Massachusetts House Approves Insurance Insolvency Fund Updates

Massachusetts House Approves Insurance Insolvency Fund Updates

Massachusetts House Approves Insurance Insolvency Fund Updates

Alison Kuznitz – House News Service

8 minutes ago

BOSTON, Mass. (SHNS)–Massachusetts residents and businesses would get stronger protections if their property and casualty insurance companies end up failing, under a bill that gained momentum late in the session on Beacon Hill.

Without debate, the House last week quietly passed a bill (H 4772) that aims to update the parameters for a social safety net fund, created by the Legislature in 1970, and increase limits on property claims and accidents that have not been reviewed in decades. The Senate on Monday sent the rewritten bill, originally sponsored by Rep. Daniel Cahill, to the Senate Ways and Means Committee.

The bill would ensure that the Massachusetts Insurers Insolvency Fund aligns with a framework promoted by the National Association of Insurance Commissioners in 2009, said Barbara Law, who manages MIIF and is executive director of Guaranty Fund Management Services. The bill also clarifies that the MIIF covers cybersecurity insurance claims.

“The Massachusetts version of the statute was one of the oldest in the country; it hasn’t been updated regularly over the years,” Law told the News Service. “Therefore, there are many opportunities to bring current best practices from other states to Massachusetts, as well as the opportunity to increase the coverage limit. So people, particularly on the property side, we could make sure that there was enough coverage allowed by law so that they would have a better chance of having all of their claims covered.”

Climate-related events in recent years have led to property insurance insolvencies in Louisiana, Florida and South Carolina, he said.

“We wanted to be prepared if those insolvencies started to have a larger effect in Massachusetts, and we also wanted to make sure that if we started to experience that type of climate here, we were prepared,” Law said. “So it’s really about preparation. “We wanted to make sure our law was in a position to provide enough coverage to Massachusetts residents.”

The bill would increase the limit on existing claims, such as those for car accidents and environmental cases, from $300,000 to $500,000, a level already enacted in Connecticut and Rhode Island, according to testimony Law sent to Financial Services Committee co-chairs on last fall. The new limit would not apply to workers’ compensation claims, which are uncapped and paid out of the lifetime fund, Law said.

Aimed at providing a safety net for home and property owners in Massachusetts, the bill also proposes a $1 million limit for residential or commercial properties, a policy Law said was implemented in California after A forest fire caused the bankruptcy of an insurance company.

“We recognize that Massachusetts has high property rebuild values, so we recommend a $1 million limit for property claims just to make sure we stay on track,” he said.

All insurance companies that are licensed to provide property and casualty coverage in the Commonwealth are members of the MIIF and contribute to the fund to help pay claims, according to GFMS.

The Massachusetts Association of Insurance Agents supports the bill, particularly the special limit provision for real estate because of the “increased severity and frequency of these claims,” ​​said executive director Nick Fyntrilakis. In written testimony, Fyntrilakis warned that Massachusetts is “currently at a disadvantage compared to other states” that have adopted updated insurance policies.

“This bill would improve benefits for Massachusetts residents affected by insurer insolvencies and reduce costs for the property and casualty insurance guaranty fund framework in the Commonwealth without tax increases or larger appropriations if enacted,” Fyntrilakis said. He added: “These updates are much needed and, in some cases, long overdue.”

Law said the MIIF, which is regulated by the Division of Insurance, has paid approximately $500 million in claims to policyholders over its history when insurance companies large and small were insolvent. Workers’ compensation claims have largely driven activity in the fund, although Law said the MIIF has also seen bursts of activity linked to insolvencies over asbestos-related claims in the late 1980s and early 1990s and after the terrorist attacks of September 11.