N.Y. Gov. To Push Insurance Exchange

"By bringing together buyers and sellers of complex commercial insurance, the exchange will reaffirm our status as the hub of international trade and finance and it will also curtail the unregulated transactions that devastated the global economy," the governor said in his address.

"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, saying that it would complement what Lloyd's does.

In a speech in November, New York First Deputy Superintendent Kermitt Brooks laid out plans for a new exchange. The original exchange began in 1980 as a syndicate to write specialized risks as well as reinsurance, but it folded seven years later.

Mr. Brooks said then that the plan for the revived exchange would offer tax incentives to encourage investment.

During a press conference held after the governor's address, New York State Insurance Superintendent James Wrynn said that the aim of the exchange will be to keep insurance dollars in New York that are curently going offshore for complex, unusual and emerging risks such as reputational, cyber security and terrorism and many others that are currently going off-shore

The hub of the exchange would be in New York City, but it is expected that the back office jobs would go upstate, distributing the job creation benefits of the exchange, he said.

Mr. Wyrnn acknowledge that while there is currently a soft market, the exchange is not being launched now. He hinted that when the exchange is ready to launch the market may be in a more advantageous state for the project.

He said that the original exchange, which lasted from 1980 to 1987 had failed mainly because it was not properly capitalized,, something that this incarnation would aim to avoid.

Investors in the syndicates would come from both traditional insurers and non-traditional investors such as private equity firms and hedge funds that want to be involved, Mr. Wrynn said.

A committee will be formed within the next two weeks, "not to get this up and running quickly, but to fit the needs for the industry," he advised, and promised that when it is up and running "it will be running for a very, very long time."

The advent of technology, he noted, will aid in making the exchange efficient, and with the help of standardized forms, policyholders should have a bound coverage in their hands within 30 days.