Chubb's Profits Contracted in 2008

Fourth quarter profits at Warren, New Jersey-based The Chubb Corp. fell 37 percent to $407 million from $650 million in the same quarter last year.

For the full year, net income was down 36 percent to $1.8 billion from $2.8 billion last year.
Net written premiums for the fourth quarter were down 4 percent to $2.9 billion - with about half the decline attributable to currency fluctuation. For the full year, net written premiums decreased 1 percent to $11.8 billion.

In 2008, premiums were down 3 percent in the U.S. and up 6 percent outside the U.S.

Chubb said its combined ratio in 2008 was 88.7 percent, compared with 82.9 percent in 2007. The impact of catastrophes accounted for 5.1 percentage points of the combined ratio in 2008 and 3 points in 2007.

The expense ratio was 30.2 percent in 2008 and 30.1 percent in 2007.

Property and casualty investment income after taxes for the fourth quarter was down 5 percent to $316 million, compared with $331 million in the fourth quarter of 2007, largely due to currency fluctuation and lower yields on short term investments.

"While net income was adversely affected by continued turmoil in capital markets, the relatively modest size of our investment losses reflects the successful execution of our conservative philosophy in managing our $39 billion portfolio," said John D. Finnegan, chairman, president and chief executive officer.

Breakdown by Lines

In 2008, Chubb Personal Insurance (CPI) net written premiums grew 3 percent to $3.8 billion. CPI's combined ratio was 87.1 percent in 2008 compared to 84.8 percent in 2007. The impact of catastrophes accounted for 5.4 percentage points of the combined ratio in 2008 and 6.3 points in 2007.

The Homeowners line grew 1 percent and had a combined ratio of 83.7 percent. Personal Automobile net written premiums declined 3 percent, and the combined ratio was 87.6 percent. Other Personal lines grew 17 percent and had a combined ratio of 97.5 percent.

Chubb Commercial Insurance (CCI) net written premiums declined 2 percent in 2008 to $5 billion. The combined ratio was 93.9 percent in 2008 and 85.8 percent in 2007. The impact of catastrophes accounted for 8.1 percentage points of the combined ratio in 2008 and 2.6 points in 2007. Average 2008 renewal rates in the U.S. were down 5 percent for CCI, which retained 85 percent of the U.S. premiums that came up for renewal. In the U.S., the ratio of new to lost business was 1 to 1.

Chubb Specialty Insurance (CSI) net written premiums declined 2 percent in 2008 to $2.9 billion. The combined ratio was 83.3 percent in 2008 and 77.4 percent in 2007.

Professional Liability had a 2 percent decrease in net written premiums and a combined ratio of 85 percent. In the U.S., average 2008 renewal rates for professional liability were down 2 percent, renewal premium retention was 88 percent and the ratio of new to lost business was 1.3 to 1.

Surety had a net written premium increase of 4 percent and a combined ratio of 69.9 percent.__

Obama Taps The Hartford's Wolin for Key Economic Policy Post

The Hartford Financial Services Group, Inc. today announced that Neal Wolin, president and chief operating officer of the company's Property and Casualty Operations, has accepted a position in the White House as Deputy Counsel to the President for Economic Policy and Deputy Assistant to the President.

Wolin joined The Hartford in 2001 as executive vice president and general counsel. He was promoted to president and chief operating officer of the company's Property and Casualty Operations in June 2007. Prior to joining The Hartford, he served in several positions in the U.S. Government, including General Counsel of the Department of the Treasury, Executive Assistant to the National Security Advisor and as Deputy Legal Adviser to the National Security Council. Wolin earned his J.D. from Yale Law School, his M.Sc. in Development Economics from the University of Oxford and his bachelor's degree from Yale University.

In conjunction with this announcement, The Hartford named two of its senior property and casualty executives, Juan Andrade and Jonathan Bennett, as interim co-leads of the Property and Casualty Operations. Andrade and Bennett will report to The Hartford's president and chief operating officer Tom Marra. A search for Wolin's successor is underway.

"Given the importance of the issues facing the country, there is no greater honor than being called to serve. I am looking forward to being part of the President's team of advisors in this most challenging period," said Wolin.

"President Obama is building an outstanding economic team to address the many complex challenges facing the nation and our financial system," said Ramani Ayer, chairman and chief executive officer. "We recognize the unique call to service this presents for Neal and wish him all the best in his return to Washington."

Andrade is currently executive vice president of sales and distribution for Property and Casualty. He joined The Hartford in 2006 when he assumed leadership of the P/C claims organization. Prior to joining The Hartford, Andrade held several leadership positions with The Progressive Corp., and also held management positions with American International Group.

Bennett is currently executive vice president of personal lines and small business insurance. Bennett joined The Hartford in 1999 as staff assistant to Ayer. He has since served in several leadership roles at the company, including vice president of corporate development, head of the eBusiness Ventures Team, and senior vice president of product management for the personal lines division. He was promoted to his current role in 2005. Before joining The Hartford, Bennett was with CIGNA, leading institutional fund strategy and marketing for the individual insurance division and as a product manager for corporate-owned life insurance. Prior to CIGNA, Bennett was with Arthur Andersen LLP.

Congressman Seeks National Review of State Workers' Compensation Laws

Congressman Joe Baca, D-Calif., has introduced legislation that would authorize the creation of a National Commission on State Workers' Compensation Laws.

Baca's National Commission on State Workers' Compensation Laws Act would establish a separate body to evaluate state workers' compensation laws in order to determine if they provide an "adequate, prompt and equitable" system for injured workers.

"More than 35 years have passed since our government took a serious look at the effectiveness of workers' compensation laws," said Rep. Baca. " Access to proper benefits and medical care after on the job injuries is a right every American worker deserves. I am hopeful this legislation will bring us closer to updating and modernizing our state workers' compensation laws to ensure they remain effective in this new century."

In 1972, a national commission authorized by the Nixon administration made numerous recommendations and set minimum standards.

Lawmakers Press Treasury Nominee to Boost Federal Oversight of Insurance

Seven U.S. lawmakers Friday urged Treasury Secretary nominee Timothy Geithner to boost federal oversight of insurance companies, a long-held goal of much -- although not all -- of the insurance industry.

Democratic Rep. Melissa Bean of Illinois, Republican Rep. Ed Royce of California and five others wrote to Geithner asking him "to either create an office within the Treasury Department or assign a high level Treasury appointee an insurance portfolio."

There are more than 6,000 insurers in the United States, but no federal regulator for them. Instead they answer to more than 50 state and territorial authorities. Some insurers like the regulatory system this way, while others don't.

With a new White House eyeing major regulatory reforms amid a crisis in the financial services sector, conditions look favorable for gains by the powerful faction within the industry that wants regulation centered in Washington, D.C.

The federal government has committed $150 billion in assistance to a bailout of American International Group Inc , once the world's largest insurer.

