The Obama Administration is again opposing a move to add wind insurance to the federal flood insurance program, as has been pushed by Rep. Gene Taylor, D.-Miss.
A statement from the Office of Management and Budget says Taylor's bill, HR 1264, would unnecessarily expand the government's role into an insurance area already served by private insurers.
"Although the Administration believes in strengthening the National Flood Insurance Program (NFIP) for the benefit of policyholders and taxpayers, the central rationale for the program – the difficulty of obtaining flood insurance through either the private market or state programs – simply does not apply to windstorm insurance in most markets," the OMB said.
OMB also said that because the legislation requires that a federal wind insurance program be actuarially sound, the insurance offered through a federal program may not be any less expensive, and could be more expensive, than what is currently offered by private insurers or by states.
"As a result, expanding NFIP to cover windstorm insurance would unnecessarily duplicate available insurance products and could 'crowd out" such products where they are offered, while offering little to no savings to the American public. At a time when the NFIP is already facing serious challenges, the Administration cannot support such an expansion."
The Obama Administration has opposed the wind insurance bill in the past as have various taxpayer, environmental and insurance groups. The measure is being reconsidered this week in Congress.
Monday, July 26, 2010
The Obama Administration is again opposing a move to add wind insurance to the federal flood insurance program, as has been pushed by Rep. Gene Taylor, D.-Miss.
Wednesday, July 21, 2010
Private weather forecaster WSI Corp cut its forecast for named storms in the 2010 Atlantic hurricane season on Tuesday, but still sees an active season with water temperatures and wind conditions conducive to violent storms.
In its latest tropical storm update, WSI called for 19 named storms, down from 20 in its June forecast, but maintained its outlook for 11 hurricanes and 5 intense hurricanes of category three or higher.
The 2010 forecast is well above the 1950-2009 averages of 10 named storms, 6 hurricanes, and 2 intense hurricanes.
"Record warm tropical Atlantic Ocean temperatures and an enabling wind shear environment should result in a very active tropical season this year,'' said Dr. Todd Crawford, WSI's chief meteorologist.
The disappearance of the El Nino event and a decrease in vertical wind shear both point to the potential for more Atlantic storms, WSI said.
A slow start to the hurricane season led to the downward revision in named storms. A pocket of dry air in the Atlantic is likely to limit development in the near term, WSI said, while August to October is expected to be a very active period.
WSI's models also indicate that the area from the Outer Banks of North Carolina northward to Maine is twice as likely as normal to experience a hurricane this year.
"Our model suggests that the threat to the Northeast coast this season is on a par with that in Florida and the Gulf coastal states,'' WSI said.
The Atlantic hurricane season runs from June 1 to Nov. 30.
In 2005, Hurricane Katrina was responsible for the deaths of around 1,500 people on the U.S. Gulf Coast and caused more than $115 billion in damages.
Katrina and Rita, which hit the same year, shut some oil refineries for months resulting in about 142 million barrels of oil product loss.
Offshore drilling in the U.S. Gulf of Mexico is responsible for roughly 30 percent of total domestic oil production and 11 percent of natural gas production, according to 2009 government figures.
Tuesday, July 20, 2010
Shareholders angry about BP Plc's battered stock price are heading to the courthouse in hopes of reclaiming some of their losses, but they face an uphill battle.
Since the Deepwater Horizon oil rig exploded in April, several BP shareholders have filed lawsuits accusing the company of breaking securities laws and hiding the risks of its drilling operations. The stakes are potentially huge, with the BP's market value down as much as $100 billion since the disaster.
Some of the largest U.S. pension funds could join the battle. Already, the $132.6 billion New York State Common Retirement Fund has said it wants to be named lead plaintiff so it can direct the investor litigation.
"BP was telling the world that they are really a safe company,'' said Houston-based plaintiffs' lawyer Mark Lanier. ''What was being told to the public -- including the shareholders -- was a fraudulent facade.''
