NF withdrawal still on the table for FA

The Facility Association (FA) is not prepared to withdraw from Newfoundland yet, but that option is still very much on the table, following a special meeting of member insurers Monday.
FA CEO David Simpson says members are “mindful that Bill-30 has not been proclaimed yet” and have asked the organization to look more fully into the implications of withdrawing, in preparation for that possibility. This includes examining the legality of FA leaving the province in light of published reports suggesting Superintendent of Insurance Winston Morris would block the withdrawal as being illegal.
If the province can force FA to stay, then Simpson says, “clearly it becomes an issue of compensation”. It amounts to expropriation for the province to require private sector companies to lose an undetermined amount of money for an unforeseeable period of time, he says. For 2004, the FA expects to lose almost $10 million in Newfoundland alone, not taking into account the rate rollback, which will only worsen the situation.
While insurers would prefer to keep FA running in the province, they are not willing to expose their shareholders to unlimited losses, he points out. This risk is increased as several companies have already announced their intention to withdraw from the province if the legislation goes into effect, thus spreading FA losses over an even smaller pool of insurers. If insurers in the province are unable to sustain those losses, insurers outside the province could be dragged into the fray, forced to make up the shortfall.
One alternative the province could address is exempting FA from the rate rollback. “We are serving the province with a fully authorized rate from the PUB (Public Utilities Board) that cost is nearly $500,000 to arrive at (due to the high cost of the rate approval process in the province),” Simpson points out. He adds that when Nova Scotia considered a legislated rate rollback the consumer advocate in that province recommended FA be exempt so that it could remain an insurer of last resort.
While FA welcomes the opportunity to discuss the issues with the province, Simpson says he has seen no indication the province wants to talk. Currently the Insurance Bureau of Canada (IBC) is in discussions with the province, but not FA directly.