Fla. OKs Comp Rate Reductions, But Impact Uncertain

Workers’ compensation rates in Florida will go down by over 18 percent by the new year, but a state Supreme Court decision may make the lower rates short-lived.

Florida Insurance Commissioner Kevin McCarty gave his approval to an amended rate filing by the National Council on Compensation Insurance today—a filing that does not reflect the implication of the state high court’s ruling in Murray v. Mariners Health/ACE USA.

In the Murray decision, the court ruled that judges should have some discretion in awarding attorney fees in workers’ compensation cases. The court said that judges should be allowed to adjust the results of a formula instituted by lawmakers in 2003 when those results are not “reasonable.”

Lori Lovgren, state relations executive for NCCI, said the group “decided to wrap up” the filing it was ordered to resubmit by Mr. McCarty prior to the court’s ruling, rather than try to restart the process anew with an amendment to an already amended filing. Mr. McCarty rejected an earlier filing, ordering an 18.6 percent rate reduction rather than the 14.1 percent decrease proposed by NCCI.

That filing, she said, was made with an effective date of Jan. 1, 2009. In addition, however, she said that NCCI will begin work on a separate filing to account for the Murray decision with an effective date of March 1, 2009 that will be submitted some time in mid-November.

In a notice sent to NCCI affiliates, Ms. Lovgren noted that the standard procedure for filings makes it difficult if not impossible to get a post-Murray filing in place to take effect Jan. 1.

“We're working as quickly as we can to file no later than mid-November,” she said. She explained that Mr. McCarty intends to call a hearing, which has a 21-day notice requirement, and that the schedule is further complicated by the holidays.

“As you can see, 3/1/09 is pushing it,” she said.

Edward Domansky, a spokesman for the Florida Office of Insurance Regulation, said that a separate, post-Murray filing would not be out of the ordinary.

“As far as a new filing to reflect what the NCCI believes will be the effect of the Murray decision, they would be expected to make that filing,” he said. Once that filing is received, he added, “the OIR would then review it just as it does every filing to ensure that it properly documents the rate being requested.”

Announcing his approval of the NCCI filing, and the expectation of a post-Murray filing, Mr. McCarty noted that limits on attorney fees played a vital role in the reduction of workers’ compensation rates during recent years.

“The reduction of attorney participation in workers’ compensation cases has been cited as one of the significant causes of the reduction in rates since the 2003 legislative reforms,” he said. “Limitations on attorney fees have helped Florida employers to realize a significant savings on their workers’ compensation insurance.”

In the Murray case, the attorneys would have been due a total of $684.84 for their work on the case, which averaged out to $8.11 an hour for roughly 80 hours of work. The court ruled instead that they should be paid at roughly the market rate for such work, which was said to be $200 per hour, and awarded the plaintiff’s attorneys a total of $16,000. The amount was almost five times the amount received by the claimant.

CNA Reports Income Loss Of 290%; Gets $1.25B Cash Infusion

CNA Financial Corp. continued dismal third-quarter financial loss trends, reporting net income decreased 290 percent in the third quarter, and that it had secured a cash infusion of $1.25 billion from Lowes Corp.

The Chicago-based insurer reported third-quarter net income dropped $505 million from the comparative quarter to a loss of $331 million, translating into a loss per share of $1.23. The company reported revenues decreased 33 percent, or $825 million, to $1.66 billion in the period. The combined ratio in the quarter grew 3.6 points to 114.1.

For the first nine months, net income dropped 95 percent, or $650 million, to $37 million, or 14 cents a share. Revenues for the period compared to last year dropped 16 percent, or $1.2 billion, to $6.3 billion. The nine-month combined ratio increased 3.6 points to 110.3.

The third-quarter results were affected by $168 million in after-tax catastrophe losses. The quarter also included a number of investment loss items, with an increase in net realized investment losses of $385 million from the prior year.

CNA said it would issue $1.25 billion of preferred stock to the Loews Corp., with a dividend rate of 10 percent for the first five years, of which $1 billion will be used to support statutory capital. The remaining $250 million will go to the holding company to support financial flexiblity. Because of this, the company is suspending dividend payments on common stock until the preferred is paid in full.

During an analyst’s conference call, Stephen W. Lilienthal, chairman and chief executive officer, said the move was made to position CNA to withstand the current financial stress the markets are suffering.

Mr. Lilienthal also announced that Thomas F. Motamed will take over his position upon his retirement on Jan. 1.

Late today, insurance rating service A.M. Best said the “A” insurance financial strength rating on CNA would remain unchanged.

Insureds Need To Sort Out Potential Hammer Effects Before Claims Arise

What do a mallet, sledgehammer and jackhammer have in common? If you are an insurance buyer, one of these tools is in each of your employment practices liability, directors and officers liability, and errors and omissions policies.

Most comprehensive general liability policies contain limit language, which states the insurer has a “right” to settle claims—thus leaving an opportunity for discussion. The settlement language in D&O, E&O and EPL policies are quite different.

Although the terminology used in this article is tongue-in-cheek, the real life significance is critical. The hammer clause deserves more attention than many insureds give it.

It is wise to understand the potential impact this clause will have on a claim before it’s too late. It is important enough to revisit in light of recent changes in underwriters’ approaches and its effect on claims settlements.

There is technically no “hammer clause” in the policy. Instead, it is insurance jargon that refers to a caveat in the policy that limits the insured’s options during claim settlement discussions.

The clause detailing these limits actually is the part of the policy that defines the insurer and insured obligations when both do not agree on whether to settle a claim.

In most E&O, EPL and D&O policies, the insurer reserves the right to make that decision at least to some degree. Usually the clause can be found under the “Defense Settlement” section, although it can also appear in the “Definitions and Reporting/Notification” sections.

In broad terms, the hammer clause dictates whether the insurer will pay anything over the first proposed settlement, and if so, how the settlement amount in excess of the proposed settlement (and related defense costs) will be divided up between the insurer and the insured. The insurer’s clout in the matter has given rise to the “hammer” terminology.

There are a number of options being offered and ways in which carriers approach this important clause, making it a crucial part of the insured’s insurance buying decision. (See accompanying textbox, “Avoid The Hammer.”) Although rarely referred to as co-insurance, in reality that is exactly what it should be considered.

