New Jersey Treasurer Brian Clymer said Friday that he sees "a lot of technical problems" with a proposal to bond out a $1.3 billion deficit in the state auto insurance pool program, but believes the idea is "doable."
Clymer, the guest speaker at a meeting of the Municipal Analysts Group of New York, said a search is under way for underwriters and bond counsel interested in helping the state develop a bonding plan.
New Jersey's auto insurance system has historically been one of the most highly regulated in the nation, in part because of an unusually high claims rate and a reluctance among insurers to write policies for categories of drivers considered even marginally risky.
The regulatory structures imposed to deal with the problem have in recent years generated huge deficits at the state-supervised insurance pool, known as the Market Transition Facility, which is the insurer of last resort for many of the state's bad drivers.
"What we are tentatively looking at is some kind of workout with the insurance companies," Clymer said. "We would like to look at the possibility of using the fines and penalties of bad drivers in essence to pay off the claims of other bad drivers."
Clymer said one of the obstacles is finding a way to isolate the revenue stream of fines and penalties backing the bonds. He said a new agency might have to be established to handle the transaction.
"Although it's technically complicated, we think that it's doable and politically acceptable because it will not hit good drivers, and it will not hit the general public in the form of surcharges or additional taxes," Clymer said.
Similar plans to bond out auto insurance pool deficits have been rejected several times before.