Legislation was sent on to the full Senate this week tightening rules on how much capital insurance companies have, requiring V.I. credit unions be federally accredited, and adopting accepted uniform language in other V.I. financial regulatory laws.
Most of the new financial regulation bills were requested by Gov. Kenneth Mapp’s administration.
Sen. Clifford Graham sponsored a bill to require any credit union in the territory be federally chartered and regulated by the National Credit Union Administration and insured by the National Credit Union Shares Insurance Fund.
"This is a really simple bill that puts all credit unions in the Virgin Islands under the oversight of the federal government," Graham said. All five of the credit unions operating in the USVI right now are already federally chartered, "but we don’t want items like what happened in the past to repeat themselves," Graham said.
Graham was referring to the St. Thomas-based Her Majesty’s Credit Union. In 2014, U.S. District Court entered summary judgment of more than $1 million against Stanley McDuffie, one of the creators of HMCU, over charges of defrauding clients, conspiracy and racketeering.
The credit union had an office in Denver and its creators reside in Aurora, Colo. The company first came under scrutiny by Colorado state regulators, who issued subpoenas seeking information in 2010.
The company refused to comply and the officers refused to appear in court. As a result, a Colorado judge sentenced McDuffie to two concurrent six-month sentences in prison for contempt of court.
The SEC subsequently took up the case, followed by the V.I. Department of Justice.
Despite calling itself a credit union, HMCU was never chartered as a credit union by any state or the NCUA. And it was not insured by the National Credit Union Share Insurance Fund, a U.S. government-backed fund used to protect deposits of credit union members.
The USVI has no law requiring it to be chartered or insured. Graham’s bill would change that.
The Rules and Judiciary Committee sent the measure on to the full Senate, with Sens. Novelle Francis,
Jean Forde, Justin Harrigan and Janette Millin Young voting yes. Sens. Neville James and Nereida "Nellie" Rivera-O’Reilly were absent. Graham attended but is not a member of the committee.
The Rules Committee also sent on five other bills, all from Mapp, changing insurance laws.
One bill increases the amount of capital that insurance companies need, based on the amount of risk they take on in their policies. It limits the amount of risk a company can take and requires a company with a higher amount of risk to hold a higher amount of capital, according to administration officials.
The other four bills are meant to help the territory get accreditation by the National Association of Insurance Commissioners, which would help insurance companies set up in the territory, according to the administration.
One bill adopts NAIC standards for regulating insurers. All 50 states and Puerto Rico have laws adopting those standards and the lack of similar laws has been cited by insurers as an obstacle to doing business in the territory. The bill would also strengthen financial solvency regulation and the V.I. insurance commissioner’s authority to take corrective actions when necessary, according to administration officials.
Another of the bills affecting NAIC accreditation formally places third party administrators, who sell policies and collect payments on behalf of insurance companies, under the regulatory authority of the Division of Banking and Insurance. The division already regulates them, using its general authority as an insurance regulator but this would give it explicit statutory authority.
A third bill gives insurance regulators authority to identify and address perceived risks to an insurance company from non-insurance and non-regulated entities within the insurance company’s holding company structure. This became part of the NAIC model law after the financial crisis of 2008, when the financial stability of the AIG Insurance Group was threatened by one of its non-insurance affiliates within its holding company system.
Lastly, the committee approved a bill to make licensing requirements for insurance agents, brokers and adjusters the same as those in the states.
All the measures were approved without opposition.