Copyright 2002 The Baltimore Sun Company
All Rights
Reserved
The Baltimore Sun
August 29, 2002 Thursday FINAL Edition
SECTION: BUSINESS, Pg. 1C
LENGTH: 683 words
HEADLINE:
Md. orders insurer to write new policy on state property;
Royal &
SunAlliance also is fined $
125,000 for cancellation due to 9/11
BYLINE: Meredith Cohn
SOURCE:
SUN STAFF
BODY: State regulators yesterday ordered
a London-based insurer to continue providing coverage for Maryland's properties,
including the Baltimore-Washington International Airport and the stadiums at
Camden Yards, and pay a fine for dropping the state after the Sept. 11 terrorist
attacks.
In a 75-page ruling, the Maryland Insurance Administration,
which oversees insurance companies operating in the state, said Royal &
SunAlliance Insurance Group PLC did not give proper notice or reasons for
canceling the state's $
500 million annual policy in February.
While many public and private property owners nationwide have faced
difficulties retaining insurance against acts of
terrorism,
insurance professionals say the Maryland case is unique in its scope and that
the order is likely headed to the courts.
Under the order, Royal &
SunAlliance USA Inc., the American affiliate of the British firm, must write
another insurance policy by next Tuesday and pay a $
125,000
fine. "Although Royal's business sustained an adverse impact from Sept 11, I
find that Royal used this occasion to improperly weed out its book of business
rather than to underwrite fairly and properly," Insurance Commissioner Steven B.
Larsen wrote in the ruling.
The insurance regulators said the company
had options other than to cancel the entire policy, such as raising rates or
excluding acts of terrorism from coverage.
But Royal & SunAlliance
said yesterday that it followed all the rules in dropping the state's coverage
in February, when the policy was due to expire. The insurance coverage continued
while the company appealed the state's effort to compel it to continue the
coverage.
"We are disappointed by the ruling invalidating our decision
not to renew the insurance policy for the state of Maryland," said Kedar Bryan,
a spokesman for the insurance company.
"Our action was fully consistent
with Royal & SunAlliance's rights and obligations and in the time required
by Maryland law. Royal & SunAlliance decided not to renew the policy because
it could no longer currently underwrite the level of coverage previously written
for the state of Maryland. This was due in large part by the unavailability of
reinsurance caused by the Sept. 11 terrorist attacks."
He said company
attorneys were reviewing "what the next step should be."
Insurance
companies, which collectively are expected to pay about $
40
billion to cover the costs of the Sept. 11 attacks, largely lost their
reinsurance. That's the insurance coverage the companies buy to reduce their
risk.
In turn, insurers have raised rates and dropped coverage for acts
of terrorism on public and private property. Acts of terrorism were not
generally mentioned in policies prior to the Sept. 11 attacks and were covered.
Congress is considering legislation that would temporarily protect
insurance companies from such immense losses in the event of another
catastrophic attack. If the legislation is passed, the state may face more
favorable conditions next February, when state Treasurer Nancy K. Kopp says the
state may need to seek a new insurer.
"We are very pleased that the
administration found that the state had been acting correctly and that the
complaint against Royal & SunAlliance was correct," said Kopp, whose office
bought and renewed the annual policy for 11 years.
"We believe that
Royal & SunAlliance will continue to honor our current policy until next
February," she said. "I recognize that come February, we'll have to get new
coverage. In all candor, I recognize that the property insurance will be more
expensive and may not retain terrorism coverage. It's a problem everyone is
facing."
Terrorism insurance has become difficult for public and private
property owners to obtain, agree groups that represent the policyholders and the
insurance companies.
But the Maryland case is unique, said Robert P.
Hartwig, chief economist at the Insurance Information Institute, which is
maintained by insurance companies. "I'm unaware of this occurring in another
state," he said. "I'm sure the (insurer) will appeal."
GRAPHIC: Photo(s), 1. The state Capitol building in
Annapolis also is covered by a $
500 million policy that was due
to expire last February.; 2. Baltimore-Washington International Airport is among
the state properties covered by the $
500 million policy with
Royal & SunAlliance.; 1. FILE PHOTO : 1999; 2. FILE PHOTO : 2001
LOAD-DATE: August 29, 2002