NEW YORK—New York insurance officials' proposed plan to revive the New York Insurance Exchange has generated interest from the insurance industry, observers say.

In announcing their intent to reconstitute the exchange, state officials last week said the exchange would attract new capital to New York and the insurance market, offer efficiencies to buyers and serve large and complex risks.

Gov. David Paterson announced the initiative in his Jan. 6 state of the state address and officials later framed the exchange as a way to enhance New York's image as a world financial center and retain business going offshore.

“We have this within our own power to do,” said New York State Insurance Department Superintendent James J. Wrynn. “We're now going to make every effort to see if we can do it.”

The exchange would be a Lloyd's of London-style marketplace through which buyers could purchase insurance and reinsurance, and where capital providers and others who want to take on risk could form syndicates.

State officials said they had no specific timetable when the exchange would be up and running, but said they intended to hold their first work committee meeting, in which industry officials and regulators will discuss operational details and challenges, within two weeks.

The department will proceed in an “expeditious” manner, although its goal is to make sure the exchange works, not to start operations quickly, Mr. Wrynn said. “It's something we're working on daily.”

Mr. Wrynn stressed that the exchange ideally would attract not only insurance companies but other capital providers, such as investment banks, private equity firms and hedge funds looking for investments uncorrelated with the rest of their portfolio.

“Now for the most part, opportunities for these nontraditional sources of capital to invest their equity in insurance and reinsurance risks do not exist in New York,” Mr. Wrynn said. “That's why they go offshore to London, Bermuda or Dublin. This shouldn't be the case.”

Peter H. Bickford, a New York-based attorney and insurance consultant who was general counsel for the original exchange, said he thought Mr. Wrynn was emphasizing nontraditional sources to ensure the exchange attracts new capital to the insurance market.

“Most of the capital in the original exchange was definitely from the (insurance) industry, and that was one of the issues,” Mr. Bickford said. “Was (the exchange) really drawing new capital to the insurance industry or was it just recirculating existing capital?”

In touting the exchange, Mr. Wrynn said it could make insurance buying more efficient, offering standardized forms, providing contract certainty and simplifying multistate transactions. He said the exchange would look to complement Lloyd's, and would be ideal for large and complex risks such as cyber security, terrorism, supply chain integrity, reputational risks, climate change, professional indemnity, marine, catastrophe and aviation.

David Pagoumian, CEO of Iselin, N.J.-based wholesale broker NAPCO L.L.C., agreed the exchange could make insurance buying more efficient, if organized properly.

“Obviously, the spirit of an insurance exchange market in New York already exists. You have all the major insurance carriers here,” Mr. Pagoumian said. “If you put together a program with a couple different companies, they all want their binder, they all want their different exclusions. Having an exchange could perhaps bring more consistency in the product.”

The Independent Insurance Agents & Brokers of New York Inc. supports the idea, Research and External Communications Director Tim Dodge said.

“It's got to be for more complicated-type risks,” he said. “I think we're talking high-hazard accounts and accounts with very high property values.”

Mr. Wrynn also said the exchange would create “thousands” of jobs in New York and in upstate New York, along with “significant” revenues, although he declined to share exact figures from a preliminary analysis performed by department officials. He said the exchange likely would be physically located in Manhattan, but said state officials expect much of the back-office jobs and infrastructure to be located in upstate New York.

The original NYIE opened in 1980 but closed in 1987 because of inadequate capital, poor claims experience, soft market conditions and other factors.

Some industry observers have expressed skepticism that the exchange would fare better this time around, citing the large amount of capital needed by reinsurers, the tax advantages of offshore facilities and the current soft insurance market.

“It may be soft now, but we're not getting up and running tomorrow,” Mr. Wrynn said. “Ideally, when we are ready to get this up and running and have a ceremonial ribbon-cutting, there is a hard market. But we're proceeding along because we want this to be something that serves a need of the industry, notwithstanding the condition of the market at the time.”

Mr. Wrynn said the department continues to seek “competitive tax treatment” for the exchange, but also said such an arrangement would not be a prerequisite for success.

Then-Superintendent Eric Dinallo first suggested the idea of reviving the exchange in early 2008, but the financial crisis sidetracked that effort, department officials said. The idea has gained momentum since the September confirmation of Mr. Wrynn, who made the project a top departmental priority, officials said.