2. Insurance intermediaries requirements

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1 United States (New York) LOCKE LORD Cele Ogawa 1. Insurance intermediation activities 1.1 Is the distribution of insurance products (hereinafter referred to as insurance intermediation activities or insurance intermediation ) limited to insurance intermediaries in your country? Yes, although insurers can also distribute products directly without the use of any intermediary. 1.2 What does the term insurance intermediation include? Is there any definition set forth by statutory or case law? In any case, please indicate which activities/services are included in the above definition, for example, presentation or proposal of insurance products, assistance or consultancy aimed at drafting the agreement. Are collaboration activities that relate to the administration or execution of the contracts drafted, even in the case of accidents, included in the definition? Does the drafting of contracts or insurance agreements in a collective form on behalf of insured individuals also form part of insurance intermediation activities? The New York Insurance Code considers anyone involved in the negotiation, solicitation or sale of insurance contracts as subject to licensure as an insurance intermediary. The Code defines negotiation as the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers; solicitation as attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company; and sale of an insurance contract as including the exchange of a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company. Thus, this definition would encompass the presentation or proposal of insurance products, assistance or consultancy aimed at the drafting of an insurance contract for presentation to an insurer and administrative activities associated with the contracts executed or drafted. 1.3 Are insurance intermediation activities allowed as ancillary activities to other professional activities (eg, travel or rent-a-car services, etc) and to what extent? Furthermore, are there exceptions that allow actors, other than insurance intermediaries, to carry out insurance intermediation activities? Is it a matter related, for example, to the risk covered, the duration or the cost of the policy premium, etc? In general, New York has adopted the view that all persons involved in the transaction of contracts of insurance must be licensed as insurance intermediaries. However, for certain industries and lines of business, the licensing requirements are streamlined, in recognition that the procurement of insurance is an activity ancillary to the licensee s principal business. Examples would be cargo shipping agents, limited lines travel insurance agents, credit insurance agents, title insurance representatives, rental car agents, self-service storage agents and portable electronics insurance agents.

2 2. Insurance intermediaries requirements 2.1 In order to act as an insurance intermediary, is there need for an authorisation and/or to be enrolled in a register? If yes, what are the requirements to be authorised/enrolled in the register as an insurance intermediary (individual or legal entities, integrity and/or professional requirements, etc)? Briefly explain how it works. All persons transacting contracts of insurance with respect to persons, property or risks located in New York must obtain a licence from the New York Department of Insurance. The principal categories of insurance intermediary licensees in New York are resident and non-resident business entity agency licences and resident and nonresident individual agent licences by line of business, such as surplus lines, property insurance, casualty insurance, life insurance and health insurance. For each of the individual resident licences, the following criteria must be met: individuals residing in New York must be at least 18 years of age, complete the requisite mandatory hours of approved pre-licensing study for the particular line of business, submit to fingerprinting, submit to a background investigation, and pass a written examination administered by the Department of Insurance. Non-resident intermediaries transacting insurance with respect to New York risks must also be licensed in New York, but need not take a pre-licensing course of study or pass a qualifying examination if they hold the same kind of licence in their home state. Business entities engaging in the transaction of insurance contracts in New York must also obtain organisational licences from the New York Department of Insurance, based on the appropriate licensure of all individuals transacting business on behalf of the entity in New York. Such organisational licensees need not, in general, maintain a physical presence in the State of New York, however, one or more of its agents must be residents of New York. 2.2 In what form can anyone access and verify the registration/authorisation or verify the fact that the insurance intermediary is a professional (eg, via web)? The New York Department of Insurance maintains an online register of all individual and organisational licensees. This database is accessible to the public. 2.3 Are insurance intermediaries with a registered office in another country allowed to operate in your country and how (eg, under the right of establishment or freedom to provide services in your country, as in the EU)? If yes under what conditions? In such a case, are they bound by the same obligations as the insurance intermediaries with a registered office in your country? Please describe. New York provides no reciprocity for licensees operating in other states or countries. If such persons are transacting insurance with respect to New York risks, they must obtain a non-resident licence in New York. 3. Different types of insurance intermediaries 3.1 Please list the different types of insurance intermediaries acting in your country such as agents, brokers, banks, financial intermediaries or financial advisers. See Do insurance intermediaries need to enter into a written contract with the insurers (or receive a mandate from the insurers)?

