On June 24, 2024, the New York Division of Monetary Providers (“DFS”) issued Insurance Circular Letter No. 6 (2024),[1] informing property and casualty insurers writing and delivering business property and legal responsibility insurance coverage insurance policies in New York, together with extra/surplus strains insurers, that the newly enacted N.Y. Insurance Law § 3462 prohibits insurers from inquiring about or making underwriting and score selections based mostly on a property’s standing as an reasonably priced housing improvement or containing reasonably priced housing models. If an insurer used this information prior to now as a part of their utility, underwriting course of, or rate-setting course of, they have to revise such functions, underwriting tips, and charges accordingly.[2]
Part 3462 gives that insurers could not “cancel, refuse to situation, refuse to resume or improve the premium of a coverage, or exclude, restrict, limit, or scale back protection underneath a coverage” [3] based mostly on the truth that the actual property being insured is an reasonably priced housing improvement. Insurers likewise are additionally prohibited from inquiring upon utility whether or not a property is an reasonably priced housing improvement or accommodates reasonably priced housing models.[4] The statute outlines the next components and bars insurers from asking about them on functions and from contemplating them throughout underwriting and score.[5]
These components embrace:
- Any affordability requirement imposed on residents of specified earnings ranges;
- Participation in government-run rental help packages (e.g., Part 8 vouchers);
- The extent or supply of earnings of tenants, house owners, or shareholders; and
- Publicly-supported possession construction (e.g., possession by a public housing entity or cooperative housing company).[6]
New York property and casualty insurers could not embrace these components on an utility nor use them in making an underwriting or score choice, together with “to find out if additional underwriting is critical.”[7] DFS instructs insurers—together with extra/surplus strains and the New York Property Insurance coverage Underwriting Affiliation—to finish the follow of amassing this data and stop its use in underwriting and score. DFS additional encourages insurers to overview their charges, utility varieties, and underwriting tips, and revise them if essential[8].
Part 3462(b) reiterates that insurers could cancel, refuse to situation, refuse to resume, improve premiums on a coverage, or restrict, limit, or scale back protection underneath such coverage, because of “different components which can be permitted or not prohibited by some other part” of the Insurance coverage Code,[9] i.e., nonpayment of premium or different components not deemed discriminatory.
Background
In November 2022, DFS collaborated with New York State Properties and Group Renewal to situation a report[10] on “will increase in insurance coverage premiums and unavailability of insurance coverage protection for reasonably priced housing developments.”[11] DFS investigated additional by way of direct inquiries to insurers working in New York State and found that some property and casualty insurers inquire about government-funded models or tenants’ use of presidency rental help as a part of their underwriting course of. DFS subsequently lobbied for Half BB of the education, labor, housing, and family assistance budget, which added part 3462 to the Insurance coverage Regulation, was signed by Governor Hochul on April 20, 2024, and took impact instantly.[12]
A full copy of Round Letter No. 6 (2024) is out there here.
New Jersey
Earlier this week, the New Jersey Division of Banking and Insurance coverage (“DOBI”) concurrently issued Bulletin No. 24-10[13] and Order No. A24-06,[14] informing property and casualty insurers admitted in New Jersey that DOBI “has grow to be conscious of potential points regarding the availability and value of insurance coverage protection for reasonably priced housing developments,” and thus requires admitted property and casualty insurers to submit survey outcomes by August 22, 2024 to [email protected]. The Bulletin and Order each specify property and casualty sublines, resembling boiler & equipment, fireplace, business a number of peril, owners a number of peril, inland marine, and employees’ compensation, amongst others. The survey primarily pertains to “government-regulated housing” and “government-subsidized housing,” together with Low Revenue Housing Tax Credit (“LIHTC”). In distinction to New York, the DOBI Bulletin and Order solely apply to admitted carriers.
Locke Lord will proceed to observe developments on this space. When you have any questions or considerations, please contact the writer or your Locke Lord accomplice.
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* With appreciation for the contributions of our summer season affiliate Dani D’Annunzio of the Fordham Regulation College Class of 2025.
[1] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Reasonably priced Housing Underwriting and Ranking (June 24, 2024) accessible here.
[2] If the insurer is admitted, they have to additionally submit their revised charges to DFS. See N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024).
[3] N.Y. Ins. Regulation § 3462(a) (McKinney 2024)
[4] See id. For instance, in 2022, some insurers disclosed to DFS that their functions requested about government-subsidized housing models and whether or not tenants paid lease with housing help. DFS asserts that part 3462(a) now prohibits questions of this nature.
[5] Id. § 3462(a)(1)–(4).
[6] Id. § 3462(a)(1)–(4).
[7] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Reasonably priced Housing Underwriting and Ranking (June 24, 2024).
[8] Admitted insurers should file revised charges with DFS.
[9] Id. § 3462(b).
[10] See Reasonably priced Housing & Insurance coverage, N.Y. Dept. of Fin. Serv (2022), accessible here.
[11] N.Y. Dept. of Fin. Serv., Round Letter No. 6 (2024), Re: Reasonably priced Housing Underwriting and Ranking (June 24, 2024).
[12] See FY 2025 N.Y. State Government Finances: Training, Labor, & Household Help, Artwork. VII. Legis., accessible here.
[13] N.J. Dept. of Banking & Ins., Bulletin No. 2024-10, Re: Reasonably priced Housing and Insurance coverage Survey (July 8, 2024), accessible here.
[14] N.J. Dept. of Banking & Ins., Order No. A24-06, Re: IN THE MATTER OF THE REQUEST FOR INFORMATION FROM INSURERS AUTHORIZED OR ADMITTED TO TRANSACT PROPERTY AND CASUALTY INSURANCE IN NEW JERSEY, (July 8, 2024), accessible here.
