Sabal Insurance Group's News Blog

Workers’ Compensation Turn a Profit? Fahgettaboudit!

2012-01-25T16:15:00.001-05:00

Workers’ compensation carriers with visions of profits over the next few years are dreaming.

It ain’t goin’ to happen, according to insurance analysts at Standard & Poors Ratings Services.

“All signs are pointing to more unprofitable years ahead for the workers’ compensation insurance industry,” the firm said in its report titled “For The U.S. Property/Casualty Industry, Making Workers’ Compensation Profitable May Be Mission Impossible.”

Why the negativity?

S&P blames continued high unemployment, a sluggish economic recovery, potential for higher inflation on future claims payments, adverse reserve developments, and a volatile investment environment with historic low investment yields.

What’s more, the workers’ compensation industry hasn’t been great at making a profit in the recent past.

All of that could add up to many years of unprofitability for the workers’ compensation industry.

S&P said that this industry has a “dismal track record” of underwriting results as illustrated by only three years of underwriting profits over the past two decades (1991-2010). Between 1991 and 2010, the industry statutory combined ratio was below 100 percent in 1995, 1996, and 2006.

A combined ratio of more than 100 percent signifies an underwriting loss. Although many property/casualty (P/C) insurers, especially those writing workers’ compensation, rely on investment incomes to offset underwriting losses, current historically low investment yields could also hinder such dependence going forward.

In light of these factors, Standard & Poor’s Ratings Services said it remains bearish on this line. Despite pockets of rate increases in a few states, S&P said it believes the negative factors point to years of unprofitability in this line.

S&P also said it believes many P/C insurers with meaningful concentration in workers’ compensation will continue to report underwriting losses in this line over the next few years, primarily arising from recent accident years (2007-2010).

Workers’ compensation pricing showed a modestly improving trend in the latter part of last year. If it persists, it could potentially lead to industrywide rate improvements for many casualty lines. However, S&P said it is unsure whether the current pace of rate increases in workers’ compensation will be sustainable over the next few years, and, if so, whether it will be sufficient to overcome increased loss costs.

The workers’ compensation industry’s reserves will remain inadequate over the next few years, in S&P’s view. Its analysts expect many insurers with meaningful concentration in workers’ compensation to strengthen their prior year reserves, especially for accident years 2007-2010.

S&P, which monitors quarterly reserve developments for all P/C insurers, said that if certain P/C insurers substantially strengthen their reserves, especially for recent accident years, such that their operating earnings fall materially below expectations, its analysts would consider lowering some ratings.

Face-to-Face Encounters: Avoiding Liability for Abandonment

2011-01-06T11:55:00.001-05:00

Providers are at risk for legal liability when they terminate services to patients. Termination of services has historically been warranted by the following circumstances, among others: violence or threatened violence, noncompliance by patients and/or primary caregivers, inability to provide adequate assistance, or inappropriateness for services. Providers are understandably concerned about the possibility of legal liability associated with the termination of beneficial services.

Specifically, they frequently express concern about the possibility of liability for abandonment of patients. The Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS), the primary enforcer of fraud and abuse prohibitions, has indicated that abandonment of patients may also constitute fraudulent conduct.

Providers now have new concerns regarding liability for abandonment in light of requirements for face-to-face encounters. Specifically, providers may not be paid for services rendered if patients have not had appropriate face-to-face encounters with physicians during required time periods. It is important, therefore, for providers to understand how to terminate services without liability for abandonment.

Practitioners often speak of abandonment as though it is equivalent to termination of services. On the contrary, patients who want to hold providers liable for abandonment must show that:

1. Providers unilaterally terminated the provider/patient relationship;
2. Without reasonable notice;
3. When further action was needed.
Patients who fail to prove any one of these requirements are likely to lose their lawsuits against providers.

The second requirement of abandonment provides a key basis for avoiding liability for abandonment. Providers will not be liable for abandonment as long as they give patients reasonable notice prior to termination of services. The key question is: what is "reasonable" notice, especially in view of new face to face encounters?

Many providers historically viewed thirty days as the minimum number of days required for reasonable notice. This period of time is too long for most patients, including patients who have not had required face-to-face encounters. A more reasonable period of time for most patients, unless a specified period of notice is mandated by state statute or regulation, is probably one to three days.

After staff members agree upon a reasonable notice period, patients and attending physicians should receive verbal and written notice. Written notices should be hand-delivered to patients’ homes. Although it is desirable, it is unnecessary to obtain a signature verifying receipt. Written notices to physicians should be faxed to them.

