Press Release No. 057
Date: November 21, 2003
Contact: Angela Johnson
Phone: 340-773-6449
angelaborchert@yahoo.com

LIEUTENANT GOVERNOR RICHARDS RESPONDS TO PROPOSED USE OF THE TERRITORY'S INSURANCE GUARANTY FUND BY 25TH LEGISLATURE

Lieutenant Governor Vargrave Richards urged the 25th Legislature to preserve the integrity of the Insurance Guaranty Fund for the sake of all VI residents.

As the territory's Commissioner of Insurance and the official charged with protecting the interest of insurance consumers in the territory, Richards corresponded Friday with Senate President David Jones delineating strong arguments for why an intact Guaranty Fund is essential to attracting new insurance companies to our shores.

"We should be alarmed when the territory is unable to sustain a robust insurance industry," Richards wrote. "Not only are insurance consumers affected when insurance is unavailable or unaffordable, but other integral sectors of our fragile island economy are also impacted. In the wake of an availability or affordability insurance crisis, banks cannot extend mortgage loans and realtors cannot sell homes when property insurance is no longer accessible to the average resident. In turn, the ability of residents to build or buy homes is severely impeded; and, without insurance, the financial wherewithal to rebuild storm-damaged homes is not readily available to low- and middle-income homeowners.

"The critical insurance issues facing the territory are inextricably linked to a financially healthy Guaranty Fund. In fact, many of the property/casualty insurers underwriting risks in our islands only do so because the territory's Guaranty Fund is pre-funded. To that end, a Guarantee Fund that is looted can only discourage insurers from doing business locally, aggravate the availability and affordability crisis, and stymie the general economic health of the territory. Obviously, this is a circumstance that we can ill afford."

The Legislature intends to appropriate $30 million from the Guaranty Fund. If senators decide they must, the Lieutenant Governor asserted that the following conditions must be applied:
" The $30 million appropriation from the Fund must be replaced with a clean, irrevocable and unconditional Letter of Credit in favor of the Commissioner of Insurance, as beneficiary thereof, on behalf of insurance policyholders in the U.S. Virgin Islands;
" The Letter of Credit must be issued by a bank licensed by the Banking Board of the U.S. Virgin Islands, and currently in good standing therewith;
" The Letter of Credit must provide that, in the event of an insurance insolvency that requires payment by the Guaranty Association pursuant to Title 22, Chapter 10, Virgin Islands Code, the Insurance Commissioner shall have the right upon demand to draw down up to $30 million from the issuing bank to cover outstanding claims; and
" The Letter of Credit must remain in place and be automatically extended until the Guaranty Fund is replenished by future premium tax payments and restored to its statutorily mandated ceiling of $50 million; provided, further, that 60 days prior to the relevant expiration date of the Letter of Credit, notice must be provided to the Commissioner of Insurance via Certified Mail, Return Receipt Requested.

Lieutenant Governor Richards said he is open to discussing with Senate President Jones any matters set forth above that require clarification.