Last month President Barack Obama signed into law The Wall Street Reform Bill. The new law which overhauls the financial regulatory system in the U.S., has also created new opportunities for foreign insurers in the Commonwealth. Previously, the law governing the Massachusetts excess and surplus market did not allow alien insurers, or insurers formed and operating outside of the United States, to write Massachusetts risks as a practical matter. The law now permits these foreign excess and surplus insurers into the Massachusetts insurance marketplace. The new federal law, however, now restricts any state from prohibiting a surplus lines broker from placing business with a non-admitted insurer domiciled outside the United States. A non-admitted insurer, however, has to be listed on the Quarterly Listing of Alien Insurers maintained by the National Association of Insurance Commissioners to qualify for the Federal exemption.
Immediately following the enactment of the Federal law, the Massachusetts Legislature changed the Commonwealth’s excess and surplus laws to more or less comply with the Federal Law. Alien non-admitted insurers are now permitted to write insurance on an excess and surplus basis. The Legislature did put in additional restrictions in the state statute, but these added restrictions do not necessarily apply to all non-admitted carriers. These changes to the excess and surplus laws were included in an omnibus bill known as An Act Relative to Economic Development Reorganization and can be found in the 2010 Massachusetts Session Laws as Chapter 240 of the Acts of 2010. Whether the validity of Massachusetts additional restrictions on alien insurers will be addressed and reconciled under the Federal legislation is an open question.
For now, what remains to be seen is how the new alien insurers that can enter the Massachusetts excess and surplus market will impact the Commonwealth and whether this is a further softening of an already soft market.
If you would like to discuss how this issue may affect your insurance business or if you have any other legal question or issue to discuss, please contact Owen Gallagher here.