For example, assume an attorney or physician, or consultant or supervisor (in an E&O claim case) is facing a $200,000 settlement and has a $1 million limit policy. If this policy has the harshest hammer language available—we refer to it as a “jackhammer” clause for descriptive purposes—the attorney or other professional insured now has to decide if he will settle and reduce his limit (thus the amount available for future claims in this policy period) by $200,000 (excess of the SIR) or pay the costs to litigate until final adjudication.
In addition to lowering the aggregate limit for any remaining or future claims, it will now be part of the insured’s loss experience and could set a precedent for future plaintiffs—a situation that is often experienced in the EPL world.

By settling the claim, the insured also runs the risk of the incumbent carrier nonrenewing and insured facing a challenging process of replacing coverage with negative loss experience.

Another example of jackhammer impact involves an EPL policy purchased with $1 million limit subject to a $100,000 self-insured retention. An employee brings a sexual harassment suit and is willing to settle for $150,000.

The insurer wants to accept, resulting in a cost to the insured of $100,000 and an insurance company cost of $50,000.

The insured, however, does not want to settle due to a strong defense, fear of setting a precedent, attracting other plaintiffs and risking its reputation. The insured decides to litigate at a cost of $250,000 and ultimately is victorious.

The total cost to insured is $200,000—the SIR of $100,000, plus the excess over the SIR ($150,000) reduced by the carrier contribution ($50,000). The carrier’s contribution is the amount the carrier would have paid if the insured had decided to accept the original settlement.

If the only change in this scenario was the policy was issued with a “mallet,” the out-of-pocket cost for insured would be the SIR of $100,000 plus $30,000 (30 percent of the $100,000 over the original $150,000 settlement proposal) for a total of $130,000.

See the significance?

Add a “rubber handle” and the insured could have saved another $50,000 (50 percent of retention) and/or if “rubber handle” included a “victorious bonus” the $30,000 would have been waived.

Let’s outline why this should be an important consideration.

A number of factors need to be considered.

An insured’s loss history is required for at least five years and plays a significant part in the underwriting process.

E&O and D&O underwriters in general shy away from claims-experienced accounts. Claims experience also affects the quality of coverage underwriters are willing to provide, especially E&O and D&O underwriters, and the cost of such insurance.

Another often overlooked but important factor is the additional financial costs the insured has to take into consideration when deciding to pursue the judicial process. Without the right ‘hammer clause’ the insured’s ability to make a wise business decision to pursue litigation could easily be adversely impacted.

It is important to provide the option to pursue litigation through the judicial process if an insured cares to make that business decision. Pursuing litigation is a critical component of managing a business and needs to be available to insureds.

With that said, the insurance carrier will suggest that they are entitled to make an economic business decision. I suggest a strong hammer as this is a no-win situation for the insured and probably will live with them for some time.

Read on because there are ways to compromise between carrier and insured.

Sometimes settling early and often encourages other plaintiffs. Although the rule of thumb is that these claims only get worse with time, depending on the coverage, most notably EPL, settling early, in some situations, sends a message of “we pay.”

In some cases, the outcome of the settlement could be significant in both monetary and nonmonetary terms—for example, in patent infringement litigation for Research In Motion, the Ontario-based wireless device company that developed the BlackBerry. In such situations, insureds may want to litigate, and without the financial support of their insurance carriers, they might not have the financial wherewithal.

The partnership between insured and insurer should not be tested during this critical time.

Another question begs to be asked which is often overlooked—what happens if the insured pressures for litigation and ultimately the final settlement is far less than the originally proposed settlement or the insured is found innocent? Who is the beneficiary of the insured’s diligence and conviction?

In summary, there are many approaches to addressing the hammer clause—each with their own advantages and disadvantages.

While it is not the only factor when purchasing insurance, the hammer clause should be studied carefully during the purchasing decision-making process and understood.

Florida High Court Eases Curbs On Comp Attorney Pay

Yesterday, the Florida Supreme Court gave state compensation claims judges greater latitude in awarding attorney’s fees to claimants by striking down strict limits on potential awards.

In the case of in Murray v. Mariners Health/ACE USA, the court found that the use of strict guidelines as outlined in the state statue would have awarded the claimants attorney’s a total of $684.84 for their work on the case, which averaged out to $8.11 an hour for roughly 80 hours of work.

The attorneys challenged the award, arguing that the going rate for lawyers in the area for cases of that nature would be roughly $200 per hour. In its decision, the Supreme Court sided with the attorneys and awarded a fee of $16,000, almost five times the amount received by the claimant.

In its ruling the court traced the history of attorneys’ fees provisions in statute, showing a statement of the right to “reasonable” attorneys’ fees and the creation of a formula to determine fees with latitude allowed to judges to adjust those fees as warranted, as well as the subsequent removal of discretion by state lawmakers in 2003.

“The Legislature did not indicate why it made the changes in respect to the determination of the amount of a claimant’s attorney fees in the history of the statute we have traced or in the 2003 revisions to the subsections,” the court said in an opinion written by Justice Charles Wells.

The court also ruled that a strict use of the formula would create “absurd” outcomes. If the provision calling for “reasonable” fees were controlled by the provision setting the formula, the “reasonable” provision “would be rendered meaningless and absurd because the application of the formula in all cases would result in inadequate fees in some cases and excessive fees in other cases,” the court said.

“Inadequate fees and excessive fees are not reasonable attorney fees,” the court noted.

William Stander, assistant vice president and regional manager of the Property Casualty Insurers Association of America, which filed an amicus brief in the case, noted that the legislation passed in 2003 contributed to a 60 percent decrease in rates in the state, a trend he warned the decision may reverse.

“Eliminating hourly attorneys’ fees, a key cost driver, was an integral component to the 2003 legislation,” Mr. Stander said. “Today’s Florida Supreme Court decision will naturally drive more litigation back into the system and drain more money from employers’ pockets.”

That sentiment was echoed by Tamela Perdue, chair of the Workers’ Compensation Coalition for Business & Insurance Industry.

“Florida’s workers’ compensation system diverted a crisis with landmark reforms in 2003, which eliminated unaffordable rates, widespread fraud and poor compliance with insurance requirements, while providing reasonably priced workers’ compensation insurance that covered more employees than ever before,” she said. “Unfortunately, today’s Supreme Court decision has put us right back into another potential crisis.”

In the ruling, the court offered a pre-emptive defense against such complaints, noting the arguments made in briefs of the abuse of hourly rate awards.

“We agree that delays and the enhancement of attorney fees should be controlled,” the court said. However, the ruling argued that state law does mandate “reasonable” fees.

