Three States Pass Fraud Bills to Close ‘Fair’ Legislative Session

Fraud measures just passed in New York, Louisiana and Maryland closed out a legislative session that was called “fair, at best” by a Coalition Against Insurance Fraud representative.

Howard Goldblatt, governor affairs director for the coalition, said legislatures around the country were focused on economic issues this session, and that may have impacted the time available to focus on fraud bills.

Mr. Goldblatt praised Louisiana for its activity this session in passing fraud legislation. Earlier in the session, he said, the state passed two fraud-related companion bills.

One measure, Mr. Goldblatt explained, makes it a crime of insurance fraud to market phony insurance documents, such as insurance cards. The second bill makes it a crime to forge insurance documents. “So if you put the two together, it attacks the same problem from two different angles,” Mr. Goldblatt said.

In a third bill, the state extended the state police fraud unit for two years, until 2010.

Most recently, the Legislature passed HB 413, a bill addressing owner “give up” schemes where auto owners arrange to have their vehicles taken and then report them as stolen.

HB 413, sponsored by Rep. Earnest Wooten, R-Belle Chasse, and passed June 23, reads, “A person who alleges that there has been a theft of a motor vehicle shall attest to that fact by signing an affidavit provided by the law enforcement.”

Mr. Goldblatt said that requiring the signing of an affidavit adds possible addition to criminal penalties if it is found that the car was not stolen, but given up.

Mr. Goldblatt also said some people may second guess committing fraudulent actions if they have to sign a legal document.

In Maryland, Mr. Goldblatt expressed disappointment at the state’s decision to repeal a measure restricting outside access to police accident reports.

The Legislature passed a bill to replace the measure, which makes it a crime to use the reports to solicit accident victims for lawsuits, but Mr. Goldblatt said the new bill does not go far enough.

He noted that the purpose of restricting access to accident reports was to give a set time period where only people involved in the accident had access. If claims were filed after that time period, he said, it could be seen as a red flag for a possible fraudulent claim.

Mr. Goldblatt said, “In [the Legislature’s] effort to clarify who could have access to the information, they’ve re-opened the door for unfettered access to accident reports from the time of the accident…This allows for anyone, regardless of whether they were party to an accident, to have access to info that identifies individuals who were in accidents.”

In New York, the Legislature passed a bill (A 10371) recommended by the Insurance Department that extends the deadline, from January to March, for insurers to file reports about their fraud-fighting efforts from the previous year.

“The report deals with the previous year’s information,” Mr. Goldblatt said. “So it gives the insurer a couple of months more to compile and really comprehend what they have to give to the department.”

The state also passed a health fraud related bill that creates a central registry of home health care aides that includes background information and proof of proper training.

Insurers Beef With Fla. Over Exam Rule Change

The Florida Office of Insurance Regulation’s proposal to eliminate insurers’ ability to critique and challenge their state conduct exams, before results are made public, has drawn criticism from the insurance industry.

Under the proposed regulatory change, the state would repeal the “informal conferences” rule allowing insurers to request an informal conference in the wake of a market conduct exam, but prior to the public release of the results, to raise concerns and request a formal hearing if those concerns are not assuaged.

The procedure set by the current rule “has well served both the OIR and the companies it regulates for nearly 14 years,” argued Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies. “Nothing in the law or in practical application of the rule has emerged or changed to warrant its repeal.”

Ms. Reynolds noted that the OIR has said it will continue to allow the informal conferences, but the issue surrounding the right to request a formal meeting remains under a cloud.

Julie Pulliam, a spokesperson for the American Insurance Association, also noted that the OIR has claimed it is not necessarily getting rid of the informal conference process, but that “they don’t think the rule needs to be on the books.”

Ms. Pulliam said the AIA also spoke out to the OIR of their opposition to repealing the rule.

Ultimately, according to Ms. Reynolds, the rule change would appear to allow Florida regulators to release publicly negative information about an insurer collected during a market conduct exam, without giving that company the opportunity to question that information in a private setting.

“Indeed, such an attempt only further strengthens Florida’s reputation as an ever-shifting regulatory environment, a place where companies doing business can count on only one thing: tomorrow’s requirements will be different from today’s,” she said. “Unpredictability does not encourage companies to enter or stay in the Florida insurance market.

OIR spokesman Tom Zutell said the office “appreciates” the concerns raised by Ms. Reynolds and NAMIC, “and will take theirs into consideration as we do all others.”

However, Ms. Pulliam said the OIR has indicated that it intends to proceed with repealing the rule. “It looks like it’s full steam ahead for the OIR,” she said.

Other groups who appeared at a hearing to protest the move included the Florida Insurance Council and the Property Casualty Insurers Association of America. According to the AIA, the OIR did not answer questions at the hearing, but asked insurers to submit questions in writing by the close of business on July 11.

State Lawmakers Lobby Hard Against U.S. Insurance Office

State lawmakers opposed to the creation of a federal Office of Insurance Information are seeking support from other state government branches, asking governors and state attorneys general to add their voices against federal OII legislation.

“NCOIL does not believe that you or other involved state officials would support a bill that would likely override state insurance laws and their related consumer protections while impacting the healthy insurance marketplace that states have built, as well as potentially lead down the dangerous path to the creation of a federal insurance regulator,” the group’s officers wrote in a letter sent to the governors and attorneys general of all 50 states.

The letter was written in response to the Insurance Information Act, or HR 5840, which was introduced by Rep. Paul Kanjorski, D-Penn., chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

The legislation would establish an Insurance Information Office within the Treasury Department to provide needed expertise to the federal government on insurance issues and work with the U.S. Trade Representatives in dealing with other countries.

NCOIL officials have expressed strong opposition to the bill, warning that it allows for the preemption of state insurance law and could serve as a precursor to the creation of an optional federal charter for insurance companies, and questioning the prominent role it created for the National Association of Insurance Commissioners as an advisory body to the federal OII.

“As state officials with boots on the ground, we know and serve the needs of our constituents better than any bureaucratic federal office,” the NCOIL officers said in their letter, adding that state lawmakers, governors and attorneys general “work side-by-side to improve insurance regulation in our states and to ensure that companies and consumers benefit from the competitive marketplace we have fostered.”

At a hearing of Rep. Kanjorski’s subcommittee held earlier this month, Illinois Insurance Director Michael McRaith offered the NAIC’s “conditional support” for the bill, provided that its own concerns regarding federal preemption of state laws were taken into account.

