N.J. To Offer Backstop For Med-Mal Coverage

NU Online News Service, Sept. 15, 2:05 p.m.EDT?New Jersey Banking and Insurance Commissioner HollyBakke issued an order last week to reactivate the MedicalMalpractice Reinsurance Association to act as a reinsurer for thestate's troubled medical malpractice carriers.

Commenting on her decision, Commissioner Bakke said she hasordered to reactivate the association to maintain availability inthe med-mal marketplace for the Garden State and preserve patientaccess to physician services. "Reactivation is a necessary step inthe department's ongoing efforts to assure the availability ofcoverage for New Jersey doctors," she said in a statement.

The Medical Malpractice Reinsurance Association was firstestablished in 1976 by the state legislature to assure theavailability of med-mal coverage, by offering insurers thenecessary financial backstop to expand their writing of coverageduring difficult market situations, Ms. Bakke explained. The lawalso gives the banking and insurance commissioner the power to havethe state act as a backstop and provide reinsurance.

The decision to reactivate the association was prompted by adepartment hearing on Aug. 6 to find out whether med-malreinsurance was sufficiently available in the New Jerseymarketplace. Based on the testimony presented, the state's bankingand insurance department determined that reinsurance was not"readily available."

Following the hearing, Ms. Bakke decided that the reactivationof the association was a "necessary and prudent regulatory measure"to keep direct coverage available in New Jersey.

"The reactivation of the association will be solely for thepurpose of providing reinsurance. In my order, I have set forth thecooperative measures the department and the association willundertake to ensure that the association is activated in aresponsible and measured manner," Commissioner Bakke stated. Thesemeasures include:

? The association must operate within commercial reinsurancestandards and at commercially reasonable terms.

? The department will approve all terms and conditions ofreinsurance agreements to verify that rates and terms arecommercially reasonable.

? Reinsurance contracts will be issued for a maximum of aone-year period and will be subject to department approval.

? To avoid conflicts of interest, company representativessitting on the board of the association cannot vote on issues wherethat company is affected.