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New York Department of Financial Services Furthers Diversity, Equity and Inclusion in the Insurance Industry
Legal Development 27 April 2021 27 April 2021
The New York Department of Financial Services (“NY DFS”) issued Circular Letter No. 5 in March 2021, which advises licensed insurers on the NY DFS’s expectations regarding diversity, equity and inclusion for the industry.
On March 16, 2021, the New York Department of Financial Services (“NY DFS”) issued Circular Letter No. 5 (the “Circular Letter”) in which the NY DFS advised all domestic and foreign insurance companies licensed in the state of its expectations regarding the role of diversity, equity and inclusion (“DEI”) in corporate governance and risk management. The Circular Letter outlines what the NY DFS describes as the business case for DEI—that, among other things, DEI leads to better problem-solving and risk management, drives profitability, and increases innovation. Accordingly, the Circular Letter instructs insurers to make DEI a business priority including by ensuring the diversity of senior management, fostering a diverse pipeline of future leaders, and communicating the importance of DEI to all stakeholders (such as by explaining how it will be achieved, setting goals and measuring progress toward those goals).
The Circular Letter is the latest effort by the NY DFS to further DEI in the insurance industry. On July 31, 2020, the NY DFS promulgated regulations which adopted (with certain modifications) the National Association of Insurance Commissioners’ (“NAIC”) Corporate Governance Annual Disclosure Model Act and Regulation. Both the NAIC models and the New York regulations require insurers to disclose, among other things, whether they have a diversity policy and how it functions.
According to the Circular Letter, the NY DFS will collect data from New York domestic and foreign insurers with more than $100 million in annual New York premiums related to the gender, racial and ethnic composition of their boards and management as of December 31, 2019 and 2020, including information about board tenure and key board and senior management roles. The data will be collected in the summer of 2021 and published on an aggregate basis in fall 2021. Further, the NY DFS will begin including questions relating to an insurer’s DEI efforts in its regulatory examination process starting in 2022.