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Following the New York State Insurance Department’s (NYSID) release with proposed regulations to ensure that coastal insurance is available and affordable, the New York Insurance Association (NYIA) expressed surprise by NYSID’s action and no recognition of an availability problem in the state. To the contrary, NYIA points out, data available through the New York Property Insurance Underwriting Association (NYPIUA) and information pertaining to insurers’ participation in the voluntary market suggests strongly that “coastal insurance availability is anything but a problem in N.Y” and that, in NYIA’s words, “NYSID’s current proposals are solutions in search of a problem.”

NYIA stated: New York’s homeowners insurance market is among the most highly regulated in the country. It’s also among the most burdensome with such requirements as a mandated three year policy period. Insurers writing policies in N.Y. must provide coverage for three years with little opportunity to cancel, except as prescribed by the law. Additionally, insurers are restricted in their ability to non-renew business by virtue of the 4 percent statewide cap imposed on cancellations. This means that regardless of the reason or circumstances, an insurer in N.Y. must renew at least 96 percent of its policies in any given year. Stated differently, we believe the interests of consumers are wellguarded in the protections afforded under the law today, and more importantly, that the flexibility to non-renew up to 4 percent of a company’s policies statewide is reasonable and necessary business to assure that adequate and financial strength is maintained.

Despite anecdotal stories N.Y.’s coastal homeowners insurance market does not have an availability problem. Coastal homeowners are able to obtain insurance with very few exceptions. Though the costs may have increased for some policyholders, these higher premiums are a reflection of the mass devastation caused by catastrophic events, as well as the increased cost of rebuilding and recovery. The statistics speak volumes—the number of new policies written annually on Long Island by NYPIUA, the insurer of last resort, has decreased by 23.8 percent over the past three years. NYPIUA only writes 1 percent of homes in Nassau County and 2.1 percent in Suffolk County. This was made clear at a roundtable hosted by the legislature in May 2010. The legislature, at that time, chose not to act, and in fact concluded that there did not appear to be an availability problem in N.Y. Moreover, the legislature certainly did not seek to impose further restrictions on insurers’ ability to effectively manage their business, unlike NYSID’s most recent actions. Rather, the legislature appropriately and wisely sought to preclude any action that would adversely impact the marketplace and otherwise compel insurers to rethink their decision to remain as active, selling participants in this market.

NYIA remains very concerned about NYSID’s actions and any other similar type actions purportedly undertaken to “fix” the coastal marketplace; particularly when no evidence whatsoever exists that the marketplace is not functioning or broken. Furthermore, NYIA strongly cautions against taking steps that, by all measures, could have a harmful effect on availability, affordability and competition. NYSID’s proposal is counterproductive, unnecessary, burdensome and unduly restrictive.

Imposing a 2 percent nonrenewal mandate on insurers is neither good for consumers nor is it good for business. Maintaining a healthy insurance market is as important as the goal of maintaining availability. If insurers are not able to manage their business effectively in the wake of burdensome restrictions, the marketplace most assuredly will tend towards dysfunction. These proposals can and will make the marketplace much worse if implemented. The last thing NYIA members want is for the N.Y. homeowners market to deteriorate causing companies to consider or reconsider whether business in the state is viable. “

NYIA has pledged to work with NYSID and the Temporary Panel on Homeowners Insurance Coverage to ensure that coastal homeowners continue to be fairly and adequately protected while keeping the insurance marketplace competitive.

 IIABNY Lauds Initiative

DEWITT, N.Y.—The Independent Insurance Agents & Brokers of New York commended the New York Insurance Department for taking steps to address homeowners market problems in the New York City metro area. The group called the actions an “important first step” toward solving availability and affordability problems in the state’s coastal areas.

According to IIABNY, for several years, New York State licensed insurance companies have restricted the amounts of homeowners insurance they will provide in the coastal areas, particularly eastern Long Island. These restrictions arose out of concern for potentially catastrophic losses should a hurricane strike. Consequently, homeowners have been forced to obtain coverage from unregulated companies or from a market of last resort. According to figures provided by the Excess Line Association of New York, non-licensed companies wrote 16,000 homeowners policies in 2009, up from 4,400 in 2005 (the year of Hurricane Katrina) and 3,300 in 2000. One out of every five dwellings insured by the New York Property Insurance Underwriting Association (the state’s market for property owners when no insurance companies will provide coverage voluntarily) is on Long Island. More than one-quarter of them are in Suffolk County. “These proposals from the NYISD are an important first step to restoring a healthy homeowners insurance market for the state’s coastal areas,” said Thomas J. Crowley of Maran Corporate Risk Associates in Southampton and IIABNY’s secretary-treasurer. “We appreciate the department’s efforts on this issue and look forward to working with them and our insurance company partners to ensure a vibrant and competitive market for homeowners near the ocean.”

The troubled market in the coastal areas has long been a concern of IIABNY’s member insurance producers. The group has called for market reforms each of the past several years in its legislative agenda. IIABNY representatives attended a May 10 meeting in Albany with industry leaders and the chairs of the New York Assembly and Senate insurance committees to discuss potential solutions.

The department has said that it is accepting comments on the draft regulations through Oct. 8. The regulations must still go through formal publication and comment periods before they can take effect.