New Jersey Automobile Insurance Risk Exchange

We are here to discuss and act on matters relating to the business of the New Jersey Automobile Insurance Risk Exchange and not to discuss or pursue the business interests of our individual companies. We should proceed with caution and alertness towards the requirements and prohibitions of federal and state antitrust laws. We should not engage in discussions – either at this meeting or in private conversations – of our individual companies’ plans or contemplated activities. We should concern ourselves only with the business of the New Jersey Automobile Insurance Risk Exchange as set forth in the agenda for this meeting. Only New Jersey Automobile Insurance Risk Exchange matters may be discussed at New Jersey Automobile Insurance Risk Exchange meetings and each company’s market plans cannot be discussed.

The New Jersey Automobile Insurance Risk Exchange (NJAIRE) was created by a 1984 statute. Its creation resulted from New Jersey’s dual liability threshold, which caused potential premium inequity to a carrier. This occurs when a limited threshold insured becomes involved in a loss with an unlimited threshold insured. It results in the limited threshold carrier essentially paying an unlimited threshold claim, usually with a higher payout, when they only received premium for less expensive coverage.

The purpose of NJAIRE is to restore premium equity to New Jersey carriers when their limited lawsuit threshold policyholders incur losses with claimants who carry unlimited lawsuit threshold liability coverage.

NJAIRE is governed by a 12 member Board of Directors and the New Jersey Department of Banking and Insurance. All members must be residents of New Jersey. Nine members are nominated by the Governor, including eight members who are affiliated with New Jersey insurers. They must submit to legislative disclosure, comply with senatorial courtesy and be confirmed by the New Jersey Senate. Three additional members are directly appointed by the Governor, the Senate President, and the Assembly Speaker.

The NJAIRE Board represents many phases of public and insurer perspectives. Board members come from actuarial, claim, financial, legal, operations, regulatory, statistical and underwriting backgrounds, allowing for a diverse group of individuals. The current Board of Directors consists of two attorneys from prestigious New Jersey law firms and members from AAA, Allstate, Farmers/21 st Century, Hanover, High Point, Liberty Mutual, New Jersey Manufacturers, Palisades, State Farm, and Travelers. The New Jersey Department of Banking and Insurance Commissioner is an ex-officio member of the Board.

NJAIRE Board of Directors Mary Bernadette Corrigan (Hanover) Mary Bernadette Corrigan (Hanover) Frank Coscia, Esq. (Schenck, Price, Smith & King, LLP) Frank Coscia, Esq. (Schenck, Price, Smith & King, LLP) Kevin Curry (Travelers) Kevin Curry (Travelers) Thomas DeFalco, Treasurer (New Jersey Manufacturers) Thomas DeFalco, Treasurer (New Jersey Manufacturers) Stephen Doyle (Farmers/21 st Century) Stephen Doyle (Farmers/21 st Century) Thomas Gorecki, (Public Member) Thomas Gorecki, (Public Member) Richard Hubschman, Esq. (Hubschman and Roman) Richard Hubschman, Esq. (Hubschman and Roman) Mark Keenan (Allstate) Mark Keenan (Allstate) Thomas Myers, Chairperson (High Point) Thomas Myers, Chairperson (High Point) Sam Sackey (NJ Department of Banking & Insurance) Sam Sackey (NJ Department of Banking & Insurance) John McBride (AAA) John McBride (AAA) Larry Weiss (Public Member) Larry Weiss (Public Member) David Ziemer, Vice-Chairperson (State Farm) David Ziemer, Vice-Chairperson (State Farm)

Board members from insurance companies do not represent their company. They represent all member companies of their trade association. New Jersey carriers belong to either 2 trade groups; the Property Casualty Insurers Association (PCI) or the American Insurance Association (AIA) or they may not belong to a trade group, and are considered Non-affiliated. Non-affiliated members represent all New Jersey non-affiliated insurers.

NJAIRE also has several standing committees, chaired by Board members who bring personal and business related expertise to their committee. The Actuarial Committee is chaired by Tom DeFalco, who is an Actuary and Officer with New Jersey Manufacturers Insurance Company. This committee oversees assessment percentages for each accident year, as well as establishing annual interest, closeout years and addressing other actuarial issues.

