The Office of General Counsel issued the following informal opinion on May 10, 2002, representing the position of the New York State Insurance Department.
Re: Agent Licensing for Overseas Reinsurer
Question Presented:
Does the New York Insurance Law permit a company to act as a reinsurance intermediary for an insurer that is neither licensed nor authorized to do an insurance business in the State of New York without having a license to act as a reinsurance intermediary?
Conclusion:
No. A company that acts an a reinsurance intermediary for such an insurer without having such a license would violate N.Y. Ins. Law § 2117(a) (McKinney Supp. 2001-2002) and N.Y. Ins. Law § 2102(a) (McKinney 2001-2002).
Facts:
Company As client is a company that is "registered" in the State of New York. Company As client would like to act as an insurance agent for an "overseas reinsurer" with respect to insured risks that are "overseas." The Department is assuming that the reinsurer is not authorized to do an insurance business in the State of New York and that Company As client would be acting as an agent for the reinsurer in the State of New York. Mr. B, Managing Director of Company A, has asked whether his assumption that Company As client need not be licensed in order to act as the agent for the reinsurer is correct.
Analysis:
New York Insurance Law Article 21 contains the provisions relating to agents, brokers and adjusters. N.Y. Ins. Law § 2101(f) (McKinney 2001-2002) states in pertinent part as follows:
(f) In this article, "reinsurance intermediary" means any person, firm, association or corporation who acts as broker in soliciting, negotiating or procuring the making of any reinsurance contract or binder, or acts as an agent in accepting any reinsurance contract or binder on behalf of an insurer, except that such term shall not include:
(3) licensed insurance agents acting within the scope of their agency authority in the placement or acceptance of reinsurance on risks produced or managed by such agents [emphasis added] .
N.Y. Ins. Law § 2102(a) (McKinney 2001-2002) states as follows:
(a)(1) No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
(2) Any person, firm, association or corporation who or which acts as a reinsurance intermediary in violation of paragraph one hereof shall, in addition to other penalties prescribed by law, be subject to a penalty not to exceed five thousand dollars for each transaction.
N.Y. Ins. Law § 2102(c) (McKinney 2001-2002) states as follows:
(c) Unless licensed as a reinsurance intermediary, no person, firm, association or corporation shall in this state act as a reinsurance intermediary or use any other designation or title which is likely to mislead the public or hold himself or itself out in any manner as a reinsurance intermediary.
Pursuant to N.Y. Ins. Law § 2101(f) (McKinney 2001-2002), the activity that Company As client would like to engage in constitutes acting as a reinsurance intermediary. The definition of reinsurance intermediary under § 2101(f) includes acting as an agent in accepting any reinsurance contract on behalf of an insurer, and the exception to the definition relating to agents that place reinsurance on risks that they themselves have produced under N.Y. Ins. Law § 2101(f)(3) (McKinney 2001-2002) applies only to insurance agents that are licensed in New York. An insurance agent may not be licensed to act on behalf of an unauthorized insurer. Accordingly, Company As client would be violating N.Y. Ins. Law §§ 2102(a)(1) and (c) (McKinney 2001-2002) by engaging in the activity that Mr. B has discussed, as it would be acting as a reinsurance intermediary without being licensed as a reinsurance intermediary, and it would be liable for penalties that include those set forth in N.Y. Ins. Law § 2102(a)(2) (McKinney 2001-2002).
In addition, N.Y. Ins. Law § 2117(a) (McKinney Supp. 2001-2002) states as follows:
(a) No person, firm, association or corporation shall in this state act as agent for any insurer or health maintenance organization which is not licensed or authorized to do an insurance or health maintenance organization business in this state, in the doing of any insurance or health maintenance organization business in this state or in soliciting, negotiating or effectuating any insurance, health maintenance organization or annuity contract or shall in this state act as insurance broker in soliciting, negotiating or in any way effectuating any insurance, health maintenance organization or annuity contract of, or in placing risks with, any such insurer or health maintenance organization, or shall in this state in any way or manner aid any such insurer or health maintenance organization in effecting any insurance, health maintenance organization or annuity contract.
N.Y. Ins. Law § 2117(d) (McKinney Supp. 2001-2002) states as follows:
(d) Notwithstanding the provisions of subsection (a) hereof, any licensed reinsurance intermediary may negotiate a contract of reinsurance, or place reinsurance, in an insurer not authorized to do business in this state [emphasis added].
N.Y. Ins. Law § 2117(g) (McKinney Supp. 2001-2002) states as follows:
(g) Any person, firm, association or corporation violating any provision of this section shall, in addition to any other penalty provided by law, forfeit to the people of the state the sum of five hundred dollars for the first offense, and an additional sum of five hundred dollars for each month during which any such person, firm, association or corporation shall continue to act in violation of this section.
As the exception to the prohibition against acting as an agent for an unauthorized insurer that relates to reinsurance intermediaries that place reinsurance in unauthorized insurers under N.Y. Ins. Law § 2117(d) (McKinney Supp. 2001-2002) applies only to reinsurance intermediaries that are licensed, Company As client would also be violating N.Y. Ins. Law § 2117(a) (McKinney Supp. 2001-2002) if it engaged in the activity that Mr. B has discussed, and it would be liable for penalties that include those set forth in N.Y. Ins. Law § 2117(g) (McKinney Supp. 2001-2002).
For further information you may contact Senior Attorney Ethan G. Wolfe at the New York City Office.