“The judges who hear these claims and determine the amount of the attorney fees … must be vigilant to award only reasonable and necessary fees,” the court said. “Further, we expect the appellate courts to review the factors in cases presented to the courts so that only reasonable and necessary fees are awarded.”
According to the American Insurance Association the decision will “severely undermine the positive impact of 2003’s landmark workers’ compensation reforms…” that “ rescued what was a failing workers’ comp system,” said Cecil Pearce, AIA vice president, southeast region.

Towers Perrin: P-C Surplus Could Drop $42B In 3Q

The U.S. property-casualty industry’s third quarter statutory surplus is projected to decline as much as $42 billion, or 8 percent, from the beginning of the year, a consulting firm estimated.

Towers Perrin said the fall of comes because insurers have been hit by equity and credit-related losses on asset portfolios, hurricane catastrophe losses and a spike in directors and officers liability claims.

Additionally, if the stock market fails to recover from steep losses precipitated in recent weeks by the financial crisis gripping the United States and the world, Towers Perrin said surplus decline could approach $80 billion, or 15 percent, by the end of the year.

Statutory surplus, reported quarterly by U.S.-based regulated insurers, is a conservative measure of the capital cushion held by insurers to protect policyholders in the event of adverse results; industry-wide figures are compiled and published by various industry trade associations.

“Buyers of commercial insurance will need to pay more attention to insurance purchasing decisions, and consider contingencies in renewal planning,” said Stephen Lowe, managing director of Towers Perrin’s global Property & Casualty Insurance practice. “The focus will now be on the quality of security offered by insurers.”

He added that buyers also will need to include insured claim liabilities in their overall management of counterparty risk. “Since the capability to estimate gross liabilities—rather than just net retained liabilities—is essential to measuring counterparty exposure, some companies may want to develop or refine these estimates,” he observed.

Among the industry findings reported by Towers Perrin:

• The projected industry combined ratio for the third quarter is 116.6 percent, producing an underwriting loss of $18.5 billion.

• Contributing factors are large catastrophe losses, continuing heavy claims for the mortgage and financial guaranty specialty insurers, emerging directors and officers’ liability claims and a general deterioration in price adequacy.

• Poor underwriting results, coupled with declining investment income, will contribute to a projected overall third-quarter industry net loss of $4.8 billion.

• Thirty billion dollars of realized and unrealized losses on investments in third quarter statutory filings are plausible; write-offs due to investments in failed financial institutions could be in the range of 0.5 percent of invested assets.

“The most recent findings from Towers Perrin’s quarterly commercial lines insurance pricing and profitability trends (CLIPS) survey indicate that commercial insurance prices declined about 5 percent in the first half or 2008, on top of similar declines in each of the prior two years,” Mr. Lowe noted. “The current situation will cause price levels to stabilize if not increase.”

He said that while losses are widespread, “we aren’t expecting any company failures; however, some downgrades from the rating agencies are likely.”

He added that this is a “wake-up call for all companies. Risk management is now more than ever an imperative. Recent failures are examples of failures in risk management, not of risk management.”

Mr. Lowe said that the magnitude of the failures makes the need for “a strong risk culture, deployment of tools to support risk-based decision making, clearly stated risk appetites, and current economic capital measurement paramount.”

House Panel Deepens Probe Of AIG

A House oversight committee has asked American International Group to provide it with extensive materials related to the activities of the company’s troubled Financial Products group over the last two years.

The Friday letter from Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, to AIG Chairman Edward Liddy is part of the panel’s continuing probe of why the company was forced to seek a federal bailout last month.

The letter follows up on issues discussed at the committee’s Oct. 7 hearing on AIG, when it was revealed that the company ignored warnings of financial problems and even when it experienced huge losses continued to dole out millions in executive bonuses and other compensation as well as for lavish meeting events.

In the letter, Rep. Waxman asked for more data on events that AIG’s operating units have held for its agents and brokers this year in addition to the week-long conference held at the posh St. Regis Resort in Monarch Beach, Calif., one week after AIG agreed to turn over 79.9 percent of its stock in return for loans of up to $85 billion from the Federal Reserve Board.

It also wants detailed data on bonus payments made to AIG executives and how AIG is using the money borrowed from the government under the bailout deal of Sept. 17.

“I ask that AIG provide the committee with a listing of all conferences, events, or retreats paid for by AIG, its subsidiaries, or affiliates from January 1, 2008, to the present, along with documents sufficient to show the charges paid for each conference, event, or retreat, including lodging, transportation, food, drink, and other charges,” the letter said.

“I also ask that you provide a listing of any similar conferences, events, or retreats planned for the next six months,” it added.

Regarding the London unit, Rep. Waxman asked for documents relating to the activities of the London-based AIG Financial Products unit that has resulted in AIG being forced to take write-downs of $25 billion.

Rep. Waxman said the committee wants information on the conference calls AIG corporate held weekly with officials in the London-based unit, as well as “all documents and communications” between the company and the people who ran the swaps unit during the last two years.

The people who ran the London unit included Joseph Cassano, its former president and, according to a Securities & Exchange filing, Doug Poling, executive vice president, chief administrative officer, secretary and general counsel of AIG FP, based in Wilton, Conn., home of their thrift. Pierre Micottis, executive vice president, market risk, of AIG FP, based in Paris, France.

Mr. Cassano was dismissed in February but received a $1 million monthly retainer from the company until AIG stopped the payments earlier this month under pressure from Congress and New York Attorney General Andrew Cuomo.

The committee is seeking a listing of all compensation paid Mr. Cassano this decade, “other than salary and cash bonus information previously provided to the committee.”

AIG asked for the loan in order to meet collateral requirements from counterparties on credit default swaps contracts the company had entered into. The $25 billion is the money AIG was forced to pony up to guarantee the CDS and maintain its credit ratings.

Since the initial agreement with the Fed and Treasury Sept. 17, AIG has also established an additional line of credit of up to $37.8 billion it can draw on in exchange for highly related government securities held by its life subsidiaries.

As of Friday, the Fed said in a weekly report, AIG has borrowed $86.2 billion from those two credit lines.

The company in reaction said, “We are working with Andrew Cuomo, New York attorney general, to address the issues raised by Congressman Waxman’s letter and we are taking other steps to rebuild AIG and return value to the American taxpayer.”

“Of course,” added Joe Norton, a spokesman for AIG, “we will respond to Rep. Waxman’s letter.”

