Insurance IOI (Items of Interest) Blog

Strike One!

December 20, 2011
In one of its first opportunities to demonstrate that it “means what it says” by its stated objective “[t]o encourage, promote and assist banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state; . . .” the new Department of Financial Services has taken a called Strike One!

In November 2011, the Superintendent of Financial Services, Benjamin Lawsky, issued a press release touting his newly issued regulation “to implement a law that deregulates most insurance business with large, sophisticated companies or public entities.” In the release, Mr. Lawsky states that “[t]he new law and regulation enhance the ability of insurers to underwrite large commercial insureds in New York, increase speed to market for certain insurance products not currently exempted and eliminate barriers to economic development in New York.”  Unfortunately, the effect of the new law and regulation on the marketplace are unlikely to match the rhetoric.

I have written an article on the new law and regulations that adds a new class of risks — for large commercial insureds with significant risk management capabilities — that can be written by domestic New York companies in the “Free Zone.”  This article points out the reasons why, in my opinion, the new law and regulations will not deliver on the promised benefits to the market.  If you are interested in reading the full article click here for a link to the Publications page of my website to access a pdf copy of the article titled “Strike One!”

A New Beginning

October 3, 2011
As of today, October 3, 2011, the New York Insurance Department, believed to be the oldest state regulatory agency in the United States, no longer exists! Today the former insurance and banking departments are merged into the new Department of Financial Services, and the new Superintendent of Financial Services, Benjamin Lawsky, becomes the chief regulator of both the banking and insurance businesses. The picture gallery of past insurance superintendents on the 3rdfloor of 25 Beaver Street, which begins with William Barnes in 1860, will end with James Wrynn 151 years later.

The new agency has the opportunity to demonstrate that this sea change in the regulatory framework in New York is a new beginning, and that it intends to fulfill the stated goals of the merger legislation.  This starts with the first stated goal: “[T]o encourage, promote and assist banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state; . . .”  Nothing could be more in line with this goal than the revival of the insurance exchange!

As many of you are aware, over a year ago the industry working group established by Superintendent Wrynn issued its preliminary recommendations for the reestablishment of an insurance exchange.  After several fits and starts, a draft plan to implement these recommendations was drafted.  However, even though a draft, and with little if any downside to the regulators, release of the draft plan release was repeatedly postponed at the request of the administration.

Today is a new day, and in honor of the old insurance department, and in support of the principal goal of its successor agency, I have posted the draft plan for the implementation of the industry working group preliminary recommendations on the “NY Insurance Risk Exchange (NY-REX)” page of my web site.  Here is the link to that page.  It is my hope that the new agency will embrace the exchange concept under its stated goals, and that it is not too late for its successful reincarnation.

Farewell Insurance Department! Hello Insurance Bureau of the Department of Financial Services!

A Challenge to the Cuomo Administration

September 26, 2011

One of the hallmarks of the first several months of the administration of New York’s Governor Cuomo was the presentation and adoption of his plan to consolidate the regulation of financial services, including the merger of the banking and insurance departments to be effective on October 3, 2011.  Over the coming months there will be considerable scrutiny by banking and insurance industry participants and observers to see whether or not the merger can or will meet the stated goal of the law “To establish a modern, dynamic, attentive, twenty-first century system of regulation, rule making and adjudication, that is responsive to the needs of the banking and insurance industries, as well as the state’s consumers and citizens; . . .”

Understandably, this initial scrutiny will be focused on the routine day-to-day interaction between the regulators, the regulated companies and the service providers to the regulated companies. Will there be the same access to the department as you were accustomed to in the past? Will you be dealing with the same department people? Will former banking regulators be handling insurance regulatory issues and vice versa? Will things that used to take forever now take forever and a day? People dislike having their routines changed, and how the merger will change routines both for the employees of the merged agencies as well as those dealing regularly with the agencies, is of the utmost immediate concern for many. But there is another longer-term issue that needs to be addressed as well: What does the new Financial Services Law portend for the future of the business of insurance in New York?

Here is a link to my web site page where you can access a copy of my article, “A Challenge to the Cuomo Administration” (Articles Web Page) urging the administration to carry out and support the stated goals of the new merger law, and to demonstrate that these objectives are not just a salve to calm industry skepticism.  The article focuses on three examples where the new department has an opportunity to prove it is prepared to support meaningful alternative market initiatives: the “free zone”, captives and the insurance risk exchange. The purpose is to promote a continuing dialogue on the goals of the new law and the intent of the administration in its execution.

