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Albany Update 2023.12

December 4, 2023

In this issue …

NYIA Testifies at Assembly Hearing

NYIA recently testified at a hearing held by the New York State Assembly on Wednesday, November 29. The Assembly Insurance and Environmental Conservation committees jointly hosted a hearing on the topic of “The Resiliency of the New York Property and Casualty Insurance Market to Climate-Change Driven by Extreme Weather Events.” You can view NYIA President Ellen Melchionni’s testimony, which begins at 51:20 of the video. Each individual’s testimony can also be viewed by clicking on their name in the agenda available at the same link.

Melchionni indicated that rate adequacy is paramount. She urged lawmakers not to overreact to the current market conditions and instead take actions to support the market, including improving the challenging litigation environment and removing the immense regulatory burdens that exist. She offered insights about the states of Florida, Louisianna and California, and indicated that extreme weather alone did not cause the negative market conditions—the distress of the markets in those states has been exponentially intensified by a difficult litigation environment and regulatory restrictions.

Melchionni offered specific solutions to help with litigation costs and curbing lawsuit abuse, including creating lawsuit lending transparency, lowering the interest rate on judgments, and repealing the antiquated Scaffold Law and instead adopting a comparative negligence standard. She also indicated that appropriate fraud deterrents need to be in place and enforced.

She urged legislators to carefully evaluate any proposed laws that would have a negative impact on the market, and said it was imperative that no new mandates or restrictions be advanced. Melchionni also said that changes in the law were needed to expedite and modernize processes, including adopting online verification for auto insurance, repealing the antiquated anti-arson application and modernizing the free trade zone.

NYIA will continue to stress the importance of rate adequacy with regulators and legislators and strongly discourage any actions that will only result in a further deterioration of the market.

Governor Hochul Announces State of the State Address

Governor Kathy Hochul announced that the State of the State address will take place on Tuesday, January 9, 2024 starting at 1:00 p.m. Her address will be delivered in the Assembly Chamber. NYIA will be closely monitoring for any initiatives related to property and casualty insurance.

Another important release by the Governor in January will be the Executive Budget. We anticipate that the Governor will present her Executive Budget on or about Tuesday, January 16.

DFS Changes Requirements for Background Checks of Officers and Directors

Effective December 1, 2023, the New York State Department of Financial Services (DFS) withdrew Insurance Circular Letter No. 6 (2001). As a result, domestic and foreign property and casualty, life, and health insurance companies will no longer be required to submit fingerprints for the following:

  • Officers, directors, and any controlling persons as part of a domestic primary licensure, redomestication, or corporate amendment application or a non-domestic licensure (expansion) application.
  • Newly appointed officers and directors of an insurance company.
  • Any person acquiring control of a domestic insurance company and any officers and directors thereof.

DFS has indicated that background checks required for any of the above must now include the following:

  1. NAIC Biographical Affidavit
    The NAIC biographical affidavit (Form 11) must be completed for each officer and director and any controlling persons. The affiant must sign the affidavit within the six-month period before the application date.
  2. Independent Third-Party Verification
    Biographical affidavits must be verified by an independent third-party that has been approved by the NAIC. See list of NAIC Independent Third-Party Vendors. Third-party verification reports must be sent directly from the approved vendor to the Department via the DFS Portal.

DFS has stated, as a reminder, that all insurance companies must use the NAIC Uniform Certificate of Authority Applications (UCAA) to submit their licensing applications. Questions related to licensing applications should be directed to the appropriate bureau:

DFS Expands Use of the National Insurance Producer Registry

DFS has announced that they will be broadening their use of the National Insurance Producer Registry (NIPR), specifically to include the ability to process licenses for New York to include resident individual original and renewal license applications for life, accident & health, and property/casualty agents and brokers. Previously, NIPR processed non-resident broker and agent licenses for New York, with all resident broker and agent licensing applications being processed directly through the DFS licensing portal. DFS will also be keeping their licensing portal, so the industry will now have two options for licensing brokers and agents. This modification was expected as DFS asked NYIA for feedback about the potential change earlier this year.

In early 2024, DFS will implement NIPR for the remaining license classes, which includes resident and nonresident business entity and adjuster licensing. Please contact Rawle Lewis, director of licensing, at rawle.lewis@dfs.ny.gov with any questions.

Updates on DFS Amended Cybersecurity Regulation

Since its initial adoption, the cybersecurity regulation has required covered entities to report certain cybersecurity events to DFS within 72 hours of determining an event has occurred. Reportable events are those that impact the covered entity and require notification to another government body, self-regulatory agency, or other supervisory body, or those that have a reasonable likelihood of materially harming any material part of the normal operations of the covered entity. Beginning December 1, 2023, covered entities also are required to notify DFS if (1) ransomware has been deployed on a material part of its information systems, or (2) a ransom or extortion payment has been made. The notification process for reporting such an event through the DFS portal remains the same and there are detailed instructions on reporting a cybersecurity incident or extortion payment.

Also, as a result of updates to eligibility parameters, DFS believes more businesses should now qualify for full and limited exemptions from the regulation’s requirements. Covered entities that qualify for an exemption should submit a notice of exemption within 30 days of making that determination through the DFS portal. Instructions on applying for or amending a notice of exemption and additional exemption qualification information are available on DFS’s Cybersecurity Resource Center under the heading of Part 500 Exemptions.

In addition, NYIA is hosting a complimentary virtual education program with the New York State Department of Financial Services (DFS) about the amended cybersecurity regulation. This program, which is specifically geared to property and casualty insurance companies, will take place on Monday, December 18, 2023 from 2:00–3:00 p.m. (ET). Featured speakers from DFS will provide property and casualty insurers with insights about the new cybersecurity requirements in the Second Amendment to 23 NYCRR 500. Be sure to register to hear directly from DFS and gain a greater understanding of the key changes as companies begin their work to be in compliance with the new provisions. The program will provide a comprehensive overview of the amended regulation as well as help companies prepare for the first major compliance deadline of April 15, 2024.

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