State Rep. Brian Kennedy of Rhode Island also testified at that hearing in opposition to the bill, and suggested that NCOIL’s opposition could be softened if state legislators were given a similar role in the advisory body to the proposed OII.

However, NCOIL spokesman Michael Humphreys said today that NCOIL’s concerns go beyond the advisory board to the proposed OII, and that while being given a role there would “to an extent” resolve some problems, “our existing concerns would remain” regarding the federal government’s intrusion on insurance regulation.

NCOIL’s letters to the governors and attorneys general comes on the heels of an effort by the group to reach out to individual NAIC members themselves. Just days after the subcommittee hearing, NCOIL sent a letter to the state insurance commissioners asking them if they agreed with the NAIC’s “conditional support” for the bill.

“NCOIL would like to confirm your continuing support of successful state insurance regulation and your opposition to H.R. 5840 in its current form,” the NCOIL leadership said in the letter. “The position taken by the NAIC—on behalf of all state insurance regulators—and presented to Congress at a June 10 hearing is a dangerous policy to pursue.”

NCOIL said the OII legislation would be among the issues discussed at its summer meeting in July, and would be in the “spotlight” during a planned NAIC-NCOIL dialogue at the meeting.

Group Says Illinois Has Worst Litigation Climate

Among the 50 states, Illinois has the worst litigation climate for business and the highest risk for lawsuits, according to a non-profit business coalition.

The rankings for best and worst states were produced by the American Justice Partnership Foundation (AJP), in collaboration with the Directorship publication.

According to the group’s “Annual Boardroom Guide to State Litigation Climates,” Tennessee is the best state for doing business.

Steven B. Hantler, AJP chairman, wrote a Directorship article listing the 10 worst states for litigation, the 10 best states, five declining states and five improving states.

He warned that companies doing business in states with positive litigation reputations should not become complacent about reforming civil litigation. Mr. Hantler pointed to the fact that 10 of the 18 states in this year’s guide with positive liability climates are trending downward at a time when tort costs continue to rise.

“To make matters worse, the American Tort Reform Association, an AJP partner, reports a surge in anti-business and pro-plaintiff legislation being introduced in most states in the country,” he wrote.

“The AJP has mobilized in key states to defeat these legislative proposals, but in view of changes in the composition of state legislatures as a result of the 2006 elections, some of this legislation will almost certainly pass,” according to Mr. Hantler.

“The plaintiffs’ bar counts on being able to take company CEOs and directors by surprise when they file major lawsuits that are based on expanded or previously overlooked state liability laws,” wrote Mr. Hantler.

“These plaintiffs’ lawyers try to create the ‘perfect storm’ by filing lawsuits with unwarranted high demands, while encouraging the news media to publicize sensational allegations of wrongdoing,” he said. “Their goal is to create severe pressure in the marketplace and thus extort companies into agreeing to settle the claims for outrageous amounts.”

The “solution,” he suggested, “is for CEOs and directors to understand the plaintiff lawyers’ playbook and how to beat them before there is a litigation crisis.”

AJP found some encouraging notes on this year’s findings. It said savvy directors and business executives should take second looks at Indiana, Ohio, Nebraska, Tennessee, Texas, Utah and Virginia, which have among the best litigation climates for business.

Illinois ’ liability climate ranks lowest, according to Mr. Hantler, because “despite successful efforts by the reform community to fend off legislative proposals favoring the plaintiffs’ bar, insurance loss ratios and monetary tort losses rank in the bottom 10 among states.”

According to the article, Illinois has been identified as the highest at-risk state for new lawsuits. It noted that ATRA has designated two “judicial hellholes” in the state: Cook County (Chicago) and St. Clair County.

Madison County was recently downgraded from “hellhole” status based on appellate court elections and the increasing frequency of rule-of law-judicial challengers in key appellate races.

Liability reform advocates have taken advantage of disarray in legislative leadership to prevent passage of two anti-reform measures. One would have reduced the degree of liability required under the state’s joint liability standard. The other would have reduced the effect of Illinois’ collateral-source disclosure rule, the article reported.

Listed as worst states were:

1. Illinois

2. West Virginia

3. Rhode Island

4. Pennsylvania

5. California

6. Florida

7. Montana

8. New York

9. Maryland

10. Alabama

Listed as best states were:

1. Tennessee

2. Utah

3. Indiana

4. Ohio

5. North Dakota

6. North Carolina

7. Nebraska

8. Virginia

9. Michigan

10. South Dakota

Listed as improving were:

1. Oklahoma

2. South Carolina

3. Mississippi

4. Louisiana

5. Tennessee

Listed as declining were:

1. Kansas

2. Washington

3. Colorado

4. Hawaii

5. Oregon

The AJP litigation risk analysis, it was explained, is intended for board directors and their advisers as they make strategic business decisions, such as where to open an office or plant.

Findings are based on AJP Foundation expertise, combined with the results of two national research indices: the Pacific Research Institute’s 2008 U.S. Tort Liability Index, and the 2008 ILR/Harris State Liability Systems Ranking.

The AJP describes itself as a national nonprofit coalition of leading corporations, think tanks, foundations, trade associations, individuals and organizations advocating for liability reform at the state level.

The group said that working with its partner organizations, AJP implements research and education initiatives in key states in support of liability reform campaigns that “have a realistic chance of success.”

Expensive Electronics Increasing Cost of Lightning Claims

The increasing value of consumer electronics has led to the cost of homeowners claims for lightning damage to rise by 28 percent over the last four years, the Insurance Information Institute said.

I.I.I. said it conducted an analysis of homeowners insurance data and found there were more than 177,000 lightning claims in 2007, causing nearly $1 billion in insured losses. In 2006, the I.I.I. said, there were more claims, about 256,000, but they caused less damage—over $880 million in insured losses.

An average claim for lightning in 2007, I.I.I. reported, was $5,321 compared to $3,446 in 2006. The average cost per claim doubled between 2004 and 2007, the I.I.I. said.

“Widescreen TVs, home entertainment centers, multiple computer households, gaming systems and other expensive devices are having a significant impact on claims losses,” said Loretta Worters, vice president of the I.I.I., in a statement.

Ms. Worters also warned that this year’s increased tornado activity may push up the number of lightning claims in 2008, since tornadoes are usually accompanied by severe thunderstorms.

The I.I.I. recommended that homeowners have a licensed electrician install a lightning protection system, which directs the destructive power of a lightning strike safely to the ground. The I.I.I. also said homeowners should use surge protectors and unplug expensive electronic equipment when a storm is approaching.

