N.Y.: E&S reform could streamline commercial insurance in the state

For insurance brokers in New York state, placing coverage in the excess-line market has long come with extra paperwork, delays and regulatory hurdles. Supported by PIANY, the bill S.5310 would eliminate an outdated requirement that no longer serves brokers or their commercial clients.

The bill, if passed, would allow brokers to bypass the diligent-effort requirement in certain cases, making it easier and faster to place coverage with unauthorized insurers when admitted carriers won’t take the risk. It’s a small but important change that could improve efficiency in the E&S market significantly.

What is the diligent-effort requirement?

Under current law, brokers looking to place a policy in the E&S market must first prove they’ve made a diligent effort to find coverage from admitted carriers. This means securing three formal rejections from licensed insurers before turning to an unauthorized one.

The intent behind this rule is understandable—it ensures that risks are placed in the admitted market whenever possible. In reality, this requirement has become little more than a bureaucratic formality—especially for commercial risks.

Retail brokers already have strong incentives to place business with admitted insurers first. Those policies are easier to manage; come with state security fund protections; and often provide more favorable terms for both brokers and insureds. If an admitted carrier won’t take a risk, it’s usually because it simply doesn’t fit its underwriting appetite. The diligent-effort rule doesn’t change that—it just adds unnecessary steps to an already challenging process.

How this bill would change the process

This bill would waive the diligent-effort requirement when a retail broker places commercial coverage through an unaffiliated wholesale E&S broker. In other words, when retail brokers would turn to wholesale brokers for help placing a tough risk, they would not have to go through the process of securing three rejections first.

The bill would not remove the diligent-effort rule for personal-lines policies or for commercial placements that don’t involve an unaffiliated wholesale broker. This would ensure that appropriate safeguards remain in place while removing a rule that no longer serves a meaningful purpose.

Why this change matters

For brokers, the benefits of this bill are clear. Removing the diligent-effort requirement in these cases would mean:

Faster coverage placement. Clients won’t have to wait while brokers chase down unnecessary declinations.

Less administrative burden. Brokers can spend more time providing service to clients and less time filing paperwork.

Improved efficiency in the E&S market. Wholesale brokers specialize in placing difficult risks, and this bill allows them to do so more effectively.

This wouldn’t just be a win for brokers—it also would be good for insureds. Many businesses—especially small- and mid-sized ones—rely on the E&S market when traditional insurers won’t take on their risks. Delays in coverage placement can create real challenges, leaving businesses exposed for longer than necessary. By eliminating an unnecessary step in the process, this bill would ensure that companies can get the coverage they need without unnecessary roadblocks.

A common-sense update

This isn’t the first time a bill like this has been introduced. In fact, similar legislation already has passed the New York state Senate in previous years. The fact that it keeps coming back—and keeps gaining support—suggests that lawmakers and industry professionals alike recognize the need for change.

For PIANY and other industry advocates, this bill would be the logical next step in modernizing New York state Insurance Law. The E&S market plays a crucial role in insuring risks that admitted carriers won’t take, and it needs to be nimble and efficient to serve businesses effectively.

By eliminating an outdated and unnecessary hurdle, S.5310 would move New York state’s insurance market in the right direction. For brokers, businesses and insureds alike, that’s a step worth taking.

Get involved

If you want to get involved with PIANY’s legislative and advocacy work, there are many ways to engage with the association:

• Participate in PIANY’s District Office Visit Program;
• Become a member of Agents Advocacy Coalition; and
• Watch your PIA Northeast publications and PIA Northeast’s social-media channels for important New York updates and share them with your followers.