The Audit committee is chaired by Larry Weiss from Palisades Safety and Insurance Management Corporation. This committee works closely with our external auditors to assure that audit guidelines are proper and current, and audit compliance is achieved by carriers. The Finance and Investment Committee is chaired by attorney Frank Coscia, assuring that NJAIRE funds receive safe and optimum yield through several financial institutions. The Insurance and Contracts Committee is chaired by Mark Keenan from Allstate Insurance Company. This committee oversees vendor and policy contracts.

M. Paige Berry is NJAIRE General Counsel. Ms. Berry is an exceptional attorney associated with the law firm of Saul Ewing, located in Princeton. The NJAIRE office is located in Franklin Boro, New Jersey (Sussex County) and is operated by General Manager Donald Foth. Don is a former long term Board member and officer, now retired from State Farm Companies.

The NJAIRE Plan of Operation and Procedure Manual contain specific reporting requirements that are not present in any other state. This can result in a lack of understanding about NJAIRE requirements, possibly as a result of staff turnover, or multi-state responsibilities. The current NJAIRE Plan of Operations and the separate Procedure Manual are written in an understandable format, and can be read and/or downloaded/printed from the NJAIRE website.

ISO serves as the Central processor for NJAIRE. ISO handles the complexities of : Reported data from each carrier Reported data from each carrier Assessments collected from applicable carriers Assessments collected from applicable carriers Reimbursements paid to appropriate carriers Reimbursements paid to appropriate carriers Annual cash settlement to all carriers Annual cash settlement to all carriers Website creation and maintenance Website creation and maintenance NJAIRE expense distribution NJAIRE expense distribution... and a myriad of other tasks that keeps an ISO team busy 100% of the time.... and a myriad of other tasks that keeps an ISO team busy 100% of the time.

NJAIRE maintains contracts with two external auditors. Annually, the financial records of NJAIRE are reviewed by Withum, Smith and Brown, a CPA firm that conducts financial audits. Through its statutory authority NJAIRE requires compliance audits of every applicably licensed New Jersey automobile insurance company. Compliance audits are conducted by AIPSO, the parent organization of most residual market mechanisms in the United States. AIPSO’s Residual Markets Audit Services (RMAS) has an exceptional history of conducting compliance audits within the industry, using many industry retirees who are very competent in their audit specialty.

NJAIRE audits encompass much more than the residual market, and AIPSO has tailored NJAIRE audits to fit NJAIRE requisites. Each year, the NJAIRE Board of Directors selects 10 carriers to receive NJAIRE audits to ascertain compliance. Each audit is conducted in a formal atmosphere. It requires advance data be provided to enable the auditors to select specific claim records for review. Audits are conducted at the carrier’s office, with up to three auditors present, usually for one week. Subsequent to the audit, there is communication between AIPSO and the carrier before a final report is submitted to the Board.

. The Board reviews every audit, in detail, taking action as appropriate, including penalty assessment when carriers fail to achieve NJAIRE compliance. Feedback from AIPSO and ISO prompted former educational seminars, now replaced by Webinars, that focus toward the actuarial, claim, statistical, or other areas in your companies that are responsible for maintaining and reporting NJAIRE information.

. NJAIRE recommends that carriers maintain an understanding of NJAIRE requirements, especially in areas where staff turnover occurs. Self-audits are also recommended to assure ongoing compliance. Contact information is available on the NJAIRE website ~ ~ for anyone who needs additional information. The Board of Directors meets four times annually, and carriers are welcome to attend Board meetings as well as the annual meeting which is held in conjunction with the November Board of Directors meeting.

Presenters ISO Mike McAuley AIPSO Jack O’Keefe

Questions/comments?? Go to the bottom right (Chat) section of your screen and key your name and company. Go to the bottom right (Chat) section of your screen and key your name and company. At certain times during each presentation we’ll unmute phone lines and ask the inquirer to present their question. At certain times during each presentation we’ll unmute phone lines and ask the inquirer to present their question. Please do not provide input unless recognized, as there are more than 100 persons attending this webinar. Please do not provide input unless recognized, as there are more than 100 persons attending this webinar.