More about the bond [View all]

I did a little digging and found some useful information regarding the issuance of the bond and NY state requirements. First of all it is possible for that bonding company to issue the bond while not itself being admitted to sell in NY. This is described in the process for obtaining coverage for risks when no NY licensed insurance company will write the risk. This can be accomplished either one of two ways.

The first is to use a NY licensed excess lines broker (not the same thing as an agent) and that broker then procures coverage through an "outside" company but only after meeting certain requirements. One of those is having at least 3 letters from authorized in NY insurers declining to issue the coverage. There are also a large number of paperwork, administration, notification requirements to the state and the insured that must be met and one item for example is a clear stamped wording on the face of the policy that in effect the company is not licensed in NY and if found to be insolvent there is no NY protection provided. The broker must carry out due diligence as specifically called out by NY Title 11 Chapter 2 Part 27.13 which notes a financial review of the proposed company must be done in addition to other requirements. Part of that review is a requirement that the proposed company must have a minimum of $45 million in surplus and it could go higher if multiple entities are involved. There is also a 3.6% of premium tax that must be reported and paid by the broker. There are other requirements as well regarding the matters but this is the basics of the first avenue for issuance using a NY licensed broker.

The second avenue is an insured can approach a non licensed insurer directly but there are still lots of requirements and the insured must pay the 3.6% of premium tax directly themselves within 60 days of the end of the calendar quarter of placing the policy in force. The notification requirements, stamped language sorts of things etc. are still present.

The updated info filed by Knight and the attorneys raises even more questions. They now, according to a CBS report, are claiming surplus of over $1 billion. Knight Specialized is a subsidiary company of Knight. Subsidiary companies are not allowed to "share surplus" across companies. So where did Knight Specialty suddenly find a huge chunk of money to dramatically ramp up it's surplus? Any loan would have to be counted against the surplus as a liability. In other words you can't borrow your way to cover the requirements of surplus amount.

Also the statement by the company that the Orange Ruski put up the $175 million all in cash but has retained control in an account supposedly "pledged" to the insurer but not in their control. They refused to specify the type of account. So there still remain a great many questions and it would appear that Knight does not have the cash in a trust account but could very likely just be looking at a promissory note pledging to fund the account for a certain amount of money. Good luck collecting on that. If the Orange Ruski has retained control of the money you can be sure that you will have problems and may well have an empty pocket.

So the bottom line is that it would appear that they are implying they used a NY broker because Knight references using ELANY, which is a professional association for excess lines insurance/brokers in NY. So add to this mire of crap the question of what ELANY did or didn't do. Is Knight being truthful? ELANY is no stranger to the filing requirements for excess lines bonds/insurance. It's what they do. Are we to believe that something went through their process and yet all kinds of required filings and notifications were not included with the bond when filed in court? I don't buy that. Is Knight claiming they used ELANY when in fact maybe all they did was ask some questions or advice?

So here are 4 links to info about this and I would note the CBS report is incorrect with their story in some areas regarding being able to get a bond through an unlicensed company but some of those errors may be the result of editing their sources rather than actual error on the part of the sources.

https://dfs.ny.gov/insurance/ogco2003/rg031025.htm

https://govt.westlaw.com/nycrr/Document/I5000943dcd1711dda432a117e6e0f345?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)&bhcp=1

https://www.elany.org/f.aspx?f=2023

https://www.cbsnews.com/news/donald-trump-175-million-civil-fraud-bond-valid-new-york/