On April 18, 2011, the Superintendent of the New York Insurance Department promulgated the twelfth 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. Although the Amendment was not officially promulgated until this month, New York has required insurers to maintain surplus to policyholders of at least $45,000,000 to obtain excess lines eligibility for over a year.
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.
As previously reported here, California is the only other state requiring surplus lines insurers to maintain minimum capital and surplus of $45,000,000. Most other jurisdictions and the National Association of Insurance Commissioners (“NAIC”) require minimum capital and surplus of $15,000,000 for surplus lines eligibility. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, states are required to grant eligibility to non-US (alien) insurers that have been vetted and listed by the NAIC in its Quarterly Listing of Alien Insurers. As large states increase the capital and surplus requirements for surplus lines eligibility to amounts greater than $15,000,000, it is conceivable that the minimum surplus requirements for listing on the NAIC Quarterly Listing of Alien Insurers will increase to be more in line with the eligibility standards in New York and California.