When the date for termination of services arrives, providers must terminate care as planned. Practitioners are sometimes tempted to continue in the face of pleas from patients, physicians, and/or family members. Providers must bear in mind, however, that their organizations, whether for-profit or not-for-profit, simply cannot afford to render unlimited amounts of uncompensated care. The consequence of lack of attention to fiscal limitations may be the disruption or unavailability of care to many patients.

Finally, providers can defeat claims of abandonment if patients for whom services are discontinued need no further attention. How do providers know whether further attention is needed? Is this requirement as subjective as it appears? On the contrary, judges are likely to make retrospective determinations about whether further attention was needed. The basis for such determinations will probably be whether patients were injured as a result of termination.

In other words, the law is likely to conclude that no further attention was needed, so long as patients are not injured as a result of termination of services. What kind of injury must patients prove? Can patients who attempt to prove emotional damage only as a result of termination of services by case managers win lawsuits?

The "good news" for providers is that courts generally require proof of physical injury or damage before they will find providers liable for abandonment. Providers must, therefore, take appropriate steps to make certain that patients are not physically injured as a result of termination of services. In rare instances, appropriate action may include sending an ambulance to take the patient to the nearest hospital. If the patient refuses transport by ambulance, the patient will have been contributorily negligent or will have assumed the risk, so providers are likely to avoid liability.

Now is the time for providers to educate themselves about the possibility of liability for abandonment. Positive steps must be taken in order to prevent this type of legal liability in view of the uncertainty of the impact of requirements for face-to-face encounters.

by Elizabeth E. Hogue, Esq.

Florida Arrests Alleged Citizens Property Scammer

2010-09-20T12:08:00.001-04:00

Florida Chief Financial Officer Alex Sink today announced the arrest of Aylin Hernandez, 23, of Miami, for fraudulently diverting mail and stealing payments intended for Citizens Property Insurance Corporation.

Hernandez was arrested this morning and booked into the Turner Guilford Knight Correctional Center in Miami-Dade County on charges of organized fraud and grand theft. The arrest results from an investigation by the Division of Insurance Fraud, with assistance by Citizens Property Insurance Corporations' Special Investigations Unit. If convicted, Hernandez faces up to 45 years behind bars.

"This fraudster is getting exactly what she deserves—serious jail time," said Sink, in a statement. "I am grateful for the work of my investigators and Citizens' Special Investigations Unit for working together to put her behind bars. Would-be scammers out there need to know that this kind of action will not be tolerated."

Working with investigators from Citizens Property Insurance Corporation, the Division of Insurance Fraud established that Hernandez created her own corporation named Citizens Property Insurance, Inc., and opened an account under that name at Check Cashing USA.

Using information she obtained while working as a clerk in several local insurance agencies, Hernandez sent invoices to various law offices and title companies, which were handling homeowners insurance escrow and service payments. The victims, believing their payments were going to the legitimate Citizens Property Insurance Corporation, sent eight checks totaling over $12,000, which were then cashed by Hernandez.

Departure of Insurer from Florida Points Up Fraud Problem

2010-09-13T10:58:00.000-04:00

With a letter sent out a few weeks ago, Explorer Insurance announced that it will no longer write private automobile policies in Florida because there is too much fraud.

"The company is taking this action in light of poor ongoing business results in Florida, particularly in the area of private passenger automobile no-fault coverage, in which loss fraud has been rampant with no signs of abatement," Explorer vice president, Steve Frisina, said in the letter to Florida's Office of Insurance Regulation.

The letter said Explorer intends to send termination notices to agents who sell its coverage within a week of the Office's acceptance of its plan. Policy holders will begin receiving non-renewal notices also within one week. And, by January 2012, no Explorer policies will remain in effect.

The Office has deferred accepting Explorer's plan for the time being present, until the company can fix some of the details of its exit.

In the meantime, however, Explorer has severely restricted the number of policies its agents are allowed to write and has told agents it is no longer paying commissions as of this week, according to a Tampa agent.

"They were going to be over $100,000 in premiums for us this year," said John Guthrie, of the John Guthrie Agency, Tampa. He has had severe restrictions on the number of policies he can write for Explorer since May.

Guthrie said that fraud is a big problem that is chasing many auto insurance carriers out of the market. Last year at this time, his agency represented 16 or 17 carriers, he said. Now the agency is down to three.

"The companies are all just pulling out or they are making underwriting so restrictive that you can't get the people through the approval," he said.

