Relates to an exemption for certain stock and non-stock insurance companies.
Ayes (58): Adams, Addabbo, Alesi, Ball, Bonacic, Carlucci, DeFrancisco, Diaz, Dilan, Espaillat, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Hassell-Thomps, Huntley, Johnson, Kennedy, Klein, Krueger, Kruger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Oppenheimer, Parker, Peralta, Perkins, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Smith, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
Nays (4): Avella, Breslin, Duane, Squadron
TITLE OF BILL: An act to amend the insurance law, in relation to exemption for certain stock and non-stock insurance companies; and providing for the repeal of such provisions upon expiration thereof
SUMMARY OF PROVISIONS: Section one of the bill creates a new section 1326 of the insurance law to provide that medical malpractice insurance carriers responsible for covering the projected deficit of the Medical Malpractice Insurance Pool shall maintain reserves for such deficits of not less than twenty percent of their respective proportionate shares of such deficits, that obligations to pay on such deficits shall be for and in years in which obligations are actually due and owing, and that reserves held shall be increased by any percentage increase in the projected deficit of the Pool.
Subsection (b) of new section 1326 of the insurance law provides for a mechanism whereby the superintendent can direct the increases in reserves for the Pool deficit when obligations actually become due and owing.
Section two of the bill provides for an effective date of December 31, 2011, an expiration date of December 31, 2015 and that a report be made by the Superintendent on the reserving needs for the deficit of the Pool.
JUSTIFICATION: Medical malpractice carriers are currently mandated by accounting rules inconsistent with New York law to carry reserves for possible deficits of the Pool at one hundred percent of the projected shortfall. This not only creates unnecessary balance sheet hardships, it increases pressure on medical malpractice insurance rates. The deficits for which these reserves must be held have not materialized in over a decade, and are projected to not develop for many more years, if at all. They are based on long term actuarial estimates only. This bill would allow for balance sheet relief, less pressure on insurance rates and a safety mechanism whereby the superintendent can call for the refunding of reserve accounts to assure that reserves are adequate when they are actually needed to cover actual deficits.
EFFECTIVE DATE: December 31, 2011 with an expiration of its provisions on December 31, 2015; the superintendent is also directed to report on the deficit and the appropriateness of reserves therefor by March 31, 2015.
FISCAL IMPACT TO THE STATE: None.
STATE OF NEW YORK ________________________________________________________________________ 5808 2011-2012 Regular Sessions IN SENATE June 17, 2011 ___________Introduced by Sen. DeFRANCISCO -- read twice and ordered printed, and when printed to be committed to the Committee on Rules AN ACT to amend the insurance law, in relation to exemption for certain stock and non-stock insurance companies; and providing for the repeal of such provisions upon expiration thereof THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The insurance law is amended by adding a new section 1326 to read as follows: S 1326. STATUTORY ASSOCIATION MEMBERSHIP; OBLIGATIONS. (A) FOR THOSE STOCK AND NON-STOCK