Thomas J. Derella First VP and Legislative Chairman of the Professional Insurance Agents of New York warned that deteriorating market conditions were creating a climate that could result in a “perfect storm” affecting insurance coverage throughout the state unless corrective measures were taken.
Speaking at a public forum led by the Superintendent of the New York State Insurance Department Gregory V. Serio, Derella provided testimony about the availability and adequacy of coverage to homeowners, small businesses and large commercial risks in the wake of Sept. 11.
“We currently have a convergence of three major factors that are negatively impacting New York’s marketplace, affecting both pricing and availability,” Derella warned. “Prior to Sept. 11, 2001, insurance pricing began to firm as a corrective to longstanding rate inadequacy. Low returns on insurers’ investment portfolios also contributed to price firming and this factor became more severe…Finally, reinsurance availability and pricing became problems following Sept. 11, as terrorism coverage was excluded or afforded on a very limited basis at a much higher cost.” Those “negative insurance market conditions could converge to create a “perfect storm” scenario for New York State.
Derella reported that availability and affordability of insurance have affected New Yorkers in varying degrees, depending on their type of business and location of the insured. He said availability problems are most acute in lower Manhattan, where it is difficult or impossible to obtain coverage and some companies are actively nonrenewing existing policies.
He also discussed several types of coverage that PIANY members have seen impacted, including business owners policies; workers’ compensation; large property risks; directors and officers; habitational; and coastal homeowners coverage.
“One of the most troubling situations is the prevalence of exclusions in general contractors’ liability policies for suits brought by employees of subcontractors,” derella stated. He urged changes in New York’s Labor Law, which imposes strict liability on general contractors and site owners for certain types of accidents.
Derella, who chaired PIANY’s Hard Market Task Force last year, said the task force will conduct a follow-up survey to measure any changes in market conditions since the task force carried out its original survey in the spring of 2001.
In concluding Derella reaffirmed the PIANY strong support for a federal terrorism reinsurance plan. “We don’t believe insurance is designed to cover terrorist events,” he stated, adding, “We’ll be headed to Washington very soon to lobby for a federal bill.”
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