The office of General Counsel issued the following informal opinion on July 31, 2000, representing the position of the New York State Insurance Department.
Re: Offering of a Variable Annuity Product Approved in New Jersey but not in New York to a New York Resident.
May a New Jersey based financial planning firm which is not licensed in New York solicit in New Jersey a variable annuity product to be issued in New Jersey by an insurer not licensed in New York to a New York resident?
Yes. If the entire transaction regarding this product occurs outside the state of New York, including the solicitation, the issuance and delivery of the policy and the payment of the initial premium, there will be no violation of the New York Insurance Laws.
The inquiry is from a New Jersey based and licensed financial planning firm. Two of the firms clients have requested a variable annuity product that the firm solicited in New Jersey on behalf of an insurer. The insurer is licensed in New Jersey and in forty-nine other jurisdictions, excluding New York. The two clients work in New Jersey but are New York residents. The product will be solicited and the entire transaction regarding the product will occur in New Jersey.
N.Y. Ins. Law § 1102 (McKinney 2000) prohibits the doing of an insurance business in this state unless authorized by a license. It states in pertinent part:
(a) No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, or exempted by the provisions of this chapter from such requirement.
N.Y. Ins. Law § 1102 (a) (McKinney 2000)
Therefore, the inquiry must look to the definition of "doing of an insurance business".
N. Y. Ins. Law § 1101 (b)(1) (McKinney 2000) defines the doing of an insurance business. It states, in pertinent part, that any of the following acts in this state effected by mail from outside the state or otherwise, would constitute doing an insurance business in this state:
(A) making or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association, or corporation authorized to do business herein, or solicitation of application for any such policies or contract;
. . . .
(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance;
(D) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter.
N. Y. Ins. Law § 1101 (b)(1)(A), (C) & (D) (McKinney 2000)
However, New York Ins. Law § 1101 (b)(2) and (b)(2)(E) provide an exception to the above and state in relevant part that:
(2) Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state ... .
(E) transactions with respect to policies of insurance on risks located or resident within or without this state ... , which policies are principally negotiated, issued and delivered without this state in a jurisdiction in which the insurer is authorized to do an insurance business; (emphasis added).
New York Ins. Law §§ 1101 (b)(2), 1101 (b)(2)(E) (McKinney 2000)
Based on the above provisions, since the entire initial transaction, including the issuance and delivery of the policy, will occur outside the State of New York, neither the firm nor the insurer would be considered to be doing an insurance business in New York. Subsequent transactions by the insurer may take place by mail as authorized under New York Ins. Law § 1101 (b)(2) (McKinney 2000).
For further information you may contact Senior Attorney Adiza J. Mohammed at the New York City Office.