Rep. Frank Bill Would Put Close Eye On Bond Insurers

Bond insurers would face increased scrutiny under legislation proposed today by Rep. Barney Frank, D-Mass., who added the threat of the federal government taking some of the market.

His announcement came as two bond insurers—Ambac and MBIA—lost their “triple-A” financial strength ratings at Moody’s.

A provision in Rep. Frank’s bill, the Municipal Bond Fairness Act, or HR 6308, calls for the U.S. Treasury to collect data on municipal bond insurers, including their financial soundness, concentration, risk management and underwriting standards.

The data could lead to further congressional action. “It may be, based on that, that we have to do some regulation of those insurers,” Rep. Frank said at a Capitol Hill press conference.

Rep. Frank criticized the unequal treatment given to municipal bonds, and in particular Full Faith and Credit General Obligation bonds, by credit rating agencies, and the thrust of the legislation is to ensure that such bonds are rated on equal footing with those issued by corporations.

“We want the standard to be likelihood of default” he explained, noting several times during the conference that such municipal bonds have not had a default since 1970 and are virtually as safe an investment as those from the U.S. Treasury.

Currently, he said, rating agencies are using two different standards for corporate and municipal bonds, holding the latter to an unfairly high standard.

Additionally, he said rating agencies take into account outside factors, such as the state of municipal government, when they should instead focus solely on the likelihood that purchasers of the bonds will be paid off, which he said was a near certainty for full Faith and Credit General Obligation bonds.

“The quality of municipal government,” he said, ‘is irrelevant.”

Full Faith and Credit General Obligation bonds are backed by a municipality’s taxation authority, Rep. Frank noted, and in cases where the municipality has difficulty paying, the state government will step in to cover the bonds, he said.

Other municipal bonds, which are tied directly to a specific funding source such as tolls for a bridge crossing, have greater risk but should still be given equal footing with rating agencies, he said.

Despite that level of investment safety, Rep. Frank argued that those municipal bonds are paying an “unreasonably high risk premium” because of their treatment by rating agencies and because the “monoline” insurers offering coverage for the bonds suffered after expanding into other financial instruments.

While the “monolines” were originally referred to as such because they were involved in just the one line, “it became ‘mono’ as in mononucleosis,” Rep. Frank said. “They got sick and they infected the bonds.”

Rep. Frank also cautioned that, should these municipal bonds continue to be treated differently than others, he believed the federal government could become more involved.

“I think we could go further,” he said, including having the federal government serve as the insurer for Full Faith and Credit General Obligation bonds.

In fact, he noted that in his view, the safety of such bonds should make obtaining insurance against their default needless. “Making municipal bond issuers buy default insurance is like making a vampire buy life insurance,” he said.

The full House Financial Services Committee will mark the bill up on Wednesday. The bill also needs the approval of the House Ways and Means Committee.

Rep. Richard Neal, D-Mass., who chairs a Ways and Means subcommittee, is a co-sponsor of the bill and said he would work to keep the bill on track there.

Even if the bill should fail to win passage during the shortened legislative season, Rep. Neal said at the press conference, it served the purpose of starting the conversation on the issue. “What might not pass this year,” he said, “may well become a priority next year.”

Fla. High Court Backs McCarty On Allstate Subpoena

Florida ’s Supreme Court declined Wednesday to intervene in the dispute between Allstate and the state Office of Insurance Regulation that had led to the insurer’s suspension.

When Allstate balked at supplying documents subpoenaed by the OIR, the firm was suspended by Insurance Commissioner Kevin McCarty—a move he ultimately reversed. The material was requested so OIR could examine Allstate claims handling and rate setting practices.

In its decision, the court said it “determined that it should decline to accept jurisdiction,” and ordered Allstate’s petition for review to be dismissed.

“We are pleased with the Florida Supreme Court’s decision in declining to accept jurisdiction of the matter between Allstate and the Office of Insurance Regulation,” said Mr. McCarty in a statement.

“We did not believe that there was any basis for the court to extend jurisdiction in this matter, because the First District Court of Appeal’s decision was in full compliance with the laws of Florida,” he added.

Mr. McCarty had suspended Allstate’s ability to write new business after he issued a subpoena for company documents and decided that the insurer was not acting in good faith to supply the material he requested. Allstate maintained that it had supplied as much documentation as it could, but that it was prevented from supplying some documents that were privileged and involved trade secrets.

A state appellate court upheld Mr. McCarty’s ruling, although he later lifted the suspension when Allstate provided an affidavit that it had fulfilled the document request to the best of its ability.

In declining to take the case any further, Mr. McCarty said the court upheld the notion that the OIR should be free to obtain any documents it requires from insurance companies.

“The Supreme Court’s decision reassures Floridians that the office has full access to insurers’ books and records and upholds the office’s actions in its efforts to protect consumers,” he said.

Kathy Thomas, a spokesperson for Allstate in Florida, said, “We have reviewed the Supreme Court's ruling and will abide by its decision.”

A Move Toward Global Solvency Rules Scheme Seen

There is increasing momentum for global alignment of solvency rules among nations, according to an international consulting firm.

That assessment came from Ernst & Young, which took note of the National Association of Insurance Commissioners’ latest move to assess international solvency regulations and make adaptations to the U.S. regulatory structure. The firm said it is endorsing the Solvency Modernization Work Plan, which NAIC adopted this month.

"We applaud the work of the NAIC on this initiative,” said Philipp Keller, head of the Ernst & Young Global Solvency II Task Force. "NAIC’s goal to upgrade the current framework is entirely in line with the organization’s historical commitment to be at the forefront of regulation and supervision."

According to the Ernst & Young analysis, the NAIC plan will compare the U.S. risk-based solvency system with Europe’s proposed solvency directives, known as Solvency II, and analyze the effect that Solvency II might have on U.S. insurers.

In particular it will address capital requirements, accounting standards, group supervision, valuation issues and reinsurance. The overhaul of Europe’s solvency framework is scheduled for implementation across the continent beginning in 2012.

Mr. Keller said, “Modernizing U.S. regulations will lead to a more level playing field between U.S. and European insurers and to a convergence of regulatory requirements. This will also reduce opportunities for regulatory arbitrage and create a more transparent and competitive financial market.”

Matthew Clark, another member of the Ernst & Young Global Solvency II Task Force, said adaptation of the U.S. insurance solvency system will benefit both the world’s largest insurance market and the global industry. “An economic- and risk-based regulatory framework in the U.S. might well create efficiency gains not only for U.S. insurers, but also for the many foreign insurance groups that have business in the U.S.,” he remarked.