Attorneys Split On Impact From Ohio High Court Asbestos Ruling

The impact of Wednesday’s Ohio Supreme Court decision putting restrictions on the filing of asbestos injury cases may not immediately produce any readily discernable impact, a plaintiff’s attorney said.

The plaintiff’s lawyer, Vincent Greene, made his remarks in the wake of the high court’s ruling that a 2004 state law, requiring plaintiffs to submit medical proof of harmful injury from asbestos before their cases are heard, can be applied retroactively.

His comments were disputed, however, by a defense lawyer who countered that there would be “tremendous” impact.

According to the Property Casualty Insurers Association of America, at the time the law was passed in an effort to clear court dockets, there were 40,000 cases pending in Cuyahoga County alone.

Mr. Greene said he thought the immediate impact of the decision will be “muted.” He noted that several counties have stayed cases rather than dismiss them, pending the Supreme Court ruling.

So the affect will not be “that dramatic.” The law at issue, he noted has been on the books for four years so “it’s not cataclysmic or titanic. There will be individuals whose conditions will worsen and they can meet that standard later on.”

Other plaintiffs, he said, may develop cancers as a result of exposure and that can be a cause for a suit that the law permits,

Mr. Greene represented Linda Ackison on behalf of her late husband Danny Ackison. Mr. Ackison also had cancer of the esophagus so the case can continue, he said. Mr. Ackison was a laborer at Dayton Malleable, in Ironton, Ohio, where he was exposed to asbestos gaskets and packing.

He called the court’s decision a results-oriented one in favor of business and against sound jurisprudence.

The court said the law would only have been unconstitutional if it impaired or took away a right, or imposed new or additional burdens, duties, obligations or liabilities as to a past transaction, or creates a new right.

As a remedial law, the court said in an opinion written by Justice Robert R. Cupp, has been found to be one that affects only the remedy provided, and includes laws that merely substitute a new or more appropriate remedy for enforcement of an existing right.

The court’s action drew an angry dissent written by Justice Paul E. Pfeiffer. “This court’s job in this case is not to fix a crisis declared by the General Assembly. Our duty is to determine what is right for Danny Ackison under the Ohio Constitution,” he wrote.

Robin Harvey, with Baker Hostetler law firm in Cincinnati, who represented a company which was dismissed, said the decision was part of a movement to clean up “a cesspool of abuse” with cases developed by radiology mills.

The Ohio statute calls for a plaintiff to have had an established competent, doctor patient relationship.

She said the law ruled out “unimpaired cases” where only thing shown was a change on the pleural lining of the lungs, but the plaintiff had no physical symptoms.

Ms. Harvey said 37,000 cases that are pending are unimpaired. In the past, she said that plaintiff attorneys would package one valid case of mesothelioma with a bunch of unimpaired cases and use it to leverage settlements of “garbage cases.”

Fitch: Financial Fallout May Cut Insurers’ Ratings

Fitch Ratings warned today it is likely to reduce the ratings of European and U.S. insurers and global reinsurers because the global financial meltdown will soon force them to write down the value of their investments.

The firm said this action is likely for 12 insurance and reinsurance sectors globally, including the health, property-casualty, life and title insurance sectors in the U.S., as well as the property-casualty and life sectors for France, Germany, Italy, Switzerland and the United Kingdom.

As a result, Fitch analysts said, the firm has decided to revise its rating outlook to negative from stable for these sectors.

Among other issues, it voiced particular concerns about global reinsurers due to their ceding arrangements, which makes them especially vulnerable to ratings downgrades.

All the warnings primarily reflect the fallout from “significant deterioration in the global financial markets and its impact on insurers' balance sheets and financial flexibility,” the rating firm said.

The company voiced particular concern for life insurance companies and for the liquidity of all insurers, and also raised a red flag for global reinsurers.

“Potential liquidity pressures are generally less severe for insurance companies than they are for other types of financial institutions,” Fitch analysts noted.

Nonetheless, the analysts said, “Fitch believes liquidity could become pressured for some life insurance companies, as well as some reinsurance companies, especially if they experience declines in their credit profiles that lead to erosions in market confidence.”

But, it said, it believes the life insurers will be able to cope because prior to the current rolling instability in worldwide financial markets, “many life insurers had built up significant capital buffers, following a period of favorable investment market conditions.”

And for the property-casualty insurers, declines in investment values and capital have exacerbated other pressures that the sectors were already facing, including ongoing intense competition and “soft” premium rates in many lines of business, together with the expected general deterioration of underwriting results and expected reductions in reserve releases as compared to recent years.

While capital pressures could ease the softening trend in non-life pricing, Fitch analysts cautioned that “it would be premature to predict a shift to a hardening market.”

As for reinsurers, the analysts noted that they could face some liquidity pressures in the current volatile financial market environment.

In many cases, reinsurers use bank letter of credit facilities to provide security for ceding companies, the analysts said. “It is not uncommon for such facilities to contain ratings triggers that require the reinsurer to post cash collateral if their financial strength ratings fall below a defined level (typically below ‘A-minus’).”

In addition, the analysts said, “some reinsurance contracts contain cancellation or recapture provisions also tied to ratings triggers that could cause the reinsurer to fund the return of a portion of premiums to the ceding company in unwinding a contract.”

Florida Cat Fund Can Handle Recent Loss, Chairman Says

Florida’s Hurricane Catastrophe Fund has taken a hit from the economic meltdown of the past few weeks, but its chairman said the fund can and will meet its current obligations.

At a meeting with its financial advisors on Tuesday, the fund’s Advisory Council was told that its total reimbursement capacity was estimated at $13.2 billion for a 12-month period and $11.8 billion if bonding were limited to a six-month period.

These numbers, according to the fund, represent a $10-to-$15 billion shortfall from the theoretical capacity needed for a maximum loss year.

The fund blamed some of its problems on the current liquidity crisis and its affects on the financial markets, as well as its own investment losses.

Additionally, it noted a decrease in its assessment base as well as the expense of an arrangement with Warren Buffet’s Berkshire Hathaway in which the fund paid for a guarantee that Berkshire would buy $4 billion in bonds if the fund’s losses exceeded $25 billion.

“Just like many businesses all over the world, the FHCF is impacted by the current financial market turmoil,” said Jack Nicholson, the fund’s chief operating officer.

