Bill Text: NJ A5649 | 2020-2021 | Regular Session | Introduced
Bill Title: Eliminates New Jersey Automobile Insurance Risk Exchange.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2021-05-12 - Introduced, Referred to Assembly Financial Institutions and Insurance Committee [A5649 Detail]
Download: New_Jersey-2020-A5649-Introduced.html
Sponsored by:
Assemblywoman JOANN DOWNEY
District 11 (Monmouth)
SYNOPSIS
Eliminates New Jersey Automobile Insurance Risk Exchange.
CURRENT VERSION OF TEXT
As introduced.
An Act eliminating the New Jersey Automobile Insurance Risk Exchange and revising various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1988, c.118 (C.17:29A-5.6) is amended to read as follows:
1. As used in this act:
a. "Actual investment income" means that portion of income generated by investment of policyholder-supplied funds. Policyholder-supplied funds are the assets that offset the insurer's total New Jersey private passenger automobile insurance unearned premium and loss reserves without regard to whether those funds came from private passenger automobile insurance policyholders or other policyholders or were from policyholder funds from the last seven calendar years or earlier years.
b. "Actuarial gain" means the remainder obtained by subtracting the allowance for profit and contingencies from underwriting income, which remainder may be positive or negative.
c. ["AIRE charges" and "AIRE compensation" mean, respectively, amounts paid to or received from the New Jersey Automobile Insurance Risk Exchange pursuant to section 16 of P.L.1983, c.362 (C.39:6A-22).] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)
d. "Anticipated investment income" means the amount obtained by multiplying earned premium by the percentage of premium representing investment income and used in the insurer's approved rate filings or filings made pursuant to section 29 of P.L.1988, c.119 (C.17:29A-42), during the period of the three calendar-accident years being calculated, to calculate the allowance for profit and contingencies.
e. "Calendar-accident year" means the period from January 1 to December 31, during which, in the appropriate context:
(1) premium or investment income was earned; or
(2) expenses were incurred[; or
(3) accidents occurred which resulted in losses, loss adjustment expenses or AIRE compensation].
f. "Car year" means the unit of exposure equivalent to the insuring of one automobile for 12 months, two automobiles for six months each, three automobiles for four months each, and so forth.
g. "Commissioner" means the Commissioner of Banking and Insurance.
h. "Development adjustment," for a given calendar-accident year, means the difference obtained by subtracting:
(1) The sum of
[(a) Losses] losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report required by section 2 of this act is due[; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due;] from
(2) The sum of
[(a) Losses] losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due[; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report is due].
i. "Excess investment income" means the remainder obtained by subtracting the anticipated investment income from the actual investment income earned by the insurer, which remainder may be positive or negative.
j. "Insurer" means an entity authorized or admitted to transact private passenger automobile insurance business in New Jersey.
k. "Private passenger automobile insurance business" means direct insurance on private passenger automobiles as defined in subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2), excluding personal excess liability insurance and insurance on commercial vehicles.
l. "Total actuarial gain" means the sum of the actuarial gains for the seven calendar-accident years immediately preceding the due date of the profits report required by section 2 of this act, less the development adjustments submitted at the option of the insurer for the calendar-accident years beginning with the eleventh calendar-accident year immediately preceding the due date of the profits report and ending with the eighth calendar-accident year immediately preceding the due date of the profits report.
m. "Underwriting income" means the remainder obtained by subtracting the sum of all losses developed to an ultimate basis, all loss adjustment expenses developed to an ultimate basis, and all other expenses exclusive of UCJF assessments, from the sum of premiums earned [and AIRE compensation developed to an ultimate basis], which remainder may be positive or negative.
n. "UCJF assessments" means amounts paid by insurers to the Unsatisfied Claim and Judgment Fund pursuant to section 3 of P.L.1952, c.174 (C.39:6-63).
o. "UCJF reimbursements" means amounts received by an insurer from the Unsatisfied Claim and Judgment Fund as a result of excess medical expense benefit payments by the insurer pursuant to section 2 of P.L.1977, c.310 (C.39:6-73.1).
(cf: P.L.2003, c.89, s.67.)
2. Section 2 of P.L.1988, c.118 (C.17:29A-5.7) is amended to read as follows:
2. a. Each insurer, except those exempt from filing pursuant to section 6 of this act, shall annually file with the commissioner, on or before July 1 of each year, a profits report containing the information and calculations required by this section. The information shall be provided with respect to the insurer's New Jersey private passenger automobile insurance business separately for each of the following coverages and for all these coverages combined:
(1) Personal injury protection, including all options;
(2) Bodily injury liability, reported at total limits;
(3) Other liability, consisting of property damage liability and uninsured and underinsured motorist coverages, all reported at total limits;
(4) Physical damage, consisting of comprehensive and collision coverages, including all deductibles.
