It has been closely coated in nationwide information media that property & casualty insurers have been withdrawing from sure enterprise strains, specifically owners, in states similar to California, Florida, Louisiana, and Texas. Different states across the nation are additionally experiencing heightened numbers of insurance coverage carriers exiting some markets. In response states have been addressing completely different elements of insurance coverage service withdrawal in varied methods. As an example, final fall, Connecticut[1] issued a Bulletin which requires property & casualty insurers that discontinue or considerably cut back “writings in a line or subline” to offer prior discover to the state insurance coverage regulator. Earlier this yr, Iowa[2] prolonged the buyer discover interval for renewals and non-renewals of private strains insurance policies from 30 days to 60 days. This spring, the Delaware Division of Insurance coverage (the “Division”) raised the difficulty of “carriers quietly exiting strains of enterprise” whereas the New Mexico Workplace of Superintendent of Insurance coverage (the “OSI”) proposed a regulation which might impose on property & casualty insurers prior discover to OSI when discontinuing merchandise within the state.
Delaware
In Could, the Division issued Bulletin No. 40[3] requesting that insurance coverage carriers undergo the Division not less than 90 days’ discover when withdrawing a line or subline of enterprise from Delaware. The Division famous “potential disruptions within the insurance coverage market brought on by service withdrawals and the chance of carriers quietly exiting strains of enterprise.” (emphasis added) In mild of those considerations, the Division requests that carriers notify the Division in the event that they “intend to terminate all or any of a enterprise line or product that may result in withdrawal from the State’s market.” The Division additional clarified that this discover request “covers conditions the place insurance coverage carriers stop using agency-facing functions and different technological instruments,[4] processes (e.g., underwriter referrals), communications to producers, or every other adjustments in enterprise practices that successfully outcome within the discontinuation or discount of a line of enterprise or product” similar to “transition[ing] all enterprise from its firm to an affiliated or non-affiliated insurer” and discontinuing “a whole ebook of enterprise on the finish of the coverage time period” or failing to “renew to a block of a enterprise.”
The Division requests that insurance coverage carriers submit a written letter of intent “not less than 90 days earlier than the insurance coverage service intends to challenge notices concerning withdrawal exercise.” Such letters of intent ought to embrace the next:
- Checklist of every line of enterprise and/or merchandise to be withdrawn;
- Purpose for withdrawal;
- Efficient date of withdrawal;
- Complete Annual Premium loss;
- Variety of impacted Delaware insureds, together with county knowledge; and
- Is the withdrawal particular to Delaware or will different jurisdictions be impacted?
Letters of intent needs to be submitted through the System for Digital Price & Type Filings (“SERFF”) and through e-mail to [email protected].
New Mexico
Final month, the OSI hosted a public listening to concerning a proposed emergency rule (13.8.7)[5] which might add alongside the present shopper discover requirement a regulator discover requirement not less than 30 days “previous to the efficient date of the discontinuation date of the primary insurance coverage product.” The New Mexico proposal different from the Delaware bulletin in that it centered on insurance coverage merchandise moderately than enterprise strains or sublines and that it required very granular info concerning particular policyholders. On the public listening to, OSI employees acquiesced to business confidentiality considerations concerning policyholder identities, acknowledging that for regulatory discover functions combination knowledge suffices. Business raised further questions concerning affiliate transfers, comparable substitute merchandise, and materiality of adjustments which have been addressed in a follow-up draft which confirmed that OSI sought discover of affiliate transfers and materials adjustments to protection, whereas replacements are much less clear.[6] Earlier this month the listening to officer printed his advice that the Superintendent of Insurance coverage challenge a closing order for publication within the state register adopting the ultimate type regulation which might take impact no later than July 30, 2024, and require insurance coverage carriers to offer to the property & casualty bureau chief discover of the impacted merchandise, efficient date, and variety of impacted insureds.[7]
Conclusion
States across the nation are responding to an actual disaster in property and casualty protection not less than partly because of substantial will increase in catastrophic climate occasions similar to convective storms, flooding, wildfires, and more and more hail. As states proceed to deal with their considerations on an advert hoc state-by-state foundation the compliance setting for insurance coverage carriers turns into more and more sophisticated. As insurance coverage firms reevaluate their product combine throughout states, particularly as to non-public strains property & casualty insurance policies, it’s incumbent upon them to contemplate shifting discover necessities and whether or not a state could view their actions as a type of quietly exiting a line or subline of enterprise.
Locke Lord will proceed to observe developments by state businesses and state legislatures. In case you have any questions, please attain out to the writer or your Locke Lord accomplice.
See additionally earlier Locke Lord commentary on associated exercise final fall: Connecticut Expands Notice Requirements for Withdrawing From a Line of Business.
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* With appreciation for the contributions of our summer time affiliate Matt Cossu of the New York Legislation Faculty Class of 2025.
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[1] Bulletin PC 34-23, Notice to Commissioner of Intent to Discontinue or Substantially Reduce a Line or Subline of Business (September 19, 2023).
[2] H.F. 2265 signed by Governor Kim Reynolds on April 10, 2024.
[3] Bulletin No. 40, Request for Letter of Intent when Withdrawing a Line of Business/Product from the Market in Delaware (May 3, 2024).
[4] The emphasis on agency-facing apps echoes Bulletin PC-34-23 issued final September by the Connecticut Division of Insurance coverage.
[5] See, OSI eDocket Proposed Amended 13.8.7 NMAC, Notification Requirement of Discontinuation of Insurance Product (April 9, 2024).
[6] See, OSI eDocket Staff’s Response to Oral and Written Comments (Could 21, 2024).
[7] See, OSI eDocket Hearing Officer’s Recommended Decision (June 6, 2024).
