Threat of Active Atlantic Hurricane Season Growing, Says U.S. Forecaster

The threat of an above-average 2010 Atlantic hurricane season has heightened over the past month and it now promises to be "a hell of a year,'' a leading U.S. forecaster said Wednesday.

William Gray, the hurricane forecast pioneer who founded Colorado State University's respected storm research team, said CSU would ramp up its predictions for the 2010 season in a report due out on June 2.

"The numbers are going to go up quite high,'' Gray said. ''This looks like a hell of a year.''
A higher forecast raises the prospect the vulnerable U.S. Gulf Coast may see a repeat of the 2005 season when a record 28 storms formed, which killed nearly 4,000 people and caused an estimated $130 billion in total damages.

The list included hurricanes Katrina, which devastated New Orleans, Rita which plowed into southern Louisiana, and Wilma, the most intense storm recorded in the Atlantic basin with peak winds of 185 miles per hour (295 kph).

Gray, who spoke on the sidelines of a regional hurricane conference, declined to specify the number of storms CSU will forecast in its outlook next week.

In its previous forecast, released on April 7, CSU had projected the season would produce an above-average eight hurricanes, four of which could be major.

In 2005, there were seven major hurricanes.

In its April 7 forecast, CSU also said the six-month season beginning on June 1 would likely produce 15 named tropical storms. An average Atlantic season has about 10 tropical storms, of which six become hurricanes.

Major hurricanes pack powerful sustained winds of at least 111 miles per hour .

Gray and Phil Klotzbach, lead forecaster with the Colorado State team, both told Reuters that forecast models showing a recent shift in wind patterns and warm tropical Atlantic waters had reinforced the likelihood that a busy hurricane season was on its way.

They referred specifically to reduced wind shear probabilities due to the dissipation of the El Nino weather phenomenon over the Pacific Ocean.

"El Nino died pretty quickly over the past couple of months,'' Klotzbach said.

An El Nino would normally allow wind sheer to seep into the Atlantic, disrupting storm formation and pushing embryonic hurricanes out to sea far from the oil-rig rich Gulf and the U.S. mainland.

Wind shear -- caused by a clash between prevailing upper-levels winds out of the west and lower-level easterly winds out of Africa -- can tear apart hurricanes or break up their circulation.

"Everything is setting up as a very active season,'' Gray said.

STORMS MAY PUSH OIL FROM SPILL INLAND

Both Gray and Klotzbach said there were too many uncertainties about the Gulf of Mexico oil spill to make any predictions about how it might come into play in the upcoming storm season.

But they were dismissive of claims the oil slick could keep storms from gathering strength and said a powerful cyclone, particularly if it comes out of the western portion of the Gulf, could propel large quantities of oil ashore in the northern Gulf.

"The counter-clockwise circulation could push oil inland, into the inland waterways, and cause a lot of problems,'' Klotzbach said.

Federal Emergency Management Agency director Craig Fugate, who spoke at the same hurricane conference in Fort Lauderdale on Wednesday, seemed exasperated by public attention to the oil spill as another potentially deadly hurricane season looms over the Caribbean and the U.S. Atlantic seaboard.

"It concerns me that we're talking about the oil spill and we're not talking about hurricane season,'' Fugate told reporters.

"Given the vulnerability of many of our coastal communities to a major landfalling hurricane, a failure to prepare for that will negate any of the work that's been done to deal with the impacts of the oil spill,'' he said.

"Yes there's an oil spill, yes it's devastating, and yes it has significant impacts to our coastline, to our tourism and to the environment. But do not confuse that with the deadly power of a major hurricane.'' he said.

Thieves Grab $1 Million in Sunglasses from Florida Factory

Sunglasses with a retail value of up to $1 million were reported stolen from a Daytona Beach factory.

Police say employees discovered the break-in Monday. The thieves apparently disabled telephones, security cameras, the alarm and computer systems of Costa Sunglasses Co. sometime Sunday night. The suspects loaded 12 pallets of merchandise on a semitrailer.

The merchandise was worth $100,000 to $250,000, with a retail value of $500,000 to $1 million.

Besides the sunglasses, burglars also took a computer monitor and hard drive.

Police are still investigating. No arrests have been made.

Lloyds, Other Insurers Sue to Block BP Claim Against Transocean

Lloyd's of London has asked a U.S. court to block a claim filed by oil major BP seeking damages against driller Transocean, which drilled the well which is currently gushing crude into the Gulf of Mexico.

Lloyds underwriting syndicates and other insurers who provided $700 million of cover to Transocean lodged a case with a federal court in Houston, arguing that the policies provided to Transocean preclude claims related to environmental damage caused by leaks from the well.

According to court documents, the insurers argue that Transocean's contract with BP only makes it liable for environmental damage caused by any spills from its rig, which exploded and sank, causing the pipe running from the rig to the well to snap. The well is leaking oil.

BP said it had lodged a claim against the insurers but declined to comment further. No one was available for comment at Transocean.

Even if BP were awarded the full $700 million of cover the insurers provided to Swiss-based Transocean, it would be only a small fraction of the total bill for the cleanup operation and compensating people who suffered losses due to the spill. Analysts at UBS put the likely cost of this at $12 billion, in a report issued on Tuesday.

MGAs Called Critical to Florida's Property Insurance Market

Several of Florida's insurers with affiliated managing general agencies (MGAs) have come in for criticism recently but there is no widespread problem with the MGA model, regulators and insurance industry executives agree.

In a new Insurance Journal video interview, they also agree that insurance company-MGA relationships are critical for the future of Florida's property insurance market, as they represent one of the few ways the hurricane-prone state is able to attract insurance capital.

The issue of Florida insurers diverting profits into management and reinsurance companies they own was the subject of a Sarasota HeraldTribune special report.

Earlier this year, the Office of Insurance Regulation questioned the deals two insurers had with their MGAs. OIR told Southern Oak Insurance Co. to reduce the payment it was sending to its MGA. A director and part owner of Hillcrest Insurance Co. in Gainesville was ordered to return $600,000 in policyholders' money. Another company's payment to its own reinsurance arm was questioned. A few of the companies that have failed are among those suspected of questionable deals with affiliated companies.

But there have not been a lot of cases of internally-owned MGAs profiting while the insurance company loses money.

"It's definitely a problem. The extent to which it is a problem is a little bit more of a debate. There have been some companies, some of those who have failed that did bad things. They basically, loaded up the back-door and took a lot of the surplus out of the company and left it dry when it came time to pay the claims or to honor its obligations," says Jeff Grady, president of the Florida Association of Insurance Agents, in the interview with Insurance Journal's Andy Simpson from the FAIA office in Tallahassee.

Insurance Commissioner Kevin McCarty thinks the problem is manageable and does not involve a lot of companies.

"I do not think it's a widespread problem," McCarty told Insurance Journal. "I can assure you those that are gaming the system, they'll be found and that's just, and that will be rectified.

"What we're talking about is really a handful of people who are gaming the system, where they're using the holding company and the affiliated parties to move money out of the insurance company into the MGA and some of those have been unsigned deals, some of them have been through overestimating the profitability of the company, and what we're here to ensure is that we have no problem with engaging services of an MGA or engaging the services of an affiliated as long as it's an arms length deal and the money is not going outside the company to the detriment of the policy holders," McCarty says in his interview.

The state appeasr to have good reason to keep the problem in perspective.

"Because of the situation we have in Florida, it is really the only mechanism that attracts capital to Florida, this internally-owned MGA," says Grady. "So when you paint them all with the same brush, and you make them all out to be bad guys, you kill the only thing that we have left which is the manner in which we bring capital to our state. And there are a lot of good actors there. And we can't afford to do that."

