Relates to an exemption for certain stock and non-stock insurance companies

Summary of specific provisions

Section one of the bill adds a new section 1326 to the Insurance Law to allow carriers to limit the application of contingent liabilities to the financial statements of medical malpractice insurers.

Justification

Medical malpractice insurance is a unique business in New York. The vast majority of the state's medical malpractice insurance capacity is provided by admitted, single-state, mono-line insurance. carriers, most of which are mutuals or reciprocal insurers that are owned or controlled by physicians which provide medical malpractice coverage to physicians. However, in addition to financial challenges, these insurers, admitted in New York State, have been confronted with mounting competition from Federally sanctioned out-of-state Risk Retention Groups which are less-regulated than New York admitted carriers. These Risk Retention groups may be able to provide cheaper medical malpractice coverage in the short term, but may not have the financial wherewithal to pay claims over the long term.

This bill changes the way carriers have to ledger the obligations of the Medical Malpractice Insurance Pool as liabilities to the carriers, removing gross (aggregated) liabilities in favor of posting obligations only within a year of when they become due. Carriers will be required to maintain a reserve of not less than 10% of their respective and proportionate liabilities of the pool. ALL carriers will see an immediate benefit to surplus as a result, thus improving the balance sheet and the annual statement to be filed in March.

This bill modernizes the Insurance Law as it relates to medical malpractice insurance. It recognizes the unique place that medical malpractice insurance holds in the provision of health care in New York.

Purpose or general idea of bill

This bill will positively affect the balance sheets of all medical malpractice carriers in the state and prevent the unregulated Risk Retention Groups from using the pool obligation as a competitive argument against the state carriers.

Summary of specific provisions

Section one of the bill adds a new section 1326 to the Insurance Law to allow carriers to limit the application of contingent liabilities to the financial statements of medical malpractice insurers.

Justification

Medical malpractice insurance is a unique business in New York. The vast majority of the state's medical malpractice insurance capacity is provided by admitted, single-state, mono-line insurance. carriers, most of which are mutuals or reciprocal insurers that are owned or controlled by physicians which provide medical malpractice coverage to physicians. However, in addition to financial challenges, these insurers, admitted in New York State, have been confronted with mounting competition from Federally sanctioned out-of-state Risk Retention Groups which are less-regulated than New York admitted carriers. These Risk Retention groups may be able to provide cheaper medical malpractice coverage in the short term, but may not have the financial wherewithal to pay claims over the long term.

This bill changes the way carriers have to ledger the obligations of the Medical Malpractice Insurance Pool as liabilities to the carriers, removing gross (aggregated) liabilities in favor of posting obligations only within a year of when they become due. Carriers will be required to maintain a reserve of not less than 10% of their respective and proportionate liabilities of the pool. ALL carriers will see an immediate benefit to surplus as a result, thus improving the balance sheet and the annual statement to be filed in March.

This bill modernizes the Insurance Law as it relates to medical malpractice insurance. It recognizes the unique place that medical malpractice insurance holds in the provision of health care in New York.

Prior legislative history

New bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately.