The New York Department of Financial Services (Department) has announced that Regulation 203 – Enterprise Risk Management & Own Risk and Solvency Assessment (Proposed Regulation) will be formally proposed in a notice of proposed rulemaking to be published in the New York State Register on January 22, 2014. The deadline for submission of public comments will be March 8, 2014. The full text of the Proposed Regulation is available on the Department’s website at http://www.dfs.ny.gov/insurance/rproindx.htm.

As anticipated, the provisions of the enterprise risk management (ERM) report are substantially similar to the recently added Form F of the National Association of Insurance Commissioners (NAIC) Insurance Holding Company System Model Regulation, and the own risk and solvency assessment (ORSA) summary report New York will require is substantially similar to the recently finalized NAIC Risk Management and Own Risk and Solvency Assessment Model Act. 

Last year, New York adopted amendments to its insurance holding company laws to include the requirement that insurance holding companies adopt formal ERM functions and file ERM reports annually with the New York Superintendent of Financial Services (Superintendent) by April 30 of each year. These amendments, which became effective in October 2013, apply to any holding company “that directly or indirectly controls an insurer.” N.Y. Ins. Law § 1503(b). As a result of the applicable holding company act definitions, the New York ERM reporting requirements apply to all holding companies that directly or indirectly control any insurer licensed in New York, and not just to holding companies with New York domestic subsidiaries. The provisions of the Proposed Regulation are consistent in this regard. Pursuant to proposed 11 NYCRR 82.2(b)(1), “an entity shall file electronically an enterprise risk report with the superintendent by April 30 of each year.”  Entity is defined by the Proposed Regulation as a holding company that directly or indirectly controls an insurer authorized to do an insurance business in New York. See 11 NYCRR 82.1(d) and (g).

Unlike the ERM reporting requirement, the Proposed Regulation’s ORSA summary report requirement is not the result of any specific statutory amendment to the New York insurance laws, and the preamble to the Proposed Regulation indicates that the Department is relying at least in part on the Superintendent’s general examination authority under Section 309 of the New York Insurance Law. Pursuant to proposed 11 NYCRR 82.3, the Proposed Regulation’s ORSA summary report requirement will apply only to New York domestic insurers with $500 million or more in annual direct written and unaffiliated assumed premium and to insurance holding company systems, article 16 systems and article 17 systems of which a domestic insurer is a member having $1 billion or more in annual direct written and unaffiliated assumed premium. This is consistent with the reporting requirements under the NAIC Risk Management and Own Risk and Solvency Assessment Model Act, which are applicable only to domestic insurers meeting such criteria.