Mass. personal lines: a surplus of disagreement
Claims by Massachusetts regulators that the combined surplus of the insurers serving the state’s homeowners market is inadequate and that changing the auto system will help boost the homeowners market are untrue, according to one of the state’s leading insurers.
But state insurance officials insist they are right in raising concerns about the adequacy of capital behind the homeowners market and in suggesting this condition is tied to the auto insurance system.
Speaking at a recent industry panel, John Kittel, Arbella Insurance Group senior vice president, blasted Insurance Commissioner Julianne Bowler for her recent assessment in which she claimed that the homeowners’ market is supported by only $32 billion in combined surplus, or about $33 for every premium dollar. Bowler compared that figure with Connecticut ($55 billion), New Hampshire ($192 million) and other New England states and suggested a severe hurricane could put a serious strain on insurance resources and the economy.
Bowler has argued that the way to get more capital into the homeowners market is for the state to make its auto system “more rational” like those in other states. “The goal of auto insurance reform is not to fix auto for the sake of fixing auto. It’s to increase the personal lines market capital base,” she said.
Auto system changes
Bowler’s boss, Gov. Mitt Romney, has been pressing for deregulation of the state’s auto insurance system. Legislators are expected to debate the legislation later this month.
Arbella, which opposes the auto legislation, thinks Bowler’s analysis is misleading because it only looks at the surplus of individual companies instead of insurer groups. Kittel said the total surplus is actually more than $125 billion. Using what he said was Bowler’s flawed formula, he maintained Massachusetts has a higher surplus than New York –and the ratio to premium dollars gets smaller the bigger the state.
Bowler’s figures are also suspect because they “totally ignore the existence of reinsurance,” Kittel added.
Speaking before the Cape Cod chapter of the Massachusetts Association of Insurance Women, Kittel maintained that Bowler’s argument “should be considered an embarrassment.”
Kittel also refuted the argument that the homeowners market would benefit from changing the auto system, pointing out that three of the top 10 homeowners carriers do not even sell auto coverage.
But Bowler’s office stood by its argument. “The Division of Insurance was looking at surplus in our market; New York is not our concern. We understand reinsurance is a significant component but from a regulatory perspective we would want to see our domestics with greater surplus,” said DOI’s Christopher Goettcheus said.