US Catastrophe response: In case of emergency...

The catastrophic floods in several states across the US in July reminded us once again how important it is to monitor and comply with the regulatory obligations of emergency legislation or proclamations. Wisconsin, Illinois, Indiana, Iowa and Missouri all introduced rules addressing the practical problems of renewing household insurance at a time when policyholders’ homes may be flooded and where delivery of renewal notices is likely to be disrupted.

All state insurance commissioners exercise some emergency rule-making powers. Whether the emergency is the result of wildfires, earthquake, windstorm or flood, they see their powers as central to their consumer protection role.

By their nature, these measures are usually brought in with immediate effect. Although, in practice, they are usually actioned by the surplus lines broker, responsibility for non-compliance will frequently lie with the insurer. Also, beyond immediate legal considerations, any failure to comply can have significant reputational repercussions when dealing with policyholders who might have lost all they own.

Because of the speed of drafting, though, these announcements can often be unclear. In cases of legal ambiguity, for example, as to whether a measure applies to surplus lines insurers, notification of the state’s announcement will be made. This will be accompanied by a description of the outstanding issue and an indication of when the market will receive clarification.

Understandably, therefore, the Lloyd’s market attaches great importance to reacting to these announcements. The role of the International Regulatory Affairs team, working alongside Lloyd’s America, is to evaluate the impact on the market and indicate the required actions. In every case, the team makes the necessary announcements as soon as possible, communicating with the market immediately upon receipt of the information.

To keep up to date with international regulatory changes, access the ‘What’s New’ report on Crystal www.lloyds.com/crystal. A market bulletin will only be issued in exceptional circumstances.
Last updated on 10 Sep 2008