In May, the National Insurance Crime Bureau released a report that said that Florida has led the nation in suspected staged auto accidents the last three years in a row. According to the report, Florida had 3,006 suspicious claims from 2007 to 2009, and that was almost twice as many as the two states with the next most suspicious claims, New York and California.

The worst place in Florida was Tampa, the report said. Previously the worst place had been Miami and South Florida. But, in 2009, there were 487 questionable claims related to staged accidents in Tampa, while there were only 258 such claims in Miami.

Guthrie said he and some of his fellow agents in Tampa's Hillsborough County have gotten so frustrated by the situation, and by the lack of government action to crack down, that they have begun collecting petition signatures from new policy and renewal clients and forwarding that petition on to the Department of Financial Services, which houses the Division of Insurance Fraud.

"They need to do something about this fraud," he said.

Jack McDermott, a spokesperson from the Office of Insurance Regulation, said that fraud was not the responsibility of his agency so they do not know much about it. But "We have heard, anecdotally, from other companies that they have been having trouble with fraud," he said.

Explorer, which is based in Santa Clarita, Calif., is a member company of the ICW Group, San Diego. Until now, it has sold automobile policies only in California and Florida.

As of the end of July, the company had 16,576, in-force policies in the private passenger automobile insurance line in Florida, with direct written premiums of $16.1 million and a loss ratio of 124.2.

Eileen Beaudette, an agent in Naples who has been an Explorer representative, said that in her area fraud and staged crashes are not a big problem and she has not had carriers stop writing. But she has been aware that it is a big problem in Tampa and on the east coast of the state.

"We've been lucky," said Beaudette, of A Auto Buyers Insurance. "We still have a lot of carriers writing."

Beaudette said that Explorer was never a very big part of her agency's business because their rates were not very good.

AIG Settlement Covers $60 Million of Ex-CEO, Ex-CFO Costs

2010-08-30T13:22:00.001-04:00

Former longtime AIG chief Maurice ''Hank'' Greenberg and another former executive will get $60 million from the company's insurers to cover legal and other costs as part of a proposed settlement of investor lawsuits, court papers show.

The payouts to Greenberg and former Chief Financial Officer Howard Smith are in addition to $90 million that American International Group Inc.'s insurers, as previously reported, will pay directly to the company as part of the proposed settlement.

The $150 million of payouts were revealed in an Aug. 25 agreement filed in Delaware Chancery Court, and obtained Friday by Reuters.

They stem from litigation in which investors accused more than 20 onetime AIG executives and directors of poor oversight and allowing improper bonuses. The Delaware lawsuit was filed by investors on behalf of AIG.

Greenberg left AIG in March 2005 after nearly four decades at the helm.

AIG in November 2009 said it had resolved all litigation with Greenberg, and agreed to reimburse him and Smith for as much as $150 million of legal fees and expenses, according to an agreement filed with U.S. regulators.

The $60 million payout by insurers is separate from that agreement, and Greenberg and Smith represented in the earlier agreement that no one else other than the insurers was obligated to indemnify them for the relevant costs.

AIG had $200 million of insurance for directors and officers, the Delaware agreement shows. None of the sums being paid go to investors, and Greenberg and Smith are also not responsible to pay out money in connection with the agreement.

In emailed statements, AIG said it was pleased the matter has been resolved, as did Lee Wolosky, a partner at Boies, Schiller & Flexner LLP who represents Greenberg.

A lawyer who signed the Aug. 25 agreement on behalf of Smith did not immediately return a call seeking comment.

The Delaware agreement requires approval of Vice Chancellor Leo Strine of the Delaware court. A settlement will be made final upon the dismissal of similar litigation in Manhattan federal court, the agreement shows.

Based in New York, AIG in September 2008 narrowly averted collapse after becoming overexposed to risky debt. It accepted a federal bailout that grew to $182.3 billion and left taxpayers owning a nearly 80 percent stake.

Six weeks ago, AIG agreed to pay $725 million to settle a shareholder class-action lawsuit led by Ohio Attorney General Richard Cordray, who accused it of accounting fraud and trying to manipulate its stock price.

AIG still faces shareholder class-action litigation in Manhattan federal court. Greenberg has sought to dismiss a civil fraud lawsuit by New York Attorney General Andrew Cuomo over a sham reinsurance transaction.

The case is In re: American International Group Inc Derivative Litigation, Delaware Chancery Court, No. CA 769.

Stanford Execs Deny Key Role in Alleged Fraud Cited by Lloyd's

2010-08-30T13:20:00.001-04:00

Lawyers for Texas financier Allen Stanford and two accounting executives who worked for him sought to distance their clients Friday from the alleged financial wrongdoing insurer Lloyd's of London cites as a reason to void a policy covering their defense fees.

