Dec. 5, 2001 — The territory's insurance commissioner and industry officials are criticizing Gov. Charles Turnbull's decision to use money in the government's Insurance Guaranty Fund.
Despite protests, Turnbull signed a bill Saturday with a provision allowing the government to dip at will into the Insurance Guaranty Fund. That is the fund local insurance companies pay into annually to ensure coverage for policyholders in case any company is unable to pay claims, as has happened several times here.
The fund's balance now stands at about $40 million, according to Lt. Gov. Gerard Luz James II, who also serves as the territory's insurance commissioner.
The legislation, supported by Sens. Lorraine Berry, Roosevelt David, Douglas Canton and David Jones, 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."
On Tuesday, James called the move "unconscionable" and said it puts insurance consumers at risk. He had asked Turnbull to veto the proposal.
"This is the third time in one year I've written the governor to veto such legislation," James said. "He never responded."
David Ridgway, president of the V.I. Insurance Association, said there may be a plan to develop substitute funding for the cash that is now in the fund. But if the amount is not sufficient to cover claims, insurance customers might be faced with partial or delayed payments.
He noted that the fund is capped at $50 million. If the government exercised patience and let the fund accrue its limit, it then could use the excess monies at its discretion, he said. The Guaranty Fund grows by about $14 million a year, Ridgway said.
In recent years, four insurance companies have failed, James said. Payments to former customers of two of those companies — Island National and Phoenix — are still being paid out of the fund.
Sen. David told Radio One on Wednesday morning that James was "totally off base."
"The Guaranty Fund is not being depleted at all," he said, adding that the funds would be transferred to another type of account in order to leverage them with an eye toward economic development. "There is absolutely no danger to the fund."
John Harper, spokesman for the Insurance Association, said the move doesn't reflect well on the government, which is trying to project an image of stability to prospective investors.
"A government that borrows from a fund for purposes other than it was intended sends the wrong signal," he said.
