[UPDATE: Since we posted this news item, we have learned that NYSIR is a “municipal reciprocal insurer,” as New York Insurance Law Section 6102 defines that term. That same section of the law permits a municipal reciprocal insurer to opt out of having its policies covered by the New York Property Casualty Insurance Security Fund (also known as “the guaranty fund.”) According to NYSIR’s website, they have chosen not to participate in the NYPCISF. Therefore, should the carrier run into difficulty paying claims, they may assess each one of their policyholders (referred to as “subscribers”) for the shortfall. It is possible that some school districts may attempt to hold their insurance agents liable for the amounts of these assessments.
It is important to know that many insurance agents’ Errors and Omissions Liability Insurance policies exclude coverage for losses resulting from the insolvency of an insurance carrier that had an A.M. Best rating of worse than “B” at the time the agent placed the coverage and if the policy in question was not protected by a state guaranty fund. NYSIR’s A.M. Best rating was “B” until August 23. As reported below, it was downgraded that date and subsequently withdrawn.
Any agents who placed coverage with NYSIR on or after August 23 may be uninsured for losses resulting from a subsequent insolvency, should that happen.]
The financial strength rating of the New York Schools Insurance Reciprocal (NYSIR) has been downgraded and withdrawn. A.M. Best, a company that evaluates insurance carriers’ financial strength and creditworthiness, announced the actions on Aug. 28.
The actions conclude a rapid series of events. On July 12, A.M. Best downgraded the carrier’s financial strength rating (FSR) from “A minus” (Excellent) to “B” (Fair.) Just six weeks later, the FSR was downgraded again to “C++” (Marginal).) The same day, the carrier asked A.M. Best to withdraw the rating as they wish “to no longer participate in AM Best’s interactive rating process.”
Big I New York members who insure educational institutions through NYSIR may want to contact their clients for two purposes:
- To advise them of the rating actions.
- To discuss what the clients want to do with their insurance programs.
There is a form letter for this type of situation in our ebook The Big I NY Big Book of Form Letters & Other E&O Tools. This valuable resource is free for members and available for $99.00 to non-members.
We will report further developments regarding this situation as we learn of them.