James Graganella, president/CEO, Southern Fidelity and Capitol Preferred, says the state would be in even more trouble than it is now with property insurance if it were to discourage MGAs.

"We need the MGAs to be profitable and the insurance companies, too, because that's what attracts capital to Florida. Let's face it, we are in a high catastrophe prone area and after '04 and '05 if we didn't have that provision in our statute I can promise you we wouldn't have been able to attract capital to Florida," Gragaenlla says. "We have to do that. If we don't have the ability to attract capital to Florida then Florida's insurance market will not survive. So that's very important, but it's also not fair for investors to make a profit while the insurance companies are losing money."

According to Jay Newman, chairman, Sawgrass Mutual, MGAs were responsible for a lot of new capital in the 1990s and then again after the big storms of 2004 and 2005.

"It just shows you that this is a model that can be used to bring capital to the state of Florida. In fact, it's probably the only workable model for bringing capital into the insurance market in Florida that we know about," Newman says.

McCarty agrees with the industry that MGAs are critical to the marketplace—and not just because of their capital-raising potential.

"[M]anaging general agents play a major role in our marketplace and are very important from issuing the policies to negotiating reinsurance and there are some very, very good ones and we're glad to have them because they bring some enormous expertise and talent into the business," McCarty says.

The OIR has not had the authority to inspect upstream transactions by insurers and now only finds out about them after they happen. But that could soon change.

Recently passed omnibus property insurance legislation, SB2044, includes a provision giving OIR access to more financial information on transactions between insurers and their affiliates. The final bill requires insurers, if requested by OIR, to submit information on any affiliated managing general agencies or other affiliated companies to which they have made payments. "The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer," states the bill. Current law exempted MGAs solely representing a single domestic insurer from scrutiny.

"I'd like to be able to sign that," Gov. Charlie Crist told McCarty at a Cabinet meeting after he said he was working with lawmakers on the bill.

But the MGA provision is part of the omnibus measure, SB2044, which contains multiple parts and some provisions Crist may not like. He has not yet indicated if he will sign SB2044, although McCarty, Grady and others have urged him to do so.

S&P Expects Re/Insurance Losses from Gulf Oil Spill to Be Minimal

Based on what are so far only preliminary estimates, Standard & Poor's Ratings Services said it expects insured losses from the oil spill in the Gulf of Mexico "to be significantly less and be spread among multiple markets and re/insurers."

The report, published on S&P's RatingsDirect, is entitled "Despite Significant Environmental Damage, The Gulf Oil Spill Losses to Re/Insurers Are Expected to Be Limited." S&P indicated that "preliminary net loss estimates by some re/insurance companies indicate that losses could be contained within second-quarter 2010 results."

Nonetheless, S&P stressed that the "Deepwater Horizon oil rig explosion in the Gulf of Mexico in April is likely to become one of the largest oil spills of all time, and the cost will be significant because the contamination area continues to spread. The early economic damage estimate from this man-made disaster has already reached a few billion dollars."

The report notes that "some of the early disclosures include only the property losses, as the liability portion is difficult to estimate at this point."

However, S&P said it expects "losses from this event--with the possible exception of a few outliers--to affect earnings rather than capital. Based on these early estimates alone, we do not expect to change any ratings at this time as a result of the oil spill," S&P concluded.

Florida Hurricane Fund Has $17 Billion in Cash for Claims

The Florida Hurricane Catastrophe Fund is as healthy as ever heading into the 2010 storm season.

An advisory council to the fund reported Tuesday that it has enough cash and bonding ability to pay off more than $25 billion in losses if necessary. A financial adviser to the fund said Florida could withstand $17 billion in storm losses without having to seek additional bonding.

Advisers said the state has $6 billion in cash reserves, $3.5 billion in pre-event bonding and $7.1 billion in required private insurer contributions.

Bonds that are issued by the fund, which was created after Hurricane Andrew to help keep down the cost of insurance, are paid back by assessing insurance policyholders in Florida.

The insurance industry has been warning about the fund's finances for years.

Key Facts, Common Myths About Protecting Homes from Hurricanes

With weather forecasters calling for a worse-than-average 2010 Atlantic basin hurricane season, the Institute for Business & Home Safety (IBHS) is advising property owners on the most effective ways to protect their homes and businesses from hurricane damage.

IBHS is also trying to dispel some common myths about hurricane preparedness.

Forecasters predict 15 named storms to form in the Atlantic basin between June 1 and November 30, with eight expected to be hurricanes and four developing into major hurricanes (Saffir/Simpson category 3-4-5) with sustained winds of 111 mph or greater. The prediction is based on the premise that El Nino conditions will dissipate by this summer and that anomalously warm tropical Atlantic sea surface temperatures will persist.

IBHS is a nonprofit scientific and educational organization supported by the property insurance industry. Here's what IBHS wants property owners to know:

Facts:

1. A new, well-installed roof is one of the best forms of protection available

If your shingle roof cover needs to be replaced, do it now, while there is still enough time for the shingles to heat up and seal properly before a storm threatens. Be sure to remove older material down to the roof sheathing and have the deck re-nailed. Spend a little extra to provide a secondary water barrier (in some areas, insurance discount may be available if you re-nail and/or install an approved secondary water barrier so check with your insurance company) and have a high wind-rated roof cover installed. IBHS has detailed guidance available to help you specify a quality installation.

2. Protecting all openings in exterior walls will greatly improve a building's chances for surviving a hurricane

One of the most important things you can do to improve the chances your home or business will survive a hurricane is to protect all windows and doors. The range of products on the market today, such as storm shutters or impact-resistant windows, means it's easier to find protection that fits your budget. Whatever you choose, make sure the product has the proper product approvals for wind pressure and large-missile impact. If it is not a permanent product, place permanent fasteners ahead of time so installation is easier when storms threaten. Gable end vents can be shuttered as if they were a window. Garage door companies have bracing systems available for about $400 that should work for most door styles.

3. Securing loose roof shingles is critical

Keeping shingles attached is critical. If the edge shingles are not well fastened or extend beyond the drip edge more than a 1/4", high wind can lift them off and create a peeling process or domino effect. If they come up without much effort (older shingles become brittle and may crack when bent too much), secure them with three one-inch dabs of roofing cement under each tab.

4. Sealing openings, cracks and holes will help prevent water damage

Water can invade homes in a number of ways, especially when it's being blown horizontally. The problem is compounded if there is a loss of power and air conditioners or dehumidifiers are unable to dry things out. Fill holes where wires, cables and pipes enter and exit the house and seal around electrical boxes and circuit breaker panels. Seal cracks around wall outlets, dryer vents, bathroom and kitchen vents, and wall lights.

5. Strengthening soffits (the material covering the underside of your roof overhang) also helps prevent water damage

Keeping soffits in place can help keep water out of your house. Some vinyl and aluminum soffit covers have wood supports, but the soffit material is not adequately fastened to the wood, or there is no wood backing and the vinyl or aluminum channels are stapled or nailed to the wall. If there are wood supports, secure soffit material with sharp-pointed stainless steel screws. If the channels are just nailed to the wall, you can use polyurethane caulk to seal the channel to the wall and tie the parts together.

6. Limiting potential flying debris helps protect your building

Limiting possible sources of wind-borne debris by surveying your building's surroundings before a storm will help protect your home or business and those around you. Replace gravel/rock landscaping materials with shredded bark. Limit yard objects. Keep trees and shrubbery trimmed. Cut weak branches.

