FOR IMMEDIATE RELEASE
CALLS ON ASSEMBLY TO ACT ON IMPORTANT LEGISLATION TO EXTEND RISK BASED CAPITAL STANDARDS
TO P/C INSURERS
Standards Would Allow Dept to Better Assess Insurer Financial Condition and More Expeditiously Provide Appropriate Remedies
Superintendent of Insurance Gregory V. Serio today called on the New York State Assembly to pass legislation that would extend the use of Risk Based Capital standards to property/casualty insurers. Risk Based Capital is a tool to evaluate the minimum capital needs of insurers and is currently utilized in New York for assessing the capital adequacy of life and accident & health insurers.
"Nearly all states have adopted Risk Based Capital as the minimum capital standard for property/casualty insurer. While I applaud the progress the State Senate has made in passing this important legislation, I urge the Assembly to take action and give the Department the necessary tools we need for earlier intervention into troubled situations," said Serio. "New York is at a disadvantage by not having this standard and its accompanying regulatory remedies in order to assist in fulfilling our financial solvency oversight role."
"The economic challenges arising out of September 11, the financial collapse of Enron, and allegations of compromises in the independence of public accountants auditing financial statements have caused all financial regulators to be more concerned and aware of all aspects of the financial condition of insurers," said Serio. "These new standards provide a powerful tool to measure capital adequacy and will enable the Department to more effectively employ statutory remedies. The use of Risk Based Capital standards allows for earlier detection of possible financial difficulty and gives the Department greater flexibility to more rapidly assist in restoring financial health and minimizing exposure to the States security funds."
The insurance industry is regulated to ensure that insurers maintain sufficient capital to fund policyholder obligations. Risk Based Capital standards are designed to establish minimum capital requirements based upon the risk applicable to the operations of property/casualty insurers. The standards consider industry performance, individual insurer characteristics, and the allocation of reserves and premiums among insurers. Risk Based Capital standards are intended to strengthen the safety net that statutory surplus currently provides for policyholder obligations.
The proposed new Risk Based Capital standards are contained in a Department Bill, Senate Bill S.3737 sponsored by Senator Seward, State Insurance Committee Chairman. The Bill passed the State Senate on March 5, 2002.