Physicians’ Reciprocal Insurers Continues to Press for Change

(Roslyn, NY – June 2, 2009) - You may have seen some recent news about Physicians’ Reciprocal Insurers (PRI) which may have caused some confusion, so we wanted to set the record straight about the role of State mandates on PRI, and the health of our business.

First and foremost, please understand that the recent financial statement you may have read about is not an accurate representation of PRI’s ability to pay claims. PRI has operated successfully for 27 years and has never reported a negative cash position. With the exception of carrying MMIP losses on our books —which we are required by the State to do— our surplus would be positive and our current reserves have been deemed actuarially adequate to meet existing long-term obligations.

Rest assured that PRI has paid, and will continue to pay, all claims and is in a position to satisfy all obligations to our policyholders well into the future. Every policyholder of PRI can feel secure in the strength of their malpractice coverage.

PRI insures over 12,000 practitioners and scores of hospitals, clinics and other health care facilities in New York State. We have one of the most proactive and innovative risk management and education capabilities in the country, and consistently strive to find new ways to provide doctors and patients with safer environments.

Due to the political and social cross-winds in New York State, the medical malpractice insurance market has evolved quite dramatically — from a traditional commercial insurance market to one with very different operating guidelines. Commercial carriers have shied away from this market because of its unique regulatory environment and a complicated political backdrop, which attempts to balance the rates charged to doctors with the ever-increasing costs of defending claims and settling lawsuits. This is a delicate balancing act, one that we have adapted to with considerable success. PRI understands the unique challenges of this market and has not lost sight of our focus – supporting physicians and the venues in which they practice and improving the quality of patient care in New York State.

In fact, PRI and others have been supporting legislation to change the way in which the financial strength of medical malpractice insurers is measured. Switching to a cash flow model is a practical solution to the financial model that is currently in place, and can be implemented without major disruption to all stakeholders due to the unique characteristics of loss reserving, loss payouts, and investment opportunities available under long-tail casualty business. If Albany acts on this proposed reform in 2009, we can make moderate adjustments that will shore up potential financial and operating deficiencies.

In presenting alternative solutions, PRI has taken into consideration not just the needs and requirements of our insureds, but also those of all malpractice carriers who have been affected by the overly complicated and counterintuitive environment in which we currently operate.

Our approach is a conservative one, charging rates at the level we need to preserve the security of future claims pay-outs, while working hard to avoid charging higher rates that our insureds cannot afford. For many years, PRI has been aggressively lobbying "behind the scenes," and consistently introduces innovative ways to improve a troubled system. Not everyone will agree that our proposed cash flow formula is a perfect solution, but based on our consultations with some of the most respected actuaries in the region, we believe that it is a good first step towards stabilizing medical malpractice rates in New York State.

We consider our physicians, physician groups, and institutional insureds our partners, and we want to work with you to address the critical defects in the malpractice insurance system through appropriate change. We appreciate your business and will continue to keep you informed of any developments that may affect your coverage.

Anthony J. Bonomo, Chief Executive Officer