NEW YORK--New York Gov. David Paterson last night confirmed thatthe state is seriously considering resurrection of the long-defunctNew York Insurance Exchange as part of its financial servicesmodernization campaign.

The exchange debuted in 1980 as a syndicated, subscription-basedmarket modeled after Lloyd's of London, to write both specializedrisks as well as reinsurance. It folded seven years later, thevictim of a softening market and poor underwriting, among otherproblems, critics said.

However, given the new dynamics in the financial marketplacenearly 30 years later, it might be time to reestablish the exchangeto create new capacity for hard-to-place risks, as well as bolsterNew York's position as a dominant player in the insurance world,Gov. Paterson noted in his introductory speech at a dinner herehosted by Lloyd's.

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

After the dinner, New York Superintendent Eric Dinallo--whofirst raised the possibility of reactivating an exchange facilityback in February--confirmed that he is indeed exploring the optionseriously.

"It's something we're taking a close look at," he told NationalUnderwriter. "It's very preliminary, but the fact is covering suchnon-correlated risks via an insurance syndicate as part of acentral exchange might prove to be very attractive toinvestors."

Although the original exchange folded back in 1987, the lawauthorizing creation of such a facility remains on the books.

Gov. Paterson praised Mr. Dinallo for his work as head of a"blue ribbon panel" examining regulatory modernization--not justfor insurance, but for the entire financial services industry inNew York. A report, including recommendations for reform, is due byyear's end.

He said the state would "seriously consider moving toprinciples-based regulation, focusing on the outcome, to makeoversight more efficient and effective."

He added that he supports a move to "level the playing field"when it comes to allowing foreign reinsurance entities, such asLloyd's, to do business in his state without imposing unnecessarycollateral burdens not required of domestic carriers.

"We want to remove prejudicial restrictions on foreignreinsurers," the governor said.

Lord Peter Levene, the chairman of Lloyd's and host of thedinner, which drew an all-star cast of top players from across theindustry, praised the governor for stating his commitment to anopen market for all qualified players. "The U.S. should notdiscriminate on the basis of geography, as opposed to the morerelevant element of financial strength," he said.

Both Gov. Paterson and Lord Levene noted the symbioticrelationship between London and New York City when it comes toinsurance. As a prime example, each cited the more than $11 billionin claims that Lloyd's paid related to Sept. 11 damages, and thebillions more in exposure Lloyd's has taken on to insure WorldTrade Center area reconstruction projects.