurer are to be considered excess line premium subject to the excess line tax and the ELANY stamping fee.
  9. The 10th amendment to Regulation No. 41 was promulgated on December 19, 2007. This amendment changes the maximum deposits required in which Alien insurance companies eligible in New York must put in trust to secure payment of judgments. The amendment is intended to conform New York regulation to new trust fund requirements adopted by the International Insurers Department of the National Association of Insurance Commissioners.
  10. New York adopted legislation in 2008 amending Insurance Law Sections 2601 and 3420 and Section 3001 of the Civil Procedure Law and Rules (“CPLR”). Among other things, the Legislation prohibits insurers from denying a claim under policies issued in New York after January 17, 2009 based on late notice unless the insurer can show that it was prejudiced by the untimely notice, and would also allow an underlying plaintiff to bring a declaratory judgment action directly against the tortfeasor’s insurer under limited circumstances.The New York Insurance Department also issued a Circular Letter 26 (2008), dated November 18, 2008, to clarify that the Legislation applies to “all liability policies,” including renewals, issued or delivered in New York on or after the Legislation’s effective date, including those policies issued in the excess/surplus lines market. It therefore appears that that the Legislation’s treatment of claim’s made policies will apply to claims-made policies which may only be issued in New York by unauthorized insurers through the excess/surplus lines market.
  11. The NYDFS in 2009 promulgated the 11th Amendment to Regulation 41 in order to expand the export list effective for placements on or after September 2, 2009. The new coverages added to the export list include: commercial excess and umbrella liability (over $10,000,000), commercial property (excess of $50,000,000), contract frustration, employed lawyers liability, construction contractors liability coverage, owner’s contractor’s protective, prize indemnification, special events and vacant commercial property.
  12. On April 18, 2011, the Superintendent of the NYDFS promulgated the 12th Amendment to Regulation 41 (the “Amendment”). Pursuant to the Amendment, excess lines insurers obtaining eligibility in New York on or after January 1, 2011 must maintain surplus to policyholders of at least $45,000,000, instead of $15,000,000. Excess lines insurers that obtained eligibility in New York prior to January 1, 2011 will be required to increase the amount of surplus to policyholders from $15,000,000 to $45,000,000 incrementally over the next few years. Specifically, excess lines insurers that became eligible in New York prior to January 1, 2011 must maintain surplus to policyholders of at least $25,000,000 by July 1, 2011, $35,000,000 by January 1, 2012 and $45,000,000 by January 1, 2013.The Amendment also provides for an automatic $1,000,000 increase to the minimum amount of surplus to policyholders for all eligible excess line beginning on January 1, 2016 and every three years thereafter
  13. On April 21, 2011, the NYDFS issued a proposed draft 13th Amendment to Regulation 41 for public comment. The proposed Amendment expands the types of risks to be added to the so-called “export list.” Some of the proposed risks to be included on the New York export list include Builders Risk insurance, Elevator Service and Maintenance Contractors – Liability and Property Damage, Excess Professional/Errors & Omissions Liability – All Classes, Excess Salary Protection (Disability) Insurance, Large Law Firm Lawyers’ Professional Liability Insurance and Primary and/or Excess “Liability” Insurance for vacant or unoccupied buildings.
  14. On July 22, 2011, the NYDFS issued the 14th Amendment to Regulation 41 and Circular Letter No 9 (2011) which addresses the allocation issue when a risk has exposures both in the U.S. and outside of the U.S. The state has now indicated that only that portion in the U.S. shall be taxed by NY. The amendment also changed the trust fund requirements. The trust fund was previously a condition of eligibility but it is now a substitute for pre-answer collateral. The NRRA prohibited eligibility requirements imposed by a state outside of capital and surplus requirements and the requirement that the insurer be in good standing in its home state.
  15. The New York State Department of Taxation and Finance issued a technical memorandum regarding changes to NY Tax Law Article 33-A. These changes were necessitated in order to conform to the requirements of the Nonadmitted and Reinsurance Reform Act (NRRA) for independently procured insurance. The memorandum advises that for taxable insurance contracts independently procured from an unauthorized insurer with an effective date on or before July 21, 2011, tax payers should use form CT-33-D(4/11) and for taxable insurance contracts independently procured from an unauthorized insurer with an effective date on or after July 21, 2011, taxpayers should use form, CT-33-D(7/11). The fundamental difference in these forms is that transactions effective on or before July 20, 2011 continue to be tax allocated while transactions effective on or after July 21, 2011 are taxed on 100% of the gross written premium.
  16. On July 22, 2011, the NYDFS issued Circular Letter No. 9(2011) regarding “home state” determination for purchasing group (PG) members.The Circular Letter states that excess line brokers must file affidavits and related individual certificate of insurance for each individual New York “home stated” member of the PG and pay premium taxes only to New York for New York “home stated” PG members. However, only one set of declinations and one master affidavit is required for each purchasing group.
  17. On March 12, 2012 the NYDFS issued Supplement No. 1 to Insurance Circular Letter No. 9. The purpose of this supplement to Circular Letter No. 9 is to provide guidance and clarification to all insurers eligible to write excess line insurance in New York and to all excess line brokers regarding the termination of trusts established pursuant to New York Regulation 41 prior to the July 21, 2011 effective date of NRRA. Under Supplement No. 1, if an unauthorized foreign or alien insurer wishes to terminate a trust that has been established pursuant to New York Regulation 41 prior to July 21, 2011, then the insurer must do so in conformance with the trust fund agreement.
  18. The NY DFS expanded the export list in 2013 effective for placements made on or after April 10, 2013.
    The “export list” sets forth types of insurance coverages that the New York Superintendent of the Department of Financial Services has determined are generally not available from licensed insurers. Three declinations are not required for export list coverages. Risks on the “export list” only exempt
    The following new coverages added to the export list will require no declinations:
    Asbestos, Fungi and Water Damage Remediation and Removal
    Liability and Property Damage.
    Builders Risk Insurance
    Coverage for construction projects where the total insured values exceed $10,000,000.
    Elevator Service and Maintenance Contractors
    Liability and Property Damage.
    Excess Professional/Errors & Omissions Liability – All Classes
    Excess liability coverage where the underlying policy limits and/or self-insured retention is at least $10,000,000 per occurrence.
    Excess Salary Protection (Disability) Insurance as a monoline policy
    Insurance pursuant to Insurance Law section 1113 (a)(31)(A) against financial loss caused by the cessation of earned income due to disability from sickness, ailment or bodily injury, in an amount up to that portion of an individual’s annual earned income, which is in excess of the amount of in-force disability insurance from an authorized insurer, [in amount not to exceed 75% of the individual’s annual earned income in total based upon the sum of in-force disability insurance and salary protection insurance when benefits are payable to individual or individual’s beneficiary.]
    Large Law Firm Lawyers’ Professional Liability Insurance (LPL)
    Professional liability for a law firm that has more than 100 attorneys.
    Recreational Guide Services
    Coverage for outfitters and guides for Camping, Hiking, Rafting, Bungee Jumping, Parachuting, Hunting and Fishing Clubs, Shooting Ranges, Hunting and Fishing and similar recreational activities.
    Vacant or Unoccupied Buildings
    Primary and/or Excess “Liability” Insurance for vacant or unoccupied Buildings.
  19. The following changes were included in the final adopted version of the 14th Amendment to Regulation 41:a) Neither ELANY nor excess line brokers will be required to obtain:
    • an insurer’s prospective three year business plan,
    • an executed copy of the insurer’s trust agreement and periodic “funds in trust statement” from the trustee,
    • alien insurer IID Standard Financial Statements. (See II, 3 below)

