NEW YORK DEPARTMENT CHANGES COURSE ON BROKER CONTINGENT COMMISSION ARRANGEMENTS
The New York Insurance Department has issued a new regulation, Regulation No. 194 (effective January 1, 2011), which addressees contingent compensation arrangements for brokers in the placement of insurance. While this Regulation contains an express exception stating that it does not apply to the placement of reinsurance, this Regulation is a major shift from the approach taken by former New York Attorney General Eliot Spitzer in this area, and the potential impact of this change in policy on the placement of reinsurance is unclear. The Regulatory Impact Statement for Regulation 194 states that ‘[t]here is nothing inherently improper about incentive-based compensation arrangement[s] between an insurer and the producer,” so long as there is proper disclosure of the arrangement. The Department has also published an Assessment of Public Comments relating to this regulation, and has amended its settlement agreements with three major brokers, Aon, Marsh and Willis, to permit them to engage in contingent commission arrangements subject to the disclosures required by Regulation 194. The Independent Insurance Agents and Brokers of New York, a trade association, has announced that it plans to sue to attempt to block the implementation of this regulation, on the ground that it imposes an undue burden on its members and exceeds the authority of the Department.
This post written by Rollie Goss.
