The Office of General Counsel issued the following opinion on April 6, 2005, representing the position of the New York State Insurance Department.

Re: Commercial Lending by an LLC Owned by an Unauthorized Insurer


Does the below-described proposed transaction constitute the doing of an insurance business under N.Y. Ins. Law § 1101 (McKinney Supp. 2005)?


No, the below-described proposed transaction does not constitute the doing of an insurance business under N. Y. Ins. Law § 1101 (McKinney Supp. 2005)?


An Illinois domiciled life insurer (ABC Inc.) is not licensed to conduct an insurance (or any other type) business in New York State. It does not solicit or transact business of any kind in this state. ABC Inc. intends to form a limited liability company (the "LLC") under Delaware law, of which it will be the sole owner and manager. The business purpose of the LLC will be as follows:

[T]o engage in any lawful business permitted under the laws of Delaware or the laws of any jurisdiction in which the limited liability company may do business, including specifically the conduct of commercial real estate mortgage lending, but specifically excluding the conduct of an insurance business.

The LLC will not be registered as an insurance company, nor does it intend to solicit or transact any insurance business. The LLC does intend to apply for authority to conduct business in New York as a foreign limited liability company. The LLC will act through its sole and managing member, ABC Inc., in the conduct of its business, including the making of commercial real estate mortgage loans secured by New York real property. Finally, both ABC Inc. and the LLC intend to comply with N.Y. Ins. Law § 2117, which prohibits acting for, or aiding an unlicensed insurer; and N.Y. Ins. Law § 2122, which prohibits advertisements of, or public announcements for unlicensed insurers.


The New York Insurance Law defines the doing of an insurance business as follows:

(b)(1) Except as provided in paragraph two, three or three-a of this subsection, any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules:

(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 applications for any such policies or contracts;

(B) making, or proposing to make, as warrantor, guarantor or surety, any contract of warranty, guaranty or suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the warrantor, guarantor or surety;

(C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance;

(D) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this chapter;

(E) 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) (McKinney Supp. 2005).

Two prior opinions of this office, Office of General Counsel Opinion 99-48 (NILS May 18, 1999) and Office of General Counsel Opinion 86-71 (NILS August 13, 1986), were presented to support the contention that the conduct of the commercial lending business by an LLC wholly owned by an unauthorized insurer would not constitute the unauthorized conduct of an insurance business. In both the cited opinions, this office concluded that the conduct of lending activities by an unauthorized insurer (or an entity wholly owned by such insurer) within this state did not fall within the definition of doing an insurance business, and that, accordingly, such activities would not be in violation of the Insurance Law.

The rationale applied to the cited opinions is equally valid for the transaction described herein. Therefore, the lending activity proposed would not be viewed as the doing of an insurance business under New York Law, and neither ABC Inc. nor LLC would be subject to the insurance licensure process or compliance requirements of the New York Insurance Law. However, both ABC Inc. and LLC must comply with N.Y. Ins. Law §§ 2117 and 2122 (the prohibitions on acting for / aiding unauthorized insurers and calling attention to such insurers, respectively).

For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.