The Corporation of Lloyd’s is a non-profit corporation, created by Special Act of Parliament in 1871, which itself does no underwriting, but instead provides services to the member underwriters at Lloyd’s. One of its administrative departments is the Finance & Market Services Group (“FMSG”), which administers the American Trust Fund, a fund held in trust by it and the Corporation of Lloyd’s as security for Lloyd’s policies issued to American insureds. As of December 81, 1988, the American Trust Fund had $9.4 billion dollars on deposit at Citibank in New York. Although the Underwriters neither deposit directly into the American Trust Fund nor are able to draw directly from it, a portion of their premium income derived from underwriting of American risks is deposited in the Fund through various complex accounting arrangements.5
One of the essential business purposes that the American Trust Fund serves is to enable New York insurance brokers and insurance companies to do business with Lloyd’s underwriting syndicates, which are not “authorized” to write insurance in New York. A New York insurance broker is prohibited from placing insurance with an unauthorized insurer unless it has ascertained, inter alia, that such insurer maintains a trust fund at a New York bank, in an amount specified by regulation, as security for the insured. 11 N.Y.C.R.R. § 27.5(a)(1)(ii). Similarly, a New York insurance company may neither count as an asset nor credit against its loss reserves any obligation reinsured with an unauthorized alien insurer, unless such alien insurer maintains a trust fund at a New York bank in a similarly specified amount. 11 N.Y.C.R.R. § 125.4(c). Thus, although these regulations impose obligations only on entities licensed by the New York State Insurance Department, their effect is to make it practically impossible for unauthorized insurers, such as Lloyd’s underwriters, to avail themselves of the New York insurance-purchasing market without establishing the required trust funds in New York banks. The Underwriters could not, contrary to their assertion, achieve the same enabling effect by maintaining their own account in London.
It is clear from the foregoing that FMSG, by managing the Fund which is on deposit with a New York bank, is performing a service in New York which is an essential prerequisite to whatever New York underwriting the Underwriters may undertake. Since, as above indicated, the assets of the Fund are in the billions of dollars, we may infer that this underwriting business is substantial. It follows that the Underwriters are “doing business” in New York under the doctrine established in
Frummer v. Hilton Hotels Int’l, Inc. (1967) 19 N.Y.2d 533, 281 N.Y.S.2d 41, 227 N.E.2d 851,
cert. denied (1967) 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266,
6 and that due process is in no way offended by New York's exercise of jurisdiction over them.
International Shoe Co. v. Washington (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.
See also Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528;
Hanson v. Denckla (1958) 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283.
We recognize that there is no specific evidence in the record of the exact amount that the various Underwriters before us contribute to the Fund, or of the percentage of American underwriting business that is transacted in New York. As to the first consideration we gather from the general drift of the arguments by all parties
5
The Underwriters' argument that there may be some significance to the fact their money finds its way into the Fund by those complicated arrangements rather than by direct deposit borders on the frivolous.
6
The Underwriters’ citation to Bobe v. Lloyds (2nd Cir.1928) 27 F.2d 347 does not dictate a different result. Bobe was an action on a policy issued by a Lloyd’s underwriting syndicate to a New York insured, and the issue was whether the Corporation of Lloyd's was acting as the syndicate’s "treasurer” through maintenance of the trust fund in New York, within the meaning of a statute providing that jurisdiction could be obtained by service of process on such a “treasurer." Bobe had nothing to do with whether or not a syndicate could — through the Corporation’s activities in New York — be deemed to be "doing business" there under doctrines that had not yet begun to be developed.