March 26, 2002 – Lt. Gov. Gerard Luz James II said Tuesday that insurance rate increase requests made to his office in recent months have not been driven by increases in reinsurance costs, as indicated by local companies, but have been actually submitted by the companies themselves. Asked the basis for his conclusion, James said he learned in recent meetings with London underwriters that reinsurers had not increased their rates.
However, Tami Noel, president of Red Hook Agencies Inc. and managing agent for N.E.M. (West Indies) Insurance Ltd. (NEMWIL), said later Tuesday, "I don't know why he would make such a statement." She said her cost for catastrophe reinsurance has gone up 25 percent.
At a meeting in January with the lieutenant governor, who is the territory's insurance commissioner, Noel said that of every premium dollar her agency collects, 90 cents goes for reinsurance, leaving little to pay claims and cover administrative costs. (See "Insurers: V.I. business reputation is terrible".) Noel added Tuesday in a telephone interview, "We weren't able to attract certain companies because of their U.S.V.I. exposure."
James made his comments at a press conference he called to discuss his trip to England to meet with underwriters at Lloyd's. At the gathering Tuesday, he accused "my predecessor" — Kenneth Mapp, whom he did not name — of allowing Lloyd's to use commercial rates without filing them in accordance with the law, thus causing "exorbitant increases" in condominium premiums, among other things.
The three companies that still write property insurance, including windstorm coverage, in the territory have all filed for rate increases; none have been granted. At a hearing James held on Jan. 30, it was suggested that the companies had not provided actuarial information required by law in order to receive a rate increase. But the companies said they were never told what was required of them by the actuarial firm hired by the Division of Banking and Insurance to review the rate requests. (See "Communication but no conclusions at hearing".)
Reinsurance is the insurance that covers primary insurance companies against catastrophic losses.
James has been under fire since he issued an order without warning and made it retroactive in December declaring a moratorium on cancellations and non-renewals of insurance policies until June 1. Lloyd's filed a complaint against James in January asking the court to nullify the order, but Territorial Court Judge Rhys Hodge denied the request. Hodge scheduled a hearing for Jan. 15 to hear arguments in the matter, but when the date came, Lloyd's representatives said they had reached an agreement out of court with the lieutenant governor.
On Tuesday, James painted a picture of Lloyd's underwriters working in the dark without knowledge of what was going on in the Virgin Islands until his recent visit. "I learned from a Lloyd's underwriter that he does not [have] and has never had a manual for determining rates," he said. He did not explain why an underwriter would have such a manual, and a call to his office later in the day for clarification was not returned.
Normally it is the underwriters who determine the parameters of what risks they will cover and who, then inform the companies or agencies how to establish their rates, given the specifications of any given risk.
James also stated that a "Lloyd's underwriter represented in the territory by Tunick was not even aware that Tunick and Marshall & Sterling were informing policyholders, in non-renewal notices, that Lloyd's is no longer able to offer homeowner's coverage in the Virgin Islands because my office is prohibiting it from charging premiums sufficient to cover its cost of reinsurance."
In response to a request for comment, Dave Ridgeway, president of Marshall & Sterling on St. Croix, issued a one-paragraph statement saying he is in London this week meeting with various underwriters. "My initial reaction is one of disappointment at the lieutenant governor's representation of some of the facts," he said, adding that he was awaiting a transcript or tape of James's remarks. "I have today made a written request for a meeting with the lieutenant governor and will await his response before making additional public comment," he said.
A call placed to Theodore Tunick & Co. on St. Thomas seeking comment was not returned.
James said Tuesday he had ordered the moratorium back in December to protect the community. He has since lifted the order for any "Lloyd's Syndicate companies that either have not filed for rate increases or have voluntarily agreed in writing that they will not engage in conduct prohibited by the interim order and voluntarily will renew and write new property insurance policies" in the territory.
Telephone queries found only one company, Island Heritage, currently writing a few new property policies. However, with renewal of reinsurance looming on the horizon, insurance specialists say that could change.
James said his London meetings were "extremely productive." He said, "I took the opportunity to demonstrate to these underwriters and brokers the significance of the stringent building code adopted since 1995 [that] makes the Virgin Islands a good market for insurance."
Among his accomplishments on the trip, he said, he persuaded a Lloyd's underwriter to extend capacity to two local agents for homeowner's coverage. He couldn't say by how much.
And he said another major carrier that had previously not responded to inquiries about completing its application for licensing is now "keen" to proceed.
The press conference was broadcast live on WSTX radio.
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