    b) Foreign insurers will no longer be required to establish a $2.5 million trust fund. Such trust funds which currently exist may be terminated in accordance with the terms of the trust agreement.

    c) Service of Process/Consent to Jurisdiction.
    • §27.16 of Regulation 41 is deleted. This removed from the regulation but Not From the Insurance Law requirements regarding consent to service of process and appointing the superintendent as agent for service of process. Eligible insurers should note that New York Insurance Law §1213(c) exempts unauthorized insurers from posting collateral or pre-answer security in litigation on risks placed through excess line brokers when the policy designates the superintendent as the lawful attorney upon whom lawful process may be served.

    d) The following obligations are now directed at insurers where previously the excess line broker was responsible to verify the insurers conduct:
    • the insurer will be directly required to file an electronic EL-1 report on March 15th each year setting forth each New York excess line transaction bound in the prior calendar year,
    • unauthorized insurers will be directly prohibited from selling a) types of coverage which the excess line law bars excess line brokers from selling, b) coverages which are not recognized as legal types of insurance in New York, c) coverages which are prohibited by public policy.
    • insurers will be directly required to treat payment of premium to the excess line broker as payment to the insurer.

    The following provisions of Regulation 41 remain unchanged:

    a) Excess line brokers will continue to be required to obtain the following unless ELANY obtains these documents.
    • a copy of a foreign insurer’s most recent Annual Statement
    • evidence that the insurer is on the current IID Quarterly listing (alien insurers only),
    • a copy of the insurer’s latest Report on Examination, only if accessible to the excess line broker
    • a certificate of authority from the insurer’s home jurisdiction verifying the kinds of insurance the insurer is permitted to underwrite.

    b) Effective 1/1/2017, foreign insurers must maintain at least $46M of policyholder surplus to be eligible.

    c) Also, excess line brokers shall not place coverage with an insurer unless the insurer’s Financial Statements or other evidence demonstrates:
    • the insurer is solvent and otherwise complies with the solvency requirements for the authorized insurers;
    • has surplus sufficient to support its writings, reasonable in relation to its outstanding liabilities and adequate to its financial needs;
    • claims practices have been, and continue to be, satisfactory; and
    • management is trustworthy and competent.

    d) Any time an excess line insurer does not meet the standards noted above, an excess line broker must:
    • cease procuring from such insurer, and
    • notify in writing within ten days, the Superintendent, excess line association, any producing broker and each insured, that coverage should be replaced in the excess line broker’s judgment.

  20. ELANY issued Bulletin 2014-07 on March 19, 2014 explaining only premium and other taxable consideration for the insurance policy should be included on a binder or dec. page.
    On March 31, 2014, ELANY issued Bulletin 2014-08 stating that any entity or individual acting as a cover holder, managing general agent, managing general underwriter, or program administrator from a New York office, pursuant to a binding authority agreement entered into with an eligible excess line insurer must be properly licensed as an excess line broker and must file the binding authority agreement with ELANY.
  21. As of January 1, 2017, ELANY’s stamping fee was reduced to .017% for policies incepting on or after January 1, 2017.
  22. On June 10, 2016 the New York Department of Taxation and Finance issued two Advisory Opinions (TSB-A16(4)C and TSB-A-16(5)C) that eligible surplus lines insurers are subject to franchise taxes on insurance Companies and those taxes are not limited by NY Tax Law §1505(a)(1). ELANY issued Bulletin No. 2016-17 noting that these opinions are consistent with previous opinions by this Department.