Myths:

1. Open the windows on the leeward side of the house so the air pressure doesn't explode the building

It is almost impossible to know ahead of time which wall will be the leeward wall – and wind directions frequently change as a storm passes. Trying to open and close windows during the storm puts you next to glass that can break, causing injury. Also, as wind direction changes, open windows could allow wind-driven rain to stream into your house or business and ruin belongings. The normal leakage of air around windows and doors will tend to keep the pressure in your building slightly lower than the atmospheric pressure caused by the storm outside. The greatest danger comes when a large window or door fails on a wall facing the wind. The key is keeping all wind and water out with proper opening protection.

2. You only need to protect the openings facing the ocean or gulf

Because hurricanes are a moving, rotating storm, winds can come from any direction, which can change rapidly if you are near the eye. Your best bet is to protect windows and doors on all sides of your building.

3. Tape windows with a big "X"

Taping glass does nothing to address the main point of protection – keeping the glass in its frame and securely attached to the building.

4. Leaning or pushing against a window or door that is being blown inward by wind pressure can help keep the window or door from breaking or opening.

This clearly puts you in harm's way and increases the likelihood that you will be cut or injured. No matter what kind of glass you have, stay away from all windows during a severe storm. Before a storm threatens, review the anchorage of your doors. On entry doors, you can install extra latches and make sure that hinges are well-anchored with long screws that extend into the wall framing. Take protective action ahead of time so that you won't be tempted to try and keep doors closed by pushing on them. Put as many walls as you can between you and the windward side of your home.

Florida Governor Signs Bill Regulating Use of Traffic Cameras Statewide

Governor Charlie Crist today signed legislation that creates statewide standards for the use of cameras as traffic enforcement devices.

House Bill 325, the Mark Wandall Traffic Safety Act, requires cameras to be tested regularly and to comply with specifications established by the Florida Department of Transportation.

The bill also requires that a notification of violation must be issued before a formal traffic citation and that points cannot be assessed toward a person's driver license.

A portion of the funds from traffic fines will go to the Brain and Spinal Cord Injury Trust Fund, which supports the Miami Project to Cure Paralysis. Earlier today, the Governor held a signing ceremony in Bradenton where he was joined by Melissa Wandall, wife of Mark Wandall, the legislation's namesake who was killed by a red-light runner in 2003.

In addition to the Brain and Spinal Cord Injury Trust Fund, a portion of the funds from traffic violations will also go to the Department of Health Administrative Trust Fund, which supports trauma centers, as well as general revenue and the county or municipality in which the violation occurred.

In 2008, there were 76 fatalities and more than 5,600 motor vehicle-related injuries caused by drivers who disregarded a traffic signal in Florida, according to the Department of Highway Safety and Motor Vehicle. Traffic signal violations were the sixth highest cause of traffic-related fatalities and the third highest cause of traffic-related injuries in 2008.

Chinese Drywall Maker Settles With Homebuilder Beazer; Terms Undisclosed

A Chinese drywall maker announced that it settled a case brought against it by U.S. homebuilder, Beazer Homes, for an undisclosed dollar amount.

Knauf Plasterboard Tianjin (KPT), through its legal representative, Don Hayden, a principal for Baker & McKenzie in Miami, said the settlement was reached in an attempt to put the issue behind them while assisting with Chinese drywall repair efforts.

“KPT has been in discussions with builders in recent weeks seeking a reasonable solution to repair homes built with KPT drywall,” said Mr. Hayden in a statement.

He confirmed in an e-mail to NU Online News Service that the settlement between Knauf Plasterboard Tianjin Co. Ltd. and Beazer Homes relates to impacted properties in the two Florida Beazer properties where affected Chinese drywall has been uncovered.

“The settlement is a settlement for present and future property claims in those two communities in addition to 54 other properties that Beazer has inspected outside the two developments,” he wrote.

He did not respond to a request to reveal the dollar-amount of the settlement before this article went to press.

The company said its drywall was imported into the United States within a 10-month period in 2006 and that KPT drywall accounts for 20 percent of all drywall imported from China during that period.

“KPT has developed a reasonable settlement offer to extend to homebuilders that will meet residents’ expectations to live comfortably in their houses,” the company said in today’s statement.

“This settlement is further proof of KPT’s commitment to cooperate with homebuilders, federal courts, regulators and official organizations,” Mr. Hayden said in the statement. “We will continue to work with these parties to ensure concerns pertaining to KPT drywall are addressed and properly fixed.”

In the same statement, Kevin Buster, partner at King & Spalding, who represents Beazer Homes, said: “We appreciate KPT’s efforts to resolve this issue.”

“As part of Beazer’s customer service commitment, it has investigated many homes nationwide, and has aggressively reached out to its homeowners in its two affected communities in southwest Florida,” he said.

“To date, Beazer has identified fewer than 50 homes with Chinese drywall, all located in those two communities.”

“Beazer has proactively developed and implemented a comprehensive repair protocol, has offered that protocol to each of its homeowners where Chinese drywall has been found, and has been repairing the affected homes for some time now.”

NU Online news Service, May 18, 4:05 p.m. EDT
A Chinese drywall maker announced that it settled a case brought against it by U.S. homebuilder, Beazer Homes, for an undisclosed dollar amount.

Knauf Plasterboard Tianjin (KPT), through its legal representative, Don Hayden, a principal for Baker & McKenzie in Miami, said the settlement was reached in an attempt to put the issue behind them while assisting with Chinese drywall repair efforts.

“KPT has been in discussions with builders in recent weeks seeking a reasonable solution to repair homes built with KPT drywall,” said Mr. Hayden in a statement.

He confirmed in an e-mail to NU Online News Service that the settlement between Knauf Plasterboard Tianjin Co. Ltd. and Beazer Homes relates to impacted properties in the two Florida Beazer properties where affected Chinese drywall has been uncovered.

“The settlement is a settlement for present and future property claims in those two communities in addition to 54 other properties that Beazer has inspected outside the two developments,” he wrote.

He did not respond to a request to reveal the dollar-amount of the settlement before this article went to press.

The company said its drywall was imported into the United States within a 10-month period in 2006 and that KPT drywall accounts for 20 percent of all drywall imported from China during that period.

“KPT has developed a reasonable settlement offer to extend to homebuilders that will meet residents’ expectations to live comfortably in their houses,” the company said in today’s statement.

“This settlement is further proof of KPT’s commitment to cooperate with homebuilders, federal courts, regulators and official organizations,” Mr. Hayden said in the statement. “We will continue to work with these parties to ensure concerns pertaining to KPT drywall are addressed and properly fixed.”

In the same statement, Kevin Buster, partner at King & Spalding, who represents Beazer Homes, said: “We appreciate KPT’s efforts to resolve this issue.”

“As part of Beazer’s customer service commitment, it has investigated many homes nationwide, and has aggressively reached out to its homeowners in its two affected communities in southwest Florida,” he said.

“To date, Beazer has identified fewer than 50 homes with Chinese drywall, all located in those two communities.”

“Beazer has proactively developed and implemented a comprehensive repair protocol, has offered that protocol to each of its homeowners where Chinese drywall has been found, and has been repairing the affected homes for some time now.”

Florida Leaders See Omnibus Bill Stabilizing Home Insurance Market

Florida insurance leaders belive that recently passed legislation (SB2044) is a step towards stabilizing the state's property insurance market that has had been rocked by politics, premiums assessments, company failures, reopened hurricane claims and a credit mitigation program that got out of hand.

