N.Y. Comp. Codes R. & Regs. Tit. 11 §§ 80-2.0

Current through Register Vol. 46, No. 36, September 4, 2024

Section 80-2.0 - Preamble

(a) Traditionally, production and underwriting of insurance were performed by independent parties. Agents and brokers produced and insurance companies underwrote insurance. It is recognized that business arrangements wherein a producer controls an insurer and places risks with that insurer can and do exist to accomplish legitimate business purposes. This Subpart is not intended to adversely affect these legitimate business arrangements. However, without proper safeguards these arrangements have the potential to create conflicts of interest that might harm policyholders or injure the insurer and, if insolvency results, adversely affect the Property/Casualty Insurance Security Fund or Public Motor Vehicle Liability Security Fund.

(b) Because of the special nature of the relationship between the controlling producer and the controlled insurer:

(1) A contract between a controlled-insurer and a controlling producer, within a holding company system, under the circumstances described in section 80-2.2 of this Subpart, is a material transaction that may adversely affect the interests of the insurer's policyholders or shareholders, within the meaning of section 1505 (d)(4) of the Insurance Law.

(2) Charges or fees for services of a controlling producer are not deemed reasonable within the meaning of section 1505 (a)(2) or section 1608 (b) of the Insurance Law, if they exceed those paid to other producers for comparable business.

(3) Transactions regulated by this Subpart between subsidiaries of a domestic insurer which is subject to article 16 of the Insurance Law may affect the operations, management, or financial condition of that domestic insurer, within the meaning of section 1608 (d) of the Insurance Law.

(4) In order to substantially comply with requirements or limitations that are reasonably necessary to protect the interests of the people of this State as required by section 1106 (e) of the Insurance Law, an authorized foreign controlled insurer or a controlled United States branch of an alien insurer not entered through this State, which is organized or incorporated in, or entered through a state that does not have in effect a substantially similar law, must comply with this Subpart to be in substantial compliance under article 16 of the Insurance Law.

(c) In accordance with section 1501(b), on the superintendent's initiative, the superintendent may determine, after notice and opportunity to be heard, that a person exercises such a controlling influence over an authorized insurer to be deemed to control the insurer. In accordance with section 1501(c), a person may make an application to the superintendent to determine whether that person does not, or will not upon the taking of some proposed action, control another person.

(d) Any person in violation of this Subpart is subject to the applicable penalty provisions of the Insurance Law or other laws, including monetary penalties and revocation or suspension of licenses. In appropriate circumstances, the superintendent may condition the continuance of the license upon the performance of certain actions by the licensee, such as restitution or providing adequate collateral. See, for example, Montuori v. Corcoran, 557 N.Y.S.2d 313 (1st Dept. 1990); Bowley Associates Ltd. v. State Insurance Department, 98 A.D.2d 521, 471 N.Y.S.2d 585 (1st Dept. 1984), aff'd. 63 N.Y.2d 982, 480 N.Y.S.2d 1011.

(e) Accordingly, this Subpart establishes rules to safeguard against possible abuses and their consequences.

(f) This Subpart is not intended to preempt, foreclose or otherwise impair any cause of action brought by the receiver of an insurer arising out of any act or omission of any producer. In the event of conservation, rehabilitation or liquidation of the controlled insurer, the superintendent may defer to the receiver of the insurer to pursue restitution.

N.Y. Comp. Codes R. & Regs. Tit. 11 §§ 80-2.0