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Senate
Approves Insurance Insolvency Measure
HARRISBURG -- The
Senate approved Senate Bill 815 on Tuesday, a measure introduced by Senator Don
White, R-41st District, that would change the way payments to insolvent
insurance companies are handled by the state.
If enacted, Senate Bill 815 could save
Pennsylvania businesses around $40 million in workers compensation and other
insurance premium costs, a move that could protect jobs and save costs to
consumers.
“The bill is not particularly complicated. All
it does is clarify that under our insurance liquidation laws, any deductibles
connected to an insurance policy go to claims under that policy, not to the
estate of the insurer,” Senator White said.
“That means the Guaranty Associations here and
across the country will have to assess less money on insurance policyholders,”
Senator White continued. “Without this bill, the Insurance Department is
forcing the Guaranty Associations to cover claims that were supposed to be paid
by these deductibles -- and that means additional assessments on policyholders,
which is the same thing as additional taxes.”
Senator White drafted SB 815 in reaction to the
insolvency of Reliance Insurance Company, which faces an estimated $3 billion
shortfall in assets versus policyholder claims. Because Reliance was domiciled
in Pennsylvania, the Department of Insurance is serving as liquidator. Reliance
had issued many policies to corporate policyholders with large deductibles of
$250,000 and more. Right now, those deductibles are going into the Reliance
estate -- meaning the Guaranty Associations in Pennsylvania and across the
country, and all other policyholders, are paying the claims that were supposed
to covered by these deductibles. SB 815 changes that, directing these
deductibles to the claims they were intended to cover.
“Any bankruptcy -- whether it is an insurance
company, some other business, or a person -- is a painful one, and no creditor
or claimant can ever be made whole,” Senator White said. “The best we can do is
make sure creditors and claimants are treated fairly. This bill helps do that
with insurers that go under: It gives the insurer’s estate the same money the
insurer had, no less but no more. And it saves policyholders here and across
the country money.”
In addition to providing a sense of fairness, SB
815 will provide savings and benefit taxpayers, Senator White said.
“This legislation will produce savings for
businesses, medical providers and homeowners here and across the country. In
Pennsylvania, those savings will be as much as $40 million, mainly in lower
assessments on employers for workers compensation,” Senator White said. “The
Commonwealth’s budget will also see some of those savings. We allow insurers to
offset from their premium taxes half of what they pay to the Property and
Casualty Guaranty Association -- so this bill will mean less of an offset, and
more money to the Commonwealth.”
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