Jul 5, 2017

Bill to transfer funds from NJSLIGF signed by governor

Legislation (P.L.2017, c.97) that transfers $8 million from the Surplus Lines Insurance Guaranty Fund to the state’s general fund was signed by Gov. Chris Christie July 4. The legislation was sponsored by Sen. Paul Sarlo, D-36, and Assemblyman John Burzichelli, D-3, respectively (S-3328/A-5005).

The NJSLIGF was established to provide a safety net for policyholders and claimants of insolvent surplus-lines insurance companies by ensuring the payment of claims. All surplus-lines companies in New Jersey are required to be members of the fund and to contribute funds for its operation. Each member insurer is responsible for making an initial one-time payment of $25,000 into the fund. Additionally, a surcharge, in an amount determined by the Department of Banking and Insurance, is collected on any surplus-lines coverage policy issued in New Jersey.

However, the surcharge has not been collected since 1993 and the DOBI ceased to collect the initial $25,000 payment as of July 21, 2011, due to limits imposed by the federal "Dodd-Frank Wall Street Reform and Consumer Protection Act." In neither case has DOBI found a need to reinstatement of the fees to be necessary to meet the current and projected obligations and expenses of the fund. Instead the fund has generated revenue from net investment and 1. interest income; and 2. distributions collected in connection with insolvency proceedings.

Since its inception the NJSLIGF has paid benefits due to the insolvency of 14 surplus-lines insurers. However, only three of those insolvencies have occurred in this millennium. Due to the lack of claims, $100 million in resources have been diverted from the fund since 2000.

At the end of 2015, the fund carried a balance of $12.2 million with a combined indemnity and loss adjustment expenses reserves of $1.3 million. The $8 million transfer from the NJSLIGF to the general fund leaves the NJSLIGF with a balance of approximately $4.2 million.

A-5005 passed the Assembly (by a vote of 72-4-0) on June 29. The Senate received the bill without referring it to committee on July 4. That same day the Senate passed A-5005 (by a vote of 22-12) and it was sent to the governor who signed the legislation into law on the same day.