New York State and Insurance Regulation
Introduction:
Recently, there is much talk in the news about regulating the insurance industry at the federal level. This recent activity has been sparked by the current credit card account defaults, bank closures and financial institution failures. The AIG situation and this past fall financial melt-down has also pushed the consideration for federal regulation. Although AIG’s hundreds of Property and Casualty (P&C) Insurance companies are sound and financially stable, their credit default swap business for insuring bonds, mortgages and other financial packages had sever problems as mortgages and their offshoot CDOs were collapsing. There is obvious a requirement for credit default swaps (CDS) regulation - search the blog for other articles on CDSs. Since state P&C insurance regulation has worked very well where federal financial market regulation has not worked well during the financial melt down, what is the rational in having the insurance industry regulated at the federal level? Let us explore this question by looking into to the charter of the New State Insurance Department. The information that follows is from the the Department’s web site.
The Insurance Department is responsible for supervising and regulating all insurance business in New York State. The Department’s mission is to:
* Ensure the continued sound and prudent conduct of insurers’ financial operations;
* Provide fair, timely and equitable fulfillment of insurer obligations;
* Protect policyholders from financially impaired or insolvent insurers;
* Eliminate fraud, other criminal abuse and unethical conduct in the industry; and
* Foster growth of the insurance industry in the State.
The Department carries out its supervisory function by issuing licenses to agents, brokers, consultants, reinsurance intermediaries, adjusters, and bail bondsmen; conducting examinations of insurers to determine their financial condition, treatment of policyholders and claimants, and underwriting practices; and auditing each company’s annual reports.
The Department carries out its regulatory function by determining qualifications of insurers; regulating rates, certain retirement systems and pension funds; reviewing policyholders’ complaints; supervising the liquidation, rehabilitation, and conservation of insolvent insurers; and approving corporate formations, mergers, and consolidations.
Until 1849, insurance companies doing business in New York State were chartered by special acts of the Legislature. A law was passed that year requiring prospective insurance companies to file incorporation papers with the Secretary of State. The law also vested regulatory power over insurance companies with the State Comptroller, who was authorized to require the companies to submit annual financial statements and to deny a company the right to operate if capital securities and investments did not remain secure.
The Insurance Department was created in 1859 by the New York State Legislature and assumed the functions of the Comptroller and Secretary of State relating to insurance. The Department began operations in 1860. The Department is headed by a Superintendent appointed by the Governor. The agency continued unchanged after the 1925 constitutional reorganization of State Government.
In addition to its main office at 25 Beaver Street, Manhattan, the agency has staff in Albany, Buffalo, Rochester, Syracuse, Oneonta and Long Island.
The New York Liquidation Bureau, a separate office under the jurisdiction of the Superintendent, is charged with rehabilitating or liquidating insurance companies. It is located in New York City.