3 In general, insurance intermediaries need not have written contracts with the insurers, but current US industry practice is to enter into written contracts between insurers and intermediaries that appoint the entity and its licensed individuals as appointed agents of the insurer. 3.3 Can an insurance intermediary enter into a contract with the insurers (or receive a mandate from the insurer) and in turn enter into one or more agreements with other insurance intermediaries (the so-called horizontal distribution)? It is not uncommon, particularly with respect to commercial insurance placements, for there to be multiple levels of intermediaries, for example, a retail intermediary that deals directly with the insured, one or more wholesale intermediaries, and, for placements with international insurance markets, an intermediary in the country where the insurer is located. Such intermediaries can enter into a contract with the insurer, although the more common practice is to have their contract with the intermediary up the chain of distribution. It would be more common, for example, for a retail producer to have a contract with a wholesale producer rather than with the insurer directly or for a managing general agent to have an agreement authorising the MGA with authority to underwrite risks for the insurer. 3.4 The insurance intermediaries more in detail: The agent Does the role of insurance agent exist in your country? If yes, describe the agent s functions. All intermediaries licensed in New York, including brokers, are considered to be acting as insurance agents and are licensed as such (ie, representatives of the insurer). As such, all acts of agents for which the insurer has authorised are imputed to the principal, the insurer. They perform all the normal insurance intermediary functions and can be appointed to represent multiple unaffiliated insurers. The insurer pays their remuneration in the form of a commission, typically computed as a percentage of the premium paid. An insurance producer selling an insurance contract shall disclose the following information to the purchaser orally or in a prominent writing at or prior to the time of application for the insurance contract: a) a description of the role of the insurance producer in the sale; b) whether the insurance producer will receive compensation from the selling insurer or other third party based in whole or in part on the insurance contract the producer sells; c) that the compensation paid to the insurance producer may vary depending on a number of factors, including (if applicable) the insurance contract and the insurer that the purchaser selects, the volume of business the producer provides to the insurer or the profitability of the insurance contracts that the producer provides to the insurer; and d) that the purchaser may obtain information about the compensation expected to be received by the producer based in whole or in part on the sale, and the compensation expected to be received based in whole or in part on any alternative quotes presented by the producer, by requesting such information from the producer.

4 In particular, does an agent act on behalf of the insurer or the insured? Who pays the agent s remuneration? To what kind of remuneration is the agent entitled? See If he acts on behalf of the insurer, describe the type of work relationship with the insurer (eg, subordinate, para-subordinate or freelance, selfemployed etc). Does the principal-agent model exist, that is, is one appointed by the insurer to manage a particular branch or subsidiary? In the US, insurers transact business with both exclusive agents and nonexclusive agents. Exclusive agents transact business only on behalf of the insurer and its affiliates, whereas non-exclusive agents are authorised to represent multiple unaffiliated insurers and act essentially as independent freelance producers What type of organisation does the agent have? Can he have staff working for him (eg, sub-agents)? An agent can act either as an individual producer, or be part of a licensed agency that comprises multiple individual employed licensees and staff. It is not uncommon for larger organisations to have contractual relationships with subagents, who produce business and place that business through the upstream agency Is the relationship between the insurer and the agent regulated by a collective bargaining agreement? If yes, what does it mainly cover? Can the relationship be exclusive to a particular area? Is the remuneration established by the collective bargaining agreement? Can the provisions be waived by the parties mutual agreement? Typically in the US, relationships between an insurer and agent are not regulated by collective bargaining agreements. While it is true that many large insurers offer their intermediaries standard contracts with standard terms, conditions and commission rates, some insurers are prepared to negotiate bespoke agreements with certain intermediaries, particularly where the intermediary controls a large volume of business. Alternatively, in these instances the insurer may continue to use its standard contract form but waive or modify certain provisions, such as commission rates, service levels, etc Does the termination of the work relationship between the agent and insurer provide for the agent s obligation to return the portfolio of contracts? In such a case, would the agent be entitled to an indemnity? Under the so-called American Agency System that prevails throughout the US, an agent s clients are typically considered to be an asset that belongs to the agent rather than the insurer. So long as the agent is in compliance with its financial obligations to the insurer at the time the work relationship with the insurer terminates, the agent is deemed to be the rightful owner of its expirations, or list of clients, and the insurer does not have the right to solicit these clients directly or sell this list to other intermediaries. The agent is free to bargain away this right in its contract with the insurer, but such instances are relatively rare in the US, except in the case of insurers that do business through captive or exclusive agents.