Ernst & Young said it is maintaining a comprehensive Solvency II Web site, www.ey.com/solvencyII, providing current information on the proposed regulations and commentary on the potential impact of this new framework.

Insurer's Please Case For Aftermarket Parts

Seeking to stave off what it sees as a potential legal challenge to aftermarket parts, insurance industry groups called on the U.S. Patent and Trademark Office to ensure that such parts remain legal and available to consumers.

“We are concerned that ongoing legal proceedings involving a novel application of design patent rights would harm our members’ policyholders by increasing auto repair costs, which would necessitate higher insurance costs,” wrote the National Association of Mutual Insurance Companies, American Insurance Association and the Property Casualty Insurers Association of America in joint testimony submitted to the PTO.

“We believe these legal proceedings could establish precedent that could virtually eliminate competitive aftermarket repair parts from the marketplace,” the groups wrote.

The PTO held a hearing on the issue of aftermarket parts and the protection of industrial designs as intellectual property as part of a “listening tour” that began in Michigan in May to gain different perspectives on the issue.

Aftermarket parts—cheaper generic versions of products produced by a vehicle’s original manufacturer—have been a controversial issue since 1999 when legal attacks on insurers were commenced that contended carriers were requiring use of parts that were unsafe. A $1.05 award against State Farm was overturned on appeal, but last year a jury returned a $17 million verdict against American Family.

Deputy Undersecretary of Commerce for Intellectual Property and Deputy Director of the USPTO Margaret Peterlin in advance of hearing insurer testimony said, “The goal of this listening tour is to hear all perspectives on issues surrounding industrial design protection so the USPTO can evaluate and assess what policies are best for our intellectual property system.”

The PTO undertook its tour noting that legislation has been introduced in the House that would create an exception to copyright infringement laws for certain component parts used to repair other objects that would include auto parts. That legislation, HR 5638, was introduced by Rep. Zoe Lofgren, D-Calif., and is awaiting action by the House Judiciary Committee.

Specifically, NAMIC pointed to the case of Ford vs. Keystone, now pending in the U.S. Court of Appeals for the Federal Circuit. If the challenge is successful, aftermarket parts, such as sheet metal or body parts, would effectively be removed from the market, forcing consumers to use only those from the original manufacturer.

Such an outcome, according to NAMIC, would drive repair costs up and increase the likelihood that a damaged vehicle would be considered as a total loss for insurers.

“It would eliminate a low-cost option and necessitate that all repairs utilize more expensive OEM parts,” NAMIC said. “It has been estimated that competitive aftermarket parts are currently priced 34 percent to 83 percent lower than the comparable OEM parts.”

Insured Coastal Property Value Grows 7% A Year

A catastrophe risk modeling firm, reporting on what it called an “alarming” development, said coastal area insured property values have grown at 7 percent a year since 2004.

Despite the devastating shore property damage inflicted by the 2005 hurricane season, the increase in “the number and value of exposed properties along the U.S. Gulf and East Coasts continues apace—and remains the largest factor affecting insurers’ hurricane risk today,” AIR Worldwide Corp said.

The Boston-based firm said from Dec. 31, 2004 to Dec.31, 2007 in New York and Florida alone, the insured value of residential and commercial properties in coastal counties passed $2 trillion dollars each.

Despite the recent weakening of the real estate market in many areas, the insured value—or the cost to rebuild properties—has maintained an annual growth rate that will lead to a doubling of the total value every decade, AIR said.

Ming Lee, president and CEO of AIR, said “While the scientific debate over the effects of global warming on the frequency and severity of hurricanes remains inconclusive, there is no question that the significant increase in the number and value of exposed properties over the last decade has and will continue to contribute to increasing hurricane losses for insurers.”

The firm found that since the impact of Hurricane Katrina in 2005, the total insured value of properties in the coastal counties of Louisiana has grown at the lowest compound average annual rate of all coastal states, or just over 2 percent.

Mississippi coastal counties, also impacted by Hurricane Katrina, averaged a five percent annual increase, the second lowest of all coastal states.

Overall, 38 percent of the total exposure in Gulf and East Coast states is located in coastal counties, which accounts for nearly 17 percent of the total U.S. property values.

The complete report and rankings of states according to property value is available at:

http://www.air-worldwide.com/_public/images/pdf/AIR2008_Coastline_at_Risk.pdf

Four N.J. Comp Reform Bills Pass Senate

The New Jersey Senate yesterday easily approved three measures designed to reform the state’s workers’ compensation system.

All three bills now go to the Assembly.

• S1913 allows judges to issue contempt orders and levy fines for disobeying any order of a judge or any regulation regarding workers’ comp.
• S1914 strengthens enforcement against employers for failure to provide workers’ comp coverage.
• S1917 adds three new members to the New Jersey Compensation Insurance Rating and Inspection Bureau.

Out of 40 votes, 38 were in favor of S1913, 36 for S1914, and 38 for S1917.

“The bills will make minor improvements to the system but do not represent a major overhaul,” says Laura Kersey, American Insurance Association assistant vice president, Northeast Region.

None of the three measures have drawn objections from trade group representatives.

Another comp bill not voted on yesterday, S1918, was referred to the Senate Budget and Appropriations Committee and will be the subject of a hearing on Monday. The bill is a companion measure for Assembly bill A2970. It would require insurance fraud prosecutors to join forces with the Department of Labor and Workforce Development to investigate cases of failure to provide workers’ comp coverage.

The four bills are expected to pass before June 26 when lawmakers adjourn for their summer break. Assembly voting sessions are scheduled for June 23 and June 25.

In all, the legislature has been at work on a six-bill comp reform package. Two remaining measures are seen as unlikely to pass the Assembly until the fall, but the Senate is likely to pass them before adjournment, said State Sen. Paul Sarlo, D-Bergen, who sponsored the package.

The Senate Labor Committee will hold a hearing on the stalled bills Thursday, and they are scheduled to be on the Senate floor June 24.

S1916 drops the deadline for mandated hearings on emergency care for injured workers from 30 days to two days, providing insurers with minimal research time. Insurers believe the timeframe is “unreasonable and unworkable,” said Ms. Kersey.

S1915 requires proof of workers’ comp coverage from certain licensed entities before they can renew their licenses.

Patrick Breslin, assistant secretary at New Jersey Manufacturers, said he believe the objections to the bills in question can be resolved.

Fitch: ‘08 To Be A Losing Year For Insurers

The property-casualty insurance industry can expect a “modest” underwriting loss this year as soft market pressures deteriorate underwriting profits, according to a rating service analysis.

