The New York State Department of Financial Services has a stern warning for out-of-state group annuity issuers: Don’t try to sell pension risk transfer arrangements in New York without getting licensed in New York state.
Out-of-state insurers should not even try to sell group annuities to customers located outside of New York state from offices in New York state.
Kevin Bishop, the department’s acting general counsel, gave that message today, in a circular letter sent to all life insurers and insurance producers doing business in New York.
The letter has the title, “Re: Soliciting, Negotiating, Selling, and Servicing Group Annuity Contracts Issued by Unauthorized Insurers.”
In the text, Bishop says the department has heard that “one or more unauthorized life insurers have been soliciting, negotiating, selling, and servicing group annuity terminal funding or close-out contracts from their New York offices through in-person meetings, telephone calls, mail, emails, and other communications.”
Engaging in those activities as an unauthorized insurer violates state law, Bishop.
New York state law also prohibits unauthorized insurers from collecting or receiving any premiums or other fees in New York, Bishop says.
State law imposes a penalty of $1,000 for the first violation of the law and $2,500 for each subsequent violation on any insurer doing an insurance business in New York state without a license, Bishop says.
“Each meeting, telephone call, piece of mail, email, or other communication originating from a New York office or from outside New York into New York would be a separate violation,” Bishop says.
An unauthorized insurer can conduct some limited back office activities in New York state, such as gathering information about the insurance industry and mailing completed applications on non-New York risks to placing agents located out of state.
An out-of-state, unauthorized insurer with back office operations in New York “may not have its name on any sign or have a New York mailing address,” Bishop says.
If a pension plan sponsor will be buying a group annuity for a pension risk transfer involving New York state residents, the group contract and certificates should be delivered or issued for delivery in New York state by a New York state-authorized insurer and administered by that insurer, Bishop says.
“Although an unauthorized insurer affiliated with the authorized insurer can be used to issue and administer a group contract and certificates issued or delivered outside of New York to non-New York residents, the unauthorized insurer may not solicit, negotiate, sell, or service the out-of-state group contract or certificates from an office or any other location in New York,” Bishop says.
A link to the New York state group annuity circular letter is available here.
— Read New York State Implements Best-Interest Standard for Annuity Sales, on ThinkAdvisor.