5 3.4.2 The broker Please describe the broker s services. In general terms, do the services consist of intermediation or are they similar to consultancy/advisory activities? Is the broker an independent actor? In New York, intermediaries licensed as agent-brokers act in the role of an agent in a given transaction and represent the insurer in some capacity and also represent the insured by owing a duty to its client/insured limited to procuring insurance requested by the insured and nothing more, except in special circumstances. The courts in New York have long held that insurance brokers act as agents on behalf of an insured and not the insurer and this has been codified by New York law. Yet even though a broker acts on the insured s behalf for purposes of securing coverage, the broker also can serve as the agent of the insurer in another capacity such as collecting and holding premiums from its insured to be forwarded to the insurance company as an agent of the insurer. Thus, the broker can serve in the dual capacity of acting in a fiduciary capacity whether collecting premiums to be forwarded to the insurer or transmitting claim and/or settlement sums from insurers to the insured for both insurer and insured. The law is reasonably settled on initial principles that insurance agents have a common-law duty to obtain the requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage. Insurance agents or brokers are not personal financial counsellors and risk managers, approaching guarantor status. In the absence of special circumstances, there is no special relationship between the broker and the insured obligating the broker to advise the insured as to the sufficiency of its limit of liability. A fiduciary relationship between an agent/broker and the insured can be established by demonstrating a special relationship between the agent/broker and the insured based on prior dealings and/or representations by the agent/broker triggering a fiduciary duty to advise such as exercising broad discretion to service the insured s needs; counselling the insured concerning specialised insurance coverage; holding oneself out as a highly-skilled insurance expert, coupled with the insured s reliance upon the expertise; and receiving compensation, above the customary commission built into the premium paid, for expert advice provided. New York s highest court recently issued a decision that parties may construe as supporting the existence of a special relationship as long as the insured can show that it made a specific request to the broker. In American Building Supply Corp. v Petrocelli Group, Inc, No. 188, 2012 NY LEXIS 3476 (NY 19 Nov. 2012), the court found that, because the insured made a specific request for coverage and relied on the broker to procure that coverage, the broker had a duty to provide that specific coverage Who pays for the broker s remuneration (please specify case by case for the different services, if any)? Is the broker allowed to retrocede a portion of his remuneration to the insurer or to the insured? Brokers are typically compensated by way of a commission payable by the insurer. The broker may also collect a fee from the insured in accordance with disclosure requirements. See Banks, financial intermediaries, financial advisers and others allowed to act as insurance intermediaries

6 Can banks, financial intermediaries and/or financial advisers act as insurance intermediaries? Banks, financial intermediaries and/or financial advisers can act as insurance intermediaries in New York if they are appropriately licensed with the New York Department of Insurance to transact the applicable lines of business, as described above 2.1 and Please define a financial intermediary. Are there particular requisites for the profession of financial intermediary? Does the financial intermediary have to be enrolled in another register (eg, a register of financial intermediaries)? Financial intermediary means an institution, firm, organisation or individual who performs intermediation between two or more parties in a financial context, such as connecting sources of funds with users of funds. A financial intermediary is typically an entity that facilitates the channelling of funds between lenders, investors, foundations or other entities that have money and are interested in connecting with businesses, or communities where their money can be deployed. Financial intermediaries include, but are not limited to, banks, financial development corporations, economic developers, microbusiness lenders and community development organisations. Financial intermediaries must be licensed in their individual capacity in addition to carrying an insurance licence Please define a financial adviser. Are there particular requisites for the profession of financial adviser? Does