The Business Council supports this legislation that would eliminate the aggregate cap on assessments of life companies used to fund the state's life insurance company guarantee corporation. The corporation, created by statute but wholly funded by the life insurance industry, guarantees most policyholder payments in cases where a life insurer becomes insolvent.
The bill also brings provisions of the Insurance Law into greater conformance with the National Association of Insurance Commissioners (NAIC) Life and Health Insurance Guaranty Association Model Act (the “NAIC Model”).
All life insurers licensed to do business in New York is required to participate in this guarantee corporation.
The current law, Article 77 of the state Insurance Law, caps the aggregate amount of assessments allowed against insurance companies at $558 million; a funding cap that was proven to be inadequate due to the ongoing liquidation of the Executive Life Insurance Company of New York ("ELNY").
The life insurance industry supports the need for an adequately funded guarantee fund, and supports the repeal of this aggregate cap. This change makes New York's guarantee fund consistent with other states, none of which impose this type of aggregate assessment cap. Without this legislation, life insurance policy holders and the life insurance industry in New York would be left without a workable guaranty fund.
In addition, this legislation would adopt other provisions of the NAIC model legislation by extending provisions of the act to all eligible customers, not just New York State residents, and clarifying provisions related to group annuity contracts.
Finally, this provision would authorize the incorporation in New York of a resolution facility to provide administration for future insolvent New York life companies.
In summary, this legislation addresses an urgent need to update and maintain the effectiveness of tthe state's life insurance guarantee fund, and brings the state's regulation of life insurance companies more in line with that of other states. It also has the broad support of the life insurance members, including life insurance companies represented by The Business Council.
For these reasons, The Business Council supports approval of S.7320-A/A.9155.