NAIC created the new unit to monitor the most distressed lines of business, formulate solutions, and propose regulatory responses.

The working group will report to the Property/Casualty Insurance (C) Committee and is to be chaired by Texas Insurance Commissioner Jos? Montemayor. The P/C Committee had voted last week to form the working group, which the NAIC said will focus initially on medical malpractice coverage.

"The insurance industry is sensitive to changing market conditions and price competition," said P/C Committee chairwoman Darla Lyon, who is South Dakota insurance commissioner.

Ms. Lyon added that, "Problems in any one market may be caused by multiple factors --catastrophes, changes in claims payout patterns, changes in legal environments, changes in interest rates, changes in underlying costs, or overly optimistic pricing in soft markets."

David Snyder, assistant general counsel for AIA in Washington, D.C., noted that at the recently concluded NAIC Fall National Meeting, the P/C Committee had agreed to review the lines of insurance for which, according to a consumer-interest group, there have been increasing complaints about affordability and availability.

In arguing for a more balanced study, the AIA stressed to the committee that "if it is going to study these markets, that it also study the root causes for any market problems," Mr. Snyder said. These causes include recent lack of profitability, terrorism exposures, reinsurance costs and availability, and rising medical and legal costs, he stated.

The Committee finally agreed to include an analysis of the root causes of affordability and availability problems, not just the problems themselves, Mr. Snyder reported.

He said that this will give the NAIC a fuller picture of what is happening in the insurance markets. It also will ensure that the proposed solutions will not just be about suppressing rates or "interfering with the insurance industry's ability to re-establish stability," he stated.

He explained that AIA is "very concerned that a regulatory response could prolong the down cycle if it prevents needed rate increases and other adjustments while costs are rising and reinsurance and terrorism continue to exert pressure."

The Working Group's review is to start next year, Mr. Snyder said.