Twenty one years after the New York Insurance Exchange Commission (the “Exchange”) closed its doors for trading, New York State officials have begun to consider reviving this unique market.  The Exchange was created in 1979 with the enactment of Regulations 89, 89-A and 89-B.  Modeled off the Lloyd’s structure, it represented New York State’s response to the then existing market capacity crisis.  Pressure to open competition and significant growth of the insurance industry during the mid-1970’s instigated general concern that premium dollars would flow to international markets having a greater capacity to write high-risk insurance.

The Diebold Group, Inc. initially projected the Exchange to explode as the only U.S. “Free Trade Zone” unfettered by state insurance regulators and the rate and form filing requirements.  However, by 1987 market conditions had changed so drastically that the syndicates were no longer able to write any new business on the Exchange.  In the years following the initial rapid growth, many of its syndicates were either rehabilitated or liquidated.  By February 1996, the Exchange itself was ordered liquidated by the New York State Supreme Court.

Now, New York Governor David Paterson and New York Superintendent Eric Dinallo have confirmed that the State is considering reviving the Exchange.  The regulations authorizing the Exchange remain in effect.  Additionally, the market conditions of the late 1970’s may have returned, making the revival of the Exchange a practical domestic solution to insurance industry pressures for a market with similar writing capacity that is free from extensive regulation.

We will continue to follow this issue and provide further updates on InsureReinsure.com.