AIG nearly collapsed last year after becoming overexposed in the largely unregulated market for credit default swaps, which was undermined by the sharp U.S. housing downturn.

Bean and Royce are long-standing advocates of federal regulation, as are big insurers such as Allstate Corp.

"We all share the belief that we must take steps to ensure that a similar situation does not occur in the future," the lawmakers' letter said. They also cited last year's problems in the bond insurance industry as further evidence of the need for Washington to play a greater role in supervising insurers.

The American Insurance Association, a lobbying group for large property-casualty insurers, issued a statement of support for the lawmakers' letter.

Geithner on Friday pledged to strengthen regulation of over-the-counter derivatives, such as credit default swaps, and to pursue registration of hedge funds.

In written responses to questions from Sen. Carl Levin, a Michigan Democrat, Geithner said: "We are going to need sweeping changes, in regulatory policy, the oversight structure and in our tools for crisis management."

He faces a confirmation vote by the full Senate on Monday.

Insurer's Fire v. Pollution Argument Dismissed in Houston Court

Great American had previously asked a federal court in Houston to determine whether the total pollution exclusion of its excess policy applies to the claims asserted in the underlying lawsuits. This exclusion, like a similar exclusion in the policyholder's primary liability policy, excluded coverage for certain injuries arising out of "pollutants." Both policies defined "pollutant" to include "smoke," "soot" and "fumes."

The policyholder's primary policy, however, also contained what is commonly known as a "hostile fire" exception, which stated that its pollution exclusion does not apply to injuries arising out of "smoke" or "fumes" from a "hostile fire." The Great American policy did not contain this exception.

The agreement between Great American and its policyholder will result in the dismissal of Great American's federal court action.

Whether Great American's policyholder is liable to the plaintiffs will be determined in future proceedings in the lawsuits filed by the families of the individuals who died in the fire.

Great American's policyholder has consistently maintained that its conduct did not cause or contribute to the fire or its tragic consequences.

Savvy US Airways Pilot May Have Grounded Lawsuits

A savvy pilot saved at least 155 lives when he guided a disabled US Airways jet to a relatively gentle landing in the Hudson River last week. He also may have protected his airline from the rash of lawsuits that usually follows a plane crash.

Legal experts say that because of its happy outcome, Flight 1549 has the potential to be among the least litigious airline crashes in recent memory.

"You may be looking at the rarest case where the accident is just an act of God,'' said Justin Green, an attorney with the law firm Kreindler & Kreindler, which has extensive experience investigating aviation accidents.

Certainly, the blame game that normally accompanies air disasters has yet to turn up a villain in the Jan. 15 splash-landing.

All 155 passengers and crew members aboard the plane survived, thanks to exceptional flying by Capt. Chesley B. "Sully'' Sullenberger and his co-pilot, Jeff Skiles. The rescue of the downed passengers, who stood on the floating plane's wings, went off without a hitch. Injuries were relatively minor.

The investigation into the cause of the crash is ongoing, but all indications are that the plane's two engines were knocked out by a collision with a flock of large birds -- a freak accident that some pilots and other experts have said might have been unavoidable.

Still, there may yet be room for victims upset by the experience to find grounds for a lawsuit, lawyers said, especially if further investigation reveals catastrophic engine failure or that the bird strike might have been avoided.

"I fundamentally do not believe in a pure act of God air crash,'' said David Rapoport, a Chicago attorney with extensive experience in airline disaster litigation. "I have never found one yet ... and when all the data is all in here, my suspicion is that this won't be one, either.''

One possible area of litigation could be the effectiveness of programs aimed at driving birds away from LaGuardia Airport, where the flight originated.

Bird activity is a well-known hazard at LaGuardia, and the Port Authority of New York and New Jersey, which runs area airports, has implemented a wide array of measures aimed at driving away waterfowl, especially geese.

Green and other lawyers, however, noted that preliminary information seemed to indicate the collision took place miles from the Queens airport _ 3,000 feet over the Bronx, airspace where the Port Authority has little or no ability to control bird activity.

Another question revolves around the possibility that a mechanical defect may have contributed to the simultaneous failures of both the jet's engines.

"If, indeed, there was some other reason why one of the two engines failed, other than birds, you could have grounds for a suit,'' said Mary Schiavo, an aviation lawyer and former inspector general for the U.S. Department of Transportation.

The National Safety Transportation Board has not yet begun its analysis of the engines. One of the engines was located at the bottom of the Hudson River on Wednesday, and the other was still attached to the rest of the plane, which was taken by barge to a Jersey City, N.J., marina over the weekend for inspection.

With just days lapsed since the crash, it's impossible to measure how much legal activity it may someday generate.

Federal law, in fact, bars lawyers from soliciting business from air crash victims in the first 45 days after an incident.

New York state's bar association sent lawyers to the hotel where some of the crash victims gathered last week, but they weren't looking to pick up business; they were there predominantly to shoo away any ambulance chasers who turned up.

US Airways has already taken some steps to keep passengers happy, including cutting each one a check for $5,000 to cover their missing luggage.

The airline did not immediately respond to requests for comment on what other arrangements it might be making to compensate victims.

"I do think there will be payments to the people involved,'' Rapoport said. "The airline's insurers are probably willing to pay everybody something.''

But he and other lawyers also noted that Sullenberger's successful water landing changed the case's legal landscape dramatically.

"The difference between this being a case where you have half the plane dead and the other with serious injuries and everyone suing over post-traumatic stress disorder is the way the pilot performed,'' Green said.

Ironshore Creates U.S. P/C Operation Run By Former AIG Execs

Ironshore Inc. has appointed Steven England as executive vice president responsible for running its newly created U.S. Property/ Casualty underwriting operations based in St. Louis, Missouri.

The new unit, Ironshore National Branch, will act as a U.S. underwriting office for certain of Ironshore's property/ casualty operations. Ironshore National Branch will build out a national distribution platform for Ironshore products utilizing primarily a wholesale brokerage distribution strategy.

Jordan Gantz and Jim Dowdy have also joined the group and both report to Steve England.

England was most recently president of AIG Landmark, where he managed the start up of an agribusiness practice. Prior to heading up AIG Landmark, he was regional vice president for AIG's Commercial Insurance Group in Houston, Texas. he will report to Shaun Kelly, CEO of Ironshore's U.S Operations.

Gantz has been in the insurance industry for 23 years. Prior to joining Ironshore, he was most recently senior vice president for AIG Landmark where he managed the casualty start-up of the agribusiness practice. Before joining AIG Landmark, he was the chief underwriting officer in Bermuda for Allied World Assurance Co.

Dowdy has 27 years' experience in the insurance industry. Most recently, he was senior vice president for AIG Landmark where he managed the property start-up of the agribusiness practice. Prior to AIG Landmark, Dowdy was zonal property manager for Lexington Insurance Co.'s Northeast Zone.