At the same time, they warn that the legislation that they all hope Gov. Charlie Crist will sign will not solve all of the market's problems and it will not mean big savings for consumers.

In a new exclusive video, Insurance Journal's Andy Simpson interviews Jeff Grady, president/CEO, Florida Association of Insurance Agents; Kevin McCarty, insurance commissioner; James Graganella, president/CEO, Southern Fidelity and Capitol Preferred; and Jay Newman, chairman, one-year old Sawgrass Mutual on SB2044 and on what the Florida market might look like a year from now.

The bill under consideration by Crist, SB2044, addresses a number of costs in the system. It reduces the time a homeowner has to file a claim after a hurricane from three to five years and more closely regulates public adjusters, some of whom are blamed for an explosion of reopened claims from Hurricane Wilma five years ago. It allows an insurance company to withhold a portion of payment on a replacement cost claim to make sure that the money is being used to actually repair the property. It raises surplus requirements for carriers. It also streamlines the process for insurers to get state approval for reinsurance costs in rates and tries to bring premium credits for mitigation efforts under control.

Insurance agents believe the most important thing the bill does is give carriers a chance to get back on firmer financial footing so they are better able to pay claims in the future.

"This bill is meant to help restore solvency. I'm not suggesting that it does because just as it took a while to get to this point, it is going to take a while to get out of it, and let's keep our fingers crossed that there is no storms. But… there are some things in there that I think do good things for the companies, maybe do some good things for agents, but more importantly do great things for consumers which try to make sure that carriers can deliver on their promise," says Jeff Grady, president, Florida Association of Insurance Agents.

While all hope that the bill will help stabilize the market, consumers should not get their hopes up for huge premium savings, according to Insurance Commissioner Kevin McCarty.

"It's always dangerous to speculate about future rates. We will say, though, that the trajectory was for a very negative impact on companies. And what we're seeing hopefully is that the combination of the attributes of this bill will stabilize the market. At this point, we would be happy just stabilizing the market. I anticipate that there will be cost increases that are associated with doing insurance business in Florida, but we're hoping to see it return to profitability in the next fiscal year," he tells Insurance Journal in the interview in Tallahassee.

From the carriers' perspective, SB2044 represents a good first step toward a stronger market that will benefit them and consumers.

"It's not a game changer. It doesn't solve all the problems but it's a step forward just like the bill last year was a step forward," says Jay Newman, chairman, Sawgrass Mutual.

James Graganella, president and CEO, Southern Fidelity and Capitol Preferred, agrees.

"I think it's a step in the right direction. I think this is a bill that's very consumer friendly in the long haul," he said.

In the video interview, the leaders also address how they hope the Florida marketplace looks a year from now assuming Crist signs SB2044.

"No hurricanes - that's what I would hope for over the next six months - and that some of these good measures that were really a restoration of what we have lost are starting to have a positive impact on these carriers. They find their foundation and they start to grow surplus rather than lose it. And we are not having all this churning of business that is going on now; that we have some stability in the marketplace that agents feel comfortable in advising consumers to go with that company. That would be a much better day than where we are now," says FAIA's Grady.

Coming Hurricane Season Could Complicate Gulf Oil Spill Disaster

BP's oil spill could make for one of the highest-stakes U.S. Gulf hurricane seasons on record.

Storms may scuttle clean-up efforts, force containment vessels to retreat, or propel spilled crude and tar balls over vast expanses of sea and beach, scientists said.

Meteorologists say that climate conditions are ripe for an unusually destructive hurricane season, the storm-prone period that runs from June 1 to the end of November in the Gulf. Oceanographers say that could hurt the clean-up.

"If a storm comes into this situation it could vastly complicate everything,'' said Florida State University oceanography professor Ian MacDonald.

"All efforts on the shoreline and at sea, the booms and structures and rigs involved in clean-up and containment, could stop working.''

As thousands of spill responders gird for a clean-up that could last for months or years after the leaking well is capped, weather and ocean currents are emerging as major unknowns, raising anxiety levels, economic and environmental stakes in the Gulf as storm season nears.

Compounding the uncertainty is how little research has been done on how storms affect oil spills. Some believe storm surges may help disperse the oil off shore or break down the slick. Other research suggests the oil slick itself could keep storms from gathering strength.

Recent Atlantic Basin readings showed water temperatures up to 0.8 degrees Celsius above normal, and near a record high for the season. El Nino, which creates wind shear that can prevent Gulf hurricanes from forming, has recently subsided. The factors could spur major storms in the Gulf this year.

"It only takes one storm to wreak havoc,'' said Chris Shabbot, a meteorologist at Sempra in Connecticut. "The consensus forecast is for above average storm activity as the El Nino (event) decays and the Atlantic is as warm or warmer than 2005.''

Colorado State University's renowned team of forecasters is calling for an above-average hurricane season that may bring 15 named storms this year, eight of hurricane strength.

Accuweather's Joe Bastardi also fears a destructive season.

"I hate to say it since the oil spill is already affecting people, but I think this hurricane season is going to be big,'' he said in an interview.

The next official hurricane season outlook from the government's National Oceanic and Atmospheric Administration is due on May 20.

STORMS AND CURRENTS

Miles and miles of booms have been placed offshore along the Gulf Coast to help stop the slick from making landfall.

Amid the menacing forecasts, oceanographers and spill-responders are considering how storms and deep ocean currents would affect the movement of spilled oil, which authorities say could soon hit land in Louisiana, Mississippi, Alabama or Florida.

The U.S. coast of the Gulf of Mexico spans some 1,680 miles (2,700 km). The spill, gushing an estimated 5,000 barrels a day from a subsea oil well 50 miles south of Louisiana, has formed a thin oil slick that covered more than 1,200 square miles in late April, according to Louisiana State University researchers. The slick has been harder to define this month, and may be shrinking, LSU professor Nan Walker said.

Lurking under the sea surface, viscous tar balls are forming, facilitated by wave activity, as the heavier hydrocarbon molecules gradually sink towards the sea-floor, a process that can take months, scientists said.

Experts are having trouble modeling how the oil will react in water since BP hasn't disclosed exactly what kind of crude is spilling. Lighter oil evaporates quicker and is more easily dispersed by chemicals. Heavier crude can be more damaging to marine or bird life, but it could sink faster or be easier to contain.

As many as 520 vessels are already responding to the spill throughout the Gulf, according to U.S. authorities. Efforts to stop the spill involve drilling relief wells from a seaborne rig, which BP says could take three months. The company is also trying to cap the leak with a metal funnel on the sea-floor, to gather oil into a giant hose connected to a storage ship above.

Both of those efforts could be disrupted by tropical storms, which can force evacuation of oil and gas rigs throughout the Gulf.

Peter Niiler, an oceanographer at the Scripps Institution in San Diego, has researched how even winds caused by a low pressure cycle can displace floating scientific buoys from waters near Florida to Texas in less than a week.

"Anything on the ocean surface, including oil, can move very fast and just about anywhere that wind or currents push it,'' Niiler said.

The oil slick might even reach waters and shores abroad, scientists and foreign authorities warned this week.

Mexican officials say if the spill persists into the fall it could reach Mexican beaches along the country's Gulf Coast, the site of famed tourist destinations like Cancun.

Some of the spilled crude should make its way into the LOOP current, a deep ocean stream that transfers heat from the tropics to higher latitudes and becomes the Gulf Stream.

"If you look at it, the LOOP current could lead that oil right to Havana, Cuba,'' said Florida State's MacDonald.

