New York Insurance

Director: James P. CORCORAN is on a mission. At M. Corcoran, Superintendent of Insurance of New York State, a key segment of the insurance industry important rules missing, and as a consequence the possibility of an insurance crisis looms.

James P. CORCORAN is on a mission. To Mr. Corcoran, Superintendent of Insurance of New York State, a key segment of the insurance industry important rules missing, and as a consequence the possibility of an insurance crisis looms.

The territory is financial guarantees, a relatively new field for insurance companies, has been very lucrative for some companies and disastrous for others.

The guarantees - it may be issued by banks or insurance - see the protection of investors in the event of failure. The notion of financial security is in large part, that letters of credit or bank guarantees or insurance, protection of a wide range of companies or municipal bonds.

Some insurance companies began to enter the store in 1970, has been able to grow, but not significantly for over a decade. In 1981, there were only three insurance companies on the market as financial guarantees in Germany.

But with the constant growth in the early 1980’s for issuing municipal bonds, because there has been an increased demand for insurance, especially since the financial instruments provided obtain higher credit ratings. More than 40 insurance companies have the scope and New York State, in the centre of most of the activity.

In 1986, insurance companies have reported that it had protected more than $ 170 billion in municipal bonds, Corporate Bonds and Limited Partnerships. But these figures represent only 50 per cent of the total population, “said Sandra seal of the New York Insurance Department. Ms. Siegel explained that 1986 was the first time, insurance companies had a report on the financial guarantee contracts and causes much confusion led to a strong sub-numbers.

At the same time, more than insurance companies were informed in writing of financial guarantees addition, the volume of municipal bonds has fallen sharply. The effect was the creation of a difficult competitive environment for insurance companies - and a sharp drop in premiums.

”What happened is that municipal bonds was approximately $ 240 billion in 1985 to about 98 billion dollars last year,’’said Gerald Friedman, president of FGIC Corporation, one of the largest insurers of financial guarantees. ”As a result, you saw enormous price for the policy. Over the past two years, prices have 40 to 50 percent.”

Mr. Corcoran, in a highly competitive atmosphere, combined with the absence of rules on reserves and capital, he worried that the industry are not equipped to control defaults by municipalities. The magasin”est simply not well regulated,”he said recently in an interview. ”But they continue to grow in an enormous rate. It is easy for companies to weigh in a false sense of security, if nothing happens, this year or next year. But these are insurance policies on investment, the last 20, 25 or 30 years.”

”This is a simple economic incentive for businesses that do not have sufficient reserves, and this worries me, because if companies can not default for the municipal elections, then it could lead to a crisis of ‘insurance,”he says.

Mr. Corcoran Agency is responsible for the licensing of insurance companies that their operations in New York State, but he said it was difficult to find such licenses in the current climate. ”We are human beings that these measures are licensed by the great state of New York, but the great state of New York is really very concerned,”he said.

His main concern, he said, is that not enough guidelines on how much money insurance companies must be included in the reserve. But, says Corcoran, it is also concerned that the current legislation allows for an insurance company in a variety of different types of policies - from financial reports to ensure the damage and accident insurance. This means that a failure by financial guarantees could rebound in other areas of insurance business.