Survey: Risk Managers Report Modest Premium Decreases in Q4

Insurance premiums for businesses continued a five-year trend of falling rates during the fourth quarter of 2008, but recent data suggest a reversal of this trend may soon be underway.

Rates for property, general liability, and directors and officers (D&O) liability premiums all decreased at a materially slower pace than in recent quarters, according to the RIMS Benchmark Survey, a survey of policy renewal prices as reported by North American corporate risk managers.

Data from RIMS Benchmark Survey corroborates Advisen's recent forecast that the commercial insurance premium market cycle is close to its bottom. Commercial insurance prices should begin increasing by the fourth quarter of 2009 or the first quarter of 2010, according to Advisen analysts.

The average general liability premium fell more than any other line at 5.9 percent in the fourth quarter, but this decrease is modest when compared to the 9.6 percent decline in the third quarter. Property premiums were off by 3.8 percent, again modest when compared to the 8.5 percent decline in the third quarter. Workers' compensation continues to reflect little volatility with a 0.8 percent decrease in the fourth quarter, consistent with a two-year trend.

Unsurprisingly D&O continued to show two trends: an increase for financial institutions buying insurance in the face of a meltdown in that sector; and falling average premiums for commercial business in other sectors. D&O rates fell 1.2 percent in the fourth quarter, down from 2.1 percent in the third quarter. Excluding financial institution buyers of insurance, the fall in premiums was 4.5 percent in the fourth quarter, as compared with 7.5 percent in the third quarter.

"Risk managers tracking RIMS Benchmark Survey results are keenly aware that we may not see continued price reductions for long," says Daniel H. Kugler, member of RIMS board of directors and assistant treasurer, risk management at Snap-on Inc. "The most recent data show that the soft market isn't over yet, but it may be losing steam."

"Overcapacity has driven a long soft market and the events of this past quarter may portend a market shift for commercial insurance," says Dave Bradford, executive vice president at Advisen. "In addition to much higher than average catastrophe losses in 2008, insurance companies are facing claims from the subprime meltdown, global credit crisis and now even from the Madoff scandal. Reserves for these claims and material losses in investment income have led to negative earnings and new capital is scarce," Bradford said. "We expect the next few quarters of data from the RIMS Benchmark Survey to show the end of the soft market."

Insurance Claims for 2008 U.S. Catastrophes to Top $25 Billion

U.S. property/casualty insurers are expected to pay homeowners and businesses $25.2 billion for 2008 property losses from 37 catastrophes — the fourth highest cost in a decade and the highest frequency in a decade, according to preliminary analysis by ISO's Property Claim Services Unit.

PCS estimates that insurers paid 3.9 million claims for damage in 40 states resulting from 2008's 37 catastrophes. More than 2.7 million personal lines claims accounted for 64 percent of the $25.2 billion loss, while 340,000 commercial lines claims accounted for 27 percent of the total loss, and 876,000 vehicle losses accounted for 9 percent.

The 37 catastrophes in 2008 were the result of hurricanes, severe weather, winter storms, and tropical storms. Hurricanes caused the largest loss, currently estimated at $13.3 billion in insured damage. Severe weather events — those producing damaging winds, large hail, tornadoes, and flooding — caused an estimated $10.5 billion in losses. Winter storms resulted in more than $1 billion in losses, and two tropical storms cost insurers $300 million of the total $25.2 billion loss.Among the 40 states experiencing insured losses from catastrophes in 2008, following are the states with the largest losses:

Texas

$10.2 billion

Louisiana

$2.2 billion

Minnesota

$1.6 billion

Ohio

$1.3 billion

Georgia

1.0 billion

Gary Kerney, assistant vice president, PCS, said there are several "extraordinary characteristics" of the 2008 catastrophes.

"Foremost are the six consecutive tropical systems that made landfall on U.S. coastlines. Dolly, Eduoard, Fay, Hanna, Gustav, and Ike struck along the coastline stretching from southern Texas to Virginia. Unusually frequent tornado touchdowns and related insured property damage contributed to record-setting frequency and significant losses in the first six months of 2008. All of this activity was followed by a very quiet fourth quarter in which PCS declared only one catastrophe — a winter storm in mid-December."

The 37 catastrophes in 2008 are the highest frequency in a decade, tying the number of catastrophes in 1998, 11 years ago.

2008 A Challenging Year, But Strong Business Model Underpins Industry Resilience, Insurance Execs Tell Joint Industry Forum

Catastrophes and Financial Crisis Test Insurers

NEW YORK, January 15, 2009 - The property/casualty insurance industry faced a series of challenges in 2008 as the financial crisis and natural catastrophes took their toll, but the insurance business model remains strong going forward, said chief executive officers (CEOs) participating in the View from the Inside Looking Out, a panel discussion at the 13th annual Property/Casualty Joint Industry Forum.

"We had the double whammy in 2008," said Charles (Chuck) Kavitsky, chairman, president and CEO, Allianz of America Corporation, adding:

"Between the catastrophe issues that we had to deal with as well as what was happening in the financial markets, we had a pretty significant test and the industry did great."

Moderated by Dr. Robert P. Hartwig, president, Insurance Information Institute (I.I.I.), the session offered insights into the way insurance company CEOs view the operational issues and challenges facing the P/C industry in 2009 and beyond.

Pierre L. Ozendo, CEO-Americas Division, Swiss Re, noted that the P/C industry is resilient because it is conservative in its risk management and because it is focused on a strong business model. "This industry is focused on a business model that has been proven over hundreds of years and continues to be proven today. Maybe we shouldn't dabble in things we don't know very well, but we do know our business model very well," he said.

Michael S. McGavick, CEO, XL Capital Ltd. agreed. "The business model of the P/C industry remains strong, vital and proven yet again." However, he cautioned underwriters not to let their eyes wander from that model.

"We're the survivor or beneficiary because we spend every moment focusing on the worst that can happen. Whenever we don't start from there we put ourselves at risk of being the alternative outcome," he said.

Franklin (Tad) Montross, chairman and CEO, General Re Corporation, said there were a number of lessons to be learned from the financial crisis.

"First the industry needs to reassess its reliance on catastrophe models. It's certainly an area where there's a dependency that we really need to understand."

Another is that diversification is not a strategy in and of itself, according to Montross. "Diversification is a byproduct, and the operational risk associated with diversifying portfolios is much greater than the diversification benefit," he said.

Speaking from the perspective of insurance buyers, Daniel S. Glaser, chairman and CEO, Marsh Inc, noted that clients more than ever want to see options during the insurance selection process. "The majority of clients are seeking alternatives," he said.

Glaser noted that the value of insurance brokers is enhanced by the current volatile economic conditions. "It's one of those quirky idiosyncrasies that volatility happens to be good for the brokerage industry. It's not necessarily good for our clients, but certainly our clients come to rely on our advice a lot more in times of volatility," he said.