the financial adviser have to be enrolled in another register (eg, a register of financial advisers)? Financial adviser is a term used to reference a broker-dealer, investment adviser or financial planner. Section 15(a) of the Securities Exchange Act of 1934 (the Exchange Act ) requires financial intermediaries acting as broker-dealers engaged in interstate commerce to register with the Securities and Exchange Commission (SEC). Broker is defined in Section 3(a)(4) of the Exchange Act as anyone engaged in the business of effecting transactions in securities on behalf of others. The SEC has traditionally interpreted the definition of broker very broadly to reach persons who participate in important parts of a securities transaction, including solicitation, negotiation and execution of the transaction. The presence of transaction-based compensation has often led to a presumption that the recipient must register as a broker-dealer. The SEC requires an investment adviser to register with the SEC if it has assets under management of at least $100m or the investment adviser provides investment advice to an investment company registered under the Investment Company Act of 1940 (SEC Rule 203A-1). If the investment adviser has between $25m and $100m of assets under management and must register with 15 or more states, the investment adviser must register with the SEC. If an investment adviser is eligible for an exemption as found under Dodd-Frank, it may also register with the SEC. If the investment adviser does not meet the SEC s statutory criteria, the investment adviser must be registered or licensed by a state, unless otherwise exempt. Generally speaking, the SEC regulates investment adviser firms with more than $100m in assets under management (and certain other investment adviser firms that meet other statutory criteria). The states regulate investment adviser firms with less than $100m in assets under management and fee-only financial

7 planners. New York also regulates and requires the registration of a brokerdealer, investment adviser or financial planner Can financial intermediaries and/or financial advisers distribute any insurance and/or financial products? If yes, under what conditions or with what limitations? Yes. Financial intermediaries, financial advisers and financial planners must be dually licensed to sell insurance products. Recognising the potential for abuse when a bank either directly or indirectly offers insurance in conjunction with sales or loans, the New York Insurance Code contains restrictions on such offers and specifically prohibits tie-in sales, stating in pertinent part that: No person engaged in the business of financing the purchase of real or personal property or of lending money on the security of real or personal property shall require, as a condition precedent to financing the purchase of such property or to loaning money upon the security thereof, or as a condition prerequisite for the renewal or extension of any such loan or for the performance of any other act in connection therewith, that the person for whom such purchase is to be financed or to whom the money is to be loaned or for whom such extension, renewal or other act is to be granted or performed, negotiate any insurance or renewal thereof covering such property through a particular insurance agent or broker. The New York Insurance Code also provides that no person making a loan secured by real property may make available to any person (that is, to any insurance agent) information contained in a fire and casualty insurance policy for the purpose of soliciting other types of insurance coverage if the borrower has filed a statement with the lender indicating that this information may not be used or made available for that purpose. Thus, the New York Insurance Code further limits the ability of institutional lenders to operate as a referral service through arrangements with insurance agents and brokers. The Gramm-Leach-Bliley Act (the GLBA ) was enacted on 12 November The stated purpose of the GLBA was to permit insurance companies, banks and other traditional financial institutions to affiliate with each other. The GLBA provides that issuers of insurance and insurance agents must comply with licensing requirements of all states in which they issue or sell insurance. The Federal Reserve Board (FRB), however, regulates the parent holding company. The GLBA authorises the FRB to approve affiliations between insurers and depository institutions and pre-empts state law that presents or restricts these affiliations. Although the creation of the financial holding company (FHC) structure under the GLBA enables banks to affiliate with insurance companies, the limitations regarding direct issuance of insurance by banks under the National Banking Act remain. One