American International Insurance Company of New Jersey (AIIC NJ), a subsidiary of American International Group, announced that it has reached an agreement with the State of New Jersey Department of Banking and Insurance that will enable it to maintain its presence in the State’s auto insurance market.
Under a Consent Order approved by Acting Commissioner Donald Bryan, AIIC NJ will suspend its withdrawal plan for a minimum of two years. It may reactivate the withdrawal plan by advising the Commissioner of its intention to do so on or before the expiration of this two-year period.
The Consent Order also grants AIIC NJ an 8.9 percent rate increase. Additionally, AIG member company American International Insurance Company of Delaware (AIIC Delaware) will receive a certificate of authority to underwrite auto insurance in New Jersey. Under the consent order, AIIC Delaware will write all new business, and up to 25 percent of AIIC NJ’s existing business will be transferred to AIIC Delaware. The transferred business will be comprised of policyholders meeting certain high-risk characteristics. The combined rate effect of these changes is roughly equivalent to the Administrative Law Judge’s decision rendered in July of 2001.
Commenting on the Order, Robert Sandler, AIG Executive Vice President stated that, “The Consent Order affirms our contention that our rates were inadequate and that a significant rate increase was necessary, while also offering a solution that addresses the challenges of underwriting high-risk business in a “take-all-comers’ environment.”
He added that, “The process required to achieve this agreement also underscores the extraordinary lengths to which insurers must go to achieve a justifiable rate increase. It is our hope that the implementation of the terms of this Order in combination with the full implementation of the AICRA (Automobile Insurance Cost Reduction Act) reforms, the adoption of the expedited rate filing procedures and substantive rate regulatory reform will enable AIIC of New Jersey and AIIC of Delaware to participate in a competitive automobile insurance market free from the damaging political intrusions of the past.”
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