After sweeping near Havana, the LOOP current continues towards the Florida Keys and the Gulf Stream heads up the U.S. Eastern Seaboard.

Some researchers said a wider dispersion of the spill may be good, and storms could help that process along. Researchers at NOAA, in a report last week, said the oil slick may also help to impede storm formation by preventing heat transfer from sea to air.

"There are two important issues here: the effect of hurricanes on the spill, and the effect of the spill on hurricanes,'' said Doron Nof, professor of oceanography at Florida State University.

"I think what a hurricane would do is break up the oil spill, making it even harder to clean up,'' he said.

Connecticut Babysitter to Pay $1.1M Settlement over Boy's Drowning

A Connecticut teenager and her mother have agreed to pay $1.1 million to the family of a toddler who drowned while the girl was baby-sitting.

The New Haven Register reports that Cheshire Probate Judge Raymond Voelker approved the settlement Wednesday between the Veenhuis family and Michelle and Krista Repko.

Authorities say Krista Repko was baby-sitting 3-year-old Cole Veenhuis and his twin sister when Cole drowned in the family's pool on May 2, 2009.

No criminal charges were filed, but the Veenhuis family pursued the case in probate court as part of Cole's estate. They included Repko's mother, Michelle, in their claim because she allegedly recommended her daughter to baby-sit.

A message left at the Repkos' home wasn't immediately returned Friday.

Property Insurers Watching Ominous Hurricane Forecasts

After significant catastrophe losses in first quarter 2010, U.S. property/casualty insurers and global reinsurers are hoping their balance sheets don't face further financial risks, even as conditions appear ripe for the upcoming hurricane season to be potentially as active as 2005. The industry enters the season on the strength of underwriting and financial results that rebounded in 2009 after deteriorating in 2008, a year marked by catastrophe losses from hurricanes Ike and Gustav and poor investment returns associated with the global financial turmoil.

Three forecasters predict four intense hurricanes in the Atlantic Basin, well above the long-term average of two to three intense storms. Warmer sea surface temperatures and a transition to neutral El Niño conditions are expected to enhance hurricane activity.

State wind and beach plans and last-resort insurers saw in-force liabilities grow by double and even triple-digit percentages from 2005 to 2009 in states such as North Carolina, Florida and Texas.

Though still major writers of homeowners' multiperil, Citizens Property Insurance Corp. in Florida and Louisiana Citizens Property Insurance Corp. have shifted market share to other carriers through takeout programs.

An A.M. Best Co. special report data show insurers' pullback from hurricane prone states accelerated in the 2005-2009 period compared with homeowners' multiperil business written earlier in the decade.

The top 10 A.M. Best rated writers' market share fell more than eight percentage points from 2005-2009 in Louisiana; about three percentage points in Mississippi; and more than nine percentage points in Texas.

Florida Man Charged with Arson of His Yacht Named Shameless

A Tallahassee man has been arrested on charges of arson, insurance fraud and grand theft after state investigaors said they determined the suspect intentionally set fire to his yacht, a 50-foot SeaRay named "Shameless," and then filed a false insurance claim to collect insurance benefits.

Florida CFO and State Fire Marshal Alex Sink announced the arrest of Arthur Freeman. He was booked into the Leon County jail. If convicted, he faces up to 65 years behind bars.

The arson was discovered when an evidence analysis established the presence of gasoline on the SeaRay, which runs on diesel fuel, accrding to officials.

The case has been turned over to the Fourteenth Judicial Circuit State Attorney's Office for prosecution.

Lawsuits Over Gulf of Mexico Oil Spill Expected to Increase Dramatically

Companies linked to the massive Gulf of Mexico oil spill are facing a flood of lawsuits, as legal actions from the disaster spread faster than the crude gushing from BP Plc's blown-out undersea well.

Nearly 100 lawsuits have already been filed across the Gulf region, and the disaster, which lawyers envision becoming one of the biggest class actions in U.S. history, involves billions of dollars in potential liabilities.

"This is not just an environmental disaster, this is a legal disaster, Alabama Attorney General Troy King told reporters Wednesday.

"It seems clear that this one will eclipse the Exxon Valdez payout,'' said Zygmunt J.B. Plater, who chaired a legal task force for a special commission in Alaska following the Exxon Valdez oil tanker spill there in 1989.

"The hit in terms of economics is going to be measurable and it's going to be greater,'' said Plater, a law professor at Boston College, who noted that the population and levels of investment along the Gulf coast dwarfed those at stake in remote Alaska more than 20 years ago.

BP is the most exposed to potential damages in the case. The London-based oil giant is the owner of the ruptured undersea well spewing out oil at an unchecked rate of about 5,000 barrels (210,000 gallons/795,000 litres) per day.

The resulting oil slick threatens fisheries, beaches and wildlife refuges -- and livelihoods -- along the Gulf Coast.

Other companies involved in the spill include Transocean Ltd., owner of the Deepwater Horizon drilling rig licensed to BP, and Halliburton Co., which provided a variety of services on the rig and was involved in cementing the well to stabilize its walls.

Families of some of the 11 workers who died in the April 20 Deepwater Horizon rig blast have filed wrongful-death claims, and people who were injured have also taken legal action.

The companies also face lawsuits brought by fishermen, restaurants, charter boat companies, hotels and rental property owners. Gulf Coast states could also sue, as could municipalities, for lost tax revenues, and shipping companies if traffic into major ports or the Mississippi River is disrupted.

"You're talking about the entire economic structure of five states and all their ancillary businesses,'' said Tim Howard, a Tallahassee lawyer who last week filed one of Florida's first class-action suits over the oil spill.

"You're talking maybe about close to a half a trillion dollar economy here,'' Howard added. "This is why you do not mess around and play around with something toxic.''

BP's shares have been pummeled since the accident, wiping about $30 billion from its market value.

The company has said repeatedly that it takes responsibility for the oil spill and will pay any legitimate damage claims. BP Chief Executive Officer Tony Hayward has said that includes interrupted business activity.

"SOME RED FLAGS''
BP declined to comment Wednesday on the number of lawsuits it now faces in connection with the spill.

But it moved last week to have what it then described as ''at least 70 suits'' consolidated in a court in Houston, the U.S. oil hub which also serves as the command center for teams directing the oil spill clean-up efforts.

In its appeal to a judicial panel that will decide which court is best equipped to hear the cases, BP also took the unusual step of asking that Houston Judge Lynn Hughes, appointed to the federal bench by former President Ronald Reagan, handle the multi-district litigation.

"It's a little unusual for the defendants in massive litigation to request a judicial panel to send them to a particular court with a particular judge,'' said Brent Coon, a lawyer who spearheaded civil action against BP after the 2005 explosion at its Texas City refinery, which killed 15 workers.

"It certainly raises some red flags for some people,'' added Coon, whose firm is representing a survivor of the rig explosion suing BP, Transocean and Halliburton, among others.

"BP's blueprint (is) saying that they're transparent when in fact they're not; saying that they accept responsibility when in fact they're already pointing their finger at the other guys,'' Coon said.

A lawsuit brought against BP by one of its own shareholders, who alleged the company helped cause the Gulf spill by putting profit before safety, was dropped by the plaintiff Tuesday without any explanation from lawyers.

But the move may offer little solace to BP.

"The number of cases is going to increase dramatically,'' said Robert Gordon, an attorney with New York law firm Weitz & Luxenberg, which is representing 500 Gulf area commercial fisherman in the oil spill litigation.

Florida Workers Compensation Rates to Drop Again

Workers compensation insurers writing in Florida have filed for an average 4.2 percent rate decrease.

