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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:

• Property and Casualty: PropertyInsuranceCompanyLicensingUnit@dfs.ny.gov
• Health: HealthBureauRegulatory@dfs.ny.gov
• Life: electrofile@dfs.ny.gov

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.

PUBLICATIONS ▸ Overview | Albany Alert (m)  |  Albany Update (m)  |  Annual Conference Review  |  e|minute (m) | Enacted Law Bulletins (m) | Guiding Principles |  Legislative Introductions (m)  |  Your NY Connection Magazine (m) 

Albany Update 2023.11

November 13, 2023

In this issue …

DFS Adopts Cybersecurity Regulation

As NYIA previously announced, DFS has promulgated the final amended regulation of 23 NYCRR 500, Cybersecurity Requirements for Financial Services Companies. The amendments are robust and will require companies to make adjustments for how they approach cybersecurity and compliance with the regulation, NYIA was pleased to see that the final version is substantially better than the previously proposed versions. Thank you to the many companies that provided subject matter expertise to NYIA during this process and shared feedback on the various adaptations of the proposal.

In addition to the panel discussions held last week at NYIA’s Annual Meeting, the association will be partnering with DFS to hold an education program for the entire property and casualty industry on December 18 from 2:00 to 3:00 p.m. Information on how to register will be distributed in the near future.

The regulation took effect immediately on November 1, 2023, but the default date for entities to be in compliance is 180 days from the effective date. The only provisions that immediately took effect are in relation to exemptions (500.19 (e)-(h)), enforcement (500.20), effective date (500.21), transitional periods (500.22) and exemption from electronic filing and submission requirements (500.24). Covered entities need to comply with notices to superintendent (500.17) in 30 days. There are also transition periods for certain provisions of one year, eighteen months and two years.

In an effort to help companies digest this amended version of the regulation, below is a list of resources. We will also be distributing a document that provides further analysis about the changes and expands on what DFS provides in the New York State Register.

Final Adoption of the 2nd Amendment to 23 NYCRR 500
Substance of Final Rule (as it appeared in New York State Register, this provides a detailed list of what is new in the amended regulation)
DFS Assessment of Public Comments
Governor Hochul Media Release
DFS General Education on the Amended Regulation (scroll to Training Resources)
Implementation Timeline for Small Businesses
Implementation Timeline for Class A Businesses
Implementation Timeline for Covered Entities

NYIA Meeting on Expansion of Wrongful Death Legislation

As part of the association’s continued advocacy on the wrongful death legislation, NYIA recently met with the Governor’s office. Our main objectives for the meeting were to articulate our concerns regarding the substantial impact of the legislation on our policyholders from an affordability standpoint as well as ultimately on the availability of insurance, particularly given that the market is already stressed. NYIA also cautioned the Governor’s office about the finality of any action to expand wrongful death as a constitutional provision (Article I, Section 16) prohibits limiting the law in the future. The association is in the process of drafting a legal analysis of this provision per the request of the Governor’s office. We will keep members informed on any further developments.

Meeting with DFS on Expanded Life and Health Guaranty Fund

NYIA met with DFS late last week on the issue of the inclusion of health in what is now the Life and Health Insurance Company Guaranty Corporation of New York. DFS was looking to meet specifically in relation to property and casualty insurance companies who are licensed to write accident and health policies.

The guaranty corporation recently reached out to all companies who are licensed in New York to write life or health, including property and casualty companies that are licensed to write accident and health. This outreach was in relation to what is called a class A assessment, which is paid by all companies who are licensed to write life or health, even if they do not have any premium The assessment is based on the companies admitted assets, and as is outlined in New York Insurance Law 7709, companies with admitted assets of up to $50 million are assessed $200, $50 million to $1 billion are assessed $1,000 and $1 billion or more $2,000. The class A assessments are used for administrative costs and other general expenses of the guaranty corporation. DFS indicated there was a great deal of confusion around that communication as it was sent from an Outlook address and not all companies were familiar with their connection to the guaranty corporation.

DFS confirmed that any class B or class C assessments that would relate to an actual insolvency, would only be assessed on a property and casualty insurance company in relation to their accident and health insurance premiums. Property and casualty companies that do not actively write health insurance in the preceding three years will not be assessed. These assessments will be based on the average premium written over the past three years and determined on a pro rata basis.

DFS has encouraged the guaranty corporation to include an FAQ on their website, but has asked for NYIA to share this information in the meantime. If you have any questions about how this expanded life and health guaranty fund impacts property and casualty insurance companies, contact Cassandra Anderson at canderson@nyia.org.

DFS Adopts Amended Regulation on Financial Statement Filings and Accounting Practices and Procedures

On November 1, 2023 DFS adopted the final seventeenth amendment to the insurance regulation 172 (11 NYCRR 83), regarding financial statement filings and accounting practices and procedures. There were no changes made in this final version from the proposed amendment that was put forward by DFS on August 2 as a consensus amendment regulation. The amendment updates the Accounting Practices and Procedures Manual reference, which is cited in this regulation. Previously the regulation referred to the 2021 edition of the manual, and the amended regulation now references the 2023 edition of the manual. There are no other changes in the regulation that would impact property/casualty insurance companies (there is a small change for health insurers).

WCB Releases 2024 Assessment Rate

The New York State Workers Compensation Board (WCB) recently established the 2024 assessment rate for employers. The rate as of January 1 is 9.2 percent of the standard premium or premium equivalent. The rate for 2024 is .6 percent less than the rate in 2023, which is 9.8 percent.

DFS Releases Public Auto Data Call

DFS has issued a section 308 data request to commercial automobile liability insurers covering public automobile classifications. DFS states that the purpose of the data call is “To ensure that appropriate insurance coverage is available and affordable, and to promote the long-term viability of entities providing public livery insurance in New York, the Department continues to monitor issues and developments affecting this market.” The survey has been sent to companies with commercial auto premium in 2022 and requests detailed information about the number of policies and direct premiums written for all public auto classifications for a company as well as any intended rate revisions or changes to the current level of writings in the immediate future. The survey is due by December 20, 2023. Questions can be directed to 308PublicAuto@dfs.ny.gov.

Guilty Plea in One of New York’s Largest No-Fault Insurance Frauds

Alexander Gulkarov, a 37-year-old man from Queens, pled guilty to co-leading a massive no-fault scheme as recently announced by the U.S. Attorney’s Office, Southern District of New York. The arrests of Gulkarov and 12 conspirators, including doctors, an attorney, and an NYPD police officer was made public in early 2022. The U.S. Attorney’s Office said the fraud was perpetrated from 2014 to 2021 through Gulkarov and others unlawfully owning medical clinics, profiting from unlawfully owned pharmacies with the prescription of unnecessary medical treatments, durable medical equipment and medications. Gulkarov pled guilty to one count of conspiracy to commit bribery, one count of conspiracy to commit healthcare fraud and one count of aggravated identity theft. As part of his plea agreement Gulkarov agreed to pay forfeiture of $40 million and restitution of $40 million.