Understanding The Different Types Of Surety Bonds

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Law 6901(a)( 1 )(A)(Mc, Kinney 2000). Facts: Mr. A is the President of ABC Co., a financing organization located in New york city, which is not an insurance company. Mr. An explains a scenario in which an individual demands a loan from his company. Instead of providing the loan, ABC Co. directs them to a financial organization that, in turn, problems the loan.

would then ensure the loan under a surety bond, for a charge. Mr. A would like to know whether these activities would constitute doing an insurance company, for which licensing would be needed. Analysis: Mr. A asked whether ABC Co. would be doing an insurance coverage company within the significance of N.Y.

Law 1101 (Mc, Kinney 2000 & Supp. 2002). N.Y. Ins. Law 1102(a) (Mc, Kinney 2000) forbids anybody, firm, association, corporation or joint-stock company from doing an insurance coverage company in this state, unless accredited as an insurer or exempted from licensing. N.Y. Ins. Law 1101(b)( 1) (Mc, Kinney 2000 & Supp.

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(emphasis provided) Subparagraphs (C), (D) and (E) are not relevant to this discussion. N.Y. Ins. Law 1101(a)( 1) (Mc, Kinney 2000 & Supp. 2002) defines "insurance agreement" as follows: (a)( 1) [A] ny contract or other transaction whereby one celebration, the "insurance company", is obliged to confer advantage of pecuniary worth upon another party, the "insured" or "recipient", dependent upon the taking place of a fortuitous event in which the guaranteed or beneficiary has, or is expected to have at the time of such occurring, a material interest which will be negatively impacted by the occurring of such occasion.

Ins.  Full Article (a)( 2) (Mc, Kinney 2000 & Supp. 2002) specifies "fortuitous event" as "any event or failure to happen which is, or is presumed by the parties to be, to a substantial level beyond the control of either party." In accordance with the above, if ABC Co. assures the bank that it will pay the loan due to the financial default of a customer, such activity would make up doing an insurance coverage organization, for which licensing would be needed.