New York Insurance Holding Company Regulation Amendments to take effect on June 23, 2013

by Saul Ewing LLP


The New York Department of Financial Services has adopted amendments to its insurance holding company regulation, which are intended to (i) harmonize the regulation to the NAIC’s Model Insurance Holding Company System Regulatory Act (so as to allow New York to maintain its NAIC accreditation), and (ii) reflect changes in technology (for example, by requiring electronic filings in certain situations). Insurers subject to New York’s insurance holding company regulation will need to adjust their holding company filings to comply with these and other new requirements.

On April 9, 2013, the New York Department of Financial Services (the “DFS”) adopted amendments to its insurance holding company regulation (Insurance Regulation 52). The amendments are intended to (i) harmonize Insurance Regulation 52 to the NAIC’s Model Insurance Holding Company System Regulatory Act (so as to allow New York to maintain its NAIC accreditation), and (ii) reflect changes in technology (for example, by requiring electronic filings in certain situations, as described below). Among other things, insurers subject to New York’s insurance holding company regulation will also need to comply with (i) new thresholds involving the submission of affiliated reinsurance agreements, and (ii) new thresholds involving notice to the Superintendent of certain affiliated lease agreements. Additionally, certain affiliated transactions will now be deemed to be “material,” and, accordingly, will require prior notice to (and non-disapproval of) the Superintendent.

The regulatory impact statement for these amendments provides that because enterprise risk management (“ERM”) reporting requirements and Own Risk Solvency Assessment (“ORSA”) reporting requirements are applicable not only to holding company transactions, but also to certain other types of transactions, the DFS decided that ERM and ORSA requirements should be included in separate regulations, and, accordingly are not included in the amendments to Insurance Regulation 52.

These amendments to Insurance Regulation 52 will not become effective until June 23, 2013 (60 days after Notice of Adoption is filed in the State Register, which filing was made on April 24, 2013). The amendments include the following:

  • Holding Company Registration Statements, and related amendments, must be filed electronically by the controlled insurer, unless the Superintendent grants an exemption to the new electronic filing requirement.
  • Holding Company Registration Statements must include a statement that the controlled insurer’s board of directors (or a committee of the board) oversees the insurer’s corporate governance and internal controls. Such statement must also provide that corporate governance and internal control procedures have been approved or devised, implemented and continue to be maintained and monitored by the controlled insurer’s officers or senior management.
  • The Superintendent may permit a significant person who is an individual to submit a certified public accountant compilation, rather than an opinion of an independent certified public accountant, in connection with (i) a controlled insurer’s annual reporting requirements, and (ii) applications for approval of acquisition of control of New York domestic insurers.
  • In connection with a controlled insurer’s annual reporting requirements, the controlled insurer must submit a list of all unauthorized insurer affiliates that have electronically filed copies of their annual statements with the NAIC. For each unauthorized insurer affiliate that has not electronically filed with the NAIC, the controlled insurer must provide a copy of such unauthorized insurer’s most recent annual statement that was filed with its state of domicile.
  • The amendments raise the threshold for when a property/casualty insurer must submit an affiliated reinsurance agreement to the Superintendent, as follows:

A domestic controlled insurer is not required to submit a copy of an affiliated reinsurance contract, agreement or memorandum (unless requested by the Superintendent) where (i) the reinsurance premium or a change in the domestic controlled insurer’s liabilities (or the projected amounts for any of the next three years) is less than 5 percent of the insurers policyholders’ surplus at the end of the last calendar year, and (ii) the domestic insurer is licensed to write the basic kinds of property/casualty insurance or is a New York licensed title, mortgage or financial guaranty insurer.

  • The amendments raise the threshold for when an insurer must notify the Superintendent of any affiliated lease of real or personal property that does not provide for the rendering of services on a regular and systematic basis to (i) 1 percent of an insurer’s admitted assets at the end of the last calendar year for insurers subject to Article 42 (life, accident & health and legal services insurance companies), and (ii) 2 percent of an insurer’s admitted assets at the end of the last calendar year for insurers that are not subject to Article 42. Such transactions are deemed to be “material transactions” that require notice to the Superintendent and non-disapproval before they may be entered into.
  • Affiliated management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing agreements are deemed to be “material transactions” that require notice to the Superintendent and non-disapproval before they may be entered into.
  • Where (i) a holding company seeks to divest its controlling interest in a domestic insurer, (ii) the domestic insurer is aware of the proposed divestiture, and (iii) the domestic insurer anticipates that no person will have a controlling interest in the domestic insurer after the proposed divestiture, the domestic insurer is required to file a notice with the Superintendent of the proposed divestiture. Such notice must be filed upon the earlier of (i) 30 days prior to the proposed cessation of control, or (ii) within 10 days of becoming aware of the proposed divestiture.

Insurers subject to New York’s insurance holding company regulation will need adjust their holding company filings to comply with these new requirements. Questions concerning these requirements may be addressed to the author of this Alert.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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