Posted on 23 Sep 2010
According to preliminary recommendations that indicate what shape the facility may take, officials who are seeking to revive the New York Insurance Exchange may be moving away from earlier discussions of favorable tax treatment for participants.
Officials from the industry and the New York State Insurance Department have begun to work on a business plan for the potential revival of the exchange, observers said.
The exchange would be a Lloyd's of London-style marketplace for insurance buyers and capital providers. The original New York Insurance Exchange operated from 1980 to 1987, when it closed due to inadequate capital, poor claims experience, soft market conditions and other factors.
In 2008, Eric Dinallo, then the state insurance superintendent, proposed reviving the exchange, and his successor, James J. Wrynn, has expressed enthusiastic support for the plan since taking office last year.
Seven working groups consulting the New York State Insurance Department issued a set of preliminary recommendations, which were presented to the department in June.
Members of the working group on taxes said that they were “not sold” on favorable tax treatment being critical to the exchange. Previously, department officials said that the exchange might need tax advantages to compete with offshore reinsurers in Bermuda, Ireland and elsewhere.
“The NYIE is unlikely to differentiate itself from its competitors through a more favorable tax regime,” the working group wrote in a presentation document. “Bermuda already has a very favorable tax regime and is still losing business to Ireland ... The example of Ireland demonstrates how important an attractive regulatory and market access value proposition can be.”