Mary Cozzolino, special assistant to Banking and Insurance Commissioner Holly C. Bakke, said the commissioner has the power to have the state act as a backstop and provide reinsurance under a 1975 law that created a Medical Malpractice Reinsurance Association.

Ms. Cozzolino said the MMRA statute has been used in the past to assist the medical malpractice insurance market, but not as a reinsurer.

Although Princeton, with the support of the commissioner, intends to halt new writings, Ms. Cozzolino noted that it will continue to cover its existing insureds and that there are seven other companies that continue to write insurance for physicians in the state.

Ms. Bakke, in announcing the hearing, issued a statement that noted Princeton, during difficult market conditions this past year, "remained a committed player in the New Jersey marketplace.

"As other carriers exited the market and qualified New Jersey physicians lost their professional liability insurance, Princeton absorbed a considerable amount of that business. As a result of these efforts, Princeton's book of business currently consists of 53 percent of the New Jersey marketplace."

In notifying the department of its decision to suspend new writing, Princeton cited its growth of business and "its inability to secure reinsurance at traditional levels (below $1 million) as a factor contributing to its current financial condition, making it necessary to temporarily suspend writing new business."

Ms. Bakke said that based on Princeton's large market position and "concerns that traditional reinsurance is not readily available, I am exercising my statutory authority to determine if reinsurance for medical malpractice coverage is unavailable in the New Jersey market.

"Should a department hearing determine that reinsurance is unavailable, I am prepared to consider reactivating the Medical Malpractice Reinsurance Association."

The commissioner added that she is confident Princeton's decision is "both a temporary and a responsible one, in the best interest of current Princeton policyholders. Physicians covered by PIC should be assured that the company will continue to meet its obligations to them, renew its existing book of business and cover additional doctors who join practices Princeton now insures."

The department, she said, supports Princeton's action "and believes that this is the most prudent course for the long-range protection of Princeton insureds. Princeton continues to act responsibly and cooperate fully with Department regulators as we work together to protect the interests of Princeton policyholders."

As with many other states, New Jersey has seen physicians demonstrate at the state capitol in Trenton, protesting their soaring insurance rates.

Ms. Bakke said Democratic Gov. Jim McGreevey has directed her department to take immediate steps to assist physicians until a more comprehensive reform package can be adopted.

She said that to date, the department has approved three new carriers: Conventus, NJPURE and MIIX Advantage, and helped doctors having difficulty finding coverage through a Marketplace Assistance Program.

Ms. Bakke also mentioned that she had issued an order to show cause which required insurance carriers to offer doctors options in coverage as a means of providing some premium relief in the short term.

The department, she said, had addressed special problems obstetricians have due to limited health maintenance organization reimbursements and escalating premiums by encouraging HMOs to increase reimbursements for high-risk obstetric patients. It has also initiated an aggressive program to ensure that physicians are getting paid on time by HMOs, according to Ms. Bakke.