exception to this rule is 12 USCS, section 92, which permits national banks to sell insurance in sparsely populated areas. Moreover, banks have been granted certain insurance authority pursuant to the Comptroller of the Currency s interpretation of the incidental powers clause of 12 USCS section 24. A national bank located and doing business in any place with a population of less than 5,000 persons could act as an agent for fire, life or other insurance companies by soliciting and selling insurance, even if that insurance was not related to any extension of credit or other customer relationship of the bank. New York chartered savings and loan associations are prohibited from acting in an insurance underwriting or marketing capacity. As under federal law, New York

8 chartered savings and loan associations may participate in the ownership of savings and loan service corporations and be part of a holding company system that owns an insurance agency. New York savings and loan associations may not invest more than ten per cent of their total assets in service corporations, and investments may only be made in service corporations that engage in activities reasonably related to the savings and loan activities of the association. No specific bulletins or other guidelines exist with respect to the approval of insurance-specific service corporations With reference to insurance intermediaries other than agents, brokers, banks, financial intermediaries and financial advisers, as indicated under question 2.1 above (if any), please describe what kind of products they can distribute and under what conditions. Besides those described above, there are no other insurance intermediaries who can sell insurance products. 4. Rules of conduct and responsibilities 4.1 Are there rules of conduct that insurance intermediaries should comply with (eg, duties in relation to the obligation of utmost care, correctness, utmost good faith, information, adequacy, transparency, conflict of interests, filing of documentation, separate accounting or other accounting obligations)? Please describe the above duties, specifying if they apply to all types of insurance intermediary (eg, agents, brokers, banks, financial intermediaries, financial advisers, etc) and whether the content differs with particular reference to responsibility according to the type of actor/activity and person (insurer or insured) receiving the activity. All licensed intermediaries including agents, brokers, banks, financial intermediaries and financial advisers have a duty to use reasonable care, diligence and judgment in procuring the particular insurance specified by the insured. Because one of an insurance intermediary s main functions is the direct marketing of insurance policies, policyholders funds pass through a producer s hands on a daily basis. All funds received by any person acting as an insurance agent or broker as premiums are held in a fiduciary capacity. The agent or broker acts as a fiduciary in this regard both as to the insured and the insurer. The statutory and case law specifying that an insurance producer holds premium funds in a fiduciary capacity effectuates a public policy of protecting both insurers and policyholders from the mishandling and dissipation of insurance premiums. Banks have conflict of interest concerns as stated in An insurance broker, like an insurance agent, is a person who transacts insurance on behalf of an admitted insurance company. A broker s duties and responsibilities vary according to the nature of the function he or she is employed to perform and whether the agent is an agent or a broker, licensed as an agent. It is customary for a broker to execute an agency contract with multiple insurers. Generally, the agency contract contains such information as the nature of the agent s authority, limitations on authority, type and amount of compensation, and provisions for termination by either party. Also, the broker, as an agent, also has obligations under tort law toward the insurer, in addition to contract law for breach of its obligations under its agency contract. The most definitive characteristic of the difference between agents and brokers is the fact that an agent has authority to bind the carrier, but a broker does not. Typically, a carrier must first execute the binder on a policy, and the broker may not execute a policy without prior authorisation from the carrier. Unlike an agent, a

