The Business Council opposes this legislation that provides the Superintendent of the Department of Financial Services (DFS) with explicit authority to order an insurer into an administrative supervision proceeding.
The proposed legislation, based on the National Association of Insurance Commissioners (NAIC) Administrative Supervision Model Act, actually goes well beyond the NAIC model giving discretion to the Superintendent to determine what conditions warrant placing a company under administrative supervision.
Currently, Insurance Law Article 74 authorizes the Superintendent to apply for a court order for rehabilitation of a domestic insurer upon determination that certain conditions are met. These conditions include failure to submit to inspection of books; willful violation of the company’s charter or any law of the State of New York; refusal by officers to be examined under oath. The Department has argued that current statutory authorization does not provide the Superintendent with sufficient flexibility to address the unique situations that may be the subject of a failing insurer. This legislative proposal would allow the Superintendent to issue the order, take over the operations of the company and do so absent judicial review.
Additionally, the activities of a company placed under administrative supervision are subject to a broad set of criteria including a “catch all” provision – which goes beyond the NAIC model by allowing the superintendent to prohibit activities that the superintendent may determine to be necessary.
This is another example of administrative overreach by proposing to expand its already robust unilateral authority. DFS has both the authorization to proceed in such cases and the appropriate means to execute such orders through the courts. In addition, the proposal extends beyond the mission of DFS to regulate financial service businesses and oversteps into the constitutional jurisdiction of the Attorney General. The lack of transparency and imposition of rules absent oversight is troubling and should therefore not be enacted.
For the above reasons the Business Council strongly opposes this proposal and urges it rejection by the Senate and the Assembly.