Insurance Circular Letter No. 6 (2024)
June 24, 2024
TO: All Insurers Authorized to Write Property/Casualty Insurance in New York State, Licensed Insurance Producers, the New York Property Insurance Underwriting Association, and the Excess Line Association of New York
RE: Affordable Housing Underwriting and Rating
STATUTORY REFERENCE: N.Y. Insurance Law § 3462
I. Background and Purpose
On November 22, 2022, the New York State Department of Financial Services (“DFS”), in coordination with New York State Homes and Community Renewal, published a report, pursuant to Chapter 790 of the Laws of 2021 and Chapter 158 of the Laws of 2022, on increases in insurance premiums and unavailability of insurance coverage for affordable housing developments in New York. As described in the report, the U.S. insurance market has experienced a significant hardening in recent years, characterized by an increased demand for insurance, fewer coverage options, and steady and significant rate increases. This hard market, which is not limited to specific lines of business, has had a considerable impact on the price of the commercial property and liability insurance policies purchased by affordable housing developments.
In order to provide further clarity and analysis on insurance coverage for affordable housing, DFS requested additional information from authorized property/casualty insurers regarding coverage for affordable housing. DFS found that some authorized property/casualty insurers request from applicants information about government-subsidized housing units or tenants paying rent with housing assistance. Responding insurers indicated that they use this information primarily for underwriting purposes, either to determine eligibility or to determine if further underwriting is necessary.
As a result, DFS worked with the Governor and Legislature to propose and pass Part BB of Chapter 56 of the Laws of 2024 (“Part BB”) to prohibit an insurer, including an excess line insurer, from inquiring about on an application or canceling, refusing to issue, refusing to renew, or increasing the premium of a policy, or excluding, limiting, restricting, or reducing coverage under a policy based on the fact that the real property being insured is an affordable housing development.
The purpose of this Circular Letter is to inform all insurers authorized to write property/casualty insurance in New York State, licensed insurance producers, the New York Property Insurance Underwriting Association (“NYPIUA”), and the Excess Line Association of New York (collectively, “addressees”) that insurers, including excess line insurers, and NYPIUA cannot inquire about on an application or cancel, refuse to issue, refuse to renew or increase the premium of a policy, or exclude, limit, restrict, or reduce coverage under a policy based on the fact that the real property being insured is an affordable housing development or contains affordable housing units.
II. Discussion
On April 20, 2024, Governor Kathy Hochul signed into law Part BB, which added a new Insurance Law § 3462 entitled “[a]ffordable housing underwriting and rating” and which took effect immediately. Insurance Law § 3462 provides that an insurer that issues or delivers in New York insurance covering loss of or damage to real property containing units for residential purposes, or legal liability of an owner of such real property, may not inquire about on an application or cancel, refuse to issue, refuse to renew, or increase the premium of a policy, or exclude, limit, restrict, or reduce coverage under a policy based on the following: (1) the residential building contains dwelling units that must be affordable to residents at a specific income level pursuant to a statute, regulation, restrictive declaration, or regulatory agreement with a local, state, or federal government entity; (2) the real property owner or tenants of such residential building or the shareholders of a cooperative housing corporation receive rental assistance provided by a local, state, or federal government entity, including, but not limited to, the receipt of federal vouchers issued under Section 8 of the United States Housing Act of 1937 (42 U.S.C. §1437f); (3) the level or source of income of the tenants of the residential building or the shareholders of a cooperative housing corporation; or (4) whether such residential building is owned by a limited-equity cooperative, owned by a public housing authority, or owned by a cooperative housing corporation subject to Private Housing Finance Law Article 2, 4, 5, or 11.
Insurance Law § 3462 further states that nothing in that section prohibits an insurer from canceling, refusing to issue, refusing to renew, or increasing the premium of, an insurance policy, or excluding, limiting, restricting, or reducing coverage under such policy, due to other factors that are permitted or not prohibited by any other section of the Insurance Law.
Addressees are reminded that insurers, including excess line insurers, and NYPIUA must comply with Insurance Law § 3462 and can no longer request information about government-subsidized housing units or tenants paying rent with housing assistance or use this information for underwriting purposes, either to determine eligibility or to determine if further underwriting is necessary.
If an insurer’s rates are based on the insured real property being an affordable housing development or containing affordable housing units, then the insurer must revise its rates to conform to the change in law and an authorized insurer must file its revised rates with DFS. Insurers also must update their insurance applications and underwriting guidelines accordingly.
III. Conclusion
Insurers, including excess line insurers, and NYPIUA are reminded that they must comply with new Insurance Law § 3462 and cannot inquire about on an application, or cancel, refuse to issue, refuse to renew or increase the premium of a policy, or exclude, limit, restrict, or reduce coverage under a policy based on the fact that the real property being insured constitutes affordable housing.
Please direct any questions regarding this circular letter by email to [emailprotected].
Very truly yours,
Bernard Ganley
Deputy Superintendent, Property Bureau
