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

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 Holly Bakke issued an order last week to reactivate the Medical Malpractice Reinsurance Association to act as a reinsurer for the state's troubled medical malpractice carriers.

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

The Medical Malpractice Reinsurance Association was first established in 1976 by the state legislature to assure the availability of med-mal coverage, by offering insurers the necessary financial backstop to expand their writing of coverage during difficult market situations, Ms. Bakke explained. The law also gives the banking and insurance commissioner the power to have the state act as a backstop and provide reinsurance.

The decision to reactivate the association was prompted by a department hearing on Aug. 6 to find out whether med-mal reinsurance was sufficiently available in the New Jersey marketplace. Based on the testimony presented, the state's banking and insurance department determined that reinsurance was not "readily available."

Following the hearing, Ms. Bakke decided that the reactivation of 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 the purpose of providing reinsurance. In my order, I have set forth the cooperative measures the department and the association will undertake to ensure that the association is activated in a responsible and measured manner," Commissioner Bakke stated. These measures include:

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

? The department will approve all terms and conditions of reinsurance agreements to verify that rates and terms are commercially reasonable.

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

? To avoid conflicts of interest, company representatives sitting on the board of the association cannot vote on issues where that company is affected.