January 19, 2021

Volume XI, Number 19


January 18, 2021

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The New York Department of Financial Services Requests Assurance From Regulated Financial Institutions and Insurance Carriers Regarding Their Preparedness to Respond to COVID-19 Crisis

On March 10, 2020, the New York Department of Financial Services (“DFS”), which regulates a wide variety of financial institutions, including banks, insurance companies, and investment advisors doing business in New York, issued a series of letters regarding the response to the Novel Coronavirus (“COVID-19”).   In addition to providing guidance, DFS has asked all regulated financial institutions to provide “assurance” that they have plans to address the operational and financial risks associated with COVID-19.  A copy of the letter to regulated financial institutions can be found here, and here, a copy of the letter to regulated insurance entities can be found here; and a copy of the letter to regulated institutions engaged in cryptocurrency businesses can be found here.   The DFS has asked these institutions to provide reports regarding their plans “as soon as possible,” but no later than April 9, 2020.

Specifically, DFS has advised these institutions that their plans should “be sufficiently flexible to effectively address a range of possible effects that could result from COVID-19, and reflect the entity’s size, complexity and activities.”  DFS has stated, however, that response plans for both financial institutions and insurance companies should address:

  1. Preventative measures to mitigate the risk of operational disruption, including the impact on consumers and vendors;
  2. A strategy addressing the impact of the outbreak in stages;
  3. An assessment of the facilities, systems, policies and procedures necessary for continued operations and services, if staff is working off-site, and the effectiveness and security of remote access;
  4. Employee protection strategies that will sustain an adequate workforce, which includes employee awareness and steps to reduce the spread of COVID-19;
  5. Assessment of the preparedness of critical third-party service providers and suppliers;
  6. Plans for communicating with consumers, vendors, and employees;
  7. Procedures for testing response plan to ensure effectiveness;
  8. Governance and oversight of the plan, including identifying the critical members of a response team, to ensure ongoing review and updates to the plan, including the tracking of relevant information from government sources and the entity’s own monitoring program.

Furthermore, DFS has advised “regulated financial institutions,” which would include certain banks, credit unions, and investment advisors, that their response plans must include “an assessment of potential increased cyber-attacks and fraud.”

Although DFS’ guidance to insurance carriers did not highlight the issue of cyber-attacks and fraud, given the projected public health impact of the COVID-19 crisis, insurers should also be prepared to address a large volume of claims for health, disability and life insurance, and take appropriate action to ensure timely and accurate claims handling.  Finally, DFS closed each letter by reminding the boards of directors and senior management of the regulated insurance entities that they are responsible for ensuring that they have adequate plans to respond to the COVID-19 crisis and to communicate those plans to their employees, customers, and vendors.

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 79



About this Author

Janene Marasciullo, Epstein Becker Law Firm, New York, Labor and Employment, Litigation Attorney

Janene Marasciullo is a Member of the Firm in the Employment, Labor & Workforce Management and Litigation & Business Disputes practices, in the New York office of Epstein Becker Green. Ms. Marasciullo has extensive first-chair experience litigating complex commercial, fraud, regulatory, and employment disputes, with an emphasis on disputes arising within the financial industry. In addition, she represents corporations and individuals during regulatory investigations and grand jury investigations...

Brian G. Cesaratto, Epstein Becker, Employment benefits Litigation Lawyer, Workforce Management attorney

BRIAN G. CESARATTO is a Member of the Firm in the Litigation and Employment, Labor & Workforce Management practices, in the New York office of Epstein Becker Green.

Mr. Cesaratto's practice includes complex commercial litigation, criminal defense, internal and law enforcement investigations, employment litigation, and computer and electronic data misappropriation and forensics.