N.Y. Governor To Push For Insurance Exchange Relaunch

New York Gov. David A. Paterson said he will push to revive the defunct New York Insurance Exchange to help "maintain New York's status as the financial capital of the world."

In his "State of the State" address last week, he added that the exchange--which would work as a syndicated, subscription market just like Lloyd's of London--would stimulate the economy by increasing the flow of capital and insurance premiums to New York.

He also promised increased transparency and security for all in the process.

"New York was the epicenter of so much that went terribly wrong in 2008. It is our responsibility as New Yorkers to lead in the rebuilding and reform of these vital global markets," he remarked.

This is not the first time Gov. Paterson has talked about the exchange. He first broached the idea at a dinner hosted by Lloyd's in New York in June 2008.

"We have private equity funds and hedge funds and other investment funds that might be eager to place their capital in the insurance business right here in New York," he said back then. "An exchange would provide such an opportunity. This would be complementary to what Lloyd's does on its side of the ocean."

New York's former insurance superintendent, Eric Dinallo--now a prime candidate for the state's attorney general post--first raised the possibility of reactivating the exchange in February 2008, when he suggested that "covering non-correlated risks via an insurance syndicate as part of a central exchange might prove to be very attractive to investors."

In a speech last November, New York First Deputy Superintendent Kermitt Brooks laid out plans for a new exchange, which would offer tax incentives to encourage investment.

The original New York Insurance Exchange debuted as a syndicated market in 1980. It was conceived during a capacity crunch, but folded seven years later--the victim of a softening market, capital shortages and poor underwriting, among other problems cited by critics.