A separate profits report shall be filed for each insurer and each insurer in an insurance holding company system. Each insurance holding company system shall file a separate combined profits report for all insurers in its system. The excess profits computation for an insurance holding company system shall be performed on its combined profits report, except that the commissioner may order an adjustment in the combined profits report if in his judgment, upon examining each insurer's profits report in the insurance holding company system, one or more of the insurers in that system are excessively subsidizing other insurers in that system.
b. The profits report shall contain the following information, in a manner and for a time period as prescribed by the commissioner by regulation:
(1) Losses paid;
(2) Losses developed to an ultimate basis;
(3) Loss adjustment expenses paid; and
(4) Loss adjustment expenses developed to an ultimate basis[;].
(5) [AIRE compensation received; and] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)
(6) [AIRE compensation developed to an ultimate basis.] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)
c. The profits report
shall contain the following information for the calendar-accident year ending
December 31 immediately preceding the date the profits report is due:
(1) Premiums written;
(2) Premiums earned;
(3) All other expenses, itemized separately as follows:
(a) All commissions and all brokerage fees;
(b) All taxes, all licenses and all fees;
(c) [All AIRE charges;] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)
(d) All UCJF assessments;
(e) All other acquisition costs and all general expenses;
(f) All policyholder dividends incurred by the insurer, including any excess profits refunded or credited to policyholders;
(g) The net of all catastrophe reinsurance premiums incurred to unaffiliated catastrophe reinsurers and all sums paid or owed by unaffiliated catastrophe reinsurers for losses that occurred during the calendar-accident year, subject to such substantiation of expense as the commissioner may require;
(h) All expenses incurred for the services of a limited assignment distribution carrier pursuant to subsection c. of section 1 of P.L.1970, c.215 (C.17:29D-1);
(4) Allowance for profit and contingencies, calculated by multiplying the premiums earned by the profit and contingency factors authorized for use with the insurer's approved rate filings, which profit and contingency factors shall be based on the insurer's targeted rate of return, method of doing business, the cost of capital and other relevant economic considerations of the insurer;
(5) Anticipated investment income;
(6) Actual investment income; and
(7) UCJF reimbursements received.
d. The profits report shall include a clear and explicit calculation of each of the following items, in a manner and for a time period as prescribed by the commissioner by regulation:
(1) Underwriting income;
(2) Actuarial gain;
(3) Excess investment income;
(4) Development adjustment;
(5) Total actuarial gain; and
(6) Excess profits.
(cf: P.L.2003, c.89, s.68.)
3. (New section) Any savings realized by an insurer licensed to transact private-passenger automobile insurance in this State through the elimination of the New Jersey Automobile Insurance Risk Exchange by P.L. , c. (C. ) (pending before the Legislature as this bill), as determined by the Commissioner of Banking and Insurance, shall be deposited into the "Pedestrian Safety Enforcement and Education Fund," established pursuant to section 1 of P.L.2005, c.86 (C.39:4-36.2), and shall be used to alleviate pedestrian safety problems.
4. The following sections are repealed:
Sections 15 and 16 of P.L.1983, c.362 (C.39:6A-21 and 39:6A-22); and
Section 12 of P.L.1985, c. 520 (C. 39:6A-22.1).
5. This act shall take effect on the first day of the third month following enactment.
STATEMENT
This bill eliminates the New Jersey Automobile Insurance Risk Exchange.
The New Jersey Automobile Insurance Risk Exchange (AIRE) was created by statute for the purpose of compensating insurer members of the exchange for claims paid for non-economic loss and claim adjustment expense which would not have been incurred had the less costly tort limitation option provided under statute been elected by the injured party filing a claim for non-economic loss.
Membership in AIRE is required for every insurer licensed to transact private passenger automobile insurance in New Jersey, including all applicable residual market mechanisms. All AIRE assessments, expenses and costs are paid by New Jersey automobile insurance companies.
The bill provides that any savings realized by an insurer licensed to transact private-passenger automobile insurance in this State through the elimination of AIRE, as determined by the Commissioner of Banking and Insurance, are required to be deposited into the "Pedestrian Safety Enforcement and Education Fund," and to be used to alleviate pedestrian safety problems.
