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FAQs Regarding Reorganization of the New York State Insurance Department

Release Date: April 18, 2011

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On March 31, 2011, the New York State legislature enacted Governor Cuomo's budget bill relating to the 2011-2012 fiscal year (the "Budget Bill").  In addition to numerous other provisions, the Budget Bill contains provisions that will result in the merger of the Departments of Banking and Insurance into a new entity to be known as the Department of Financial Services (the "DFS"). 

We have provided some answers below in response to some questions we have received relating to the passage of the Budget Bill and its effect on the insurance industry.

Q. Who does the DFS regulate?
Section 201 of the Financial Services Law, which was enacted pursuant to the Budget Bill, provides that the Superintendent of the DFS shall supervise not only persons subject to the Insurance and Banking Laws, but also those persons who provide financial products and services in New York. A "financial product or service" is defined as including not only products or services offered or provided to persons regulated by the Banking and Insurance Departments, but also any financial products or services offered or sold to consumers generally, though numerous exceptions apply. We expect that over time, there will be further guidance as to what constitutes a "financial product or service" under this law given that there seems to be room for interpretation.

Q. How will the DFS be structured internally?
The DFS will be overseen by a Superintendent, who will be appointed by the Governor. The Budget Bill provides for separate divisions of Banking and Insurance, which will each be headed by separate Deputy Superintendents. Originally, the Consumer Protection Board ("CPB") was supposed to merge into the DFS, but the Legislature ultimately rejected this proposal (the CPB will instead be folded into the Department of State). 

Q. When will the Budget Bill be effective?
The Budget Bill is generally supposed to be effective on April 1, 2011, but the actual merger of the Banking and Insurance Departments is supposed to occur effective October 3, 2011.  Assessments to defray the operating expenses of the DFS are supposed to be assessed for each fiscal year commencing on or after April 1, 2012, at which time Section 332 of the New York Insurance Law will be repealed.

Q. How will the Budget Bill affect the provisions currently contained in the Insurance Law?
For the most part, the Insurance Law will remain in effect "as is." However, the Budget Bill allows for further changes to be made to both the structure of the more....

This Jaeckle alert, prepared by the attorneys at Jaeckle Fleischmann & Mugel, LLP, is intended for general information purposes only and should not be considered legal advice or an opinion on specific facts. For more information on these issues, contact one of the attorneys listed above or your existing Firm contact. Prior results do not guarantee a similar outcome. The invitation to contact is not a solicitation for legal work in any jurisdiction in which the contacted attorney is not admitted to practice. Any attorney/client relationship must be confirmed in writing.  Copyright 2011. All Rights Reserved.  Jaeckle Fleischmann & Mugel, LLP  Buffalo, NY.