The article is also slated to be published in the September 28, 2011 issue of Insurance Advocate magazine.

Thank you Mr. Roberts!

October 26, 2010

I was sad to hear about the recent passing of Burton Roberts who was purportedly the model for the judge in Thomas Wolfe’s “The Bonfire of the Vanities.” My sadness, however, was on a more personal note – Mr. Roberts is probably the reason I ended up in the insurance industry.

When I was looking for a job in NYC following my graduation from Law School, a friend who had graduated the year before and was an assistant DA in the Manhattan DA’s office of the Frank Hogan era, arranged an interview for me. It turned out that the interviewer was the gruff, intimidating Burton Roberts, then a senior assistant to Mr. Hogan. After informing me about the rigors of the position and questioning me at length about my background and aspirations, Mr. Roberts informed me: “Young man, you seem like a smart, pleasant person, but you are far too nice to be working in the district attorney’s office.” It was not presented as a put-down, but merely an honest assessment of his view. After having had several condescending interviews with “white shoe” firms (“We only hire from Harvard or Yale, but I told [so-and-so] I would talk to you, so go ahead.”), I actually left Mr. Roberts’ office feeling a lot better about myself. He listened and then gave what was probably an accurate assessment.

Soon thereafter I accepted a position in the legal department of United States Life Insurance Company, and the rest, as they say, is history. So, thank you Mr. Roberts, for knowing more about me than I did at the time.

Insurance Exchange Update

July 17, 2010

In February 2010, New York Superintendent James Wrynn convened the first meeting of a Working Group of interested parties from the insurance industry, the investment community and others to consider the revival of an insurance exchange in New York. This Working Group, to which Superintendent Wrynn appointed me as a Special Advisor*, was divided into a number of sub-groups to consider various aspects of the Exchange issue, including: markets, government relations, taxes, operations and technology, capitalization, regulatory oversight and multi-state issues. Each of the various sub-groups met and conferred over the months following the initial Working Group meeting. These deliberations resulted in the presentation at the end of June 2010 of preliminary recommendations of the sub-groups. A copy of this presentation, prepared by the New York Insurance Department, can be accessed on my website at (on the Insurance Exchange page).

The next phase of this project is the preparation of an action/business plan to be presented for comment to the full Working Group. It is anticipated that an initial draft plan will be available by early Fall 2010.

*Although I am a special advisor to the Insurance Exchange Working Group and its various sub-groups, the views expressed by me at this blog site, my various articles or elsewhere on the Insurance Exchange topic are solely mine, and do not necessarily reflect those of the New York Superintendent of Insurance, the New York Insurance Department, the Exchange Working Group or the various sub-groups.


June 21, 2010

Marsh and McLennan Companies CEO, Brian Duperreault, reportedly told attendees at the recent Insurance Day Summit in Bermuda that the proposal to revive the New York Insurance Exchange would face an “uphill battle” to create a market in current conditions. While this view certainly has some truth to it, and many of his observations about the issues facing the effort to revive the Exchange are well taken, the concern is that these views are preventing engagement in a unique opportunity by many potential insurance and financial participants.

One of the most challenging hurdles being faced by the Exchange working group established by NY Superintendent Wrynn is the “wait and see” attitude of many key players – let’s see what “they” come up with before we decide if it will work for us. Hopefully, Mr. Duperreault is not placing Marsh in this category. Given all the publicity about the revival efforts, and the fact that the Exchange would be a brokerage market, why wouldn’t Marsh – or any major US based brokerage firm — jump at the opportunity to actively participate in the effort – to help with the design, structure and scope of the Exchange? And why wouldn’t any broker, underwriter, manager or investor that utilizes the Lloyd’s market be interested in creating a similar market closer to home? Rather than leaving the decisions on the look, feel and structure of the Exchange to others, the time to participate is now while the input has meaning.

Mr. Duperreault reportedly stated, “The last New York Exchange started at absolutely the worst possible time in that market and that didn’t work out too well to say the least.” While it is true that the Exchange opened during a soft market, it was conceived and constructed during a seriously hard market. Now it is being considered during a soft market, but by the time it is constructed and operational it could very well be in a hard market. The lesson is that the exchange cannot and should not be viewed as a product for a moment. It should be viewed as a marketplace for the long haul, with the structure and flexibility to address changing market needs. With enabling legislation already on the books and the New York regulators providing the impetus and support for the revival effort, it would be disappointing indeed if the insurance and financial industry leaders did not take full advantage of the opportunity to support and participate in the initiative.

