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HomeNewsArchivesGOVERNOR OK'S TAPPING INSURANCE GUARANTY FUND

GOVERNOR OK'S TAPPING INSURANCE GUARANTY FUND

Dec. 3, 2001 – Although Gov. Charles W. Turnbull took the Senate to task over the weekend for recklessly playing Santa in numerous spending amendments to a bill funding sewage system repairs, he nonetheless signed a great many of those measures into law.
And one of them is an open invitation to keep spending more: He approved letting the government dip at will into the territory's Insurance Guaranty Fund, which local insurance companies pay into annually to ensure coverage for policyholders in the event any company is unable to make payment on claims.
The legislation Turnbull approved allows the government to access "all funds currently existing in the Insurance Guaranty Fund … up to$30 million, which amount shall be substituted … with a financial instrument of equivalent value, including a standby letter of credit, surety bond, reinsurance certificate or any other such instrument as deemed appropriate by the governor."
The Insurance Guaranty Fund now falls within the new Economic Development Authority, under an umbrella called the Economic Development Fund, and is managed by the EDA governing board.
In October of 2000, a plan was advanced in the Senate to use money in the Guaranty Fund to finance step increases for teachers. The V.I. Insurance Association, representing the territory's insurance agencies, strongly opposed the idea, and Lt. Gov. Gerard Luz James II, in his capacity as Insurance commissioner, came out against it.
So did the then-legislative post auditor, Campbell Malone, as well as the Turnbull administration's mainland financial consultants, First Union Securities. According to First Union a year ago, "Based on credit reports provided by the major rating agencies, the overall health of the property and casualty insurers has not improved significantly since the IGF was established five years ago … As a result, we do not believe that it would be prudent at this time to reduce the capitalization of this fund."
With interest and contributions, the Guaranty Fund grows by about $14 million a year and has a current cap of $50 million. Insurance Association spokesman John Harper said last fall that it stood at $42 million to $45 million. However, he said, that sum could be eroded quickly in a disaster. After Hurricane Hugo, when two companies became insolvent, the fund covered "easily more than $50 million" in claims, he said.
Tapping into the fund for other purposes, Harper said last year, would leave the insurance companies at risk. "The property and casualty insurance market in the Virgin Islands is quite tenuous," he said, and without the fund as a cushion, some companies might pull out, which "would decrease the availability of insurance and increase its costs."
On Saturday, Turnbull said he approved the measure because he thinks the concept is "innovative and a worthy endeavor that could directly benefit St. Croix in particular, and the Virgin Islands in general."
But in the same letter to Senate President Almando "Rocky" Liburd, the governor said, "With an estimated $14 million Legislative over-appropriation of the 2002 Fiscal Year General Fund revenues, this pre-Christmas spending spree is disturbing."
Turnbull cleared his desk of all pending legislation hours before the midnight Saturday deadline to sign or veto six bills or allow them to become law without his signature. He referred to much of the legislation as fiscally "irresponsible," and told Liburd, "It is time for this Legislature to stop writing appropriations bills with red ink."
The other spending amendments the governor approved included several million dollars for school repairs, road work and infrastructure projects.
His line-item vetoes removed from the bill:
– A $700,000 appropriation from the Land Bank Fund to the V.I. Housing Authority for the cistern and slab program and the In House Home Mortgage program.
– A $520,000 appropriation from the Land Bank Fund for infrastructure costs for the Town House Development at Estate Fortuna.
– An increase in the cap amount on personal loans from the Government Employees Retirement System to $50,000 from the current $8,000. Turnbull said the change would be "a potential additional burden on our retirement system … which can ill afford it."
– A requirement that any investigation of Innovative Telephone's rates by the Public Services Commission go back to the date of the last previous investigation. "The determination of an appropriate 'test period' which will not unduly … impair the function of the utility being investigated … should be left to the … PSC, and not subject to legislative micro-management," the governor said.

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Dec. 3, 2001 - Although Gov. Charles W. Turnbull took the Senate to task over the weekend for recklessly playing Santa in numerous spending amendments to a bill funding sewage system repairs, he nonetheless signed a great many of those measures into law.
And one of them is an open invitation to keep spending more: He approved letting the government dip at will into the territory's Insurance Guaranty Fund, which local insurance companies pay into annually to ensure coverage for policyholders in the event any company is unable to make payment on claims.
The legislation Turnbull approved allows the government to access "all funds currently existing in the Insurance Guaranty Fund ... up to$30 million, which amount shall be substituted ... with a financial instrument of equivalent value, including a standby letter of credit, surety bond, reinsurance certificate or any other such instrument as deemed appropriate by the governor."
The Insurance Guaranty Fund now falls within the new Economic Development Authority, under an umbrella called the Economic Development Fund, and is managed by the EDA governing board.
In October of 2000, a plan was advanced in the Senate to use money in the Guaranty Fund to finance step increases for teachers. The V.I. Insurance Association, representing the territory's insurance agencies, strongly opposed the idea, and Lt. Gov. Gerard Luz James II, in his capacity as Insurance commissioner, came out against it.
So did the then-legislative post auditor, Campbell Malone, as well as the Turnbull administration's mainland financial consultants, First Union Securities. According to First Union a year ago, "Based on credit reports provided by the major rating agencies, the overall health of the property and casualty insurers has not improved significantly since the IGF was established five years ago ... As a result, we do not believe that it would be prudent at this time to reduce the capitalization of this fund."
With interest and contributions, the Guaranty Fund grows by about $14 million a year and has a current cap of $50 million. Insurance Association spokesman John Harper said last fall that it stood at $42 million to $45 million. However, he said, that sum could be eroded quickly in a disaster. After Hurricane Hugo, when two companies became insolvent, the fund covered "easily more than $50 million" in claims, he said.
Tapping into the fund for other purposes, Harper said last year, would leave the insurance companies at risk. "The property and casualty insurance market in the Virgin Islands is quite tenuous," he said, and without the fund as a cushion, some companies might pull out, which "would decrease the availability of insurance and increase its costs."
On Saturday, Turnbull said he approved the measure because he thinks the concept is "innovative and a worthy endeavor that could directly benefit St. Croix in particular, and the Virgin Islands in general."
But in the same letter to Senate President Almando "Rocky" Liburd, the governor said, "With an estimated $14 million Legislative over-appropriation of the 2002 Fiscal Year General Fund revenues, this pre-Christmas spending spree is disturbing."
Turnbull cleared his desk of all pending legislation hours before the midnight Saturday deadline to sign or veto six bills or allow them to become law without his signature. He referred to much of the legislation as fiscally "irresponsible," and told Liburd, "It is time for this Legislature to stop writing appropriations bills with red ink."
The other spending amendments the governor approved included several million dollars for school repairs, road work and infrastructure projects.
His line-item vetoes removed from the bill:
- A $700,000 appropriation from the Land Bank Fund to the V.I. Housing Authority for the cistern and slab program and the In House Home Mortgage program.
- A $520,000 appropriation from the Land Bank Fund for infrastructure costs for the Town House Development at Estate Fortuna.
- An increase in the cap amount on personal loans from the Government Employees Retirement System to $50,000 from the current $8,000. Turnbull said the change would be "a potential additional burden on our retirement system ... which can ill afford it."
- A requirement that any investigation of Innovative Telephone's rates by the Public Services Commission go back to the date of the last previous investigation. "The determination of an appropriate 'test period' which will not unduly ... impair the function of the utility being investigated ... should be left to the ... PSC, and not subject to legislative micro-management," the governor said.