This marks the eighth decrease in workers compensation rates since 2003. The cumulative overall statewide average decrease in workers compensation rates will be 64.7 percent since the 2003 reforms.

Insurance Commissioner Kevin McCarty said that the National Council on Compensation Insurance (NCCI) filing came into the Office of Insurance Regulation on May 7.

NCCI made the rate filing due to a change in the Special Disability Trust Fund (SDTF) assessment -- a change that ultimately reduces the insurance company's overhead expenses. The assessment rate has been reduced from 4.52 percent to 1.46 percent. This lower rate will be evident on new and renewal policies, effective July 1, 2010.

The Legislature established the SDTF in 1955 to encourage the employment of workers with pre-existing conditions. The SDTF was modified in 1997 to eliminate the eligibility for accidents after January 1, 1998. The SDTF is maintained by assessments on carriers and self-insurers. This is the first decrease in the SDTF assessment since 1994.

McCarty said the rate reduction follows a "consistent trend" of declining workers compensation rates that began following the legislative reforms in 2003.

In an interview with Insurance Journal before the rate filing was announced, McCarty said he thinks those reforms are still working.

"I'm told by many that the end is near and that the good days may be over, but we remain cautiously optimistic that we're going to continue to have a robust and affordable workers comp market," he said.

Massachusetts Cuts Worker's Comp Rates

Massachusetts has approved a 2.4 percent decrease in workers' compensation insurance costs, a figure that should reduce premiums by an estimated $22.5 million this year.

Originally the Workers' Compensation Rating and Inspection Bureau, a private, nonprofit organization of Massachusetts workers' compensation insurers, had asked for a 4.5 percent increase in rates. Based on the projected workers' compensation premiums of $935 million. That figure would have increased premiums by about $42 million statewide.

The rate reduction, which goes into effect Sept. 1, marks the tenth rate reduction in the Bay State since 1994.

"Lowering the cost of workers' compensation insurance is very much in keeping with our larger goal of improving the state's business climate so that we can grow the economy and create jobs," Gov. Deval Patrick said.

Barbara Anthony, undersecretary of the office of consumer affairs and business regulation, said the cut "offers further proof that reforms have created efficiencies within the system that continue to produce savings for businesses."

However, Paul Meagher, president of the Workers' Compensation Rating and Inspection Bureau of Massachusetts (WCRIBMA), sounded less enthusiastic about the cuts.

"In today's uncertain economic climate, maintaining a healthy voluntary market for workers' compensation insurance will likely be a challenge given the continuing increase in claims severity and low expected industry investment returns," he said. "The WCRIBMA is committed to working with its committees, members, regulators, and other stakeholders toward our shared goal of a stable and healthy workers' compensation market in the Commonwealth."

New Jersey Court Reverses Ruling in Insurance Records Case

A New Jersey court has found that records of settlements reached by insurance companies on behalf of government entities should be open to the public.

In 2008, lawyer Mark Cimino asked used the state's Open Public Records Act to request copies of legal settlements involving Gloucester County government.

The county argued that the settlements were made by insurance companies and that records of them were stored with the firms.

A lower court judge agreed that those factors meant the documents in question were not covered by the open records law.

But on Monday, a three-judge appeals panel reversed the ruling, sending it back to a lower court.

Gloucester County Counsel Samuel Leone says the county still believes it was right.

Insurance Industry Reacts to Gulf Coast Oil Spill

The blame game for the recent British Petroleum (BP) oil rig accident and subsequent oil spill is just getting started as are the insurance implications of this disastrous event, according to underwriters and other observers.

"It's going to take several years to sort out the various liabilities and what resources in terms of insurance assets and other assets each player is going to contribute," said John Nevius, a shareholder at Anderson Kill & Olick in New York and an expert in environmental insurance coverage.

According to Marla Donovan, vice president of product development at Burns & Wilcox, workers comp, excess casualty and liability, environmental and contingent business interruption are a few of the coverages that could be triggered by this event, but she expects the worst-case scenario.

"All liability coverages will be triggered," said Donovan. "This is an enormous property damage loss."

BP and the exploration company Transocean, and potentially Cameron International Corp. and Halliburton Co., are expected to have numerous payouts to deal with. These payouts will include coastal property owners, businesses along the Gulf Coast, and families of the lost the rig workers, just to name a few. Gulf Coast shrimpers, a Mississippi seafood company and stranded rig workers have already filed suits.

BP's chief executive officer Tony Hayward has told news outlets the company will honor all legitimate claims arising from the disaster. However, it is still anyone's guess as to what the total cost of this event will be to reinsurers and how these costs will eventually trickle down to the insurance industry. BP is self-insured but their total amount of self-insured retention (SIR) is unknown. Reinsurers will still be on the hook for a substantial amount.

"Every major reinsurer in the world is involved in this claim," said Donovan. "Swiss Re, Munich Re, Gen Re, Partner Re – everyone has a piece of this."

Partner Re has already come out and estimated that its losses will be in the $60 million to $70 million range, but Donovan and Nevius agree these are modest amounts at this point in time. However, it is important for the reinsurers to come forward with their potential liability so it doesn't look like they are dodging the situation.

"Usually the estimates are about one third of what it ends up being," said Donovan. "But no one that is participating can remain silent. It is standard for them to indicate how much they are involved and that is absolutely what is happening."

Oil Spill Insurance Issues

As insurers wade through the complications of this event, insureds are seeking respite and trying to save their businesses.

The weak economy forced many insureds to cut back on coverage that they didn't think they needed, such as environmental coverage, which could be crucial during this crisis.

"Environmental coverage is not a requirement most of the time like general liability," said Gina Jones, director of environmental programs at Burns & Wilcox in Centennial, Colo. "In this economic situation, insured's don't want to pay for something they don't have to."

Jones says that has left many business owners on the Gulf Coast vulnerable to the cost of the environmental impact of this situation.

"We have had a lot of calls from people and businesses that are uninsured for environmental exposures and are looking to buy after the fact, but it's too late," Jones said. "We can only help them going forward but a lot of insureds take the stance this isn't going to happen again."

Business income and business interruption are other huge liabilities because of this incident and could be covered on an environmental liability policy if the insured added business interruption coverage, says Joe Boren, CEO of Ironshore's environmental division and John O'Brien, president of the environmental division.

"Business interruption is an area that a lot of pollution policies have, and there is an option to purchase the coverage," said O'Brien. "But a lot of insureds do not purchase it because they think it won't affect them."

However, said Boren, many businesses will see differently after this event.

"Those in the hospitality industry [along the Gulf] are starting to get cancellations because of the pollutant incident and they may go look at their insurance policies and see they have no pollution coverage," Boren said. "This is going to lead people in commercial property business to say 'I have a gap in coverage because I didn't think I need it, and guess what, I need it.' The industry should start to see that."

Jones said this incident highlights why it is important for underwriters to discuss the importance of all of their potential exposures with insureds.

"If this teaches anyone anything it is that every one of our clients has an environmental exposure," she said. "It is real. If agents aren't talking about environmental exposures or insuring a particular risk, they are putting their E&O at stake because an insured could go back and say they weren't told they need pollution coverage."

Ironshore has formed a rapid response team of industry experts and has them on the Gulf Coast to answer liability questions about the incident and provide guidance from an insurance perspective. Since it is the only insurance carrier with an office in New Orleans, Ironshore has also been able to help workers on the ground make sure they have their liabilities covered.

