Under legislation signed by Governor Cuomo earlier this month, some New York-licensed insurance brokers now have more flexibility than before in dealing with clients in New York that are multinational firms, where (i) such firms seek group life, group annuity or group accident and health coverage for their non-U.S. employees and (ii) such insurance is purchased from a non-U.S. carrier. In addition, under this legislation, the non-U.S. insurance carrier offering the proposed coverage may not need to obtain a New York insurance license simply by virtue of the broker's activities.
Prior to this legislation, which amends Sections 1101 and 2117 of New York Insurance Law and became effective immediately, it was unclear whether any of these activities, described below, could lawfully be conducted in New York without violating New York's prohibitions on insurance activities within the state by non-licensed actors. The law thus represents a meaningful clarification of New York's insurance "long-arm" jurisdiction, a vital topic given New York's singular role as a financial center and the rigorous regulatory oversight of the New York insurance market.
By way of background, an insurer not licensed in New York (a "Non-NY Licensed Insurer") may not engage in "doing an insurance business" (a broad concept that covers entering into a policy, soliciting an application for insurance and collecting premiums, among other things) in the state, with certain specified exceptions (the "Licensing Exceptions"). In addition, even more broadly, New York law prohibits any person -- even a licensed broker -- from conducting in New York any of the following activities involving a Non-NY Licensed Insurer:
- Acting as agent for such Non-NY Licensed Insurer in connection with insurance activities.
- Acting as insurance broker in
- "soliciting, negotiating or in any way effectuating" a policy of such Non-NY Licensed Insurer, or
- "placing risks with" such Non-NY Licensed Insurer.
- "In any way or manner" aiding such Non-NY Licensed Insurer within New York in effecting any insurance contract.
A person violating one or more of these prohibitions can be subject to, among other things, civil penalties assessed by the New York Department of Financial Services.
Under the safe harbor established by the new law, certain actions, listed below, taken by a New York insurance broker within New York to sell group life, group annuity or group accident and health insurance policies -- where the customer is a multinational business seeking coverage for its non-U.S. employees, and the prospective insurer is a non-U.S. carrier not licensed in any state of the U.S. (a so- called alien insurer) -- are permitted without running afoul of these prohibitions. The brokers covered by the new law are those licensed in New York to sell life or variable life insurance, variable annuities, or accident and health insurance (property-casualty lines are not included in the new authority).
- Providing information to the policyholder about the policy.
- Meeting and discussing in-person the insurance needs of the policyholder and the policies offered by the alien insurer.
- Referring the policyholder to the alien insurer and providing information to the policyholder about such insurer.
- Responding to requests for quotes by the policyholder and any other specific terms and conditions of the policy.
- Providing the policyholder information regarding renewals of existing policies.
- Managing the employee benefits program of the policyholder, including aggregating and reporting employee benefits and financial information about the program.
The new law also incorporates such actions into the list of Licensing Exceptions. This signifies that any transaction in New York "if effected by mail from outside" New York, with respect to insurance policies issued pursuant to this new safe harbor, does not constitute "doing an insurance business." Accordingly, the alien insurer need not obtain a New York license simply by virtue of such a transaction. (It should be noted, however, that any of the actions listed above would subject the alien insurer to personal jurisdiction in New York. Specifically, the amended law provides that any of the foregoing activities are among the types of actions that are deemed to automatically result in appointment by the carrier of the Superintendent of Financial Services as its agent for service of process in the state.)
In order for a broker or insurer to invoke the safe harbor, each of the following factors must be met:
- The broker's activities relate to a group life, group annuity, or group accident and health insurance policy.
- The policyholder (or potential policyholder) is an institution, resident outside of the U.S., that is member of a multinational "group of institutions" operating globally in which (i) at least one member is domiciled in the U.S. or has significant operations within the U.S. and (ii) at least one member has offices outside the U.S.
- The policy covers the policyholder's employees and their dependents.
- The employees reside outside the U.S., except that the policy can cover employees temporarily inside the U.S.
- The alien insurer is authorized to transact such insurance business in the jurisdictions where the policy is issued and delivered.
- The policy is issued in conformance with the laws of such jurisdictions.
- The policy is not underwritten or negotiated in New York.
- The policy is not issued or delivered in the U.S.
- The broker provides written notice to the policyholder that the alien insurer is not licensed in or authorized to do business in New York, the policy is not protected by the state's guaranty funds, the policy has not been approved by the New York Superintendent, and the policy may not be subject to all of the laws of New York.
- The alien insurer may not have a New York office.
- The broker may not advertise the alien insurer within New York, except as specifically described in the statute.