Insurers Warned Not To Avoid New York
New York
Insurers could provoke federal regulation if they shy away from the insurance needs of New York City following devastating terrorist attacks, New York Insurance Superintendent Greg Serio warned at an industry conference here.
Mr. Serio, speaking at the annual PricewaterhouseCoopers property-casualty insurance executive forum, said that if companies secure a measure from the U.S. Congress to backstop terrorism risk, their attitude towards New York "cant be, well just write 20 percent of what we wrote last year.'"
In the wake of the Sept. 11 destruction of the World Trade Center, Mr. Serio said that from his standpoint, seeing that insureds were compensated for a $40 billion loss has turned out to be "the easy part." He added that "the hard part now will be what happens Jan. 1 for the hospitals in New York that cant get renewals."
Another difficulty, he said, has been convincing Congress that what they do in terms of legislation "will have a material and beneficial effect on this market." Federal legislation to help insurers cope with terrorism losses will be in question, Mr. Serio said, "if at the end of the day the industry still says, we still have a problem."
He predicted that if this is the industry's reaction, "suddenly we will have this discussion of federal regulation [in Congress] all over again." Federal legislators, when they find that their latest legislation fails to settle the question of insurance availability, will be "piqued" and say "we have to get more of a handle on this insurance thing," he predicted.
Mr. Serio said New York and the nation wouldnt have the ability to get the economy up and running again "if there is this coming capacity crunch in this marketplace." He urged insurers to be creative in their thinking and to come forward with new approaches to provide coverage by partnering to build capacity and restructure risk. So far, the superintendent said, only one company had approached him along these lines. He did not name the carrier.
The superintendent urged the industry to "show intestinal fortitude" and "go out on a limb a bit."
Mr. Serio acknowledged that insurers' New York activity might be impacted by fears of a rating agency downgrade if they write coverage in terrorism-prone areas. He said he had been in talks with both rating agencies and securities analysts, and suggested that insurers, in reaching a creative solution, should bring rating agencies and regulators in on their ideas and plans at the outset.
For rating agencies, he said, "there is an opportunity for them to distinguish themselves by taking a more sophisticated look at what insurance companies do. This is not a question of writing policies in the right areas."
Mr. Serio, who related how he and hundreds of department employees who worked near the WTC were caked with dust from the twin towers' collapse, said he wanted insurers to play a role in rejuvenating lower Manhattan.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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