St. Paul Tightens Belt; Dumps Medical Malpractice

On medical malpractice, he said, "we feel this ultimately will become an uninsurable risk and will be mutualized in some way." He added that St. Paul will exit the medical malpractice business globally through non-renewal upon policy expiration, in accordance with regulatory requirements.

Mark Hamel, a St. Paul representative, said the Minnesota-based St. Paul is the number-two writer of medical malpractice in the United States, behind Medical Liability Mutual Insurance Company. "Were in every state," he said. "We insure 42,000 physicians, thousands of other healthcare providers, probably 750 hospitals or hospital systems, and thousands of other healthcare facilities."

Mr. Hamel said the company anticipates that in 2001 it will write some $500 million of medical malpractice premium. "Its important to note that on that business were also projecting an underwriting loss of nearly $1 billion," which, he said, "underscores the issue of what were dealing with here."

"We understand that this is a dramatic action that will affect a lot of policyholders, but no company can sustain the level of losses that weve sustained in medical liability indefinitely," he said, noting that the nonrenewal process will take about two years, "depending on each states situation."

Mr. Fishman said during an online conference with analysts and investors that "we think well get a reasonable degree of response from the regulators. There will certainly be some noise, but we will respond to the noise in the best way possible as we try our best to deal with the issue."

Georgia Insurance Commissioner John Oxendine, who has been outspoken about St. Paul in the past, responded that he is sorry to see any company leave a Georgia market. He added that he is worried about the companys solvency. "We do have a concern that the things were hearing coming out of St. Paul sound as if they could be the early signs of a troubled company, financially, and we hope thats not the case," he said.

Mr. Oxendine said his department will be checking "to make sure St. Paul remains solvent and does not run into any serious financial difficulties in which it would not be able to fulfill its obligation nationwide."

(During the online conference, Mr. Fishman said St. Paul had delivered a letter to regulators indicating its solvency would have been threatened if it stayed in the medical malpractice business.)

Mr. Oxendine said St. Paul had consistently lost market share in Georgia, where it has been "outworked by the competitionTheyve had pricing problems and service problems. Basically they got fat and lazy, and the competition has taken big chunks out of them."

In spite of this, he said, St. Paul is a major writer and this development "could have a derogatory effect on the marketplace in Georgia. Thats something well have to analyze and that will be part of the application process."

St. Paul made its announcement on the day West Virginia Governor Bob Wise signed new legislation addressing the states morass of insurance problems, particularly in the area of medical malpractice coverage for doctors. In October, objecting to proposed West Virginia legislation requiring hearings for non-renewals, St. Paul sent a letter to 1,000 doctors withdrawing blanket renewals.

West Virginia responded with a new bill, H.B. 601, that combines several elements to address the states insurance issues, including a tax credit for doctors against their provider tax to help cover the cost of their malpractice insurance premiums; enabling legislation for a physicians medical malpractice mutual company; a joint underwriting association; and limited tort reform.

"It has a huge impact on us," said West Virginia Insurance Commissioner Jane Cline. "They were our largest carrier." She said that out of about 3,500 acting physicians in the state, about 1,200 were covered by St. Paul. Medical Assurance, she said, insured about 750 physicians, and more than 700 are insured through a state-sponsored program already in operation. The states new law will extend the state programs.

"We are in the process of getting an insurance program up and running to provide medical liability coverage for our physicians," Ms. Cline explained.

Randy Cox, retained counsel in West Virginia for the Washington-based American Insurance Association, and a member partner of Spilman, Thomas & Battle PLLC in Charleston, W.Va., said St. Pauls exit will "test the solution that was crafted, and test it right away."

Last week, St. Paul also announced that it will:

Exit most of its Lloyds casualty insurance and reinsurance business, U.S. surplus lines, and certain non-marine reinsurance lines.

Continue to underwrite specialty commercial property-casualty products through its offices in Canada, the United Kingdom and Ireland.

Continue to underwrite surety business in Mexico through its subsidiary, Alfianzadora Insurgentes.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 17, 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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