Fitch Ratings said in a report that it has revised its forecast for this year and predicts that the industry will shift from a profitable combined ratio of 98.1 into the loss column with a 100.4 combined ration.

The poor underwriting results, coupled with a modest decline in investment income, will translate into an estimated return on surplus of 7.6 percent, down from 9.2 percent previously projected, the firm reported.

Fitch said it believes there will be an increase in the run-rate incurred losses “with a sharper deterioration occurring in the commercial lines segment than personal lines.”

The rating service is anticipating a “return to historical averages” for insured losses from natural catastrophes from below normal averages experienced in 2006 and 2007.

Underwriting will also continue to benefit from release of favorable loss reserve developments from prior underwriting periods. Timing of the release is difficult to predict, said Fitch, but “the industry still has a modest reserve redundancy.”

The downward trend is expected to continue through 2009.

“Currently, there is no catalyst evident for a shift to a hardening market trend,” Fitch said, and the trigger would probably be a large underwriting loss or “some significant event that removes capital."

Fitch said it “does not envision any meaningful shift in pricing trends until the second half of 2009 at the earliest.

Fla. Cat Fund Selling Bonds To Pay Wilma Claims

Florida ’s Hurricane Catastrophe Fund will sell additional bonds to repay higher than expected claims costs resulting from 2005’s Hurricane Wilma, officials said.

The additional bonds will raise $625 million for the fund, according to Dennis MacKee, a spokesman for the Florida State Board of Administration that oversees the Catastrophe Fund. “We hope to issue the bonds some time in July,” he said.

Mr. MacKee said the need to sell additional bonds does not signal any problems with the fund’s current financial picture or ability to pay claims as the fund works on a post-event system to cover its losses.

The SBA, he said, has already issued $1.35 billion in bonds for claims relating to the 2005 hurricane and sought to sell additional bonds to cover any remaining or reopened claims.

Bonds that have already been issued are being funded by a 1 percent surcharge on policies sold in the state that had been set to expire in 2012.

Those surcharges are applied to car, boat, home and business insurance coverage. Mr. MacKee said that to pay for the additional bonds, the surcharge would now remain in effect until 2014.

Sam Miller, a spokesman for the Florida Insurance Council, agreed that the bonds were related solely to past expense.

“This is about clearing up the 2004-2005 seasons,” he said, “and probably primarily about Hurricane Wilma.” Hurricane Wilma caused more than $10 billion in insured losses, according to the Insurance Services Office Inc.

Mr. Miller said that one of the reasons claims have outpaced reserves is a rise in public adjusters “aggressively advertising” their services to homeowners as a means to collect more money from insurers. “That’s a lot of it,” he said.

Even when claims that involve public adjusters fail to hold up as legitimate, insurers must still pay to investigate and perform their due diligence, said Mr. Miller.

Even though such claims would raise a number of questions—particularly those that are reopened after a homeowner has accepted a settlement—an insurer can’t unilaterally deny them, “or you’re going to get sued,” he explained.

Surplus Lines Bill Said To Get Key Backing

State regulators are “very close” to endorsing federal legislation that will establish surplus lines carriers’ home state as their primary regulator, and their backing is an important step for the bill to win passage this year, an industry lobbyist said yesterday.

However, state support is limited to Title 1 of the bill, H.R. 1065, the Nonadmitted and Reinsurance Reform Act of 2007, according to Joel Wood, senior vice president and director of federal affairs for the Council of Insurance Agents and Brokers.

He made his comments at the annual Capitol Hill visit of members of the Risk and Insurance Management Society Inc.

“Reinsurance is another issue,” he said. He said the reason state regulators support the surplus lines portion of H.R. 1065 is that “they believe that only through enactment of the legislation will they have the momentum to create an interstate compact that will govern this.”

On other topics, Mr. Wood and a senior adviser to a member of the House Financial Services Committee who asked not to be identified noted bipartisan support for legislation allowing risk retention groups to offer property insurance and movement on legislation creating an optional federal charter.

“The last few months have been far more interesting than I thought they would be,” Mr. Wood said. He cited the Paulson blueprint for financial modernization released by the Treasury Department in late March and the concerns voiced about the report by state regulators.

He said a question remains as to whether support for an optional federal charter for insurers contained in the report “is the end of the OFC debate or the beginning of it.”

In Mr. Wood’s view, state regulators “have gotten scared. There is motivation based on either fear or opportunity.” Specifically, he said, state regulators feel “there is going to be movement on this over the next two to three years.”

On legislation concerning risk retention groups, Mr. Wood said the “catapult” for passage of this measure is provisions solidifying the corporate governance standards for risk retention groups.

The legislative adviser said he was “bullish” on the legislation, saying that the broad bipartisan support for the legislation, as well as support from consumers and some potentially affected industries, leaves him hopeful the bill can at least pass the House in this Congress.

On surplus lines, Mr. Wood noted that a bill has passed the House twice virtually unanimously, and “it has a mechanism for sharing regulation and taxes that everyone agrees to.”

But Mr. Wood cautioned that even if the legislation passes, some states, such as Texas and California, “that like to go their own way, are never going to come around on a full interstate compact.”

Even if only 20 states agree to the compact, it will ensure that the only rules governing surplus lines insurance will be the rules of the home state.

And, having a hearing before the Senate Banking Committee is a critical component to getting the bill passed this year. “We have to have a hearing; getting oxygen is our No. 1 issue on this bill right now.”

By “oxygen,” Mr. Wood meant getting the issue before the Senate during the period when the Senate is dealing with housing legislation, high gasoline prices, the budget, and the fact that 2008 is a presidential election year.

Both Mr. Wood and Libby Baney, Washington counsel for the National Association of Professional Surplus Lines Offices Ltd. (NAPSLO), said the final bill will have a definition of sophisticated buyer that is acceptable to RIMS.

Specifically, Ms. Baney said, “the definition of sophisticated investor RIMS members want will be in the bill.”

“That’s guaranteed,” Mr. Wood said. He explained that such a definition is important because RIMS members are the consumers of surplus lines insurance. “Who is the consumer? You are. The Consumer Federation of America doesn’t represent the market for this product; you do,” he said.

“I will urge that if the Senate holds a hearing on the surplus lines bill, that a RIMS representative testify,” he said.

On the risk retention legislation, the congressional legislative adviser said concerns had been voiced over whether the definition of “property insurance” in the measure is too narrow or too broad.

He said some people have argued that the definition is too narrow, but others have argued that the current definition of the bill “pulls in personal lines.” Currently risk retention groups are limited to providing liability insurance.

