Senate Advances Bill to Change Regulations on Insurance Providers

Lawmakers approved a measure that would change the regulations that govern insurance providers in the Territory.

Requested by the governor and sponsored by Senate President Donna A. Frett-Gregory, the bill would relax the requirements that “unauthorized” insurers, known as Surplus Lines brokers, must fulfill in order to provide coverage that falls outside of the policies provided by authorized insurers in the USVI.

Surplus line insurers provide specialized types of insurance coverage when a policyholder cannot obtain coverage through a licensed insurance broker in the area. For example, when a homeowner obtains flood insurance from a third party.

“The purpose of the Surplus Lines Act is to ensure that there is appropriate access to the surplus lines market when insurance coverage from licensed insurers is not readily available,” explained Sabrina Miesowitz, General Counsel for Lloyd's, the largest underwriter of surplus insurance lines in the U.S. “The Surplus Lines Act is not intended to impact licensed insurers and we do not believe it will.”

Lloyd’s America is a subsidiary of Lloyd’s of London, an insurance marketplace established in the United Kingdom. In order to focus on it’s surplus insurance line business, Lloyd’s America announced this year that it would relinquish its only three licenses it had maintained as an admitted insurance broker, which included Illinois, Kentucky and the USVI.

“The hurricanes exposed our insurance issue,” said Senator Janelle K. Sarauw during her round of questioning. “Many homes are underinsured or not insured.”

Several senators questioned how the change in business operations at Lloyd’s would affect the accessibility of insurance coverage for Virgin Islanders. In response to questions from Committee Chairman Kurt A. Vialet, a representative of the Office of Lieutenant Governor estimated that Lloyd's underwrote about 60 to 70% of the policies in the Territory.

Proponents that testified on behalf of the measure said that the passage of the bill would allow for easier access for insurers to enter the market in the Territory. Senator Marvin Blyden asked if new admitted insurers would enter the USVI market over the short term or long-term.

Glendina P. Matthew, Acting Director of the Division of Banking, Insurance and Financial Regulation within the Office of the Lieutenant Governor and Commissioner of Insurance said she believed it would occur in the short term.

Although she sponsored the bill, Senator Donna Frett-Gregory expressed concern that the Territory could potentially lose its primary insurance underwriter within the next two years. The bill’s supporters assured lawmakers that citizens of the Territory would have access to admitted lines of insurance and surplus lines, but said surplus lines of insurance can sometimes exceed the expense of a policy insured by an admitted provider depending on the type of coverage.

Senator Dwayne DeGraff asked why Lloyd’s would switch from such an established market share of coverage within the USVI.

“I think we might be premature to go ahead and address this bill as it stands now,” said Sen. DeGraff. “It just seems like something is missing and because insurance is such a major issue here in the Territory, I think we really need to look at it here and dissect this one more.”

When pressed by Senator Samuel Carrion if Virgin Islanders could potentially face a lapse in coverage, the Lt. Governor’s Acting Director of Insurance said it expected interest parties to fill that gap, but would not specify the parties by name.

Sen. Vialet implored members of Lloyd’s to provide builders risk coverage for developers, which he said has been a major hindrance in the Territory. While the attorney for Lloyd’s said that specific area would fall under the surplus line insurance market, she could not guarantee the “specific appetites” of the Lloyd’s Council, which governs such decisions.

Despite assurances from Lloyd’s, lawmakers appeared forward looking on how the internal workings of the Territory’s largest insurance underwriter would potentially impact the Territory when it forfeits its license as the largest admitted insurer the USVI in 2024.

In response to questions posed by non-committee member, Senator Alma Francis-Heyliger, Lloyd’s said that most of the business it writes in the Territory, an estimated 80%, falls under its license here in the Territory.

When asked by Sen. Francis Heyliger what the 20% of surplus line insurance policies typically covered, Lloyd’s said it usually covered large commercial risks that requires more specifically written policies.

Sen. Francis Heyliger further asked the General Counsel for Lloyd’s if the possibility for retaining the insurer as an admitted provider still existed despite the change in business strategy.

“We are very committed to staying in the USVI,” said Meisowtiz. “There is a lot of business we write in the USVI that our underwriters would like to continue to write and that we think is appropriate to transition to the surplus lines market.”

Lloyd’s said it remains committed to its change in strategy regardless of the passage of the bill. With apparent concerns for attracting future admitted insurance underwriters, the committee went on to pass the bill by a slim vote of 2 to 1 with three committee members absent.

Bill No. 0166 will move on to the 34th Legislature’s Committee on Rules and Judiciary for further consideration and, if passed, will move to the full voting body of the Senate.