John T. Hill II, president and COO, Magna Carta Companies, observed that the view from Main Street is that the overall downturn in the economy will hit companies hard. "The biggest concern that will affect Main Street insurers is that we're going to be faced with a greater number of companies contracting or going out of business," he said.

The CEO panelists said one challenge facing the industry in 2009 is that the cost of capital is rising. At the same time the capital markets are practically closed, making the cost of raising capital prohibitive.

"Costs are going up but it is a precious commodity," said Ozendo. "The return has to be assured otherwise we run the risk of putting shareholders and our future at risk.

"Kavitsky added: "Even though our capital position as a company is very strong, no one has excess capital to play with unless you are committed to doing something with it."

Obama Presidency Could Dramatically Influence Courts, Vanderbilt Prof Says

When Barack Obama becomes president, not only will the political landscape shift in this country, but the judicial landscape will as well. Empirical research from Vanderbilt professor of law and political science Tracey George shows how the United States court system, especially the Supreme Court and the Court of Appeals, could dramatically change soon after Obama takes office.

George said there is likelihood that as many as three Supreme Court justices could leave the court while Obama is in office. Those justices are most likely to be John Paul Stevens, Ruth Bader Ginsburg and David Souter.

"If a justice is considering stepping down, it tends to happen when the party of the president that nominated that justice is in power," said George.

George believes the Obama administration, like past administrations, will consider both political and policymaking goals in nominating a replacement. She expects his ideal candidate would be a Latina Democrat who is less than 60 years old.

"The president will want someone who will help strengthen political alliances. The election showed that the Hispanic community and women greatly helped Obama win," said George.

The best professional background is less clear. George said that Obama may look to the appeals court bench for nominees because he can be more confident about their likely behavior on the court and because they may face an easier confirmation process. Or he may look beyond the courts for individuals with ideas that dovetail with his own and who would bring a fresh perspective to the bench.

"Given his own background, it wouldn't be surprising if he nominated a law professor to the court," said George.

How smoothly will Obama's picks go through the nomination process?

George said if Obama is replacing one of the justices already on the left-leaning side of the court, "the process should not be as grueling as ones we've seen in the past because the appointment is unlikely to change the balance of the court."

But, she said the Harriett Miers' nomination highlights that the new president must consider the possibility that attacks might come from within his own party rather than from outside of it.

The real power may lie in the lower courts. George's research found that more than 30,000 cases were decided on the merits by courts of appeals last term as compared to fewer than 80 in the Supreme Court.

"In a real sense, the circuit courts are the court of last resort for most claims and parties," said George.

There are currently 13 vacancies on the courts of appeals (8 percent of the 167 active judgeships) and an additional 41 vacancies on the district courts (about 6 percent.) While George W. Bush came into office with even more openings to fill (26 court of appeals and 54 district court vacancies), George said the number of openings may quickly rise because the change in party in power may prompt Clinton and Carter appointees to step down soon to ensure a like-minded replacement.

George said the Democratic Congress may increase the number of federal judges, which it has not done in two decades despite repeated pleas from the federal judiciary.

Sabal Welcomes a New Team Member

Sabal Insurance Group is very pleased to introduce the newest addition to our client services team, Catherine Shertenlieb. Catherine joins Sabal from a large property/casualty brokerage firm in Atlanta, GA and has fifteen years experience in the placement and service of complex commercial insurance accounts.

Catherine’s versatile background includes the complete supervision of national insurance programs, marketing in both standard and non-standard markets, and agency management. In Atlanta, she was responsible for the brokerage services and captive coordination for one of the largest privately-held diversified conglomerates in the United States.

Catherine is a Certified Insurance Counselor and has a Bachelor’s Degree in Communications with a focus on financial services.

Sabal is excited at the addition of Catherine's wealth of technical expertise and market knowledge, and we are certain that she will be a valuable asset to our growing organization and its client base.

P&C insurers seen hurt by investment losses

NEW YORK, Jan 15 (Reuters) - Property-casualty insurers are expected to report lower investment income in the fourth quarter and will be hurt by additional catastrophe losses from worse-than-expected hurricane activity earlier in 2008, Wachovia said on Thursday.

Total insured catastrophe losses in 2008 rose to about $45 billion, about double 2007 levels and the third costliest year on record, according to estimate from Munich Re on Thursday.

Insurers are expected to absorb about one-fifth of global losses from the financial crisis, said Robert Hartwig, an economist with the Insurance Information Institute, citing figures from the International Monetary Fund, which includes life insurers.

While neither investment losses or claims have jeopardized insurers' solvency, profits declined in 2008, Hartwig told reporters."

Insurers have met the challenge and continue to pay claims in what is likely to become the longest recession since the Great Depression," said Hartwig, adding that the worst may yet come.

Catastrophe losses in the fourth quarter are expected to be minimal, said Hartwig.

Insurers with large investment portfolios could be among the worst hit in the quarter, Wachovia said in a note to clients, referring to companies that have invested in hedge funds and private equity firms. XL Capital Ltd (XL.N) and Max Capital Group Ltd (MXGL.O) are among those insurers.

Insurers are set to begin reporting quarterly results by month's end, with Travelers Cos Inc (TRV.N), Allstate Corp (ALL.N) and Chubb Corp (CB.N) among those expected first.

Wachovia cut its fourth-quarter earnings outlook for 12 insurers, including Allstate and Everest Re Group Ltd (RE.N). However, the brokerage expects policy rates to start going up as the year progresses, creating underwriting opportunities."

Private reinsurers should have an opportunity to write more business in Florida at the June/July renewals," Wachovia said, adding that the tough credit environment made it difficult for the Florida Hurricane Catastrophe Fund to raise enough capital to fully back its expected 2009 capacity.

Wachovia named Ace Ltd (ACE.N), EverestRe and PartnerRe Ltd (PRE.N) as its top picks, and said Ace is attracting business from insurance buyers seeking stable carriers, citing the financial woes of American International Group Inc (AIG.N), XL Capital and Hartford Financial Services Group Inc (HIG.N).

AIG, once the world's largest insurer by market value, has been badly hurt by massive mortgage losses in a financial products unit not tied to any insurance operations. The company was saved from bankruptcy by a U.S. government rescue that has risen to about $150 billion.

EverestRe and PartnerRe should see a rise in demand from insurers looking to expand the number of reinsurers they buy coverage from, according to Wachovia.

Former Iowa Commissioner Vaughan Named CEO of State Regulators' NAIC

Former Iowa Insurance Commissioner Therese M. Vaughan, Ph.D., has been named chief executive officer of the National Association of Insurance Commissioners (NAIC), effective Feb. 18, 2009.