Lanier said he might get involved as an attorney for plaintiffs in the proposed shareholder class-action litigation. He said he already was preparing to file a lawsuit on behalf of former BP workers who hold company stock in their retirement plans.
But experts say investors will probably have a tough road ahead in court, since it could be hard for them to unearth any evidence about the company's disclosures on its safety procedures that rises to the level of securities fraud.
"It's entirely possible that (BP) made statements and honestly believed them and they were dead wrong,'' said James Cox, a professor at Duke University Law School. "That's not a basis for liability under securities law.''
A spokeswoman said BP does not comment on legal actions.
Securities litigation represents only a small segment of the more than 300 total lawsuits brought against BP so far. A federal judicial panel is scheduled to meet on July 29 in Boise, Idaho, to consider how to consolidate the various cases.
Shareholder lawsuits must be certified as class-actions by a court before investors can sue collectively. Typically, about one-third of shareholder lawsuits are thrown out, and two-thirds settle. They rarely go to trial.
Cox said shareholders would be lucky to get a settlement of $10 million to $20 million, which would be a pittance divided among the large number of affected investors.
That would be a far cry from the biggest recoveries in class-action litigation, the $6 billion to $7 billion awarded in the cases of WorldCom Inc. and Enron Corp.
Those cases differed from BP in that they stemmed from financial fraud, such as claiming phantom profits, rather than potential misrepresentations about safety. Enron and WorldCom also sold lots of securities in the period covered by the case, and plaintiffs were able to target third parties such as banks and underwriters.
BP investors do have a potentially powerful ally: the U.S. government. U.S. investigations could do the heavy lifting for plaintiffs, possibly using broad subpoena powers to turn up damning evidence.
The U.S. Departments of the Interior and Homeland Security are jointly investigating the rig disaster, and congressional committees are as well. The U.S. Department of Justice has also said it would open civil and criminal probes.
"You want a smoking gun,'' said Adam Savett, director of securities class actions at the Claims Compensation Bureau in Conshohocken, Pennsylvania. "A document that goes to the board room and says: 'We're not living up to industry standards, and we're not safe, and on and on.'''
But even that type of evidence might not be enough to prove securities fraud, said Jill Fisch, a professor at the University of Pennsylvania Law School in Philadelphia.
Shareholders may have little recourse unless documents show that top management knew, for example, that the company was violating specific safety regulations while publicly stating it was exceeding them and that those rules were critical to their business.
BP has already scored one victory. The U.S. Supreme Court's recent ruling in an unrelated case involving National Australia Bank essentially limited BP's liability in the United States to losses suffered by U.S. shareholders.
By excluding foreign holders of BP shares, the universe of potential plaintiffs could be cut by as much as 80 percent, said University of Michigan Law School professor Adam Pritchard.
For BP, whose spill-related legal woes are expected to drag on for years, the stockholder lawsuits may end up being a relatively minor problem, said Savett, of the Claims Compensation Bureau.
"They have a public relations nightmare,'' he said, "but I don't think they have a securities litigation nightmare.''
Monday, July 19, 2010
American International Group Inc. agreed to pay $725 million to settle a long-running securities fraud lawsuit led by three Ohio public pension funds, in one of the largest class action settlements in U.S. history.
AIG, which is nearly 80 percent owned by the U.S. government, would pay $175 million within 10 days of preliminary court approval of the settlement with a class of AIG shareholders.
The company may fund the remaining $550 million through a stock offering or other means, including cash, when it decides it is commercially reasonable to make such an offering.
The litigation, which began in October 2004, involved allegations that AIG engaged in accounting fraud, bid-rigging and stock price manipulation, said Ohio Attorney General Richard Cordray, who represented the Ohio funds.
The settlement resolves allegations of AIG's wide-ranging fraud from October 1999 to April 2005 and brings the expected recovery for AIG shareholders to about $1 billion, Cordray said.
