On Tuesday, senators met in the Committee on Finance to discuss two insurance bills for the Virgin Islands Port Authority and captive insurance companies in the territory.
The VIPA is seeking to establish a self-insurance program that will cover general liability, motor vehicle liability, and third-party coverage. The governing board of VIPA will provide oversight, according to the bill.
Attorney Vincent F. Frazer, senior staff attorney for VIPA, mentioned in his testimony that some entities, such as school districts, municipal water management companies, colleges, universities, and municipalities, establish self-insurance programs as a cost-saving measure.
“If Port Authority is permitted to establish a self-insurance program, VIPA could potentially recognize savings of more than more than $500,000 per year in premiums,” said Frazer.
According to the attorney, over the last five years, VIPA paid approximately $1,280,945 in premium costs for liability and physical damage coverage for its automobiles. VIPA incurred losses of $500,000 and paid in excess of over $600,000. The authority’s marine vehicles incurred the same ratio of premiums over losses. However, as opposed to paying out insurance premiums, in creating the self-insurance program, VIPA will mandate that a minimum of $200,000 will be kept in its self-insurance fund. Yet, VIPA will continue to use commercial insurers for its high-risk assets such as buildings and terminals.
Attorney Suzette Richards testified on behalf of the Division of Banking, Insurance, and Financial Regulation and said that the division did not support the bill.
“We most respectfully inform this committee that the division does not support Bill No. 34-0204 as currently written. While the division does not object to the Port Authority creating a self-insurance program under provisions set out by the Legislature, this should be done under another section of the Virgin Islands Code,” said Richards.
The self-insurance law is regulated by the Division of Insurance. However, the division does not mandate government entities. Richards also listed other reasons why the division does not support the bill.
These reasons are that self-insurance funds are generally not regulated, the commissioner of insurance generally not co-regulating insurance with regulated entities, the bill lacking enforcement mechanisms, and no clear understanding of whether life insurance will be covered by VIPA.
“The bill as written would only subject the V.I. Port Authority to the regulations of the commissioner to the extent considered reasonably necessary to protect the V.I. Port Authority and the public interest,” said Richards. “The Port Authority, as a government instrumentality, would, under the bill, have their own authority to issue their own regulations.”
Senators also voted on a bill to change the title of the law relating to captive insurance companies. The bill will amend the law from being called the “Virgin Islands International Insurers Act” to “Virgin Islands Captive Insurers Act.” This change, according to Senate President Donna Frett-Gregory, will define and clarify the purpose of the chapter and limit any insurers other than multi-state insurers from being licensed as captive insurance.
“With these safeguards in place, the measures will strengthen the regulatory oversight of the Division of Banking and Insurance over the captive insurance program and secure reaccreditation of the division of banking and insurance,” said Frett-Gregory.
“We’re no longer going to be using the term international insurer. We’re going to be using the term captive insurer,” said Glendina P. Matthews, the director for the Division of Banking, Insurance, and Financial Regulation.
Senators took testimonies into consideration and voted on both bills. Both were voted on favorably and forwarded to the Committee on Rules and Judiciary.
Sens. Kurt Vialet, Marvin Blyden, Dwayne DeGraff, Donna Frett-Gregory, Javan James Sr., Janelle Sarauw, and Samuel Carrion were present.