"We know that whenever you have a crisis like this there is a lot of contractors out working and they may look at their insurance policies and say 'I need more limits to take on a project like this.' We wanted them to know we are available 24/7 if they need assistance," said Boren. "There are also people that aren't presently environmental contractors who are being used in that way to work on the spill, such as fisherman. Other people include those who are in related fields but are not environmental contractors and may not have environmental insurance at all and want to protect themselves."

Jones said Burns & Wilcox is also able to provide coverage for environmental contractors looking to assist with the clean-up efforts along the Gulf, and the company has been receiving many calls and submissions for that exposure.

Ironshore is also coordinating efforts with environmental contractors in different parts of the country that it doesn't insure with those working on the Gulf Coast.

"If we insure the company or not is irrelevant to us," said O'Brien. "We are just trying to match up resources where there is tremendous need for these resources. This is an unprecedented national emergency and doing what's right is way more important than just worrying about your own business."

Dog Attack Proves Costly for Tennessee Child's Family

The family of an 8-year-old girl who was attacked by a pit bull on her birthday is now wondering how to pay for a large hospital bill.

Eileen King has nothing but praise for the treatment her daughter Hailey received at Le Bonheur Children's Medical Center after the April 8 mauling in north Shelby County.

King told The Commercial Appeal her children are covered by her ex-husband's health insurance, but she's concerned she still might have to pay some of the $47,870 hospital bill.

"I don't know what I can do,'' said King, 42, a former gas station manager who is unemployed.

The woman who owned the dog that attacked Hailey was a renter and has no homeowners insurance that could cover the costs. King tried to contact lawyers, but they weren't making any promises that they could recover damages from the dog owner.

(According to the Insurance Information Institute, dog bites account for one-third of all homeowners insurance liability claims.)

An account for donations to Hailey's medical costs has been established at Regions Bank.

Hailey and her 9-year-old brother, Dylan, and a friend were walking in north Shelby County near Raleigh. She wanted to invite another friend to her birthday party.

A one-year-old pit bull named Spike was chained to a tree in the yard of a home, but broke its collar and attacked her, according to the Shelby County Sheriff's Office.
The dog dragged her down the sidewalk before a neighbor fended the dog off with a rake.

The dog's owner, Latoya Redwing, 32, gave up the dog to county animal control authorities and it was euthanized April 19, she said.

In an appearance in Environmental Court, Redwing received a $50 fine for violating a county ordinance.

Redwing said the dog was a gift after her Chihuahua died and that it was not vicious but had been provoked by children throwing bricks. She wasn't home during the attack, and didn't say that Hailey was one of those children.

"Personally, I love animals and I think that my dog, just because he was a pit bull, got a bad reputation before anybody even knew the situation and what happened,'' Redwing said. "He was already condemned.''

Redwing said she took flowers, a teddy bear and balloons to the Kings' home to apologize and offered assistance while Hailey was still in the hospital, but her mother told the woman to leave.

King said she doesn't believe that the dog was provoked and said she didn't want to hear Redwing offer any excuses.

Hailey is recovering well and is getting her school lessons at home. But it remains to be seen how well her right arm will bounce back. The dog bit down on her shoulder all the way to the bone and the injury required reconstruction of her rotator cuff, King said.

The attack was so severe "it was difficult to see all of the dog bites because of the blood,'' according to report by the deputies who responded that day.

But Hailey, who wants to be a veterinarian, said the attack hasn't shaken her affection for dogs, although she is "still scare of pit bulls.''

Don’t Assess Insurers For Failed Banks, Senate Urged

WASHINGTON—Legislation to fund the unwinding of failing companies that threaten the nation’s financial system should not put assessments on insurers, three trade groups have written the Senate leadership.

The three property and casualty insurance organizations in seeking an exemption cited insurers’ existing participation in the state funds that guaranty support for failed insurers.

Their plea was made in a letter to Sen. Harry Reid, D-Nev., Senate majority leader, and Sen. Mitch McConnell, R-Ky., minority leader.

The American Insurance Association, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America wrote their letter as floor debate continues on the bill, S. 3217, “the Restoring Financial Stability Act of 2010.”

Assessment provisions are part of the legislation dealing with financial institutions deemed “too big to fail.”

As currently written, the bill creates a Financial Stability Oversight Council of regulators whose role it will be to monitor the financial system for companies that have become so large or interconnected that their failure could threaten the economy.

Under the scheme as currently designed, if such an institution were to be declared insolvent, it would be liquidated by a Resolution Authority run by the Federal Deposit Insurance Corporation.

The Resolution Authority would be prefunded through assessments levied on institutions with assets of $50 billion or more.

Under the current language, the only insurer that would be assessed would be MetLife.

However, if the funds are inadequate, under the provision as currently written, a post-funding assessment would be mandated, and all insurers with assets of more than $50 billion would be required to participate, whether or not they have a federally regulated subsidiary.

It is this provision that p&c insurers seek to amend.

The issue has become more important since it is likely that the prefunding provision will be removed as debate continues on the legislation.

“We ask that you recognize the existing state insurance guaranty system and not subject the property and casualty industry to inequitable, dual resolution authority,” the letter said.

“Making property and casualty insurers pay twice for resolution threatens to increase costs for the 270 million home, auto and business policies that we honor across the nation,” the letter said.

“Instead, these assessments should only apply to non-bank financial companies that are deemed systemically significant and subject to heightened supervision by the Federal Reserve under section 113 of that legislation,” the letter said.

The letter argued, “It simply does not make sense for non-risky property and casualty insurers to be subject to two regimes—a state fund to address their own industry’s insolvencies, and a federal fund to address the insolvencies of unrelated financial services companies.

“It is inequitable to hold insurers responsible for the risky behavior of others,” the letter said.

Fla. Legislature Passes Commercial Lines Rate Deregulation

The Florida legislature has passed a bill that would exclude certain commercial insurance lines from the rate filing and approval process.

A spokesperson for Florida Gov. Charlie Crist said it was unknown at this time whether the governor will sign the measure.

Cecil Pearce, vice president of state affairs for the American Insurance Association (AIA), said the bill, S. 2176, passed by a vote of 119-0 in the House and 37-1 in the Senate.

According to the bill, the types of insurance lines not subject to filing and approval would be excess or umbrella; surety and fidelity; boiler and machinery and leakage and fire extinguishing equipment; errors and omissions; directors and officers; employment practices and management liability; intellectual property and patent infringement liability; advertising injury and Internet liability insurance; and property risks rated under a highly protected risks rating plan.

AIA, which supported the bill, said current Florida law exempts only those policies with annual premiums above $500,000 in addition to other criteria.

Mr. Pearce noted that the filing and approval exemptions would not apply to personal lines and to commercial risks that have catastrophe exposure, such as commercial property.

He said AIA has supported the bill to address what he called the “creeping effect” of increased rate regulation in insurance lines due to the issues experienced in Florida insurance lines impacted by catastrophes.

Rate regulatory efforts since the 2004 and 2005 hurricane seasons, he said, began to creep into unrelated commercial lines.

The goal, Mr. Pearce said, is to show that competition can accomplish effective regulation of rates in lines where there are a lot of sellers.

Mr. Pearce said the three keys AIA stressed to legislators were that the bill would not impact lines with catastrophe exposure, that the products in the bill were competitive with many sellers, and that the bill had the support of buyers of these products.

To highlight the third key, Mr. Pearce said Florida’s two main business groups—The Associated Industries of Florida and the Florida Chamber of Commerce—supported the bill.

