a. That the present crisis in commercial insurance, which is characterized by the lack of availability and rapidly escalating insurance costs, has severely disrupted the economy of this State and has caused many of its small businesses to be without insurance protection entirely; and

b. While the crisis is due in part to significant increases in the frequency and severity of insurance claims and significant increases in the amount of personal injury litigation, it is also due to the cyclical nature of the insurance industry and the utilization by the industry of certain business practices which have proved to be detrimental to the financial condition of many insurers and to the functioning of the insurance system as a whole; and

c. While it is the duty of the several states to regulate the business of insurance, the present regulatory structure proved itself to be inadequate to detect the harmful business practices which were being pursued by the insurance industry, including imprudent cash-flow underwriting practices, the use of rates which were inadequate, and the use of reinsurers which were new entrants into the United States insurance market and unfamiliar with the operation of the American tort system; and

d. It is essential that the regulatory structure be modified in such a manner so that the State may be in a position to detect potential problems in the insurance system and to intervene to stop imprudent and harmful business practices before they have a catastrophic effect upon the market, similar to the present crisis.

L. 1987, c. 406, s. 1.