It is also disappointing when leaders like Mr. Duperreault feel the need to take a gratuitous shot at the experience of the old Exchange. Aside from perpetuating the misconception that the Exchange market failed*, the circumstances are far different today than they were 30 years ago!

What Superintendent Wrynn and his staff need now is insurance and financial industry leadership in helping take advantage of current circumstances to move the Exchange forward. Everyone agrees that there are many challenges in making this happen, but the gain in creating a potentially significant, modern and flexible market should be incentive enough to make it worth the effort.

This effort, however, needs Architects — not cynics! Builders — not fabricators! Players — not spectators!


*At the time the Exchange’s Board of Governors chose to close the facility there was a significant, well-structured and capitalized group of syndicates willing and able to continue with the Exchange. For more information on the history of the original Exchange, including the Board’s decision to close the facility, see my article “The Once and Future New York Insurance Exchange”, February 2010, at (on the Insurance Exchange page).

NOTE: Although I am a special advisor to Superintendent Wrynn’s Insurance Exchange working Group, the views expressed by me above or elsewhere on this topic are solely mine, and do not necessarily reflect those of the Superintendent, the Insurance Department or the Working Group.

The Once and Future New York Insurance Exchange

March 29, 2010

Since the idea of re-establishing the exchange surfaced a couple of years ago, I have been repeatedly asked what has changed in the past two decades to make a Lloyds-style insurance exchange workable in the US today when it did not seem to work before? To help the dialogue on these and other questions about reviving the exchange, I wrote an article “The Once and Future New York Insurance Exchange,” a copy of which I placed on the insurance exchange page of my website.

I am extremely pleased that Insurance Advocate magazine considered this topic of such interest that it published my article as its cover story in the March 8, 2010 issue, and that it has posted the article on its website at (click on “preview article”).

If you have any interest in this topic, I hope you will take a few minutes to read my article and possibly comment on your views about the topic to me.

Insurance Exchange Redux

February 27, 2010

After a bit of a sabbatical, I am back with a new focus: the revival of an insurance exchange in New York!

In January 2010 New York’s Governor Patterson listed in his State-of-the-State message a number of economic initiatives to be pursued by his administration. Among them was a commitment to “rebuild the New York Insurance Exchange.” The Superintendent of Insurance, James Wrynn, has backed up this commitment by establishing a Working Group with several sub-groups to help formulate an action plan for the re-establishment of an insurance exchange in New York.

In February 2010, I was appointed by Superintendent Wrynn as a Special Advisor to the Insurance Department’s insurance exchange Working Group. Because of the interest in reviving the insurance exchange, the numerous requests I have received for materials on the old exchange, and my role as special Advisor to the Working Group, I have added a page to my web site with links to governing documents, articles, studies and publications relating to the original exchange. Click here to go to this new page, which includes links to pdf copies of the constitution and by laws and operating rules of the old exchange taken from my book Exchange: A Guide to an Alternative Insurance Market (NILS Publishing Co. 1987-1990), as well as the operative statute (Article 62 of the New York insurance law) and regulations (NY Regs 89, 89A and 89B) . It is hoped that making this information readily available to all interested parties will assist in the new effort.

Knowing the laws, regulations, rules, procedures and systems of the old exchange, however, is not the same as knowing which of those worked or did not work, and why. For that insight, there is no substitute for having been there; and having been there I plan to comment on a number of these matters as the Working Group moves forward.


October 20, 2009

In prior postings I have described New York’s five (5) insurance security/guaranty funds: three non-life security funds administered by the superintendent of insurance (the property/casualty fund, the workers comp fund and the public motor vehicle liability fund); and two life funds. The Life Insurance Company Guaranty Corporation, a separate entity with its own Board of life industry representatives, administers the guaranty fund protecting current life and annuity policies. There is also a life guaranty fund covering pre-1983 policies that still remains extant. (Part III of my series of articles on the receivership process in New York, posted October 9, 2008, describes in detail the operation of and reporting requirements for these funds).