AIG, which was bailed out in September 2008 from near-collapse with a $182.3 billion taxpayer-funded rescue package, said it was "pleased to have resolved this matter."
"This settlement ends a long-standing lawsuit, allowing AIG to continue to focus its efforts on paying back taxpayers and restoring the value of our franchise for the benefit of all our stakeholders," spokesman Mark Herr said.
The class action suit in Manhattan federal court was led by the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Police and Fire Pension Fund.
As part of the overall case, the Ohio funds previously announced a $72 million settlement with General Reinsurance Corp, a $97.5 million settlement with PricewaterhouseCoopers LLP and a $115 million settlement with former AIG Chief Executive Maurice "Hank" Greenberg, other AIG executives and related corporate entities.
Cordray said together this was the tenth-largest securities class action settlement in U.S. history.
It comes a day after the U.S. Securities and Exchange Commission reached a $550 million settlement in a case against Goldman Sachs Group Inc.
That case stemmed from Goldman's marketing and packaging of a collateralized debt obligation that turned toxic during the financial crisis
Monday, July 12, 2010
Louisiana Workers' Compensation Corporation (LWCC) announced tthat it will implement an overall rate reduction of 4.1 percent beginning Oct. 1, 2010.
This marks the sixth consecutive year that LWCC has reduced overall rates, and it comes on the heels of returning a $15 million dividend to qualifying policyholders for 2009. Once this year's rate decrease takes effect, LWCC will have reduced overall rates by more than 55 percent since its first year of operation in 1992.
The most significant reduction this year will be for policyholders in LWCC's Small Accounts Program tier that pay an annual premium of $5,000 and under. These policyholders will receive an overall 15.3 percent rate decrease, reflecting LWCC's ongoing commitment to lowering rates for small businesses through increased automation and other efficiencies achieved over the past two years.
The 15.3 percent reduction is an average for policyholders participating in the Small Accounts Program, so not all policyholders in this category will experience a decrease of that size.
More than 9,000 policyholders participate in the Small Accounts Program, according to LWCC President and CEO Kristin W. Wall.
Including its $15 million dividend returned to policyholders for 2009, LWCC has paid $136 million in dividends to policyholders over the past seven years.
U.S. Health Secretary Kathleen Sebelius, who has bashed insurers over rate increases, is seeking their help in making medical coverage accessible for more patients in the years before major reforms take effect.
Sebelius, in an interview with Reuters, said she is pushing companies to help people gain insurance in the gap between now and 2014. That is when the healthcare law President Barack Obama signed in March mandates extensive changes.
Sebelius struck a cooperative tone after publicly chastising insurers for high rate hikes and after repeatedly calling them to the White House for highly publicized talks.
A more congenial relationship with insurers could help keep the major overhaul of the healthcare system on track and loosen strained relations between Democrats and big business ahead of the November midterm elections.
The goal in the next few years is to "stabilize the private sector to not only encourage those who have insurance today to keep it, but to hopefully bring additional folks back into the market,'' Sebelius said earlier this week. She talked with Reuters after speaking at a discussion on drug development.
Health insurers, which include WellPoint Inc., UnitedHealth Group Inc., Cigna Corp. and Aetna Inc., fought the healthcare law, which hits the industry with tighter regulation, higher taxes and caps on profits.
Now, the Obama administration is promising to keep a close eye on rates but also seeking to work with insurers to make the law successful.
Sebelius, a former insurance commissioner and governor of Kansas, said her approach is gaining traction.
She said one insurer recently reached out to small businesses and signed up 500 new customers from companies that had not been aware they were eligible for tax credits.
"That's exactly the kind of strategy I'm hoping will take hold,'' she said.
Sebelius said she has argued to insurers in recent weeks that practices that shut out patients or businesses with high rates are harmful to consumers as well as the companies.
"Some of those strategies I think are not particularly good business models. If they lose more and more market share as we move toward 2014, it's not really good for them,'' she said.
