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

1 Co-sponsor

• Jack M. Martins

BILL NUMBER:S5808A

Title of bill

An act to amend the insurance law, in relation to exemption for certain stock and non-stock insurance companies; and providing for the repeal of such provisions upon expiration thereof

Summary of provisions

Section one of the bill creates a new section 1326 of the insurance law to provide that medical malpractice insurance carriers responsible for covering the projected deficit of the Medical Malpractice Insurance Pool shall maintain reserves for such deficits of not less than twenty percent of their respective proportionate shares of such deficits, that obligations to pay on such deficits shall be for and in years in which obligations are actually due and owing, and that reserves held shall be increased by any percentage increase in the projected deficit of the Pool.

Subsection (b) of new section 1326 of the insurance law provides for a mechanism whereby the superintendent can direct the increases in reserves for the Pool deficit when obligations actually become due and owing.

Section two of the bill provides for an effective date.

Justification

Medical malpractice carriers are currently mandated by accounting rules inconsistent with New York law to carry reserves for possible deficits of the Pool at one hundred percent of the projected shortfall. This not only creates unnecessary balance sheet hardships, it increases pressure on medical malpractice insurance rates. The deficits for which these reserves must be held have not materialized in over a decade, and are projected to not develop for many more years, if at all. They are based on long term actuarial estimates only. This bill would allow for balance sheet relief, less pressure on insurance rates and a safety mechanism whereby the superintendent can call for the refunding of reserve accounts to assure that reserves are adequate when they are actually needed to cover actual deficits.

Legislative history

New Bill.

Fiscal implications

None to State.

Effective date

This bill shall take effect December 31, 2012 and shall be considered in effect for purposes of companies' 2012 annual financial

statements; provided however, that this section shall expire on December 31, 2016; provided further, that the superintendent shall evaluate the proper reserving level necessary for maintaining adequate security for the aggregate deficit of the association in light of loss development trends, actuarial projections of the financial condition of the association and other factors and report to the legislature on the findings of such evaluation no later than March 31, 2016.