9 broker does not act in each capacity for the insurer, and the insurer is not liable for the broker s acts or omissions. In some cases, an agent s unauthorised actions may be subsequently ratified by the insurer. Ratification of an agent s actions first requires that he or she was acting on behalf of the insurer. In addition, the principal must not only have knowledge of the agent s unauthorised act, but must also consent to, or accept, the benefits of the act. Finally, the principal must engage in conduct tending to confirm the agent s acts, or conduct that is inconsistent with a claim of disapproval. Inconclusive or ambiguous acts by the carrier may not serve as the basis for ratification. Agent s duty to insurer An agent s duties and responsibilities vary according to the nature of the function he or she is employed to perform. In fulfilling this duty, the agent is required to follow instructions relating to the agency relationship, keep the carrier informed of material facts, account for or transmit all funds received to the carrier, act in the carrier s interests, protect the carrier s interests and exercise reasonable diligence in the discharge of his or her duties. It is customary for an agent to execute an agency contract with the insurer. Generally, the agency contract contains such information as the nature of the agent s authority, limitations on authority, type and amount of compensation and provisions for termination by either party. Broker s duty to insurer Generally, a broker acts in the interests of the insured and the insurer. The longstanding rule is that the broker acts as the agent of the insured regarding the procurement of insurance, and the agent of the insurer for the purpose of collecting and remitting premiums and delivering the policy. Duty to the insured An insurance intermediary has no duty to investigate an insured s coverage needs and procure the requisite coverage to meet those needs in the absence of a request by the insured. It is the insured s responsibility to advise the agent of the insurance he or she wants, including the limits of the policy to be issued. An insurance intermediary is under an affirmative duty to disclose to the customer all material facts concerning the coverage involved. In addition, sections 780 and 781 of the Insurance Code generally prohibit insurers and agents from misrepresenting policy terms. A broker does not have a fiduciary duty to the insured, in the absence of a special relationship with the insured. 4.2 Does the insurance intermediary represent the insurer? By way of example, is the agent also the insurer s representative vis-à-vis the customer, and if so, does this also apply during trial before a court? Is there a matter of imputation of knowledge? What happens when a broker has information on matters relevant to the insurer s decision to insure which the broker fails to disclose to the insurer? Is the insured deemed to have breached its duty of disclosure in such circumstances? In which cases? Can the insurance intermediary be accountable for the contracts he executed on behalf of the insurer? Under the principle of agency, the insurer can be held liable for the acts of the insurance intermediary that are authorised by the insurer under its appointment or agency agreement. An insurance intermediary who receives information from an applicant has a duty to disclose any material information pertaining to the policy to the insurer and the insurer is deemed to have knowledge of those facts.

10 Regardless of well-defined limitations on an agent s authority, the carrier may still be bound to the agent s representations by the doctrine of ostensible authority. Although an insurance carrier may have knowledge of its agent s unauthorised acts, the doctrine of estoppel may prevent the carrier from disaffirming the insuring agreement. In some cases, an agent s unauthorised actions may be subsequently ratified by the insurer. Ratification of an agent s actions first requires that he or she was acting on behalf of the insurer. In addition, the principal must not only have knowledge of the agent s unauthorised act, but also must consent to or accept the benefits of the act. Finally, the principal must engage in conduct tending to confirm the agent s acts, or conduct that is inconsistent with a claim of disapproval. Inconclusive or ambiguous acts by the carrier may not serve as the basis for ratification. Unlike an agent, a broker lacks authority to bind on behalf of the carrier. A broker must submit an application for coverage to the carrier, and the carrier must accept the application before the risk is placed. An insurer is not liable for the broker s acts or omissions. Similarly, the agent and broker cannot be held accountable for an improper denial of coverage by the insurer. Nor can the agent or broker be held responsible for an insurer s insolvency. 