He also said some critics of the bill argue that it would require risk retention groups to participate in insurance guaranty funds.

“That is a concern,” he said. “We don’t want risk retention groups pulled into state guarantee funds.”

Both issues, he said, will be addressed in legislative language before the bill is presented to the House Financial Services Committee.

At an earlier panel, top legislative advisers of the Senate Banking Committee and the House Financial Services Committee refused to allow press coverage of their remarks.

They included Kathleen Mellody, majority counsel of the Capital Markets Subcommittee of the House FSC; Robert Gordon, senior Republican counsel to the House FSC; Sarah Kline, majority counsel of the Senate banking panel; and Andrew Olmem, minority counsel to the Senate panel.

RIMS would not permit reporters to attend unless they signed a nondisclosure and confidentiality agreement. National Underwriter would not concede to that demand, and thus were barred from attending the session. (For more on this, see Editor In Chief Sam Friedman’s blog at www.property-casualty.com.)

Insurers Wary Of Climbing Cyberliability Exposures

Cyberliability exposures will continue to grow, with claims costs more likely to run into the millions, regardless of how many individuals can prove personal damage from a data security breach, experts in this evolving market warned.

“Claims costs can quickly multiply even without proof of actual damage to anyone’s identity or personal finances,” according to James Rhyner, vice president and worldwide lawyers professional product manager for Chubb Group, based in Warren, N.J.

While moderating a panel—“Bermuda: Not Just D&O”—here earlier this week at a Professional Liability Underwriting Society conference, Mr. Rhyner cited the spiraling expense for notification and credit monitoring incurred by organizations that expose the public to identity theft if their data is lost or stolen.

“You have to let people know their privacy has been compromised,” said Stuart Anderson, vice president of Bermuda-based AIG Excess International. “Free credit reports must be offered, at $20-to-$40 per person. You have to set up a call center to answer questions and field complaints. And that’s before there are any actual liability claims.”

More insurance is available for such exposures, including from Bermuda firms, but underwriters are being very conservative with their capacity until they get a better handle on the risk, Mr. Anderson noted.

“This is the Industrial Revolution times 50, and the insurance industry is still trying to catch up,” he said.

“Cyberliability is still such a nebulous, evolving concept,” added James Loder, vice president of underwriting for XL Insurance (Bermuda).

Cyberliability coverage is triggered whenever an organization puts private information at risk, either because a computer system is hacked, or someone loses a laptop or flashdrive containing personal data, the panelists noted.

“It’s shaping up to be a low-frequency, high-severity event right now,” according to Mr. Anderson, “but as the law catches up with the risk, and as public awareness is more widespread, the frequency of the claims will become more of a problem.”

As the soft property-casualty market tempts insurers to expand their reach into new markets to boost revenue, Mr. Anderson warned carriers against “dabbling” in cyberliability exposures.

“Cyberliability is very technically challenging to write,” he said. “Don’t just dip your toe into this market without the proper expertise. You’ll need people with serious technological know-how to advise you about patches, firewalls and the like.”

Risk managers face a broader exposure beyond cyberliability when discovering a data breach, according to Lorene Philips, vice president of Bermuda’s Allied World Assurance Company.

“There is a reputational risk to deal with. It’s tough to admit publicly that your organization has a data security issue,” she noted, adding that a breach could discourage customers from doing further business with the company.

She cited as the “poster child” for cyberliability the problems faced by retailer TJ Max, which discovered a breach of its transaction processing network, affecting as many as 100 million credit and debit card accounts. She estimated that it “could cost north of $150 million to eventually revolve” all of the resulting claims.

On the plus side for insurers, this high-profile case “prompted an uptick in interest in cyberliability insurance products, with some buying it for the first time and others increasing their existing coverage,” Ms. Philips noted.

Data Points To Slower Pace For Rate Decreases In ‘08

U.S. property-casualty insurance rates are expected to decline through 2008, but not at the same pace they did in 2007, according to data released by MarketScout.

Dallas-based MarketScout, which has tracked the U.S. p-c market since 2001, reported that rates for May are down 11 percent, compared to a 13 percent reduction for the same period last year.

Richard Kerr, founder and chief executive officer of the online insurance exchange, said, “In the second half of 2007 rates declined an average of 14 percent. We don’t expect similar rate decreases in 2008. Rates will be down, but certainly not at the same pace as 2007.”

By coverage class, commercial property and general liability saw the largest decreases in May at 14 percent each. Professional liability and directors and officers liability were at the low end, dropping 6 percent each.

The manufacturing and service industries saw 12 percent decreases, while energy saw a 9 percent decrease. Contracting, habitational and transportation all saw 11 percent decreases, and public entity decreased by 10 percent.

The size of the accounts mattered little with respect to how much the rate dropped. MarketScout reported that jumbo and small accounts dropped 11 percent while large and medium sized accounts dropped 12 percent.

MarketScout said its Market Barometer uses internally gathered data plus in-person surveys. The findings are further supported by surveys conducted by The National Alliance for Insurance Education and Research.

Faltering Economy To Spur EPL Suits, Bermuda Underwriters Warn

Employment practices claims could soar this year as more companies lay off workers in a faltering economy—particularly in the financial institutions sector, professional liability underwriters here predicted.

Damage caused by the subprime debacle and resulting credit crunch, along with soaring energy costs, have “undermined the stability of workplace conditions” across the economy, according to James Gray, executive vice president and chief underwriting officer for professional liability at Max Bermuda Ltd.

“There’s lots of downsizing and restructuring as a result,” he said, noting that such activity “could trigger employment practices claims.”

“When companies are teetering on the edge, it affects the workplace psychology,” he added during a panel discussion yesterday at the Professional Liability Underwriting Society’s “Bermuda Perspective” conference. “An every-man-for-himself mentality takes hold.”

He urged employers to do a “disparate impact analysis” when planning layoffs.

“I don’t mean to sound like Scrooge,” he added, “but from an employment practices perspective, it’s better to close an entire facility rather than spread workforce reductions across the company. There are fewer individual choices to dispute.”

The odds of seeing employment practices claims filed are also greater because it’s harder for people who are let go to find new positions today, according to James Loder, vice president of underwriting at XL Insurance (Bermuda) Ltd.

“If someone lost their job in the last few years, they would probably leave gracefully and get a new position across the street in a booming economy,” he said, adding that “even if they thought they might have a cause of action, they might not pursue it,” to avoid getting a reputation within the industry as a troublemaker.