Mr. Nicholson commented, “If a large event occurs, the fund would not have to pay claims all at once. It likely would take six to nine months to receive and pay about 90 percent of our claims and three to five years to receive and pay the rest.

“Our current cash resources can take us a long way. The fund currently has adequate resources, funding and liquidity to meet any existing bonding obligations.”

On the positive side, the fund has a strong liquidity position with $2.8 billion in year-end cash for the payment of claims, and another $3.5 billion in five-year floating rate notes totaling $6.3 billion, according to the advisors report.

Given the fund’s condition, David Sampson, president and chief executive officer of the Property Casualty Insurers Association of America, said that lawmakers in the state should pay heed to the threat posed to the state and its taxpayers.

"The Florida Catastrophe Fund is the backbone of the state's property insurance system,” he said. "The current financial crisis plaguing the nation directly impacts the cat fund's ability to pay claims. Whatever post-storm costs that the state cannot access in the bond market, taxpayers will be on the hook for through assessments on their property and auto insurance bills.”

Meanwhile, A.M. Best Co. said that based on the considerable credit market contraction and recently announced revision in the Fund’s claims-paying capacity, the rating firm is “concerned with the contingent capital nature of the FHCF.”

Potential liquidity and cash flow issues that might arise from a severe hurricane “create an additional level of uncertainty. Based on current market conditions, it is only prudent to re-evaluate these expectations in the assignment of ratings, despite the near completion of the 2008 hurricane season. With the 2007 implementation of the Temporary Increase in Coverage Limits, the FHCF increased its overall exposure considerably.

Best said it has begun to assess the impact on rated entities’ risk-adjusted capitalization based on the reduction in the potential coverage available from the FHCF. This assessment is based on both the revised claims paying capacity recently released as well as Best’s analytical judgment regarding the amount of capital that could realistically be raised in today’s volatile capital markets, Best said.

It noted that companies with significant potential gaps in reinsurance coverage and correspondingly inadequate risk-adjusted capitalization will be placed under review with negative implications pending additional discussions with company management regarding improving this key metric.

Best said it recognizes that not all FHCF funding will be required immediately and could conceivably be spread over time.

Best said it will continue to evaluate the amount of credit given to the FHCF in the context of both standard and stress-tested risk-adjusted capitalization through its proprietary capital model—Best’s Capital Adequacy Ratio (BCAR). This assessment will be based on both the stated claims paying ability of the FHCF as well as Best’s analytical judgment in terms of capital raising capability.

Greenberg Says AIG Loan Terms Will Kill Company

Maurice Greenberg, the former chairman and chief executive of American International Group, has written his old company urging management to renegotiate their $85 billion government loan, saying its current terms will destroy the firm.

In a letter filed with the Securities and Exchange Commission, written to AIG’s current CEO, Edward Liddy, Mr. Greenberg attached a “plan to save AIG.”

As Mr. Greenberg calculates it , AIG ’s $85 billion federal loan “carries an actual interest rate in excess of 14 percent , and on top of that, the government receives 79.9 percent of the ownership of AIG. ”

He added that “ b ottom-line , this means that AIG cannot pay of f this loan from the proceeds of selling assets in this market, nor can it pay the annual interest rate from earnings . ”

Mr. Greenberg warn ed that as a result , “thousands of jobs will be lost, pensioners will lose their savings, and millions of shareholders will be disenfranchised. It is a los e /lose plan.”

However, he added , “if the loan were changed to non-voting preferred stock , with an approximately 5- to- 6 percent dividend and a 10-year right of redemption for AIG at a 10 percent premium , this could be turned into a win/win situation.”

His plan stated that AIG at a minimum should be “afforded the same borrowing terms as other companies.”

He noted that since the loan was arranged , the Federal Reserve has stepped up direct lending to scores of financial institutions , and for the first time last week to non - financial institutions that are able to borrow on “terms far less onerous than those imposed on AIG…”

Mr. Greenberg’s AIG stock holdings, now estimated at $1 billion, were said to be about $20 billion when he left the com pany amidst an accounting scandal in 2005, with allegations that finite reinsurance deals were misused to artificially bolster the company’s balance sheet.

Travelers Says Hurricane Losses Top $1Billion

The Travelers Companies Inc. said today that that its estimate of third quarter catastrophe losses for the of 2008, primarily from Hurricanes Ike, Gustav and Dolly amounts to approximately $690 million after-tax and $1.05 billion pre tax, net of reinsurance.

Travelers said Ike reflects catastrophe losses in eight states and includes estimated share of assessments from the Texas Windstorm Insurance Association.

On the investment side, the St. Paul, Minn.-based company said investment losses would amount to $115 million after-tax and $170 million pre-tax in the third quarter. This includes $44 million after-tax and $67 million pre-tax, with respect to securities issued by Lehman Brothers Holdings Inc. and its subsidiaries.

Travelers said as of Sept. 30 it is not a party to any credit default swaps and it has approximately $15 million of loans outstanding under its securities lending program for which it believes it has no exposure to loss.

On reserves, Travelers said in the third quarter it expects to report net favorable prior year reserve development of approximately $210 million after-tax and $330 million pre-tax.

The net favorable prior year reserve development is driven by better than expected loss experience, Travelers said, primarily in the commercial multi-peril and general liability product lines.

The reserve development also includes a $46 million after-tax and $70 million pre-tax increase to asbestos reserves. Travelers said it completed its annual in-depth asbestos claim review in the third quarter of 2008.

Taking all of the news together, Travelers said operating income per share would be reduced by 80-cents and net income per share would drop $1. The company said operating income differs from net income in that operating income excludes the after-tax impact of net realized investment losses.

“Our disciplined attention to risk management both operationally and in our investment activities has served us well in this active storm season and in a difficult economic environment,” said Jay S. Fishman, chairman and chief executive officer of Travelers in a statement.

“Our catastrophe losses were consistent with our risk and pricing models, net realized investment losses were modest relative to our overall investment portfolio and better than expected loss experience resulted in net favorable prior year reserve development,” he continued.

Whether it was reaction to the news, or the upbeat nature of the market throughout the day, Wall Street reacted by sending the company’s stock up over $4 to close to $35 a share in the early afternoon. By the close of the day shares stood at $35.49 a share, up $4.99.

Fla. Insurer Of Last Resort Study Panel Meets

A Florida lawmaker who voted to create the task force examining Citizens, the state’s home insurer of last resort, urged participants at the group’s first meeting to focus on business rather than politics.

