New York State Insurance Department Superintendent Gregory V. Serio urged the State’s Assembly to pass pending legislation which would extend the use of Risk Based Capital standards to property/casualty insurers.
The announcement explained that “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.”
Serio pointed out that “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.”
He added that “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.”
Serio cited the recent spate of economic challenges the industry faces, starting with Sept. 11, followed by Enron’s collapse and the questions it raises concerning the reliability of the accountants who audit financial statements. “All financial regulators to be more concerned and aware of all aspects of the financial condition of insurers,” Serio stated. Adopting these standards would give the NYSID earlier warning of possible financial difficulties and more flexibility in dealing with them, Serio indicated
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. If adopted they would “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 announcement concluded.
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