Sept. 28, 2004 Acting Gov. Vargrave Richards, the V.I. Commissioner of Insurance, warned the Senate Monday of potentially dire consequences if the legislators 'carry out their proposed raid on the territory's Insurance Guaranty Fund.'"
In a Sept. 27, 2004, letter addressed to Senate President David S. Jones, Richards wrote, "It has come to my attention that the Legislature is once again considering an appropriation from the Virgin Islands Insurance Guaranty Fund. But, as I have communicated to you on numerous occasions in the past, such an undertaking by the Senate can only have a negative impact on the fragile insurance industry in the territory."
The acting governor urged the 25th Legislature to leave the Guaranty Fund intact for the sake of the territory's future. Richards pointed to the widespread destruction in several sister islands and the repeated lashings Florida has received: "The pictures of devastation emanating from Grenada, the Caymans and Haiti are a grim reminder of the destructive forces of nature," he wrote. "Moreover, the 'glancing blow' that we received from Tropical Storm Jeanne should remind us of the territory's extreme vulnerability."
He reminded the Senate that "several of the small regional insurers that do business in the Virgin Islands also insure risks in those Caribbean islands that have been devastated by Hurricanes Frances and Ivan. Without question, the referenced insurers are sufficiently capitalized and adequately reinsured. But, while it is not my intent to create undue alarm, one must question the ability of any insurance company to sustain multiple catastrophic losses that may occur within a matter of weeks. Witness the four hurricanes that hit Florida in the last six weeks, with one as recent as this weekend. Exacerbating this circumstance is the fact that we are experiencing a phenomenally active hurricane season; and meteorologists have already characterized it as 'unprecedented in recent memory,'" Richards wrote.
Richards has underscored in previous correspondence to the Legislature that the Guaranty Fund was established for a single purpose: to provide the territory s insurance consumers with financial compensation in the event of an insurer s insolvency.
"If a catastrophic hurricane were to trigger an insurance insolvency, the approximately $50 million currently in the Guaranty Fund would be grossly inadequate to compensate Virgin Islands policyholders for their actual property losses," Richards said. "To use an old colloquial saying, any reduction in this fund amounts to the Territory cutting off its nose to spite its face. It is therefore expected that the Legislature will engage in sage and prudent decision making, and resist the urge to mount another ill-conceived raid on the Guaranty Fund."
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