Insurance Laws §6301 through §6304 authorize the placement of certain risks with licensed insurers who obtain a second, additional license from the Insurance Division of the Department of Financial Services. Risks that qualify for placement in the Free Trade Zone (FTZ) are subject to an exemption from the filing requirements and/or prior approval requirements for rates and forms, where applicable, as follows:
Class 1 and 2 coverages – policy forms and applicable rates are exempt from the filing requirements of New York insurance law and regulations.
Class 3 coverages – policy forms are not subject to the prior approval requirements but are subject to some filing requirements, and applicable rates are exempt from the filing requirements of New York insurance law and regulations.
However, all FTZ policies must still meet the other statutory requirements applicable to all New York insurance policies, such as the Standard Fire Policy requirements of §3404 for fire policies and the minimum liability policy requirements of §3420 (See also OGC Opinion of March 8, 2002).
Insurers
Insurers must meet certain financial and solvency standards in order to obtain an FTZ license. The business must also be underwritten and transacted from an office within New York State, and a notice must be affixed to such policies advising that the policies are exempt from the requirements noted above.
Types of Risk
The risks, which can be underwritten as FTZ risks, fall into one of three classes:
Class 1 – Individual risks that produce an annual insurance premium of at least $100,000 for one kind of insurance, or $150,000 for more than one kind of insurance.
Class 2 – Risks that have been defined as special risks by the Department of Financial Services and set forth in §16.12 of Regulation 86.
Class 3 – Coverage, other than medical malpractice, issued to a "large commercial insured" that employs or retains a special risk manager and meets the various provisions set forth in the third amendment to Regulation 86 (See Circular Letter No. 10 (2011)).
Kinds of insurance permitted to be written in FTZ:
Most but not all kinds of P&C insurance (See Insurance Law §6301(b));
Personal lines (other than automobile insurance) if included in the list of eligible Class 2 risks; and
Medical malpractice insurance as a Class 1 or 2, but not as a Class 3 risk.
Kinds of insurance that cannot be written in the FTZ:
Group policies, including purchasing groups;
Insurance where rates are subject to prior approval (See Insurance Law §2305(b) and §2328) except medical malpractice, can be written as a Class 1 or 2; and
Insurance required to satisfy any New York financial responsibility requirement.
Brokers
Because these risks are being underwritten by licensed insurers, any licensed broker can place these risks. Since FTZ insurers are licensed insurers, the excess line law does not apply, and therefore, no affidavits and related policy documentation need to be filed with ELANY, and no excess line premium taxes need to be paid on these FTZ transactions.
FTZ Class 3 large commercial insureds are separate and distinct from excess line requirements for exempt commercial purchasers.
Also, see the ELANY educational video "Free Trade Zone or Excess Line Insurance," OGC Opinion of March 27, 2002 and OGC Opinion of June 4, 2002.
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ELANY DISCLAIMER:
This is not intended to be nor should it be construed as legal advice. Consult with your own legal counsel.
Last Reviewed/Revised: September 21, 2022