The U.S. Department of Housing and Urban Development has proposed a stricter financial strength requirement for insurers of nursing homes, many of which are captives. The rules would affect who qualifies for government-insured mortgages.

William P. White, captive director for the Washington, D.C. Department of Insurance, Securities and Banking, voiced his opinion in the wake of a meeting with John C. Weicher, federal housing commissioner at HUD, who “was not aware that the kinds of concerns we raised on the alternative market side were even there,” Mr. White said. “He was trying to resolve an issue he felt was worth looking into, but he had only talked to the traditional [insurance] side.”

Mr. White earlier told National Underwriter that by requiring insurance to come from “A”-rated insurers and allowing a deductible of no greater than $25,000 per occurrence, “you have now hamstrung the very organizations that are trying to get insurance in a very difficult market.”

He said many long-term medical care providers have found a way to deal with “a terrible situation in the current hard market through a risk retention group or other alternative market mechanism,” and now “their captive is being required to be rated and have an A-rating.”

Mr. White said Mr. Weicher agreed to review “very carefully the input that came in during the response period and any information we might provide subsequent to that.” Mr. Weicher, he added, said that “under the circumstances there probably will need to be some modifications made based on the information that was provided.”

Among those at the meeting were Chris Kramer, senior vice president with Neace Lukens in Beachwood, Ohio, who brought the rule to the attention of captive insuers at last month's Captive Insurance Companies Association meeting, along with Robert H. “Skip” Myers Jr., general counsel for the National Risk Retention Association, and Lawrence Mirel, Washington, D.C. insurance commissioner.

Reproduced from National Underwriter Edition, April 16, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.