Puerto Rico gov enacts measures to ‘promote better insurance coverage’
SAN JUAN – Gov. Ricardo Rosselló signed two bills that promote “better insurance coverage” in Puerto Rico and seek to “establish a fair regulatory framework in the industry,” according to a media release issued by his office, La Fortaleza.
Senate Bill 935, a measure introduced at the governor’s request, amends the Puerto Rico Insurance Code to open up the participation of international reinsurers in the local market. “With this, it will be possible to have better coverage and options in the insurance industry in Puerto Rico,” the release reads.
The law, La Fortaleza added, “guarantees a financially healthy and competitive insurance industry in order to keep insurance costs accessible, especially in the purchase or renewal of insurance policies against catastrophic risks such as hurricanes and earthquakes.”
The measure allows local insurers to claim a credit for reinsurance in their financial statement as is the practice stateside, “but that was not allowed in Puerto Rico, which limits the industry and its coverage offers….”
In addition, the government expects the measure to foster the participation of international reinsurers in the local market by “incorporating the regulatory scheme of the model law of the National Association of Insurance Commissioners (NAIC).”
Following a summit held “to address the concerns of policyholders in the claims process associated with hurricanes,” the governor said, “in the coming days we will be presenting measures that do justice because we are not satisfied with the response of insurers and that has an effect on our ability to recover.”
La Fortaleza also quoted Puerto Rico Insurance Commissioner Javier Rivera as saying that “after the losses caused by hurricanes Irma and María, it is necessary that we not only guarantee a financially healthy insurance market, but we must also enable the broadest availability of affordable property insurance coverage so citizens can obtain adequate protection against future natural events.”
In addition, the governor enacted House Bill 1330, authored by House Speaker Carlos “Johnny” Méndez, which adopts statutes and regulations of the Service Contract Model Act adopted by the NAIC.
It creates defines a legal framework for service contracts, places “the risk of innovation on the providers rather than on consumers,” and encourages fair competition, according to the NAIC.
“Fundamentally, the Act defines a legal framework within a state to allow for the sale of a service contract as a non-insurance product. The Act also provides a clear definition of a service contract and lays out requirements for acting an entity to act as a service contract provider and/or administrator.
“The Act also includes specifics related to how a provider can satisfy financial requirements to ensure the consumer is protected when a claim occurs. This includes the use of a Service Contract Reimbursement Insurance Policy, a funded reserve account based on the amount of business written or the ability to demonstrate a net stockholders’ equity in excess of a defined amount (e.g. $100,000,000),” the NAIC explains on its website.
Several states have adopted some variation of the Service Contract Model Act.