When legislators are scrounging for money to fill a budget hole, they always greedily eye the bulging surplus in the Maryland Automobile Insurance Fund, the state-sponsored insurer of last resort for motorists who can’t get coverage anywhere else.
Officials of the fund continue to try to beat back the legislative raid on the $145 million current surplus, as they did at a hearing Tuesday before the House Economic Matters Committee.
Insurance Commission Ralph Tyler and MAIF Executive Director Kent Krabbe urged the legislators not to tap the fund, and Krabbe said the decision not to take the money last year “allowed us to whether the current storm” in the economy.
“When unemployment is down our surplus is growing,” Krabbe said. “When unemployment is spiking, our surplus goes down.” So far the surplus, invested largely in high yield corporate bonds, is down $40 million from last year, about 18 percent.
“Our losses haven’t been as bad as some others,” Krabbe said. “While they got hit by a train, we got hit only by a truck.”
The surplus is generated from premiums paid by MAIF’s more than 60,000 policyholders, but Krabbe insisted, “the surplus is not a result of excessive rate making.”
Assistant Attorney General Dan Friedman, the counsel to the General Assembly, said taking money from the MAIF surplus to put in the general fund “is likely to be constitutional,” as previous legal opinions have said. But “doing so would likely result in a lawsuit,” and “it might successful,” Friedman believes.
The suit would be based on the fact that the insurance fund surplus belongs to the ratepayers or to the insurance companies who were assessed to support MAIF in its early days.
Legislators pressed Friedman on other ways they could use the cash — whether they could borrow from the insurance surplus or whether they could use it to invest in start-up firms, such as in the bio-tech industry.
Friedman said they would likely be “less dangerous” than taking it out directly.
Del. Ruth Kirk, a Baltimore City Democrat, said the legislators ought to keep their hands off the MAIF money. “They start borrowing and they’ll never pay it back,” Kirk said.
Insurance company lobbyists, who were about the only people to attend the hearing, seconded that the hands-off stand taken by Tyler and Krabbe. “We would agree with that position,” said Lawrence Richardson, a lobbyist for State Farm, which insures about 20 percent of the motorists in the state.