“But now,” he said, “with everybody laying people off, it’s harder to get a new job, so those who are laid off are more sensitive to possible discrimination and are more likely to sue.”

Mr. Loder said that the “financial services sector is more problematic” in terms of its vulnerability to EPL claims “because of its higher pay scale.”

“In a recession, all industries and companies are at risk” of seeing more EPL suits, “but generally those with higher pay raise the quantum stakes,” he said.

The costs of such claims can balloon in a hurry, according to Mr. Gray, because “it’s not always just about the money. It’s about changing the company’s culture and priorities. The settlement might call for diversity training, a mentoring program and monitoring, and the expense adds up.”

He warned that some EPL policies “don’t recognize these corrective measures as covered costs, since it’s not a monetary payment,” urging brokers and risk managers to pay close attention to how forms are written to make sure such contingencies are in fact insured.

Fla. Tightens Insurer Regulation; Freezes Citizen’s Rates

Florida Gov. Charles Crist has signed legislation that puts the onus on insurance companies to justify rate increases and at the same time freezes rates for the state’s property insurer of last resort, which critics charge is woefully undercapitalized.

The governor also vetoed a provision of the law that would have provided $250 million to continue a program that provides incentives for small insurers willing to come to the state and write some of the business now placed with state-backed Citizens Property Insurance Corporation.

The legislation, passed last week, tightens oversight over insurance companies and bars them from increasing rates on homeowners’ policies without prior state approval.

The law abolishes arbitration panels, which had the authority to approve rate increases denied by the Office of Insurance Regulation, and says that insurers can only use hurricane models that have been approved by the Florida Commission on Hurricane Loss Projection Methodology.

The new law also doubles the maximum fines for insurers caught violating state regulations.

At the same time, the new law requires insurers to notify homeowners’ policyholders 180 days before dropping them and to pay undisputed claims within 90 days of deciding the amount of the payment.

In addition to freezing rates for Citizens until January 2010, the bill increases from $1 million to $2 million the maximum value of homes that Citizens can insure. The bill also sets the stage for assessments against all car and home insurance policyholders if storm losses exceed the state's catastrophe insurance funds.

Many critics have charged the fund is in no position to pay claims in the event of a catastrophe and could not borrow the money to do so.

The insurance industry had lobbied heavily against the measure to no avail.

David Sampson, president and chief executive officer of the Property Casualty Insurers of America, called the revisions to the rate filing process particularly onerous.

“Building a more stable environment in Florida is critical and measures that are overly restrictive limit the ability of insurers to compete in the marketplace and serve the consumers of Florida.”

“We continue to urge the state to take actions that will help efforts to attract and retain private insurers to write more policies in Florida,” he added.

An American Insurance Association staff official voiced particular concern over the provision freezing rates for Citizens.

“This just broadens the exposure of Citizens, and ultimately of all Floridians if a major hurricane strikes and Citizens does not have sufficient claims-paying resources to meet its obligations,” said Julie Pulliam, a staff official for the AIA’s southeast region.

“This bill is not good for the insurance industry, and we believe it is not good for Florida consumers, either,” added Ms. Pulliam.

But the industry does support one provision of the law, creating a blue-ribbon task force to develop a plan to return Citizens to being a true insurer of last resort and to recommend measures to encourage private insurers to assume policies currently in Citizens.

Mr. Sampson said it is important for the state to reassess the current system and “take the risk burden off of Florida taxpayers and place it back in the capital markets.”

In his veto statement, Gov. Crist said he opposed spending an additional $250 million in funds from Citizens to help move risks out of the program—a provision supported by the insurance industry.

“The citizens of Florida are already feeling the heavy weight of property insurance and property tax burdens. I do not support risking an additional financial hardship,” Gov. Crist said.

However, Mr. Sampson said the funds would help promote a return to a competitive marketplace and hoped the legislature would come up with appropriate funding in 2009.

Hartford Denied Rate Increase In Florida

The Hartford Insurance Group said it will not contest a decision in Florida denying a rate increase in its homeowners insurance, but the company plans to file for an increase for next year.

On Monday, Florida Insurance Commissioner Kevin McCarty affirmed a decision of an administrative law judge to deny Hartford Insurance Group’s request for an increase in homeowner’s insurance rates for the current rate year.

Today, a Hartford spokesman with the Hartford, Conn.-based insurer said the carrier would not appeal the administrative law judge’s decision to a state court but would, as required by law, re-file for a rate increase for the coming year. The insurer has as yet not determined how much of an increase it will seek, the spokesman said.

According to a spokesman for the Florida Office of Insurance Regulation, all insurers must file their rates annually, whether it calls for an increase, a decrease or involves a decision to maintain existing rates.

“We are disappointed by this decision, but look forward to working with the OIR [Office of Insurance Regulation] on future filings to most effectively serve our customers in Florida,” said Tom Hambrick, a Hartford spokesman.

Hartford initially reduced its rates by an average of 13.6 percent, effective last June 1, in accordance with the department’s request that they file for rates based on the savings they could presume would result from having available cheaper reinsurance through the state-run property insurer, according to a department official.

Last year the Florida legislature expanded the Florida Hurricane Catastrophe Fund (CAT Fund) to $28 billion—a $12 billion increase allowing insurers to purchase less expensive reinsurance and pass the savings onto consumers.

Insurers were allowed to file new rates based on the actual cost of the reinsurance that would be effective last Sept. 30. At that time Hartford requested an average increase of 39.6 percent, which was denied.

According to an insurance department staff official, 60 percent of insurers either kept their rates the same or lowered them in the filing.

No insurer who requested increases was granted one, the department spokesman said.

Florida Mega-Cat Won’t Guarantee Market Turn

The size of the next catastrophe to impact property-casualty reinsurers won’t determine whether it’s a market-turning event, said global reinsurance executives, instead suggesting that the element of surprise would be a bigger factor.

During Standard & Poor’s annual insurance conference here yesterday, three executives were asked how large the next catastrophe would have to be to change pricing from hard to soft.

Wilhelm Zeller, chairman of the executive board of Hannover Re in Germany, responded, “I can’t answer this question—and I doubt that there is a serious answer,” referencing a broker estimate he’d seen suggesting that a $60 billion cat would turn the market.

“My philosophy is different,” he said, explaining that his belief is that insurance and reinsurance markets change if there are “a big number of market participants that cannot continue as they did” before.

“This does not necessarily require a big catastrophe,” he noted. While a big catastrophe might help, “combined ratios north of 110 for two or three years would also accomplish this,” Mr. Zeller pointed out.