State Rep. Alan Hays, a Republican whose district includes parts of Lake, Seminole and Volusia counties, said the state legislature “intended to do a good thing” in enacting a variety of insurance measures during a special session, but that legislation had brought “some terrible unintended consequences.”

The task force’s main goal, he said should be to help undo those consequences.

The legislation, enacted by the legislation in a special session last year to help ease the burden on taxpayers, significantly increased Citizens’ exposure to catastrophic risk.

Rep. Hays reinforced the point by referencing the damage wrought by Hurricane Ike in Texas. Under the bill, in the event of a shortfall Citizens would have the authority to add assessments to its own policies and then ultimately spread assessment to any policy in the state except for workers’ compensation or medical liability coverage.

“Can you imagine if Ike had hit Florida,” he said, adding that the panel could imagine such a strike anywhere along the state’s coast. “If we had incurred that kind of damage, we’d be bankrupt, effectively.”

Rep. Hays explained his own experience with insurance prior to joining the state House’s Insurance Committee. A dentist by trade, he said his experience was limited to “writing the check” for his malpractice coverage, and that even his personal coverage was handled by his wife. The point, he said, was that the knowledge present in the task force was needed by lawmakers.

“Leave the politics to us,” he said, “we want your business expertise.”

Given the state’s exposure, and the likelihood that a major storm would trigger possible several assessments on policies, Rep. Hays said that it will be important for lawmakers to ensure that Floridians are given the facts.

“When people understand the problem, they will be better able to understand and accept the solution,” he said.

In terms of citizens specific situation, Rep. Hays noted that the company’s surplus of “between three and four billion,” likely wouldn’t cover the losses of any significant event, and he added that current financial conditions make it difficult for the state to even sell enough bonds to cover additional losses.

Already, he said, Florida has paid $224 million to Berkshire Hathaway just for the guarantee that the company would buy $4 billion worth of bonds should the state’s losses exceed $25 billion.

While asking the panel to avoid politics, Rep. Hays did offer some suggestions of his own.

“We need to raise the premiums of Citizens,” Rep. Hays said. Current rates have been frozen at 2005 levels, he noted and both state regulators and lawmakers have sought to avoid any rate hikes. “That is absurd,” he said. “It is fiscally irresponsible and it is wrong.”

While praising the overall work of the state Office of Insurance Regulation, Rep. Hays said the OIR “artificially suppressed the premiums,” and asked that the state be opened up to more business. “Let the free market work,” he asked. “Let the companies in and let the companies compete.”

Among the means to provide rate relief for property insurance policyholders in the bill is a provision to allow primary insurers to purchase additional reinsurance from the state catastrophe fund at cheaper prices than they would see from a private reinsurer. Additionally, the legislation eliminates restrictions on the state’s insurer of last resort, Citizens Property Insurance Company, which forbade it from directly competing for business with primary insurers.

However, because lawmakers sought to ensure that the legislation would not be accompanied by a tax increase, no upfront funding was made available for the increased exposure being faced by the Cat Fund or, potentially, Citizens. Instead, lawmakers expanded the ability of Citizens to make assessments after the fact, allowing the company to make assessments against property and casualty and auto lines, excepting workers compensation and accident and health coverage.

Surge in Downgrades Includes Many P-C Insurers, Moody’s Notes

Moody’s Investors Service said non-life insurance was among nine sectors that had large proportions of downgrades in the third quarter of 2008.

The others were airlines; real estate and construction; retail; banks and bank holding companies; and finance, securities and leasing—with the last two industries having the largest absolute number of downgrades.

Moody’s said the number of rated issuers on review for downgrade doubled in the third quarter. "At the end of the second quarter of 2008, 8.9 percent of rated issuers were on review for downgrade, up from 4.2 percent at the end of the second quarter," said a statement from Moody's analyst Jennifer Tennant.

Both of these percentages were higher than the corresponding reviews for upgrade, which stood at 1.2 percent of rated issuers.

Looking at a longer timeframe, negative outlooks outnumbered positive outlooks 14.7 percent to 5.3 percent, respectively, Moody’s said.

The rating service found that, continuing the trend from the previous quarter, the credit outlook for investment-grade issuers was slightly more positive than for speculative-grade issuers. Both categories, however, had more issuers on review for downgrade than for upgrade.

The United States and Canada, Moody’s said, have the largest disparity, with a 10-to-1 watch for downgrade/watch for upgrade ratio, while the United States, Canada and Europe have the largest percentage of negative outlooks and watches for downgrade.

On a positive note, the firm said the Middle East and Africa have the largest percentage of positive outlooks and Latin America had the highest percentage of rated issuers on watch for upgrade.

"These rating actions and reviews highlight the recent financial crisis and continued problems in residential real estate markets," said the statement from Ms. Tennant.

Legal Expert Foresees More U.S. Insurance Regulation

Congress will insist on “more uniform, more national regulation” next year in the wake of American International Group’s liquidity meltdown, a lawyer who heads an American Bar Association task force on insurance modernization says.

“I see some form of federal regulation, maybe not in all lines and in all areas of regulation, but I predict more strict financial regulation of insurers,” said Fran Semaya, a partner at Cozen O’Connor in Philadelphia.

She chairs the ABA’s Task Force on Federal Involvement in Insurance Regulation Modernization Task Force, a part of the ABA’s Tort Trial and Insurance Practice Section. She is also president of the International Association of Insurance Receivers.

“I don’t see more deregulation, as in an optional federal charter, but we will see more regulation, more than we bargained for,” she said.

Ms. Semaya made her comments after attending the hearing of the House Oversight and Government Reform Committee that examined the reasons that AIG needed an $85 billion loan from the federal government as an alternative to bankruptcy.

But, she said, the level of federal involvement with insurance regulation will depend on who is elected president, with Sen. Barack Obama, D-Ill., supporting greater regulation than Sen. John McCain, R-Ariz.

“I think federal regulation will be on top of, rather than an alternative to state regulation,” she said.

She said she “got the feeling” at the hearing that Congress “was not happy that the government bailed out a private corporation the way it did.”

Her feeling based on the hearing is that Congress also believes AIG management did not do a good job of overseeing the financial products unit based in London that got it into trouble and that the firm allowed the unit to continue to engage in speculative activity and did not heed “what their accounting firm was telling them about what was going on in London.”