Vaughan replaces Catherine J. Weatherford, who left the NAIC in July 2008. Andrew Beal, who served as acting executive vice president and CEO in the interim, has been promoted to chief operations officer. Beal also will continue to serve as the NAIC's chief legal officer.

Vaughan will serve as the association's primary representative and chief spokesperson in Washington, D.C. In addition, her responsibilities will include outreach to federal governmental entities and state government associations, as well as consumer and insurance industry representatives. She will also oversee the launch of the association's new Center for Insurance Information, which will make the NAIC information and resources more accessible to members of Congress and other federal agencies.

Prior to joining the NAIC, Vaughan was the Robb B. Kelley Distinguished Professor of Insurance and Actuarial Science at Drake University, a position she held since January 2005, following 10 years as Iowa Insurance Commissioner. The longest-serving commissioner in Iowa history, Vaughan also was an active member of the NAIC, completing a term as president in 2002.

The selection was based on the recommendation of a search committee formed last summer, which was chaired by 2008 NAIC President and Kansas Insurance Commissioner Sandy Praeger.

While the majority of staff members will remain in Kansas City, Vaughan's office will be housed in the association's Washington, D.C., headquarters. Vaughan will work alongside staff from the Interstate Insurance Product Regulation Commission (IIPRC). Vaughan is widely credited with being the architect of the NAIC's Interstate Insurance Product Regulation Compact.

Vaughan earned a Ph.D. in risk and insurance from The Wharton School at the University of Pennsylvania and a bachelor's degree in insurance and economics from the University of Iowa. She is a CPCU, an associate of the Society of Actuaries, an associate of the Casualty Actuarial Society and a member of the American Academy of Actuaries. She is the co-author of two college textbooks on insurance, Essentials of Insurance and Fundamentals of Risk and Insurance, the 10th edition of which was released in December 2007.

Poll Finds Americans Support Increased Business Regulation

A clear majority of Americans believe government regulation of business should be increased, a new poll showed Wednesday.

The poll, conducted by Public Strategies Inc. and the Politico news organization, found that more than seven in 10 Americans think U.S. business is on the wrong track, and 67 percent think federal regulation of businesses should be increased.

The poll, first in a quarterly survey to monitor Americans' trust in public and private institutions, followed a Wall Street collapse that has contributed to a dampening in consumer spending and deepened the recession.

Mark McKinnon, vice chairman of Public Strategies, said the results of the poll showed a a clear change from nearly 30 years ago when Republican President Ronald Reagan was swept to power by disparaging government as the problem, not the solution.

"That's really shifted here," he said. "Voters seem to be saying that government is the solution, or at least a big part of it."

The incoming administration of President-elect Barack Obama is expected to make a push for increased government regulation of the financial industry as a result of the Wall Street meltdown.

Voters appear to be looking toward Obama for change. The poll found 62 percent of Americans surveyed said their confidence in government and in the business community had fallen over the past year.

The poll showed support for Obama in putting together an economic stimulus package aimed at re-energizing the U.S. economy.

It said 45 percent believed the government's top priority over the next year is to bring forth an economic stimulus package that will employ out-of-work Americans. Only 12 percent cited a U.S. withdrawal from Iraq as the government's top priority for the next 12 months.

The survey said 46 percent would prefer the stimulus be used for direct spending on infrastructure programs over investments in corporations to protect existing jobs.

AIG to sell Canadian unit for about $308 million

CHARLOTTE, North Carolina-American International Group Inc., which received a massive cash infusion last year from the U.S. government, said Tuesday it is selling AIG Life Insurance Company of Canada to the parent of the Bank of Montreal for about $308 million in cash.

The deal is part of the New York-based insurance giant's restructuring plans and is expected to close by June 1.

AIG Life of Canada, based in Toronto, sells insurance and retirement savings products, including universal and term life plans, critical illness plans and annuities. The company sells its services through more than 5,000 agents across Canada.

"Acquiring AIG Life of Canada will strengthen BMO's overall financial planning, wealth and retirement offering, giving us the ability to expand our client relationships through a comprehensive line up of products," Bill Downe, president and chief executive of Toronto-based BMO Financial Group said in a statement.

BMO Financial said it will take on AIG Life of Canada's 300 employees and 400,000.

In November, the U.S. government gave AIG a $150 billion rescue package to help the company pull through the credit crisis. That package replaced an earlier loan of $85 billion after it became apparent the insurer needed more funds.

AIG said in October it would sell off a number of business units to repay the original $85 billion government loan.

The company has not specifically disclosed the assets it would sell or the expected prices from the sales. However, AIG has said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and plans to retain an ownership interest in its foreign life insurance operations.

As of Dec. 22, AIG had already sold interests in four businesses, and earlier in the month was said to be in the final stages of selling its U.S. personal lines business.

Shares of AIG rose a penny to $1.55 in morning trading Tuesday, while BMO Financial fell 18 cents to $26.77.

U.S. Safety Group Calls for Cell Phone Driving Ban

The National Safety Council, which campaigned to get U.S. states to enforce seatbelt laws, is taking on cellphones, saying it is starting a campaign to ban all use of mobile phones while driving.

Even so-called hands-free devices should be banned because studies show they do not make it any safer to talk on the telephone while driving, the group said.

"It's time to take the cellphone away," said Janet Froetscher, president and chief executive officer of the non-profit group.

"Studies show that driving while talking on a cellphone is extremely dangerous and puts drivers at a four times greater risk of a crash," Froetscher said in a telephone interview.

Many states and Washington, D.C. have laws requiring the use of a hands-free device while driving and using a cellphone. But several recent studies have shown drivers are far more distracted when speaking on a mobile phone, even with a speaker or headset, than talking to a live passenger.

Last month Dave Strayer of the University of Utah and colleagues demonstrated that drivers using a hands-free device drifted out of their lanes and missed exits more frequently than drivers talking to a passenger.

Strayer's team has also shown that drivers using mobile telephones are as impaired as drivers who are legally drunk.

A study from the Harvard Center of Risk Analysis estimates that cellphone use while driving contributes to 6 percent of crashes. Froetscher's group says that translates to 636,000 crashes, 330,000 injuries and 2,600 deaths in the United States each year.

"When you're on a call, even if both hands are on the wheel, your head is in the call, and not on your driving," Froetscher said. "Unlike the passenger sitting next to you, the person on the other end of the call is oblivious to your driving conditions. The passenger provides another pair of eyes on the road."

CALLING GOVERNORS

Froetscher said her group would call governors and state legislators and ask them to ban all use of cellphones while driving. She is confident the group can get states to change their laws.

"We have been through this before with seatbelts, with drunk driving. We do research. When the research demonstrates that something is very dangerous and we can save lives, we educate the public about it. We educate legislators about it," she said in a telephone interview.

John Ulczycki, a spokesman for the group, said it was behind the "Click it or Ticket" campaigns that have helped states enforce seatbelt laws.

