Yesterday, the Puerto Rico Insurance Companies Association (ACODESE, Spanish acronym) warned that the solutions proposed by the Office of the Commissioner of Insurance (OCS) and Governor Ricardo Rossello Nevares to address the shortage of property and contingency insurance in certain areas will be a cure worse than the disease.
At a hearing of the Senate Banking and Insurance Committee yesterday, the executive director of ACODESE, Iraelia Pernas, warned that giving way to the administration project - number 1727 in the version filed in the House - will expose consumers to insurance products in which they cannot claim their rights. This, in case a catastrophic event occurs and they cannot collect their claims.
"Contrary to the best intention of opening insurance options to consumers in Puerto Rico, the House bill 1727 will represent the stripping of all guarantees and will not result in more affordable premiums," said Pernas during the hearing presided over by senator Yashira Lebron Rodriguez.
This way, Pernas rejected the bill that would open the Puerto Rico insurance market to insurers that do not have an address on the island, which in technical jargon is known as surplus lines.
According to Pernas, the bill supposes "unfair" competition towards local insurers that pay contributions in Puerto Rico, maintain their deposits in local banks and employ some 30,500 people, directly and indirectly.
Bill 1727 would enable a broker to look for insurers outside of Puerto Rico if they understand that the insurance that is of their interest "may not be available" in Puerto Rico. At present, a consumer can only go to the surplus lines market when it is proven that local insurers are not willing to insure the risk in question.
From ACODESE point of view, opening the door to surplus lines could be particularly damaging to consumers who would allegedly benefit from the measure, these being condominiums, municipalities and government agencies.
A surplus line insurer is not regulated by OCS.
Yesterday, during the hearing, the Commissioner of Insurance, Jaime Rivera Rios admitted that if a consumer buys insurance with surplus lines, any situation that the consumer faces will have to abide by the laws and be addressed in the Court of the jurisdiction where that insurer is located. Also, in case of insolvency, the consumer would have to claim what would be the equivalent of the Guaranty Association in that country or state.
However, Rivera Rios argued that surplus lines insurers interested in providing services to consumers on the island will be required to have more capital than local insurers, create a trust that guarantees the insurance granted in Puerto Rico and comply with the disclosures the National Association of Insurance Commissioners (NAIC) requires.
Rivera Rios said he recognized the role played by local insurers in the economy, but then said that after Hurricane Maria, the lack of insurance in certain niches such as commercial insurance, government and coastal properties, requires taking action.
To make his point, Rivera Rios presented to the legislators the case of a building in Isla Verde that after Hurricane Maria, had only received one insurance quote and that this represented an increase of 87 percent over the previous year.
"That for me is not an insurance market ... people live in those condominiums," Rivera Rios said, urging the commission to give way to the measure.
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