Ray Barrette, chairman and chief executive officer of White Mountains Insurance Group, observed, “It usually will take a large cat that has unexpected effects.”

“If there’s a big Florida cat, it’s not going to do anything to the market,” he said. “It’s when it’s unexpected—the scope or range of [the catastrophe] is unusual. Then some specific companies get caught in a trap they didn’t know they were in. Otherwise, it’s just another way to lose money.”

Neill Currie, CEO of Bermuda-based RenaissanceRe Holdings, agreed. “A lot of this is based on psychology and fear,” he said, noting that the difficulties reinsurers faced in the wake of Hurricanes Katrina, Rita and Wilma in 2005 related to the “unexpected attributes” of that trio of storms.

“What is going to cause the fear for people not to step up the next time?” he asked.

The executives were also asked whether they thought the capital markets would be willing to step in to help replenish reinsurer capital following the next mega-catastrophe as they have in the past.

Mr. Zeller responded by urging reinsurers to take a serious look at their risk management strategies so they don’t have to rely on the capital markets.

Listing three possible risk management strategies that reinsurers can adopt—seeking to protect earnings from volatility, to ensure the survival of the company, or to protect capital, he said, Hannover Re strives to protect its capital.

“We don’t want to be in a situation after a big catastrophe where we are at the mercy of the capital markets,” he said.

So far, in the past, both after the 9/11 attacks and post-KRW, the capital markets were there to replenish capital. But there may be a 100-year event, such as an earthquake in Tokyo or California, that could dampen the appetites of capital markets participants, he speculated.

Reinsurers who rely on the capital markets “to plug holes in their balance sheets” after an event can’t participate and profit from any hardening that might follow, Mr. Zeller added.

Mr. Currie agreed. He said RenRe executives “run the company on a per-share basis,” explaining that this means “we’re looking after our existing shareholders.”

If you have to go raise new capital, the providers of that capital get the benefit of higher rates, he said.

RenRe did not have to replenish capital like other Bermuda property-catastrophe reinsurers in the wake of KRW, Mr. Currie noted. Instead, the company was able to attract capital to some existing joint ventures and new ones (sidecars) to participate in the market upside, he said.

The capital markets will “always be there,” he predicted, expressing the hope that they would again come to RenRe to facilitate the use of the capital in innovative ways in the future.

Mr. Barrette sees the appetites of the capital markets expanding even without catastrophe-driven hard markets to pique their interest.

“I think the automobile business will move to the capital markets,” he said. “The whole financing of the insurance business I think will be more driven by the capital markets” in the future, he said.

In addition, he said, “I think the capital markets will compete in the reinsurance business [and] displace a lot of it.”

Still, he said, reinsurers won’t be totally displaced, drawing an analogy to the downfall of U.K. mortgage lender Northern Rock, where the business was “completely dependent on capital markets [which] disappeared in a day.”

He also noted that with reinsurance there is the potential mismatch between basis risk (referring to the underlying losses experienced by an insurer) and the capital markets solutions (the payout of cat-linked securities).

“A good primary company will have a balance between capital markets and traditional reinsurance,” Mr. Barrette noted.

Hurricane Season Preparations In Full Swing

With June 1 marking the start of another busy Atlantic hurricane season, insurers are better prepared, should the big one strike, according to a consultant.

David Langdon, vice president with the consulting firm Towers Perrin’s reinsurance business out of Hartford, Conn., said that since 2005 insurers have become more prepared for a catastrophic event with better management of their concentration of risks and development of claims handling capabilities to improve efficiency.

“They will be prepared,” he said.

The soft market will have no impact on companies meeting their obligations, he noted, because there is an abundance of reinsurance capacity that is enabling insurers to pass on decreases to consumers.

Sophisticated modeling allows insurers greater control over their concentration of catastrophe risk, coupled with stringent capitalization requirements by rating agencies has put underwriters in a strong position to handle catastrophe losses.

He said another Hurricane Katrina-type of event would lead to stress for many claims management systems, but mapping technology has increased claims handling efficiency, enabling adjusters to inspect policyholder’s properties before a claim is filed.

Looking at this hurricane season, which runs from June 1 through Nov. 30, the Insurance Information Institute noted that forecasters predict an active season with above normal storms.

London-based Tropical Storm Risk said there is a 63 percent probability that hurricane activity this year will be in the top one-third of years historically. Colorado State University forecasters William Gray and Philip Klotzbach predict there will be 15 named storms, including eight hurricanes, four of which could reach major status of Category 3 or higher on the Saffir-Simpson scale.

The National Oceanic and Atmospheric Administration (NOAA) noted a 65 percent chance of an above normal hurricane season and 25 percent chance of a normal one.

The outlook, NOAA said, means a 60 to 70 percent chance of 12 to 16 named storms, including six to nine hurricanes and two to five major hurricanes of Category 3 or higher on the Saffir-Simpson scale.

An average year calls for 11 named storms, including six hurricanes, two of which reach major status, NOAA said.

The Federal Emergency Management Administration is warning the public, especially those in Florida, Texas, Louisiana, Mississippi and Alabama, that it only takes one storm to produce serious flooding and that flood insurance does not go into effect for 30 days after purchase.

In Florida, FEMA noted that 850,000 flood policies come up for renewal this year and that 95 percent of flood claims come during the hurricane season there. Texas has incurred $75 million in insured flood damage over the past three seasons. Mississippi has incurred $2.4 billion in insured flood damage over the past five years, while Louisiana suffered $408 million in damages from Hurricane Rita in 2005.

Yesterday, during a discussion on preparation for the 2008 season, sponsored by Marsh & McLennan Companies in New York, Ken Giambagno, global leader of Marsh Risk Consulting Forensic Accounting and Claims Services practice, noted that past catastrophes, such as Hurricane Katrina, have taught risk managers that their companies can be out of business if they are not prepared for an event. Those with recovery plans in place recuperate quickly and have already figured out where their vulnerabilities lie.

He added that recovery planning is not limited to a company’s direct impact from a catastrophe, but also how a catastrophe affecting a supplier’s facility needs to be planned for and alternative resources developed.

The first named tropical storm of the season has already hit on the Eastern Pacific side, where the season began May 15. Tropical Storm Alma struck Nicaragua yesterday and is crossing Honduras bringing heavy rains to the region.

The first named storm for the 2008 Atlantic Hurricane season will be Arthur.

On Saturday, Tropical Storm Arthur formed affecting the Southern Yucatan Peninsula bringing heavy rains to parts of Belize and Mexico. The storm broke-up by late Sunday night.