Mr. Pearce said AIA had conversations with the Office of Insurance Regulation (OIR) and reported the regulators expressed concern with including professional liability and commercial auto when there is only a single vehicle.

To take care of regulators’ concerns, professional liability was excluded from the legislation, and the commercial auto portion applies only to fleets with 20 or more vehicles, Mr. Pearce said.

Several amendments were added to the bill, Mr. Pearce said, including a workers’ compensation measure supported by the state’s county sheriff’s association and an amendment designed to protect senior citizen’s annuities.

Mr. Pearce said his understanding is that the department will recommend that the bill be signed. An OIR spokesperson said the office is still in the process of reviewing the bill and the last-minute amendments.

NU Online News Service, May 3, 3:15 p.m. EDT

The Florida legislature has passed a bill that would exclude certain commercial insurance lines from the rate filing and approval process.

A spokesperson for Florida Gov. Charlie Crist said it was unknown at this time whether the governor will sign the measure.

Cecil Pearce, vice president of state affairs for the American Insurance Association (AIA), said the bill, S. 2176 (http://tinyurl.com/3xg8jsm), passed by a vote of 119-0 in the House and 37-1 in the Senate.

According to the bill, the types of insurance lines not subject to filing and approval would be excess or umbrella; surety and fidelity; boiler and machinery and leakage and fire extinguishing equipment; errors and omissions; directors and officers; employment practices and management liability; intellectual property and patent infringement liability; advertising injury and Internet liability insurance; and property risks rated under a highly protected risks rating plan.

AIA, which supported the bill, said current Florida law exempts only those policies with annual premiums above $500,000 in addition to other criteria.

Mr. Pearce noted that the filing and approval exemptions would not apply to personal lines and to commercial risks that have catastrophe exposure, such as commercial property.

He said AIA has supported the bill to address what he called the “creeping effect” of increased rate regulation in insurance lines due to the issues experienced in Florida insurance lines impacted by catastrophes.

Rate regulatory efforts since the 2004 and 2005 hurricane seasons, he said, began to creep into unrelated commercial lines.

The goal, Mr. Pearce said, is to show that competition can accomplish effective regulation of rates in lines where there are a lot of sellers.

Mr. Pearce said the three keys AIA stressed to legislators were that the bill would not impact lines with catastrophe exposure, that the products in the bill were competitive with many sellers, and that the bill had the support of buyers of these products.

To highlight the third key, Mr. Pearce said Florida’s two main business groups—The Associated Industries of Florida and the Florida Chamber of Commerce—supported the bill.

Mr. Pearce said AIA had conversations with the Office of Insurance Regulation (OIR) and reported the regulators expressed concern with including professional liability and commercial auto when there is only a single vehicle.

To take care of regulators’ concerns, professional liability was excluded from the legislation, and the commercial auto portion applies only to fleets with 20 or more vehicles, Mr. Pearce said.

Several amendments were added to the bill, Mr. Pearce said, including a workers’ compensation measure supported by the state’s county sheriff’s association and an amendment designed to protect senior citizen’s annuities.

Mr. Pearce said his understanding is that the department will recommend that the bill be signed. An OIR spokesperson said the office is still in the process of reviewing the bill and the last-minute amendments.

Florida Passes Property Insurance Measure Supported By Insurers

The Florida Legislature passed a bill that would allow property insurers to apply more quickly for rate increases of up to 10 percent under certain conditions.

Current law allows insurers to make an expedited filing for increases of up to 10 percent due to changes in the cost of reinsurance, according to William Stander, assistant vice president and regional manager for Florida for the Property Casualty Insurers Association of America (PCI).

This bill, SB 2044 (http://tinyurl.com/364d3w3), extends the reasons to the cost of financing products used as a replacement for reinsurance, or changes in an inflation trend factor published annually by the Office of Insurance Regulation (OIR).

Expedited filings, Mr. Stander said, are still reviewed and approved by the OIR, but they are reviewed on an expedited basis.

The bill also restricts the amount of time homeowners have to file a claim after a storm to three years (down from five).

Mr. Stander said insureds still have five years to assert their defense, but must make an initial filing of damage within three years.

That lower deadline was hard fought on both sides—the industry, which sought the time limits to stem the flow of new and reopened claims seen after the 2005 storms, and the public adjusters, who viewed it as a major restriction on how they operate in Florida.

The bill also reauthorizes a 2009 requirement that insurers get state permission for rate hikes, and requires insurers to file detailed financial information about affiliates they hire for some services, addressing the recent publicized concern of so-called “hidden profits.”

Insurers also may now withhold part of a claim payout until policyholders can demonstrate the funds will actually be used to make repairs.

While declaring that he is “not overly enthusiastic about the bill,” Florida Insurance Consumer Advocate Sean Shaw did concede that the legislation benefits both companies and consumers. Most stakeholders seem to agree, offering lukewarm and cautious praise or condemnation.

Even one of the bill's sponsors, Sen. Garrett Richter, R-Naples, said the legislation was only the beginning of the long process of solving the state's property insurance challenges.

Florida Insurance Commissioner Kevin McCarty declared soon after the bill passed that he generally supported the legislation.

This may put him at odds with Gov. Charlie Crist, an unusual position. The two are normally in lockstep when it comes to insurance matters. Gov. Crist has not offered significant opinions yet on the bill but has repeatedly declared that he will veto any legislation that includes increases in premiums.

The bill has not yet been presented to the governor.

NU Online News Service, May 3, 4:05 p.m. EDT

The Florida Legislature passed a bill that would allow property insurers to apply more quickly for rate increases of up to 10 percent under certain conditions.

Current law allows insurers to make an expedited filing for increases of up to 10 percent due to changes in the cost of reinsurance, according to William Stander, assistant vice president and regional manager for Florida for the Property Casualty Insurers Association of America (PCI).

This bill, SB 2044 (http://tinyurl.com/364d3w3), extends the reasons to the cost of financing products used as a replacement for reinsurance, or changes in an inflation trend factor published annually by the Office of Insurance Regulation (OIR).

Expedited filings, Mr. Stander said, are still reviewed and approved by the OIR, but they are reviewed on an expedited basis.

The bill also restricts the amount of time homeowners have to file a claim after a storm to three years (down from five).

Mr. Stander said insureds still have five years to assert their defense, but must make an initial filing of damage within three years.

That lower deadline was hard fought on both sides—the industry, which sought the time limits to stem the flow of new and reopened claims seen after the 2005 storms, and the public adjusters, who viewed it as a major restriction on how they operate in Florida.

The bill also reauthorizes a 2009 requirement that insurers get state permission for rate hikes, and requires insurers to file detailed financial information about affiliates they hire for some services, addressing the recent publicized concern of so-called “hidden profits.”

Insurers also may now withhold part of a claim payout until policyholders can demonstrate the funds will actually be used to make repairs.

While declaring that he is “not overly enthusiastic about the bill,” Florida Insurance Consumer Advocate Sean Shaw did concede that the legislation benefits both companies and consumers. Most stakeholders seem to agree, offering lukewarm and cautious praise or condemnation.

Even one of the bill's sponsors, Sen. Garrett Richter, R-Naples, said the legislation was only the beginning of the long process of solving the state's property insurance challenges.

Florida Insurance Commissioner Kevin McCarty declared soon after the bill passed that he generally supported the legislation.

This may put him at odds with Gov. Charlie Crist, an unusual position. The two are normally in lockstep when it comes to insurance matters. Gov. Crist has not offered significant opinions yet on the bill but has repeatedly declared that he will veto any legislation that includes increases in premiums.

The bill has not yet been presented to the governor.