Her perception of Congress’ view that she gleaned from yesterday’s hearing is that management “did not examine properly this business, and management was not involved as much as it should have been. ‘They made their bed, they should lie in it,’” Ms. Semaya said is her feeling of congressional reaction to the hearing.
She also said that “some members thought there should be criminal accountability for what went on.”

“I think that at the hearing, members of Congress were really going after the CEOs, their big bonuses and their golden parachutes.”

She said New York Insurance Superintendent Eric Dinallo was asked by one member of the committee “whether anyone should go to jail for this.”

“I got the feeling that some members of Congress believe someone should go to jail for what happened to AIG, that blame should be fixed,” she added.

She said one member asked whether the McCarran-Ferguson Act should be replaced, and that Superintendent Dinallo “did a decent job of defending state regulation.”

Ms. Semaya also acknowledged that when Congress takes a look at insurance regulation next year, that there is bipartisan support for an optional federal charter, “even though the industry is split.”

Ms. Semaya noted, “I think those who favor an OFC see it at a panacea.”

But, she said, “I am concerned about holding company regulation and the split between state and federal regulation it would create.”

She said there are “definitely lines of business where it would easily fit, such as life insurance, surplus lines and reinsurance,” and she sees one option for Congress to look at is “a one-state portal,” or domiciliary state-based regulation.

But, she said, “I can’t see an OFC working for homeowners’ and auto insurance, any personal lines and small business insurance line.”

Rating Agencies React To The Hartford/Allianz Cash Infusion

Rating agencies A.M. Best Co. and Standard & Poor’s have revised their outlook on The Hartford Financial Services Group after the company received a $2.5 billion cash infusion from competitor Allianz AG in exchange for a stake in the firm.

A.M. Best Co. placed The Hartford’s “A-plus” financial strength (FSR) ratings under review with negative implications. Best also placed under review with negative implications the “a” issuer credit ratings (ICR) and all debt ratings of The Hartford, and the “aa-minus” ICR of the company’s key life and health and property-casualty subsidiaries.

Standard & Poor's Ratings Services said it has revised its outlook on The Hartford to negative from stable but has affirmed the company’s “A” counterparty credit rating and the “AA-minus” counterparty credit and financial strength ratings on all of The Hartford’s core insurance operating subsidiaries.

Both rating agencies cited circumstances surrounding The Hartford’s deal with Allianz in which Allianz will receive a stake in The Hartford in exchange for a $2.5 billion cash infusion.

As reported yesterday by NU Online News Service, The Hartford sought a cash infusion in advance of announcing projected losses due to the market turmoil.

Additionally, before the cash infusion announcement, Fitch ratings had revised The Hartford’s rating outlook from stable to negative, citing potential troubled assets in its portfolios.

Best said it is “evaluating the ultimate impact of these events—as well as the risks associated with continued market dislocation and increased financial leverage—on the ratings of The Hartford and its insurance subsidiaries.”

Standard & Poor’s said its adjustment is due to The Hartford’s announcement that it expects to report “material asset impairments estimated at $2.1 billion to $2.2 billion after taxes and will take a significant deferred acquisition cost (DAC) write-down estimated at $915 million.”

The rating agency added, “The negative outlook on [The Hartford] reflects its reduced financial flexibility because of the increase in leverage and the associated material reduction in fixed-charge coverage levels resulting from the high servicing costs on the [Allianz] investment and the expected softening of its operating performance.”

The ratings and the outlook for The Hartford’s core insurance subsidiaries remain unchanged, Standard & Poor’s said, because “the fundamentals” of the company’s life and p-c operations remain strong.

Standard & Poor’s credit analyst Robert A. Hafner said he expects The Hartford’s operating performance to be strong but below recent record earnings because of the continuing soft market and higher credit losses resulting from the economic downturn.

“The company's effective expense management and underwriting discipline will help support continued earnings strength and limit the decline in earnings through the cycle,” Standard & Poor’s said.

“In addition, management's aggressive action to raise $2.5 billion of additional capital ensures that it is among the U.S. insurance companies best positioned to weather the current economic downturn and maintain its competitive advantages and consumer confidence,” the rating service commented.

Moody’s Downgrades AIG

Moody’s Investors Service downgraded the debt rating of American International Group and two of its operating units, saying the company’s plan to sell assets may not raise enough capital to pay back its $85 billion government loan.

The New York-based rating agency said Friday there is a risk because there could be “shortfalls in executing the restructuring plan or because of declines in the business or financial profiles of the operation to be retained.”

Because of the downgrade, two other units were affected: American General Finance Corp. (AGFC) and International Lease Finance Corporation (ILFC).

Moody’s lowered AIG’s senior unsecured debt rating from “A2” to “A3” and said the long-term ratings and the company’s Prime-1 short-term rating remain under review for possible downgrade.

AGFC’s senior debt rating was downgraded from “A3” to “Baa1.” AGFC's long-term ratings remain under review for possible further downgrade.

The short-term ratings for AGFC, as well as the backed-commercial paper rating for Como LoCo Inc., were affirmed at Prime-2: outlook negative.

The Prime-2 short-term rating of AGFC's direct parent, American General Finance Inc., was placed on review for possible downgrade.

Moody’s action reflected not only the AIG downgrade but also AGFC’s “erosion in the company’s stand-alone credit profile and operating outlook.”

AIG’s ILFC, which is in the aircraft leasing business, had its senior unsecured rating downgraded to “Baa1” from “A3” and affirmed its Prime-2 short-term rating. The company’s long-term and short-term ratings are under review with direction uncertain.

Moody’s made the move based on the lack of financial support AIG will be able to give the unit and the uncertainty over future ownership.

The rating service issued its downgrades late Friday after AIG Chairman and Chief Executive Officer Edward M. Liddy announced that same morning that the insurer plans to maintain its U.S. property-casualty and foreign general insurance units and keep a majority interest in its foreign life insurance unit, but everything else was on the table for sale.

AIG is selling the units to pay back an $85 billion bridge loan from the Federal Reserve Bank as quickly as it can.

AIG secured the loan and gave the government a 79.9 percent interest in the company after it could not find capital in the private sector. AIG hit a liquidity crunch over its subprime mortgage related investments that have suffered in value and required heavy amounts of collateralization which has drained its financial position.

In A Tight Job Market More Lies Are Found On Resumes

A study that should put risk managers on their guard reports that a check of job candidates’ employment applications finds that 10 percent of them lie about their education credentials.

And the firm that made the discovery, employeescreenIQ, predicts that job applicant efforts to puff up backgrounds will only increase as the job market becomes more difficult.

