A trade group for property casualty insurers is urging New York Governor George Pataki to sign a bill that would eliminate current limitations on premium financing for surplus lines transactions.
“We strongly support the concept of freedom of rate and form for surplus lines in order to maintain a vibrant and viable market,” said Michael G. Koziol, assistant vice president and counsel for the Property Casualty Insurers Association of America (PCI) in a letter to the governor. “Any restrictions on rate and form serve only to limit the number of entities willing to write on a surplus lines basis.”
PCI urged Gov. Pataki to sign S.B. 6474, a bill which clarifies state law regarding minimum earned premiums for a financed surplus lines transaction. Currently these are limited to the greater of 10 percent of the gross premium, or $60.
“Insurers enter the New York surplus lines market based on reasonable certainty that they will get a return on investment,” Koziol wrote. “When acquisition costs exceed the greater of 10 percent of premium or $60, and the insured terminates the contract before those costs are recouped, the surplus lines market operates under a loss basis.”
A minimum earned premium will cover acquisition costs involved in reviewing, inspecting, processing, analyzing and ultimately placing a risk and operates to assure that the insurer will retain the business for a sufficient period to recoup acquisition and other costs.
“The New York Assembly overwhelmingly ratified S.B. 6474, and we urge the governor to sign this much-needed bill,” Koziol said.
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