This updates our February, 2011 blog posting.

On February 14, 2011, the New York Insurance Association (the “NYIA”), a trade association representing property and casualty insurers based in New York, testified at the New York Senate Finance Committee and Assembly Ways and Means Committee Joint Legislative Hearing regarding Governor Cuomo’s 2011–12 executive budget (the “Executive Budget”). The Executive Budget includes a bill (the “Bill”) proposing to merge the Insurance and Banking departments, and the Consumer Protection Board into a single state agency, to be known as the Department of Financial Regulation (the “DFR”). In its testimony, the NYIA expressed concern over certain provisions of the Bill, in particular the provisions governing assessments paid by domestic insurance companies to fund the operating expenses of the DFR.

Currently, the New York Superintendent of Insurance is afforded broad discretion to levy assessments on insurance companies, calculated in proportion to the gross direct premiums and other considerations written or received in New York, to cover the operating costs of the Insurance Department. N.Y. Ins. Law § 332. The Bill proposes to repeal the existing law, and grant the new superintendent of the DFR (the “DFR Superintendent”), who will assume both the insurance and banking superintendents’ responsibilities and powers upon enactment of the Bill, broader discretion in determining insurance company assessments. It would allow the DFR Superintendent to calculate assessments in such proportions as he or she deems just and reasonable on entities regulated under the insurance law as well as the banking law. The Bill contains language specifying that insurance company assessments will not cover expenses solely relating to persons regulated under the banking law, and vice versa. However, assessments could potentially be used to cover the expenses of the new agencies broad consumer protection functions. The NYIA believes that “[t]he problem is the majority of these assessments do not fund the Insurance Department’s operating expenses but rather go to other state agencies for programs often lacking a strong connection to insurance.”

Click here for a copy of the NYIA’s testimony.