OGC Opinion No. 07-03-18
The Office of General Counsel issued the following opinion on March 28, 2007, representing the position of the New York State Insurance Department.
RE: Reinsurance Intermediaries
Does the New York Insurance Law require a licensed reinsurance intermediary to obtain a broker’s license to engage in transactions where the assuming insurer is unauthorized?
No. The reinsurance intermediary license issued pursuant to N.Y. Ins. Law § 2106 (McKinney 2006) authorizes the licensee to act as a reinsurance intermediary, as defined by Insurance Law § 2101(f) (McKinney 2006).
The inquiry is of a general nature, without reference to particular facts.
The query asks about the continued vitality of Office of General Counsel Opinion No. 74-3 (NILS) (April 1974). In its entirety, that opinion reads as follows:
The Department's position is that a person engaged as a reinsurance intermediary in this State on a commission basis need not be licensed as an agent or broker where both the ceding and the assuming insurer are authorized to do business in New York. A reinsurance intermediary is required to be licensed as a broker where the assuming insurer is unauthorized. In the situation where the ceding insurer is not authorized and the assuming insurer is authorized, no license is required.
At the time the opinion was issued, New York did not provide for any reinsurance intermediary license. Therefore, a broker’s license was required to negotiate a contract of reinsurance, or place reinsurance with an unauthorized insurer, pursuant to former Insurance Law § 112 (now, § 2117, as amended). That statute prohibited any person from acting as an agent or broker for, or otherwise aiding an unauthorized insurer in effectuating any insurance or annuity contract in this state. Former Ins. Law § 112(1). However, the statute permitted a licensed insurance broker, with respect to reinsurance, to “negotiate a contract of insurance, or place the insurance, in an insurer not authorized to do business in this state.” Former Ins. Law § 112(2)(a).
The enactment of former Insurance Law § 122-a (Chapter 620 of the Laws of 1976) (now, § 2106, as amended), superseded Opinion No. 74-3 and established the reinsurance intermediary license. Former Insurance Law § 122-a(11) authorized a licensed reinsurance intermediary to “negotiate a contract of reinsurance, or place reinsurance, in an insurer not authorized to do business in this state.” Moreover, Chapter 620 of the Laws of 1976 limited the exception in former Insurance Law § 112(2)(a), which authorized a licensed broker to negotiate or place reinsurance in an unauthorized insurer, to “a contract of reinsurance on risks produced by such broker.” (These provisions were recodified by Chapter 367 of the Laws of 1984, as amended.)
Today, Insurance Law § 2101(f) (McKinney 2006) defines a “reinsurance intermediary” as “any person, firm, association or corporation who acts as a broker in soliciting, negotiating or selling any reinsurance contract or binder, or acts as an agent in accepting any reinsurance contract or binder on behalf of an insurer . . .” Insurance Law § 2102(c) (McKinney 2006), in turn, provides that no person, firm, association or corporation shall act as a reinsurance intermediary without a license. Insurance Law § 2106 specifies the procedure and requirements for obtaining and renewing a reinsurance intermediary license. Therefore, reinsurance intermediaries must be licensed to act as such in this state.
Insurance Law § 2117 is applicable to and limits the authority of a reinsurance intermediary to act under its license when the assuming insurer is unauthorized. Insurance Law § 2117, among other things, prohibits the aiding of or the acting on behalf of an unlicensed or unauthorized insurer or health maintenance organization in the doing of an insurance business in this state. Specifically, Insurance Law § 2117(d) provides a limited exception for licensed reinsurance intermediaries, derived from former Insurance Law § 122-a(11), which states that a “licensed reinsurance intermediary may negotiate a contract of reinsurance, or place reinsurance, in an insurer not authorized to do business in this state.” Thus, a licensed broker, pursuant to Insurance Law § 2117(b)(1), may negotiate or place reinsurance with an unauthorized insurer to reinsure risks produced by such broker, but a reinsurance intermediary does not need a broker’s license.
For further information you may contact Senior Attorney Brenda Gibbs at the Albany Office.