The P/C Security Funds

The p/c insurance security funds are accounts funded through industry assessments, with the commissioner of taxation and finance as custodian, and with the control of the funds vested with the superintendent as receiver. Although there is no detailed reporting by any of these funds or the superintendent, I have accumulated certain information over the years on the distributions from and recoveries to the funds on an estate-by-estate basis.
Following are schedules of the ten estates that have received the greatest amount of payments from the three p/c funds on a net basis (distributions less recoveries) for the past 11 years for the p/c fund and the past 7 years for the motor vehicle and w/c funds:


COMPANY ———————— COST TO FUND —— % of Total

Reliance Ins Co ——————— $315,954,788 ——- 27.09%
Group Council Mutual Ins Co —- $200,954,041 ——- 17.23%
First Central Ins Co —————– $117,736,140 ——- 10.10%
Legion Insurance Co —————- $88,451,306 ——– 7.58%
Transtate Ins Co ——————— $78,139,954 ——— 6.70%
Villanova Insurance Co ————- $73,655,030 ——– 6.32%
American Agents Insurance Co —- $51,956,695 ——— 4.46%
Galaxy Insurance Company ——– $28,211,496 ——— 2.42%
Home Mut. Ins of Binghampton — $28,183,527 ——– 2.42%
Union Indemnity Ins of NY ——– $26,526,835 ——— 2.27%

TOTALS ————————— $1,166,156,055 —— 100.00%


COMPANY ———————– COST TO FUND ——- % of Total

NY Merchant Bakers Ins. Co —— $47,211,782 ——– 49.95%
Capital Mutual Ins Co ————– $27,173,134 ——– 28.75%
Reliance Ins Co ——————— $10,969,398 ——– 11.61%
Legion Insurance Co —————- $3,972,573 ———- 4.20%
Acceleration National Ins Co ——- $3,690,371 ———- 3.90%
United Community Ins Co ———- $1,553,331 ———- 1.64%
Security Indemnity Ins. Co ———– $564,418 ———- 0.60%
Indemnity Insurance Co. ————- $469,670 ———- 0.50%
American Eagle Ins Co —————- $232,562 ———- 0.25%
Carriers Casualty Co ——————– $179,615 ———- 0.19%

TOTALS —————————— $94,517,565 ——- 100.00%


COMPANY ————————COST TO FUND —– % of Total

Reliance Ins Co ——————– $203,014,868 ——– 52.76%
Legion Insurance Co —————- $76,450,563 ——– 19.87%
Home Insurance Co —————- $34,006,976 ———- 8.84%
Fremont Indemnity Co ————- $14,632,437 ———- 3.80%
American Mut. Ins Co of Boston — $12,055,131 ———- 3.13%
American Mut. Liability Ins Co —- $10,636,047 ———- 2.76%
Realm National Insurance Co ——- $9,927,261 ———- 2.58%
Commercial Comp. Casualty Co —– $9,756,611 ———- 2.54%
First Central Ins Co ——————- $3,414,102 ———- 0.89%
Villanova Insurance Co ————— $3,004,611 ——— 0.78%

TOTALS —————————– $384,789,415 —— 100.00%

One caveat on recoveries: the department of taxation and finance keeps detailed records on payments from the security funds to each estate, but for some unexplained reason does not keep records of recoveries or payments to the funds from estates. The liquidation bureau has included a schedule of recoveries by estate as part of its annual report to the legislature. The 2008 schedule shows no repayments to any security fund from any estate, although the superintendent’s annual report states that $36 million was received from the Reliance estate and another $18 million from another source (Merchant Bankers) in 2008 that it were reimbursed to the security funds. These sums are not included in the charts above because they are not included in the bureau’s schedule of recoveries.

The Life Funds

Unlike the p/c funds, the superintendent does not include any information on the life funds in the annual report to the legislature, and there is no financial information included on the Life Insurance Company Guaranty Corporation web site (, which contains more disclaimers than useful information. Also, while I have successfully obtained information on the p/c funds from the department of taxation and finance and the insurance department under the freedom of information law (FOIL), no useful information is accessible on the life funds through FOIL or through the funds themselves.

As I have pointed out in the past, it is ironic that there is more information available on the p/c funds – controlled by the superintendent and his agents at the liquidation bureau — than is available on the industry administered life funds.

New Office Address and Phone Number

June 12, 2009


Peter H. Bickford, Esq.
50 Park Avenue
12th Floor
New York, NY 10016


(212) 889-7384