Ulczycki said his group, which helps run court-ordered driver safety education courses, was also working with the wireless telephone industry. "Some people suggest and you might hear the argument that there might be a lot of things that are distracting in a vehicle and why are you picking on a cellphone?" he said.

He cited data from the International Association for the Wireless Telecommunications Industry that show there are 270 million wireless telephone subscribers in the United States, and more than 80 percent admit to using a cellphone while driving.

"There are over 100 million people engaged in this behavior," Ulczycki said.

"There may be other things that people do in their cars that are more dangerous than talking on cellphones. I think one of the most dangerous thing people do is turn around in their seats. But we don't have 100 million people doing that regularly for hours a day."

AFCO Credit Corp. to Acquire U.S. Operations of Cananwill

AFCO Credit Corp. has plans to buy the domestic operations and assets of the premium finance business of Cananwill from Aon Corp.

Glenview, Ill.-based Cananwill provides insurance premium financing for commercial property and casualty policies. It was founded in 1937.

AFCO is the primary insurance premium finance subsidiary of Branch Banking and Trust Co., the principal subsidiary of Winston-Salem, N.C.-based BB&T Corp. Pending regulatory approval, the AFCO purchase is expected to be completed by the end of the first quarter. Terms were not disclosed.

BB&T is the second largest provider of insurance premium financing in the United States and the largest in Canada. Insurance Premium Finance is a unit of BB&T's Specialized Lending division.

"We are strongly committed to insurance premium finance loans and this acquisition will significantly strengthen our franchise in the United States," said Tol Broome, manager of BB&T Specialized Lending. "Cananwill employees share our values and our common goals of providing outstanding client service and helping clients achieve financial success."

BB&T's insurance premium finance operation is made up of Pittsburgh-based AFCO Credit Corp. and AFCO Acceptance Corporation, which operate nine offices across the country; AFCO affiliate CAFO, which operates three offices in Canada; and Prime Rate Premium Finance of Florence, S.C.

BB&T acquired AFCO and CAFO from the former Mellon Financial Corporation in 2007. Founded in 1954, AFCO's client base includes large conglomerates, medium-sized corporations, municipalities, professional practices, sole practitioners, groups and associations.
Colonnade Securities LLC advised Aon and Cananwill on the transaction.
Source: BB&T Corp.

Employers Found Ignorant On TPA, Care Group Pay

Many employers could be paying inflated costs because a majority are not fully aware of how their workers’ compensation arrangements work with third party administrators or managed care organizations, according to a consulting firm.

“The fact that employers do not know if their TPAs or MCOs are paid on a percentage-of-savings basis or fee-for-network access is disturbing,” said Susan S. Toussaint, president of Injury Management Partners. “This is a huge concern because some payment methodologies create misaligned incentives and actually drive up claim costs.”

Injury Management Partners consulting firm, Palm Harbor, Fla. and Occupational Health and Safety Group Magazine of Chatsworth, Calif. reported that an online survey of 91 employers found 60 percent of them are unsure how their third-party administrators or managed care organizations were compensated for medical provider network development.

According to the poll there was even more ignorance about compensation arrangements for TPA and MCO bill review services, with 74 percent of employers saying they did not know what they were.

The survey team said the employers representing a variety of workers’ compensation programs, participated in the survey, and 48 percent of them were self-insured.

Another concern was that more than half of the employers indicated that their TPA/MCO did not conduct injured worker satisfaction surveys, and 32 percent of the respondents were not sure.

“The industry forgets who the ultimate customer is,” Ms. Toussaint said. “We spend millions of dollars trying to restore injured employees to health and full capacity, and we don’t even ask them, ‘How is this working for you?’”

The survey also probed injury management processes and learned that a little less than half of the respondents knew their physicians were committed to practicing evidence-based medicine.

The use of a post-offer, pre-placement medical screening prior to hiring employees was nearly 50-50 among respondents, and a full 82.9 percent had job descriptions specifying the physical demands and essential functions of the job.

According to the survey groups, the “best” survey news was that more than 56 percent of the companies said that injured employees returned to work, including modified duties, within four days. A large number, more than 78 percent, were found to have written and communicated return-to-work programs for injured workers.

"We believe that most of our readers have effective safety programs in place and are now focusing on new ways to reduce workers' compensation-related costs," said Susan Stilwill-Gentry, group publisher of Occupational Health & Safety. "This survey helps us identify areas that can be improved and to develop education and programs to help employers achieve their goals."

Consumers Seek Probe Of NAIC Over Locked Door Meeting

Consumer advocates have written 12 state governors and a dozen attorneys general asking them to investigate whether recent action by a group of state insurance regulators violated open meeting laws.

The letter was sent by the Consumer Federation of America, Washington, and the Center for Economic Justice, Austin, Texas, after a unit of the National Association of Insurance Commissioners held a closed door session to discuss actuarial and accounting changes for life insurers.

The letter asks the attorneys general to examine whether the “trade association” of the NAIC has been used to “to circumvent open meeting, open record and administrative procedure laws.”

The Dec. 31, 2008 letter is signed by Robert Hunter, director of insurance with the CFA, and Birny Birnbaum, executive director of the CEJ.

It followed a closed session meeting of the NAIC’s capital and surplus working group on Dec. 29, 2008 to discuss a capital and surplus relief proposal advanced by the American Council of Life Insurers, Washington.

The proposal, which was first brought to NAIC leadership in mid-November 2008, has received scathing criticism because of the lack of transparency and lack of information available to regulators and the public concerning the potential impact of accounting and actuarial changes being advocated.

The ACLI said the changes are necessary to bring capital and surplus relief to life insurers. It estimated that implementation of the nine-point proposal could save the industry between $9.6 billion and $16.4 billion.

In the wake of the letter, the NAIC announced during an informational conference call Friday that a public hearing will be held on the issue Jan. 27 in Washington.

The consumers’ letter was sent to all of the states represented by members of the NAIC’s capital and surplus working group—namely the District of Columbia, Connecticut, Delaware, Maine, Iowa, Kansas, New Hampshire, New Jersey, New York, Virginia, West Virginia and Wisconsin.

Copies also went to state and district representatives for the 12 members.

As of today, replies to the letter have come in from the New Hampshire Attorney General’s Office and Maine Insurance Superintendent Mila Kofman, according to the CEJ’s Mr. Birnbaum.

Bud Fitch, the New Hampshire deputy, responded that under the state’s open meeting law, the N.H. Superior Court has sole jurisdiction to address allegations of violations and pursue remedies. He added that the statute does not assign the AG’s office a role in investigating or prosecuting alleged violations. New Hampshire is the home state of Insurance Commissioner Roger Sevigny, the NAIC’s new president.

Ms. Kofman, the Maine insurance regulator, wrote that she shared the consumers’ “objections to the working group’s decision to close this conference call to the public, and I strongly urged the working group to have an open call allowing stakeholders and members of the public to hear concerns raised and learn how each state would vote on the specifics.”

