NY DFS Regulations Allow Superintendent to be Group-Wide Supervisor

Kramer Levin Naftalis & Frankel LLP

Kramer Levin Naftalis & Frankel LLP

On June 3, amendments to New York insurance regulations, available here, became effective that will permit the New York Superintendent of Financial Services to act as group-wide supervisor of internationally active insurance groups (IAIGs, as defined below) having a specified New York nexus. Once so designated, such an entity would be subject to enhanced regulatory oversight by the superintendent.

Under these amendments to Department of Financial Services (DFS) Regulation 203 (11 NYCRR 82), adopted by Superintendent Linda A. Lacewell on June 3, an IAIG is, generally, (i) a holding company system (i.e., a New York-licensed insurer controlled by a holding company or other parent together with the insurer’s affiliates), (ii) an Article 16 system (a New York-domiciled property-casualty insurer and its subsidiaries) or (iii) an Article 17 system (a New York-domiciled life insurer and its subsidiaries) (any of the foregoing, a “group” or an “insurance group”) that meets the following criteria:

  • The group has premiums written in at least three countries.
  • The percentage of gross premiums written outside the United States is at least 10 percent of the insurance group’s total gross written premiums.
  • Based on a three-year rolling average, the total assets of the insurance group are at least $50 billion or the total gross written premiums of the group are at least $10 billion.

The superintendent may determine at any time that she is the appropriate group-wide supervisor for an IAIG that conducts “substantial insurance operations” in New York. In making such a determination, the superintendent must consider factors including the place of domicile of the insurers within the group that hold the largest share of premiums, assets or liabilities; the place of domicile of the top-tiered insurer in the group; the location of executive offices; whether another jurisdiction is acting as group-wide supervisor under an equivalent law; and reciprocity with other jurisdictions involved.

In the case of an IAIG that has not conducted substantial insurance operations in New York, the superintendent may determine that she is the group-wide supervisor in the event of a “material change” in the IAIG as a result of which either (1) the IAIG’s insurers domiciled in New York hold the largest share of the IAIG’s premiums, assets or liabilities; or (2) New York is the domicile of the top-tiered insurer or insurers in the group.

Affected insurers are required to provide the superintendent “with all information necessary to determine whether the superintendent may act as the group-wide supervisor.” In the event of any determination that the superintendent will be group-wide supervisor for an IAIG, such IAIG will be identified as such on DFS’s website. Generally, such status will permit the superintendent to assess the enterprise risks and risk management within the IAIG; request relevant information “from any member of an IAIG subject to the superintendent’s supervision,” including information about governance, risk assessment and management, capital adequacy, and material intercompany transactions; coordinate risk mitigation and otherwise communicate and share information with the IAIG’s other regulators, including through supervisory colleges; enter into agreements with the New York insurer in the IAIG that set forth or clarify the superintendent’s role; and engage in other group-wide supervision activities as considered necessary by the superintendent.

The amendments, originally proposed by DFS in February, are patterned on the 2014 amendments to the National Association of Insurance Commissioners (NAIC) model insurance holding company act. Regulation 203 had been originally enacted by DFS earlier in 2014 in response to prior NAIC amendments on holding company oversight, including enterprise risk and own-risk and solvency assessments.

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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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