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VI. Principal Regulatory Developments Affecting Insurance Companies
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The new law allows New York licensed brokers to engage in specified activities in New York with respect to (a) “alien” (i.e., non-U.S.) unauthorized insurers and (b) group life, accident and health insurance or annuities where the policyholder, or proposed policyholder, is a multinational entity (as defined above) resident outside the United States and the policy covers employees residing outside the United States. The specified activities set forth in Section 2117(k)(2) of the New York Insurance Law permit a broker to provide certain information to multinational entities regarding unlicensed alien insurers and policies issued by such insurers, make referrals to unlicensed alien insurers, and manage a multinational entity’s employee benefits program. The broker must provide written notice to the multinational entity regarding the unregulated nature of the insurance coverage before doing any of the activities specified in Section 2117(k)(2).
The new law does not permit a policy to be underwritten or negotiated in New York, or a policy to be issued or delivered in the United States. Other than as specifically permitted, brokers are not permitted to call attention to the unauthorized insurer in New York. The law also does not permit an unauthorized alien insurer to maintain an office in New York.
4. Personnel Changes
In 2015 the senior staff of the NYDFS underwent a number of significant changes. Benjamin Lawsky left his role as Superintendent of the NYDFS and was succeeded in an acting capacity by Anthony Albanese, who in turn has been succeeded in an acting capacity by Shirin Emami, who was previously the Executive Deputy Superintendent and the General Counsel of the NYDFS Banking Division. Additionally, Robert Easton left his position as Executive Deputy Superintendent of the Division of Insurance of the NYDFS and has been succeeded in an acting capacity by Troy Oechsner. We expect permanent replacements for these positions to be named in 2016.
J. 2016 Forecasting
Looking to 2016, we expect that FIO and the USTR, on one hand, and the E.U., on the other hand, will soon begin negotiations on a covered agreement; negotiations which may set the stage for mutual recognition, equivalence and potentially a foundation
for multinational group supervision in the future. Group capital will continue to be a focus of U.S. state, federal and international regulators in 2016: IAIS will continue developing the HLA and ICS global capital standards for G-SIIs, the NAIC will begin work on its group capital assessment tool for U.S. insurers, and the Federal Reserve Board will likely unveil a proposed rule as to minimum capital standards for U.S. insurance SIFIs. With respect to the SIFI designation process, it remains to be seen how FSOC will respond to renewed criticisms about its lack of transparency, and whether Congress will take action to limit FSOC’s authority. Cybersecurity will also be a continued focus, with the development of a Cyber Model by the NAIC, a cyber-related regulation by the NYDFS, and, potentially, the consideration of further federal legislation by Congress. Finally, in 2016 we expect that the threshold for adoption of PBR will be reached, with PBR becoming effective as of January 1, 2017.
K. SolvencyIIDevelopments
The regulatory marathon that is known as Solvency II is nearing the finish line. Formal implementation began in April 2015 and the new rules came into effect on January 1, 2016. There are still some loose ends to tie up and some fairly significant transitional periods to get through but for all intents and purposes the new regime is now in place. Solvency II has significance beyond Europe for a number of reasons. First, Solvency II affects international groups and how their group solvency is calculated, and therefore affects the assessment of groups that have insurance companies both within and outside of the E.U. Second, it insists that there is a form of group supervision. While group supervision is a concept that is common in many insurance regulatory regimes, it is not universal—the U.S. is a notable exception. Again, international insurance groups with an insurer located in the E.U. will be affected. Third, it affects reinsurers outside of the E.U. that wish to reinsure European insurance companies.
The commencement of the Solvency II phasing-in period from April 2015 and a series of publications and announcements from E.U. legislators and regulators during the course of 2015 have cleared up lingering uncertainty regarding a number of important matters, including the issues of equivalence and group supervision, that are of particular interest to international groups.
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review