"Mr. Stanford was not really a hands-on guy,'' Robert Bennett, Stanford's attorney, said during closing arguments after four days of hearings in federal court. "Mr. Stanford was not at the center of anything illegal or wrong.''

The nondisclosure of a nearly $2 billion unsecured loan to Stanford, misrepresentations to investors and phony accounting are all grounds to stop paying claims under a directors and officers policy, the British insurer said.

Stanford, accounting executives Mark Kuhrt and Gilbert Lopez and Chief Investment Officer Laura Holt have sued Lloyd's of London over payment of the fees. But that policy has a money laundering exclusion, so Lloyd's must prove to U.S. District Judge Nancy Atlas in Houston that the plaintiffs committed that act.

Holt struck a deal with the insurer before the start of the hearings last Tuesday. She and the three other plaintiffs in this case are accused of participating in an alleged $7 billion Ponzi scheme centered around fraudulent certificates of deposit (CDs) issued by Stanford's offshore bank in Antigua.

"It is clear that the money collected for the CDs was criminal property as defined by the policy,'' said Barry Chasnoff, an attorney for Lloyd's. "There was no evidence offered to the contrary.''

BLAME DAVIS

Lawyers for Stanford and the accounting executives have placed a lot of the blame on James Davis, the former chief financial officer of Stanford International Bank Ltd. (SIB) who pleaded guilty last August to three felony counts related to the scheme.

Davis had the final sign-off on numerous financial documents from SIB, the institution the government claims is at the center of the alleged scheme, lawyers and witnesses said.

"I believe that Mr. Kuhrt and Mr. Lopez were middle-level accounting managers and it was Mr. Davis' responsibility to deal with the auditors on these issues,'' Alan Westheimer, an accountant hired by Kuhrt and Lopez as an expert witness, testified.

Stanford also relied on Davis -- his former No. 2 man at the company and former classmate from Baylor University -- as well as on the professional advice of accountants and lawyers, Bennett told the hearing.

Still, Atlas told the hearing it was clear to her that Lopez and Kuhrt "were close to the top,'' and were close to Davis.

She said she had a suspicion that Lloyd's would not be fronting legal fees to the men after the hearings.

Lloyd's has advanced as much at $6 million to pay for Stanford's attorneys, many of whom have left the case or been fired by their client.

Stanford, who is 60 and is in jail awaiting a January trial, faces one count of conspiracy to commit money laundering as part of a 21-count June 2009 indictment.

The hearings were seen as a preview of Stanford's criminal case. Many people involved in the case, including Stanford and Lopez, invoked their Fifth Amendment right and did not testify, so much evidence centered on documents that are part of the government's civil and criminal case.

The case is Laura Pendergest-Holt, R. Allen Stanford, Gilbert Lopez and Mark Kuhrt v Certain Underwriters at Lloyd's of London and Arch Specialty Insurance Co, U.S. District Court, Southern District of Texas, No. 09-3712.

Earl Now Major Hurricane, Headed Toward East Coast

2010-08-30T13:19:00.000-04:00

Hurricane Earl has strengthened into a major Category 3 storm Monday and could arrive off the East Coast of the U.S. by the end of this week.

It is currently rocking the Caribbean's Northern Leeward Islands.

The National Hurricane Center said Earl is now the second major hurricane of the 2010 Atlantic season, with winds up to 120 miles per hour .

Hurricane warnings are in effect for Antigua, Barbuda, Montserrat, St. Kitts & Nevis, Anguilla, St. Martin and St. Barthelemy, St. Maarten, Saba and St. Eustatius, the British and the U.S. Virgin islands.

A hurricane watch is also in effect for Puerto Rico.

Hurricane Danielle has moved into the North Atlantic and is now more of a threat to Iceland than the U.S.

Florida Orders Halt to Sale of Warranty Products

2010-08-09T10:46:00.001-04:00

Florida Insurance Commissioner Kevin McCarty today announced the Office of Insurance Regulation (Office) has issued an order to Auto Repair Warranty Inc. (ARW), Auto Repair Group LLC (ARG) and Michael R. Petruziello to Cease and Desist selling unauthorized motor vehicle service agreements in Florida.

Office investigators concluded that the aforementioned companies sold unauthorized and unlicensed motor vehicle service agreements through its website www.autorepairwarranty.com and through agreements sold by ARW. In addition, investigators concluded that the companies engaged in unfair methods of competition and unfair or deceptive acts.