“The objections I have raised influenced the decision to hold a public hearing before taking any final action.”

Ms. Kofman wrote that while regulators “should avoid regulatory actions that will show our carriers in a less than healthy financial light when in fact they are very healthy companies, and that we should be trying to find a balance and help carriers without hurting consumers, I have emphasized that the challenge is how to strike that balance and make sure we are not hurting consumers.”

She added, “Now, more than ever, we need realistic, accurate financial evaluations. We should be extremely skeptical about making any change now that we would not be just as willing to make in better financial times. And we should make sure that the changes benefit policyholders (not Wall Street).”

Ms. Kofman added, “When it comes to solvency, regulators should consider changes if there is solid and convincing evidence to demonstrate that some current accounting conventions and capital requirements are duplicative or treat unrealistic worst-case scenarios as likely. The case has not been made to justify such fundamental changes, affecting a multibillion-dollar industry and millions of consumers.”

In an interview Mr. Birnbaum said that “on this particular issue, it is clear that not only was more public vetting needed but also more information needed to be given to members.”

“As a general rule, too many things are discussed out of the public view.”

Mr. Birnbaum asked whether the NAIC is “going to be a publicly accountable entity and continue as a national regulator of insurance or act as a trade association? If they are going to be a trade association, they will be ceding their national right to regulate to the Feds.”

NAIC President Sevigny, Mr. Birnbaum said, has “a real opportunity to change the nature of the way the NAIC operates and to fend off the call for federal regulation.”

In response to a request for comment from Commissioner Sevigny, an NAIC spokesperson responding to the issue referred to the NAIC’s open meetings policy posted online at http://www.naic.org/documents/meetings_naic_policy_mtg_801.pdf.).

The consumer representatives’ complaint is the latest flap to erupt over NAIC meetings. Last year members of the National Conference of Insurance Legislators criticized the NAIC for closing sessions, and two lawmakers said security guards had tried to keep them out of one meeting. NAIC and NCOIL have since come to terms.

Crop Insurers Expect Congress May Ramp Up Oversight

Insurers participating in crop insurance, who have half their costs paid by taxpayers, are concerned they may face increased congressional scrutiny this year including possible hearings regarding their rates and agent commissions.

In preparation for greater oversight by lawmakers, the industry has had an accounting firm update a study which it believes counters the view of its critics who argue that the industry is easily as profitable as the property-casualty industry.

Crop insurers are also anticipating the March release of a Government Accountability Office study that was ordered by Congress in 2007 examining whether the government inappropriately subsidizes the commissions crop insurance underwriters pay their agents.

David Graves, a lawyer who represents the American Association of Crop Insurers, which lobbies for the industry’s companies, agents and reinsurers, cautioned that while the industry is gearing up for continued congressional scrutiny, it is “unclear what Congress will do,” other than release the GAO study.

“We just don’t know how significant oversight of this industry will be in the Congress that is convening today,” he cautioned.

He cited the heavy congressional workload, the fact that the Oversight Committee will have a new chairman and that the House Agriculture Committee, which has legislative authority, has other issues to contend with, including defending its oversight of the Commodity Futures Trading Corporation and, especially, CFTC regulation of credit default swaps.

The Independent Insurance Agents and Brokers of America also lobbies for crop insurance agents and is part of an industry task force that represents the industry’s interests in Washington.

An IIABA spokesman estimated that between 5,000 and 10,000 of its members sell crop insurance. He could not estimate how many non-IIABA producers sell the product.

The latest studies are a continuation of a May 2007 hearing convened by the House Oversight and Government Reform Committee.

The committee claims on its Web site that the hearing resulted in $1.8 billion in cuts in crop insurance subsidies to pay for other programs in the farm subsidy enacted last May.

Rep. Henry Waxman, D-Calif., former chairman of the panel who was recently elected to head the Energy and Commerce Committee, notes on the Oversight panel’s Web site that because of the May hearing the farm bill passed last June contains $3.4 billion in savings for the taxpayer from the program over 10 years.

He said on the Web site that the savings will come about because the bill “reduces excessive subsidies for insurers, provides new funding for program enforcement, and modifies other provisions resulting in waste and abuse by farmers and insurers…”

The study the GAO is expected to release in March is designed to analyze whether the government is paying the private crop insurers who administer the program more than they should because the companies provide incentives to agents to place coverage with them, rather than their competitors.

In his May 31, 2007 letter seeking the study, Rep. Waxman, citing testimony at the hearing, said commissions “are the industry’s number one cost,” with “commissions varying dramatically depending on how attractive an agent’s customers are to competing crop insurance companies.

According to the industry study—prepared by Grant Thornton, L.L.P., at the request of National Crop Insurance Services Inc., Kansas City, Mo.—the industry generated total premiums in 2007 of $6.6 billion, of which $3.8 billion was subsidized by the government.

NCIS President Bob Parkerson recently visited Washington to provide the study to appropriate congressional committees, and a spokesman said he visits Washington frequently to advocate for the industry and meet with appropriate regulatory agency officials.

The subsidy is paid for through an agency of the Agriculture Department which sets rates and otherwise oversees the program. The government provided $3.8 billion in subsidies to the program, which distributed $3.8 billion in indemnity payments to farmers. The program provides coverage on 272 million acres of major crops, with potential liability of $67.4 billion.

The Grant Thornton study states that the primary insurance program, the Multi-Peril Crop Insurance Program, is not as profitable as the property-casualty industry and writing the coverage “entails greater risk” than imposed on p-c insurers.

No major insurer owns a stake in the 16 crop insurance companies, most based in the Midwest, according to industry officials. Some are stock companies, others are mutual insurers, and one company, Rural Community Insurance Services, based in Anoka, Minn., is owned by Wells Fargo Corp.

Insurers Lose Big Toxic Cleanup Appeal In Calif.

Six insurers could be on the hook for a total of $100 million under the latest court ruling in a 15-year legal battle between California and its liability carriers over a claim for toxic waste cleanup costs, according to a plaintiff’s attorney.

That estimate came from Robert Horkovich of Anderson Kill & Olick, one of the firms representing the state against the insurers.

Mr. Horkovich said he expects the insurers to seek a review of the case by the California State Supreme Court in the wake of Monday’s verdict by the California Appellate Court (4th District) in Riverside, Calif.

The appeals court decision by a three-judge panel reversed a lower court ruling in 2005 that severely limited the insurers’ exposure and found they owed the state nothing after factoring in payments by other carriers that made settlements in the case.

At issue were cleanup costs that the state was held liable for after federal officials brought an action against it in 1998 over its faulty construction of a toxic waste collection point known as Stringfellow Acid Pits, which leaked poisons into groundwater extending for miles from its site at a rock quarry in Glen Avon, Calif.