Roughly 46 million people in the United States lacked health insurance in 2008, according to the U.S. Census Bureau. Experts say many have lost coverage since then in the economic recession.
The new healthcare law includes measures aimed at "stopping the erosion of the private market'' before 2014, Sebelius said.
Employers can get financial help to keep early retirees covered, and small businesses can receive tax credits to defray insurance costs, she said. People denied coverage for serious medical problems can enroll in high-risk insurance pools set up as a temporary option.
Broader changes in 2014 are expected to extend coverage to more than 30 million Americans.
In past months Sebelius attacked big premium increases, and Obama warned companies not to impose unjustifiable rate hikes, adding to friction between the administration and industry.
Sebelius said she now hopes insurers will work with the administration. "I'm optimistic there is a real potential to do some important work over the next couple years in a collaborative fashion,'' she said.
Insurers said despite past opposition they are now committed to making the healthcare law successful.
"We are totally focused on implementation and making the legislation work,'' Karen Ignagni, head of the industry group America's Health Insurance Plans, told reporters.
Companies are aiming to boost coverage during the transition period but are pressing for more efforts to control rising medical costs that push premiums higher, said Robert Zirkelbach, a spokesman for the industry group.
State insurance commissioners also are advocating a gradual shift to a requirement that companies spend more of each dollar in premiums for the benefit of patients, he said. Otherwise, they worry insurers will leave the individual market.
"It's important that new requirements be structured in a way that doesn't cause significant disruption for people purchasing coverage on their own, particularly in the years leading up to 2014,'' Zirkelbach said.
Thursday, July 1, 2010
Hurricane Alex weakened to a tropical storm Thursday as it moved further inland over northeastern Mexico, dumping heavy rains that flooded cities but sparing U.S. oil facilities near its path.
Rain from the first named storm of the 2010 Atlantic season flooded about 80 percent of the port city of Matamoros, sent uprooted trees crashing down on parked cars and forced thousands to flee low-lying fishing villages. Inland in the industrial city of Monterrey, at least two people were killed by Alex's rains, which washed away cars, bridges and some houses and turned dry desert beds into turbulent rivers.
"The damage is enormous, a river burst its banks and we have people trapped on the roofs of their houses,'' said mayor Martin Zamarripa of the town of Hualahuises outside Monterrey.
Alex made landfall as a Category 2 Hurricane on the Tamaulipas coast around 9 p.m. Wednesday . U.S. oil installations have not been hit by the storm, which formed near the Yucatan peninsula Saturday, but some companies cut back production and evacuated staff.
As of Wednesday, oil companies had shut down production of more than 421,000 barrels per day, about a quarter of the Gulf's output, as a precaution.
They have also shut 919 million cubic feet per day of gas output, some 14 percent of the Gulf's total.
BP Plc said Thursday its Gulf oil and gas output was back to normal, although the passage of Alex slowed oil clean-up and containment efforts at its leaking deep-sea well off the Louisiana coast.
The Louisiana Offshore Oil Port, the nation's only deepwater oil supertanker unloading terminal, hopes to resume operations by late Thursday, a spokeswoman said.
Alex, which is expected to dissipate over Mexico's central mountain ranges over night, had maximum sustained winds of 50 mph and was located about 150 miles east of Zacatecas in central Mexico.
Across the border in Brownsville, Texas, at least three tornadoes swept through the area, tossing over tractor-trailers although no major damage was reported. "Isolated tornadoes are possible over portions of extreme southern Texas today,'' the U.S. National Hurricane Center said. Alex was the first and strongest Category 2 hurricane to occur in June since 1966.
Mexican marines evacuated thousands of people from fishing communities along the Gulf coast and into shelters, but some refused to leave their homes even as water ran in under doors.
However, local authorities will remain on high alert in case of rainfall as high as 20 inches. Alex killed a dozen people in Central America over the weekend.