BILL NUMBER: S8258
SPONSOR: SKOUFIS
 
TITLE OF BILL:
An act to amend the insurance law, in relation to administrative super-
vision
 
PURPOSE:
Authorizes the Department of Financial Services to pursue administrative
supervision of insurers.
 
SUMMARY OF PROVISIONS:
Section 1. Legislative Findings.
Section 2. Adds new section 1125 of the insurance law to establish a
process for administrative supervision of insurers deemed at risk of
insolvency, engaged in hazardous activity, or out of compliance with
insurance law and regulations.
Section 3. Amends subsection (a) of section 1309 of the insurance law to
allow for administrative supervision of insurers that are at risk of
insolvency.
Section 4. Amends subsection (a) of section 1310 of the insurance law to
allow for administrative supervision of domestic stock insurers that are
engaged in hazardous activities.
Section 5. Amends subsection (c) of section 1311 of the insurance law to
allow for administrative supervision of domestic mutual or reciprocal
insurers that have not complied with an order of remediation.
Section 6. Amends paragraph 2 of subsection (c) of section 1312 of the
insurance law to allow for administrative supervision of foreign insur-
ers that have not complied with an order of remediation.
Section 7. Effective Date.
 
JUSTIFICATION:
This bill authorizes the Department of Financial Services (DFS) to place
troubled insurance companies under administrative supervision. This
will allow DFS to intervene when an insurer is engaging in fraudulent or
hazardous activities, and help return the insurer to financial health
before rehabilitation or liquidation becomes necessary.
Currently, DFS can direct a troubled insurer to undertake remediation of
financial or other conditions that threaten the insurer's solvency. If
an insurer refuses to follow this order, DFS must commence a formal
rehabilitation or liquidation proceeding. These are public processes
that usually result in the termination of the insurer's operations,
causing harm to policyholders and the public.
This bill gives DFS an alternative option when an insurer refuses to
follow a remediation order. It allows DFS to access, evaluate, and
provide guidance regarding the insurer's administrative processes with-
out forcing such information into the public eye. Administrative super-
vision helps to address a troubled insurer's affairs without the public
scrutiny that comes with a formal court proceeding. The insurer has the
right to challenge the administrative supervision order at an adminis-
trative hearing.
This bill follows the National Association of Insurance Commissioners'
administrative supervision model, which has been adopted in 21 states,
including California, Connecticut, Florida, Massachusetts, and New
Jersey.
 
LEGISLATIVE HISTORY:
New bill
 
FISCAL IMPLICATIONS:
TBD
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S8258: 1309 insurance law, 1309(a) insurance law, 1310 insurance law, 1310(a) insurance law, 1311 insurance law, 1311(c) insurance law, 1312 insurance law, 1312(c) insurance law