The state has estimated that the past and future remediation costs could total up to $700 million. In limiting what California could collect from insurers, the trial judge, Erik Kaiser (now retired) relied on a California court decision in 1998--FMC Corp. v. Plaisted & Companies.

The Riverside appellate court panel, which remanded the case for further action, said FMC was a flawed decision because “it failed to follow other closely analogous California cases, based on reasoning that we find to be flawed and unconvincing.”

The FMC case ruling held that even though a policy covered multiple years, recoveries were limited by the amount of property damage taking place in a single year.

Mr. Horkovich said this meant the insured, in making a claim, basically had to pick only one year for which a recovery could be made.

Under the latest ruling, policyholders can stack coverage--accessing all coverage under all policies in all years triggered.

Insurers that remain as defendants in the case are Continental Insurance Company, Continental Casualty Company, Employers Insurance of Wausau, Horace Mann Insurance Company, Stonebridge Life Insurance Company, and Yosemite Insurance Company.

Each of them had issued to the state an excess corporate general liability policy covering a two- or three-year policy period.

Recession Seen Lasting Through 2009

There is light at the end of the recession tunnel, but the economy won’t see it until the end of 2009, and even then it might be dimly lit, according to an economic panel assembled by Prudential Financial.

The U.S. economy is 14 months into a recession that could last for the better part of 2009 before there is some recovery, a rebound that “will be tepid by historical standards, according to panelist Edward Campbell, a vice president and portfolio manager with Quantitative Management Associates, a unit of Prudential.
The reason, he explained, is because of the scope of the deleveraging that the economy still needs to undergo in spite of the tremendous stimulus that the government has already given the economy.

In order for the equity markets to rebound, the credit markets will also have to settle, Mr. Campbell said.

Tight credit markets and a deep recession that caused declines in a broad range of investments pared $30 trillion in paper wealth from investors, he said during the panel discussion.

Four anticipated consecutive quarters of GDP decline, including a 6-to-7 percent drop in fourth-quarter 2008 and a possible 5 percent decline in first-quarter 2009, speak to the depth of the recession, he added.

In spite of the severity of the downturn, don’t look for a repeat of the 1930s and the Great Depression or a “Japanese style loss of a decade” that occurred in the 1990s when the Japanese experienced protracted deflation, according to Mr. Campbell.

The reason, he said, was because government took a wide range of steps including dropping interest rates to near zero percent, “running the printing presses” and making currency available, and lending to the private sector.

Even so, the impact was felt in the way that participants in 401(k) plans handled contributions and withdrawals, according to James Cornell, senior vice president and chief marketing officer with Prudential Retirement, a unit of Prudential Financial.

Mr. Cornell cited an AARP, Washington, report that because of the economy, 20 percent of respondents had stopped contributing to retirement accounts and that hardship withdrawals and loans against plans are increasing.

Prudential found that the number of hardship withdrawals from DC participants increased 45 percent compared with numbers recorded in 2007, he said.

But, Mr. Cornell continued, in the last four months of 2008, hardship withdrawals decreased and logins for economic calculators were 108,000—a 28 percent increase over 2007. Those calculator visits, he said, resulted in increases in contributions that were, on average, 4.2 percent.

While hardship withdrawals are down, that number tracks unemployment statistics and could increase if unemployment grows in the first part of 2009, he confirmed.

Mr.Cornell also expressed concern that some companies are suspending matching of contributions from their employees, saying that it will especially hurt new participants and new hires who might decide not to contribute.

Edward Keon, managing director and portfolio manager with Quantitative Management Associates, agreed with Mr. Campbell that the government had taken steps to “avoid disaster” but that going forward balance will need to be restored in several areas.

In the near term, the government had to address the financial crisis, he said. “If the house is burning, you don’t worry about water damage to the furniture.”

But going forward, it would be better if the savings rate grew at a steady rate rather than experiencing a sudden jump because of the potential for a parallel drop in consumption and gross domestic product, he explained.

Balance is also needed in weighing risk and safety because too much emphasis on safety will stifle the economy and prevent it from growing and flourishing, Mr. Keon said.

Avoid These Global Claims Hotspots, Aon Warns Insurers

With increases in fraud and legal fees spiraling upward, insurance carriers will need to deal with a growing number of claims burdens globally in 2009, executives of insurance broker Aon said, pointing out five claims hotspots in the New Year.

Issues such as environmental threats, terrorism and product recalls shaping the claims landscape for clients in the United Kingdom are also global challenges, Aon executives said. These concerns will test the adequacy of policy coverage and the willingness of insurers to pay claims for the emerging and potentially costly issues.

Aon warned insurers to brace themselves for five top claims hotspots:

• Higher claims costs due to legal fees, credit hire and referral fees driving premium increases.

• Increased fraud as the recession takes hold, leading to delayed claims settlements and greater bureaucracy.

• New sources of liability from unexpected exposures, such as emerging and unproven technologies including nanotechnology, more product contamination issues and liabilities from financial derivatives.

• More extensive environmental pollution claims as environmental awareness increases and, in the United Kingdom, with the implementation of the Environmental Liability Directive.

• Terrorist/piracy attacks affecting commerce worldwide and possibly stifling trade.

“2008 was characterized by the rapid onset of a major global recession and the impact is spreading in terms of claims trends in 2009,” John Bell, head of claims for Aon’s commercial insurance team in the United Kingdom said in a statement. “There is a growing possibility that any financial loss may be pursued against directors who are considered to be at fault and individuals are less well off so may be tempted to make fraudulent claims. However, this comes at a time when insurers are less inclined to take a sympathetic view to paying even legitimate claims.”

He added that the increased cost of resources needed to respond to more claims and the cost of payments will be transferred back to businesses through increased premiums. “[Businesses] need to keep risk awareness at the top of their agenda so brokers can show insurers that their clients have identified risks and have plans in place to reduce or manage them. This means insurers will be more likely to respond positively in terms of pricing,” he said.

Mr. Bell said that clients need independent claims advice to make sure that valid claims are paid swiftly. “Struggling businesses should not have claims delayed by insurers switching to investigate every claim as fraudulent and introducing added complications to this crucial process.”

Neil Harrison, deputy group managing director of Aon Global Risk Consulting said in an e-mail comment that “The claims hot spots identified for United Kingdom companies provides a useful guide at a global level. From a U.S. perspective, Aon anticipates the usual recession-related uptick in claims costs associated with workers’ compensation and fraud, and the now established focus on costs arising from natural catastrophes as the two items which will likely demand the most attention from risk managers and claims managers.”

He said that Aon also notes the availability of “cost-effective pre-loss and post-loss mitigation techniques to assist organizations in their response to these two challenges.”

Aon, he concluded, is urging clients to continue to focus on prevention and planning as the most effective methods to protect balance sheets and assets.