On June 23, 2013, the Third Amendment to New York Insurance Regulation 52 (11 NYCRR 80-1), the New York regulation on insurance holding companies, will go into effect. The amended regulation requires electronic filing of the Form HC 1 registration statement and amendments thereto, with an opportunity to seek an exemption from the electronic filing requirement based upon undue hardship, impracticability or good cause. The Form HC 1 registration statement will also need to include a statement that the insurer’s board of directors, or a committee thereof, oversees corporate governance and internal controls and that the registrant’s officers or senior management have approved or devised, implemented, and continue to maintain and monitor corporate governance and internal control procedures.
The amended regulation will modify the advance filing requirements for certain affiliate reinsurance agreements entered into by New York-domiciled property/ casualty insurers. Under the amended regulation, a domestic property/casualty insurer will only need to make an advance filing with the New York Department of Financial Services ("NYDFS") for reinsurance treaties or agreements that meet a certain threshold, unless otherwise requested by the NYDFS. Filing will be required if the reinsurance premium or a change in the New York-domiciled insurer’s liabilities, or the projected reinsurance premium or a change in the New York-domiciled insurer’s liabilities in any of the next three years, is less than 5% of policyholder surplus as of the prior year-end. This filing exemption will not be available to life insurers or accident and health insurers. The amended regulation will add the following types of agreements to the list of inter-affiliate agreements requiring an advance filing with the NYDFS: management agreements, service contracts, tax allocation agreements, guarantees and cost-sharing arrangements.
The amended regulation will add a new provision requiring that where a holding company seeks to divest its controlling interest in a New York-domiciled insurer in any manner, and the New York-domiciled insurer is aware of the proposed divestiture and anticipates that no person will have a controlling interest in it after the proposed divestiture, then the New York-domiciled insurer will be required to file with the NYDFS notice of the proposed divestiture upon the earlier of 30 days prior to the proposed cessation of control or within 10 days of becoming aware of the proposed divestiture. This new requirement is adapted from the 2010 amendments to the National Association of Commissioners Model Holding Company System Regulatory Act (the "NAIC Model Act"); but it imposes the filing obligation on the New York-domiciled insurer rather than on the controlling person seeking to divest control.
Furthermore, the NYDFS stated in response to industry comments that other provisions of the NAIC Model Act, such as the requirement of an annual enterprise risk report and the establishment of supervisory colleges, will be the subject of future regulatory or legislative activity. The NYDFS addressed concerns about the confidentiality of submitted documents by reviewing the existing policies of New York law that provide for the confidentiality of such documents. NYDFS officials agree that any other confidentiality provisions would need to be added to the Insurance Law by legislation.
The full text of the regulatory amendments is available here.