The educational item most frequently falsified by applicants was the completion of high school, according to research conducted by Cleveland-based employeescreenIQ’s quality service division.

“False information about ones’ educational history is the third most common discrepancy we uncover while conducting verifications for our clients,” Kevin Bachman, employeescreenIQ’s vice president of Quality Service, said in a statement.

“As we released in our 2009 background screening trends, due to the tightening of the job market, we are predicting a rise in the number of individuals that ‘fluff’ their resume, including their educational history.”

Mr. Bachman continued that facts show that “if it wasn’t for proper screening, for every 10 people a company hired, one would have obtained employment while lying about their education, a very important aspect in most jobs.”

His firm’s research found that:
• High school diplomas were falsified more often than a college degree.
• Degrees falsified the least were post-graduate and doctoral degrees.
• Applicants’ false diploma or degree claims more often involved an institution they had attended.

Steven Rothberg, president of CollegeRecruiter.com, an information source for college students and recent graduates seeking employment, continuing education and business opportunities, noted, “employeescreenIQ’s findings are in line with insight we receive from our employer clients.”

He said, “When it pertains to education, job candidates are more likely to inflate their academic experience than to outright lie. Few will claim they graduated from a school they didn't attend, or state they have a business degree when they actually graduated with a major in communications.”

He added, however, that given the reluctance of many, and perhaps most schools, to delve into details about the academic qualifications of their alumni, “these exaggerations can be very, very difficult for most employers to identify.”

In addition to education verifications, he said, hiring professionals should make sure their screening company has the ability to conduct professional reference interviews and license verifications—three elements that play key roles in exposing applicants attempting to falsify their education credentials.

Far beyond just inflating academic experiences, another concern is “diploma mills,” which provide individuals with diplomas and degrees without requiring that any standards be met.

Diploma mills operate to make a profit by distributing non-accredited academic degrees to individuals based on a level of payment and life experiences. People obtaining these degrees can then falsely claim them on their resumes.

“You see it in the news, diploma mill operations being closed by federal and state investigations. Diploma mills should be a concern to all employers,” said Jason Morris, employeescreenIQ president and chief operating officer.
He noted that ramifications associated with hiring an individual with a false degree can be very damaging to an organization and result in a loss of trust, “and depending on the job, harm to individuals.”

Recently, the Federal Trade Commission published a helpful online tool—Avoid Fake-Degree Burns By Researching Academic Credentials —for employers to consult in order to recognize fake degrees when conducting education verifications. The U.S. Department of Education and the Council for Higher Education Accreditation also publish lists of legitimate institutions.

A white paper list containing hundreds of known fraudulent diploma mills that employeescreenIQ has identified through its education verifications searches can be downloaded at www.employeescreen.com.

October Expected To Be Busy Hurricane Month

With Subtropical Storm Laura fading away over the cold waters of the North Atlantic, hurricane forecasters expect October to be a very active hurricane month with possibly one major hurricane predicted over the next couple of weeks.

Researchers from Colorado State University said today they believe this month will produce “well above average hurricane activity,” in line with predictions for a very active hurricane season.

Phil Klotzbach and William Gray, who head up the research team at the university, said they expect to see a total of three named storms in October. Two are expected to become hurricanes, with one becoming a major hurricane of Category 3 or higher on the Saffir-Simpson scale, meaning sustained winds will reach or exceed 111 mph.

“We expect the month of October to be quite active,” said Mr. Klotzbach, lead author of the hurricane forecast, in a statement. “We continue to observe low sea level pressures and warm sea surface temperatures across the tropical Atlantic. A combination of these two factors typically leads to an active October.”

“We predict that October will be quite active based on climate signals through September,” said Mr. Gray. “There has been a strong clustering of hurricane activity around mid-July and late August-early September. We think we are now entering a new period of heightened activity that is likely to go for another two to three weeks.”

The researcher’s full-season forecast, revised in August, calls for a total of 17 named storms in the Atlantic, nine of which will become hurricanes, with five of those becoming intense hurricanes. To date, there have been six hurricanes with three becoming intense.

On Monday, the National Weather Service announced the formation of Subtropical Storm Laura with sustained winds that topped off at 60 mph. The storm never threatened the United States and dissipated today over the cold waters of the North Atlantic. Laura was the twelfth named storm of the Atlantic hurricane season that extends through Nov. 30.

For U.S. insurers, the most damaging storms this season have been Hurricanes Gustav and Ike, which hit in August and September, respectively. Risk modelers’ estimates for insured losses for Gustav ranged from $2 billion to $10 billion, while insured losses from Ike ranged from $6 billion to $12 billion.

Hurricane Ike hit the Texas coast on Sept. 13, doing tremendous damage to the Galveston area. The affects from Ike have been extensive. The U.S. Geological Survey reported yesterday that runoff caused by the storm has contaminated the waters of Lake Michigan affecting the shoreline of northwestern Indiana and Chicago.

Commercial Carrier Size Doesn’t Affect Performance

The size of a commercial insurance company does not appear to affect premium growth or underwriting profitability for three different lines in that sector, according to a new financial analysis.

That finding came in a report released by the investment firm Stifel Nicolaus, reviewing second-quarter 2008 statutory direct premium and loss data for commercial auto liability, commercial multiple peril and workers’ compensation.

Based on figures from Highline Data, a unit of Summit Business Media Co., the parent of National Underwriter, Stifel Nicolaus’ analysis found size does not appear to determine superior premium growth or dramatically affect underwriting profitability.

The analysis also found “almost no relationship (yet!) between premium growth and loss ratio deterioration.” The results were surprising because the expectation is that companies whose premium base is growing faster would be expected to see a higher deterioration in rates.

Part of the reason, noted Meyer Shields, an analyst for Stifel Nicolaus, is that unlike personal lines insurers who rely upon technology to perform the underwriting, commercial lines are still underwritten individually, “reducing the potential for economies of scale that bigger insurers might use to drive either faster or more profitable premium growth.”

He also pointed out that the differences between accounts translate into more attention to underwriting.

Noting the situation with American International Group, Mr. Shields wrote that “people are overestimating the likely outflow of business from AIG, whose property-casualty subsidiaries are more than solvent. We’re pointing investors toward smaller commercial competitors, as we see no fundamental underwriting disadvantage inherent in being small, and as even a modest move of share from AIG could represent significant growth opportunity.”