4.3 Is the insurer jointly liable for damages caused by the insurance intermediary, appointed by the same, when executing intermediary activities? Who is liable vis-à-vis the insured person? Is it always the intermediary or the insurer? When an insured lacks coverage for a claim made against it, the insured may seek to hold its broker liable if it believes the broker to be responsible for the absence of coverage under tort and contract law. Such insured versus broker claims tend to arise in one of two circumstances: (i) those in which the insured alleges wrongdoing by the broker with respect to the procurement of coverage for the insured; and (ii) those in which the insured alleges wrongdoing in the broker s handling of a claim made against an insured. In establishing negligence, an insured must demonstrate that its loss whether due to a denial of coverage, insufficient coverage, etc resulted from the broker s breach of its duties owed to the insured. To the extent the denial of coverage is due to the insurer s actions, an insured can bring a claim against the carrier for breach of contract or unfair trade practices. 4.4 Are there particular regulations or specific forms of compensation for damages caused to the insured person? A consumer can bring a private cause of action for violation of the Unfair Trade Practices Act and can recover compensatory and punitive damages as well as attorneys fees. Unfair and deceptive acts and practices ( UDAP ) claims against insurance companies appear to be allowed under New York s statute. In Harvey v Metropolitan Life Ins. Co., 34 AD3d 364, 827 NYS2d 6 (2006), an appellate court affirmed the denial of defendant s motion to dismiss in a UDAP claim against an insurance company. See also Shebar v Metropolitan Life Ins. Co., 25 AD3d 858, 807 NYS2d 448 (2006). However, many decisions hold that an insurer s mishandling of a consumer s claim does not meet the statute s public interest test. See, for example, Hassett v NY Central Mut. Fire Ins. Co., 753 NYS2d 788 (App. Div. 2003). These rulings exclude a significant portion of consumer claims against insurers. Class actions are permitted under UDAP. 5. Supervision and sanctions 5.1 Regardless of the requirement of an authorisation and/or enrolment, are insurance intermediaries subject to the control of supervisory bodies? Does the

11 supervisory body have powers/duties of prudential supervision on the insurance intermediary s activities, and if so, in what way does it act? All insurance intermediaries transacting insurance with respect to risks located in the State of New York are subject to regulation and supervision by the New York Department of Insurance. This supervision encompasses not only licensing, but also market conduct supervision of such intermediaries and enforcement actions against intermediaries that fail to comply with minimum professional standards, violate regulatory requirements, are convicted of criminal activities or engage in other fraudulent, dishonest or unethical practices. Sanctions that may be imposed by the New York Department of Insurance include suspension or revocation of the intermediary s licence, monetary penalties, cease and desist orders and orders of restitution or disgorgement. 5.2 Are there fines for violations of the insurance intermediaries obligations? If yes, please describe. As noted above, the New York Department of Insurance has legal authority to impose monetary penalties or fines for violations of various statutory and regulatory requirements. The Department also has the authority to negotiate monetary penalties or forfeitures in lieu of licence revocation or suspension. Negotiated monetary penalties in lieu of licence suspension or revocation or other regulatory sanctions can be as high as $5,000 per violation. 5.3 Do sanctions also apply to foreign intermediaries who operate in your country? Yes. 5.4 Is there a consultation procedure with the insurance intermediary before the fine is applied? In most cases, the licensee is afforded basic due process protections before regulatory actions are taken or fines imposed. These include notice of hearing, hearing before an independent trier of fact and written decision. Moreover, the Department s staff attorneys are generally prepared to engage in pre-hearing settlement discussions in an effort to resolve alleged violations, thereby avoiding formal hearing or written findings of violations. 5.5 Could the application of more fines, or the breach of particular regulations, result in the revocation of the authorisation, or in the intermediary being struck off the register (if any), or in the prohibition to act as an insurance intermediary? If so, what are the most relevant circumstances? Probably the most common tool available to the New York Department of Insurance for violations of regulatory and Insurance Code requirements is revocation or suspension of the intermediary s licence to transact business in New York. These remedies are most commonly sought in cases of misappropriation of funds, criminal convictions, fraud and other unprofessional or unethical conduct.