The office of General Counsel issued the following informal opinion on January 17, 2002, representing the position of the New York State Insurance Department.
Re: Reinsurance/Workers" Compensation "carve-out"
Question Presented:
Would an authorized reinsurer, accredited to reinsure workers" compensation and employers" liability insurance policies in New York, also be considered to be an accredited reinsurer for some, but not all of the individual risks insured (i.e., medical payments, lost wages or scheduled benefits for loss of use, employers" liability) under a policy of workers" compensation and employers" liability insurance policy?
Conclusion:
Yes. The authority to reinsure a specified portion of the risk insured under a workers" compensation and employers" liability policy would be within the authority of an accredited reinsurer of workers" compensation and employers" liability insurance policies. However, this authority would only be applicable with respect to the individual risks when the primary coverage is provided as part of a comprehensive policy of workers" compensation and employers" liability insurance. The reinsurer would not have the authority to provide accredited reinsurance for such coverages if provided in a stand-alone accident and health insurance policy. Nor would it have authority to provide accredited reinsurance for accident and health coverage provided as part of some other kind of property/casualty insurance (such as medical coverage provided under a personal injury liability insurance policy authorized pursuant to N.Y. Ins. Law § 1113(a)(13)(McKinney 2001)) unless it was authorized to reinsure that kind of insurance.
Facts:
The inquirer represents an authorized reinsurer ("the reinsurer") that is accredited to reinsure policies of workers" compensation and employers" liability insurance in New York State. The reinsurer is not accredited in New York to reinsure life, accident and health insurance.
A New York authorized insurer that writes workers "compensation and employers" liability insurance has approached the reinsurer. The insurer wishes to cede the workers" compensation risk (including medical payments, lost wages and scheduled benefits for loss) provided under a policy of workers" compensation and employers" liability insurance. The employers" liability portion of the risk insured has already been ceded to another insurer.
Analysis:
Reinsurance permits an authorized insurer to reduce its loss exposure on either an individual risk or a large number of risks by selling (ceding) a portion of its liability to another insurance company (the reinsurer). Dictionary of Insurance Terms 397 (3rd ed. 1995). N.Y. Ins. Law § 1301 (McKinney 2001) establishes the criteria whereby the ceding insurer may take credit for reinsurance as an admitted asset on its financial statement. An insurer may take admitted asset credit for reinsurance that is recoverable by the ceding insurer "from an accredited reinsurer, as defined in subsection (a) of section one hundred seven of this chapter, to the extent allowed by the superintendent on the basis of the insurers compliance with the conditions of any applicable regulation...." N.Y. Ins. Law § 1301(a)(14)(ii)(McKinney 2001).
N.Y. Ins. Law § 107(a)(2)(McKinney 2001) reads as follows:
"Accredited reinsurer" means an assuming insurer not authorized to do an insurance business in this state but which (i) presents satisfactory evidence to the superintendent that it meets the applicable standards of solvency required in this state, (ii) is in compliance with the conditions prescribed by regulation under which a ceding insurer may be allowed credit for reinsurance recoverable from an insurer not authorized in this state, and (iii) has received a certificate of recognition as an accredited reinsurer issued by the superintendent pursuant to such regulation; provided that no insurer shall be an accredited reinsurer with respect to any kind of insurance not provided for in such certificate.
Insurance Department Regulation No. 20 (N.Y. Comp. Codes R. & Regs. Tit. XI, § 125.4 (2001) is entitled "Credit for reinsurance involving the risks other than life, annuity and accident and health from unauthorized insurers." The section establishes requirements that must be met to allow ceding insurers to take credit for reinsurance recoverable from any of the following:
(1) An assuming insurer, domiciled in the United States, or an alien assuming insurer entered as a United States branch in another state (subsection (a));
(2) An underwriting member of an insurance exchange domiciled in any state or jurisdiction in the United States except New York (subsection (b));
(3) An alien assuming insurer, not otherwise entered as a United States branch in another state (subsection (c));
(4) A group located outside the United States whose members consist of individual incorporated assuming insurers who are not engaged in any business other than underwriting as a member of the group and individual unincorporated assuming insurers (subsection (d)); or
(5) A nonaffiliated assuming insurer(s) who has(ve) not complied with the requirements of subdivision (a), (c) or (d) of this section, but are authorized in their domiciliary jurisdiction to assume the kind or kinds of insurance ceded, but only with respect to reinsurance contracts entered into or renewed before September 15, 2001(subsection (e)).
N.Y. Comp. Codes R. & Regs. Tit. XI, § 125.4(a) through (e) (2001).
The inquirer stated that the clients are accredited to reinsure policies of workers" compensation and employers" liability insurance in New York State. Regardless of which subsection above was applicable, the insurer must substantially comply with the related requirements imposed upon authorized companies to receive recognition as an accredited reinsurer.
N.Y. Ins. Law § 1113 (McKinney 2001) establishes the "kinds of insurance authorized" to be written in New York. Paragraph (15) of subsection (a) of said section reads as follows:
"Workers" compensation and employers" liability insurance," means insurance against the legal liability, under common law or statute or assumed by contract, of any employer for the death or disablement of, or injury to, his employee, including volunteer firefighters" benefit insurance provided pursuant to the volunteer firefighters" benefit law and including volunteer ambulance workers" benefit insurance provided pursuant to the volunteer ambulance workers" benefit law.
An accredited reinsurer of workers" compensation and employers" liability insurance would be authorized to reinsure the entire policy or any separate risk component covered under a policy written pursuant to N.Y. Ins. Law § 1113(a)(15) (McKinney 2001), including what you describe as "the accident and health portion." Unless the reinsurer possessed the authority to write other lines of insurance, this authority would be limited to those instances where the coverage reinsured is part of a policy of workers" compensation and employers" liability insurance.
For further information you may contact Associate Attorney Samuel Wachtel at the New York City Office