New York Life Insurance Compliance Lawyer & Attorney : Currin Law Office : Annuity Compliance & Insurance Regulation

The New York State Insurance Department has posted guidance for companies wishing to file policies or riders on a certified basis in advance of the 1/1/08 effective date for the new Reg 149.   Among other things, this new regulation will make Return of Premium riders more feasible in NY and it will permit term policies to extend beyond age 80 so companies wanting to be in a position to launch products in January may want to review this guidance and prepare submissions accordingly. 

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At a recent meeting at the NYSID, a warning was put out to companies regarding the Department's discovery that on several occasions unlicensed insurers have issued  unapproved (in NY) equity indexed annuities to NY residents outside New York.  In most instances the unlicensed insurer was an affiliate of a licensed NY entity.   Mr. Maffei and Ms. Nelligan, both of the Life Bureau indicated that endorsements are required of those companies to bring the forms into compliance with NY law and that under section 3103 of the Ins. Law, the non-compliant contracts would be interpreted as being in compliance with NY law. 

This situation can cause tremendous administrative burdens for companies as these policies will almost always need to be administered by hand as they won't be real NY policies as they will retain any more favorable provisions from the non-NY version and they will not be forms of that non-NY state because of the NY endorsement.   There may also be Guaranty Fund issues because of the residency issue.  The Department's recommendation was that companies have clear controls in place to prevent this from occurring.   It is likely that there will be further discussion on this topic.

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Some companies have received "disapproval" letters when they have tried to file for extension of approval under CL6.   

There appears to be some challenges when putting this type of submission together appropriately so that it can be approved under the certified process.  It cannot be successfully done by merely making the request for an extension of approval in the submission letter for the new forms.  However, the Department assures that extensions of approval CAN be accomplished via certification, but the Re of the letter and the certification would need to be correctly prepared and the request clear from the submission package. 

The more complicated question though,  is determining when a company needs to request an extension of approval to begin with.  If a policy and an application form are both approved in the same package, are they approved solely for use with each other?  Then if another application is developed for the same policy would an extension of approval for that policy be required or would a mere reference to the policy be sufficient in the submission letter?  When I make that determination I look back at the original submission letter and the original approval letter to see what representations and conditions were put forth, but the longer we live in a certified approval world, the less clear it becomes when a real extension of approval is required. 

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At today's policy forms filing task force meeting, the NYSID indicated that they are discussing internally what the process will be to allow companies to file revised policies during the period between now and when the new regulation becomes effective on 1/1/08. 

The issue is that certification is problematic when the regulation is not yet effective.   Forms drafted to comply with the new regulation would not be in compliance with the current regulation, but the certification is happening now.  Because the certification cannot be modified, companies cannot take it upon themselves to make changes to the certification that would make it accurate.  Therefore, a specific process is necessary.  It appears that guidance on how to handle this situation will be forthcoming so that companies can begin to put these submissions together and get them approved in time for a January 1 launch under the new regulation. 

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Today the New York State Insurance Department issued a press release announcing a draft regulation that would establish a system of principles-based regulation.  

The draft regulation sets forth 10 principles for the industry and the press release also includes 10 corresponding principles for regulators, though those are not included in the regulation itself.   It is indicated these would be set out in a Circular letter.  The draft regulation will be distributed for discussion by the industry and consumers and is scheduled to be included on  the agenda of the New York State Commission to Modernize the Regulation of Financial Services, which is chaired by the Superintendent.  

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The Department has recently posted a document entitled Guidance on Equity Index Products on their website.  The guidance is not broken down by product type but rather addresses annuities and life products as well as individual and group.   One thing that jumps out at me is that there is not a single citation to law, regulation or circular letter.  This makes it more difficult to assess the basis for the positions as expressed in the product design guidance.  Some clues lie in the word groupings, but because the guidance applies to all products, some of these terms would not ordinarily apply to the product, based on where they are found in the law. 

For those companies that elected to file equity indexed products on a certified basis, there isn't a lot to determine what might come up on post-approval review that is based on law, regulation or circular letter.  However, the guidance does give a very good indication of what the examiners will be looking and asking for upon review.  And that is more than we have had in the past! 

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