New York regulators say the plan to re-launch a Lloyd’s-style exchange in the city is forging ahead, but they’re looking to hand the reins to the insurance industry to take the lead in building it.
The plan for a revitalized New York Insurance Exchange — which briefly became a major global reinsurance market in the 1980s, before quickly collapsing and shutting down in the early 1990s — was sketched out this summer by groups of insurance executives who served on seven different committees to evaluate whether an exchange was viable.
Their basic conclusion: Yes, although more work was needed to put together a detailed business plan. That initial report — which looked at regulation, markets, tax structures and other features — said the exchange would likely be a competitive addition to the state and national insurance market, particularly given its possibility to serve as a single entry point for insurers to write in all 50 states.
A number of logistical hurdles remain, however, Deputy Superintendent Mike Moriarty told Insurance Journal. The biggest: building support for the exchange within the industry itself, which includes finding seed money to help create the physical and technical infrastructure of the exchange.
That price tag won’t be cheap. Moriarty said the cost to get the exchange going has been estimated around $25 million and up. That money would pay for what executives said was a necessary component to make the exchange viable — namely, the latest computer technology designed to help insurers, underwriters, MGAs and other transact business as quickly and efficiently as possible.
To help build support within the industry, Moriarty said the department has enlisted the help of an unnamed executive — someone “well-known to the insurance and investment community” — to begin calling on fellow execs to help out. This person, is serving as the “face of the exchange” behind the scenes, Moriarty said.
In terms of timing for possibly launching the exchange, Moriarty said it’s unlikely to appear by year’s end, although “it’s feasible that there could be seed money in place, in terms of investors interested in doing the legwork need to build the exchange — such as the lawyers, facility, the technology that may be needed.
“As of now, the ball is in the industry’s court to see if this is something that they think would enhance the insurance industry in the U.S.,” Moriarty said.
Peter Bickford, a New York-based insurance lawyer who served as an executive on the original exchange, said “it’s a question of when, not whether” the exchange will be re-launched.
Bickford, who is a special adviser to the project, added that it was more important to see that the exchange “be done right,” rather than quickly.
“It’s more important that it’s set up in a properly than it be done by any particular point in time,” Bickford said.
There’s also the question of navigating the changing winds in Albany. Gov. David Paterson, who is not seeking reelection, had identified the exchange as a key economic development priority for the state, which is still suffering from steep job losses in the financial services sectors. However, Moriarty said that a new governor is unlikely to stand against a re-invigorated insurance exchange, and that the department is committed to working with industry leaders to see the new exchange reborn.
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