Feb 23, 2021

PIANY- and PIWA-priority bill passes state Senate

The New York state Senate yesterday passed legislation (S.498) that would improve the process to place commercial policies in the excess-lines market. To make the process more efficient, the bill would eliminate the diligent-effort requirement for commercial risks when a retail broker places the risks through an unaffiliated, licensed wholesaler. Additionally, the bill would remove the unnecessary requirement to report diligent-effort declinations when brokers file with the Excess Line Association of New York. These updates to the statute would streamline the process while retaining checks to protect consumers. Retail brokers still would need to work with an unaffiliated wholesaler to place an excess-lines policy. For other policies, the affidavit would be updated to reflect the information that is readily available, so the focus would be on the policy instead of the state requirement.

At the January Regional Advisory Council meetings, PIANY members identified the complexities of placing policies in the excess-lines market as a growing problem. Legislation to address these issues has been a priority for PIANY and the Professional Insurance Wholesalers Association because New York has one of the most complex processes for placing a policy in the excess-lines market. PIANY members have been advocating for this legislation through virtual office visits, and the association plans to push the state Assembly to pass the Assembly version of this bill (A.5241).

Currently, before placing a risk in the excess-lines market, a retail broker must seek coverage in the admitted market. The admitted market is more regulated with rates and policy terms that state regulators track closely. Regulators put checks in place to ensure policyholders did not forfeit those protections unless it was necessary to obtain coverage. These checks date back to when the excess-lines market had much more volatility than it does today. Any risk not included on the most recent version of the New York State Export List requires a retail producer to meet the diligent-effort requirements per state statute.  

Since the declination and affidavit requirements were put into place, the market has changed significantly. Excess-lines insurers have become more stable—many are subsidiaries of broader companies. Additionally, modern technology has changed the process to quote insurance policies in ways that make many of the affidavit’s requirements outdated. This creates unnecessary work for the producer to obtain details solely for the affidavit. These elements are not tracked by the New York State Department of Financial Services or ELANY. In order to comply with the diligent-effort mandate, a total of three declinations and 71 points of data must be submitted. New York is the only state that requires this level of documentation of diligent effort for placing an E&S policy.

This bill is one of PIANY’s 2021 legislative priorities. PIANY thanks Sen. Neil D. Breslin, D-44, for his sponsorship of this legislation and continued support of the independent agent channel.