Legislature(2001 - 2002)
05/04/2001 05:22 PM Senate JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 191-JOINT AVIATION INSURANCE ARRANGEMENTS
Mr. BOB LOHR, Director Division of Insurance, expressed his
appreciation to the committee for including the division of
insurance in developing SB 191. Although a number of their
suggestions were incorporated in the bill, his testimony would
focus on ways the bill could be strengthened.
· Minimum surplus and capital requirements similar to those
required of a domestic reciprocal insurer have been added and
is an important addition to the legislation.
· Aviation insurance will only work if it is adequately funded.
Authorization for an aviation joint insurance arrangement that
is tied to a congressional or legislative grant or loan for
reserves should be explored.
· The term "admitted assets" used on page 3, line 31 in section
21.77.040 should be defined since the specific meaning under
title 21 would not apply. In title 21 it is a term related to
statutory accounting and would not be applicable. They
suggested replacing "admitted assets" with "cash and U.S.
treasuries.
· They recommend that the aviation joint insurance arrangement
be required to notify members that the insurance is not
regulated and they provide no guarantee of protection in case
of insolvency. Language in AS 12.34.080 could be used as a
model.
CHAIRMAN TAYLOR offered amendment 1 striking the term "admitted
assets" from page 3, line 31 and inserting "cash or U.S. treasury".
SENATOR COWDERY moved amendment 1.
CHAIRMAN TAYLOR asked for the next recommendation.
MR. LOHR said the next recommendation was conceptual in nature but
he was reading from AS 24.34.080 relating to surplus lines. In (c)
is says, "a producing broker shall execute and deliver to the
surplus lines broker not later than the end of each month, on a
form proscribed by the director. A surplus lines broker shall file
with the director with a report required by (a) if this section or
with the surplus lines association with the evidence of insurance
required by (b) of this section. The surplus lines insurance first
placed or renewed in the preceding calendar month an affidavit
shall be open to public inspection. The affidavit must contain a
statement by the producing broker that the insured was expressly
informed in writing before the insurance contractor coverage was
bound that the surplus lines insure with whom the insurance is to
be placed is not licensed in this state, is not subject to the
state's supervision and in the event of the insolvency of the
surplus lines insurer, losses will not be covered under AS 21.80,
the Alaska Insurance Guarantee Association Act." He thought the
forgoing could be adopted for the purposes of the aviation joint
insurance arrangement.
CHAIRMAN TAYLOR said "That's to basically take them out from under
any coverage provided to other carriers because they are licensed
and here in the state and that's their kind of solvency pool,
right?"
MR. LOHR replied that SB 191 already takes them out because it
precludes the division from exercising any regulatory function. It
simply notifies the policyholders of the fact that the coverage
does not exist.
CHAIRMAN TAYLOR asked him to draw up the amendment and they would
include it in the bill.
MR. LOHR agreed to do so.
SENATOR ELLIS asked whether he had an opinion on the adequacy of
the minimum capital and surplus requirements set forth in the bill.
MR. LOHR replied that the requirements are drawn from the
reciprocal chapter and, at this time, aviation insurance is the
riskiest form of insurance. Because of this, there is need for
additional mechanisms even though those mechanisms face the same
difficulties that existing insurers face. Because there are so many
air crashes in Alaska, there are many insurers that are unwilling
to write policies here unless it's with companies that are known
and present little risk. Safety is certainly an element of the
concern and those requirements are better than no capital surplus
requirements but adequate capitalization is imperative. If one
crash stands to wipe out the capital surplus of the entire joint
insurance aviation arrangement then this is a recipe for disaster.
SENATOR ELLIS asked what would constitute adequate capitalization.
MR. LOHR thought the current statutory requirement would have to be
doubled at a minimum.
SENATOR ELLIS asked Chairman Taylor for the basis for his figures
for the capital and surplus requirements.
CHAIRMAN TAYLOR said they were the same as reciprocal insurance
carriers.
Number 690
SENATOR ELLIS asked if it was realistic to think that Congressman
Don Young would capitalize such a fund in Alaska.
CHAIRMAN TAYLOR replied that Congressman Young was thinking about a
$500 million figure, which is much higher than the figure
legislators considered.
SENATOR ELLIS asked whether Mr. Lohr had thought about exempting
from his oversight the activity referred to on page 2, line 5.
MR. LOHR said the Alaska Municipal League Joint Insurance
Arrangement and other entities currently operate successfully under
statute without regulation by the division. He thought it was a
legislative policy call as to whether something was within the
scope of Title 21 or not. In terms of early warning of potential
problems, Title 21 regulations are effective and problems would
come to light sooner if they were regulating than if they were not.
Number 552
SENATOR COWDERY noted that building contractors were interested in
a pool several years ago and wondered how that was working.
MR. LOHR didn't believe the effort was carried to fruition but the
concern at that time was adequacy of capitalization.
CHAIRMAN TAYLOR agreed that they weren't able to capitalize the
effort.
He directed SB 191 be held in committee.
| Document Name | Date/Time | Subjects |
|---|