Hold Off On JUA Formation, NAII Says
NU Online News Service, June 6, 1:24 p.m. EST?An insurance company organization is suggesting that state regulators wait to see if surplus lines carriers step in to supply malpractice and other hard-to-obtain coverages before they set about creating joint underwriting associations.
The advice came from the National Association of Independent Insurers Surplus Lines Committee.
Following a meeting of the group, Michael Koziol, senior director and counsel at NAII, put out a statement advising that surplus lines insurers, which are non-admitted carriers not licensed for a particular state, "can provide a safety valve for businesses and consumers that are encountering difficulties in obtaining insurance."
State regulators, he declared, "should not impede this natural competitive process by creating JUAs before it's clear that the surplus lines market isn't working in these troubled areas."
Mr. Koziol added that "because rate and form restrictions affecting the standard market do not apply to surplus lines insurers, they can provide customers with tailored policies to meet their specific needs when they have difficulty obtaining coverage elsewhere."
Generally, customers who have followed a due diligence procedure and tried unsuccessfully to obtain insurance from at least three licensed companies in their state can then seek coverage from an out-of-state surplus lines insurer, which is not subject to that state's rate and form restrictions.
"This system has worked well over the years, providing more than $9 billion a year in needed coverage since 1994," Mr. Koziol said. "To meet that need, surplus lines insurers must be free to write a variety of coverages without being tied to specific mandates or restrictions."
The result, he added, "is far better for everyone than the artificial mechanism of forming a JUA that forces licensed insurers to bear the risks involved, ultimately at a higher cost for all consumers. In addition, under no circumstances should a JUA be ahead of surplus lines in the hierarchy of markets."
NAII, based in Des Plaines, Ill., counts more than 700 property-casualty companies as members.
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