COMPANIES TO WHICH SUBPARAGRAPH (B) OF PARAGRAPH TWO OF SUBSECTION (B) OF SECTION ONE THOUSAND THREE HUNDRED TWENTY-FOUR OF THIS ARTICLE APPLIES, NO LIABILITIES ARISING FROM THE OBLIGATIONS OF AN ASSOCIATION AUTHORIZED PURSUANT TO SUBPARAGRAPH (D) OF PARAGRAPH TWO OF SUBSECTION (C) OF SECTION FIVE THOUSAND FIVE HUNDRED TWO OF THIS CHAPTER SHALL BE DUE AND OWING FROM SUCH COMPANIES UNLESS AND UNTIL SUCH OBLI- GATIONS CAN BE SATISFIED, AFTER CONSIDERATION OF ALL RESOURCES OF THE ASSOCIATION, INCLUDING BUT NOT LIMITED TO CURRENT PREMIUM INCOME, BY A CONTRIBUTION FROM SUCH COMPANIES AND THE COMPANIES ARE NOTIFIED OF SAME BY SUCH ASSOCIATION NOT LESS THAN THREE HUNDRED SIXTY-FIVE DAYS PRIOR TO THE DATE UPON WHICH SUCH OBLIGATIONS SHALL BE DUE AND OWING, AND SHALL ONLY RELATE TO OBLIGATIONS OF THE ASSOCIATION THAT ARE ACTUALLY DUE AND OWING BY THE ASSOCIATION IN THAT YEAR IN WHICH CONTRIBUTION IS TO BE MADE BY THE COMPANIES. SUCH OBLIGATIONS SHALL NOT BE AGGREGATED FOR ANY OTHER YEAR EXCEPT THAT IN WHICH THE CONTRIBUTION IS DUE AND OWING OR PREVIOUS YEARS FOR WHICH CONTRIBUTIONS HAVE NOT BEEN SATISFIED; FURTHER, SUCH LIABILITIES AND THE CONTRIBUTIONS THEREFOR SHALL NOT INCLUDE ANY CONTINGENT LIABILITIES OF THE ASSOCIATION FOR THE YEAR FOR WHICH CONTRIBUTIONS ARE REQUESTED; PROVIDED, HOWEVER, THAT COMPANIES SHALL MAINTAIN AT ALL TIMES A RESERVE OF NOT LESS THAN TWENTY PERCENT OF THEIR RESPECTIVE AND PROPORTIONATE LIABILITIES OF THE AGGREGATE DEFICIT OF THEEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD11724-05-1 S. 5808 2
ASSOCIATION, AS SUCH RESPECTIVE AND PROPORTIONATE LIABILITIES OF THE AGGREGATE DEFICIT ARE REPORTED BY THE ASSOCIATION CONSISTENT WITH THE PROVISIONS OF THIS SECTION; FURTHER, COMPANIES SHALL EACH YEAR INCREASE ITS MINIMUM RESERVE, ASSUMING IT IS LESS THAN ONE HUNDRED PERCENT OF THE RESPECTIVE AND PROPORTIONATE LIABILITY OF A COMPANY FOR THE AGGREGATE DEFICIT OF THE ASSOCIATION, BY THE PERCENTAGE INCREASE IN THE AGGREGATE DEFICIT OF THE ASSOCIATION FROM THE PREVIOUS YEAR. (B) THE SUPERINTENDENT SHALL, FOR A YEAR IN WHICH THE AGGREGATE DEFI- CIT OF THE ASSOCIATION IS REPORTED BY THE ASSOCIATION AS REQUIRING A CONTRIBUTION, INSTRUCT CONTRIBUTING COMPANIES TO INCREASE RESPECTIVE AND PROPORTIONATE RESERVES PROVIDED FOR IN SUBSECTION (A) OF THIS SECTION BY AN AMOUNT NOT LESS THAN TWENTY-FIVE PERCENT PER YEAR AND FOR EACH CONSECUTIVE YEAR THEREAFTER FOR EACH YEAR THAT A CONTRIBUTION IS NECES- SARY UNTIL SUCH TIME AS A COMPANY HAS REACHED A RESERVING LEVEL OF ONE HUNDRED PERCENT OF ITS RESPECTIVE AND PROPORTIONATE LIABILITIES FOR THE AGGREGATE DEFICIT OF THE ASSOCIATION; PROVIDED, HOWEVER, THAT COMPANIES MAY REDUCE ITS RESERVES THEREAFTER BY SUCH AMOUNT IN AND FOR THE SECOND CONSECUTIVE YEAR AND EACH YEAR THEREAFTER IN WHICH A CONTRIBUTION IS NOT REQUIRED TO THE MINIMUM RESERVE PROVIDED FOR IN SUBSECTION (A) OF THIS SECTION. S 2. This act shall take effect December 31, 2011 and shall be consid- ered in effect for the purposes of companies' 2011 annual financial statements; provided, however, that this section shall expire on Decem- ber 31, 2015; provided further, that the superintendent shall evaluate the proper reserving level necessary for maintaining adequate security for the aggregate deficit of the association in light of loss develop- ment trends, claims settlement trends, actuarial projections of the financial condition of the association and other factors and report to the legislature on the findings of such evaluation no later than March 31, 2015.