Both companies are based in Ohio. Office records indicate ARW and ARG have never been authorized to sell warranty products in the State of Florida.

"Companies selling insurance products of any kind must adhere to Florida's stringent licensing process," said Insurance Commissioner Kevin McCarty. "Floridians should always verify the products they purchase are being offered by companies licensed in our state."

Obama Opposes Adding Wind Coverage to Federal Flood Insurance

2010-07-26T10:51:00.001-04:00

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.

Private Firm WSI Cuts U.S. Hurricane Forecast to 19 Named Storms

2010-07-21T13:56:00.001-04:00

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.

Investor Face Uphill Battle with Liability Lawsuits Against BP

2010-07-20T14:22:00.001-04:00

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.

SMOKING GUN
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.''

AIG to Pay $725M to Settle Securities Fraud Lawsuit

2010-07-19T14:09:00.001-04:00

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

LWCC Reducing Overall Rates by 4.1%

2010-07-12T10:49:00.000-04:00

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.

Obama Administration Asks Health Insurers to Embrace Reforms Now

2010-07-12T10:47:00.001-04:00

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.

Hurricane Alex Weakens to Tropical Storm

2010-07-01T14:41:00.001-04:00

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.

Goodyear Tire, Mississippi Families Settle Over 2000 Accident

2010-06-28T15:23:00.001-04:00

Goodyear Tire and Rubber Co. and the families of three men involved in a 2000 accident in which one of them died have settled a lawsuit.

The Mississippi Supreme Court last week dismissed the lawsuit. The court noted its order that both sides sought the dismissal because a settlement had been reached.

The young men's families -- and a Copiah County jury -- blamed the accident on a faulty tire on the Chevrolet Camaro rather than excessive speed and the beer the men had been drinking.

The state Court of Appeals agreed last April and upheld a $2.1 million verdict against Goodyear and Big 10 Tire Co.

Goodyear and Big 10 appealed.

Supreme Court Strikes Down Sarbanes-Oxley Accounting Board

2010-06-28T13:20:00.000-04:00

The Supreme Court Monday struck down part of a 2002 law that created a national board that polices auditors of public companies, ruling that it violated the constitutional requirement on the separation of powers among the branches of government.

The high court's ruling on the Public Company Accounting Oversight Board (PCAOB) could put pressure on Congress to revisit the Sarbanes-Oxley corporate reform law, opening it up for potential changes in the reporting duties of companies.

The court's mixed ruling held that the board violated the the U.S. Constitution's separation of powers principle, but also held that the law does not violate the Constitution's appointments clause.

At stake in the case was how corporate America is audited and a key provision of the Sarbanes-Oxley corporate reform law adopted in response to the Enron and WorldCom accounting scandals early in the decade.

The ruling was a victory for the Free Enterprise Fund and a small Nevada accounting firm, which argued that the law unconstitutionally stripped the president of power to appoint or remove board members or to supervise their activities.

Board members are appointed by the U.S. Securities and Exchange Commission and can only be removed by the SEC for cause. The board, set up as a quasi-private agency, has the power to impose rules and to inspect and fine accounting firms.

The board is funded through fees it collects from public companies. It inspects thousands of auditors, including the Big Four accounting firms: Ernst & Young LLP, KPMG , PricewaterhouseCoopers and Deloitte & Touche LLP.

The Free Enterprise Fund and the accounting firm sued in 2006. A federal judge and a U.S. appeals court rejected the challenge.

The Supreme Court's majority opinion said the limits on the removal of board members violated the separation of powers requirement.

But the court also held that the unconstitutional provisions can be separated from the rest of the law.

After Profitable 2009, Reinsurers Face Pricing Pressure from Primary Insurers

2010-06-21T14:10:00.000-04:00

A softening casualty market, strong company earnings, and a quiet catastrophe season resulted in the reinsurance industry enjoying, in 2009, one of its most profitable underwriting years in nearly a decade.

Today, reinsurers must continue to push-back on multi-year deals and reject raw coverage despite pricing pressure by primary insurers, according to a panel of senior reinsurance executives who spoke before the Casualty Actuarial Society (CAS) Seminar on Reinsurance.

George Venuto, executive vice president, Willis Reinsurance, noted that there is a distinct difference in how primary business and excess casualty business is being viewed. "Trying to please primary casualty insurers is probably the most difficult thing to do right now," he said. "On the property side, we are continuing to see rate pressure. The model changes have created a visual downward pressure on pricing," he said, adding, "It is not the best pricing environment on the insurance and reinsurance side."

Venuto said that terms and conditions were softening somewhat and there was an increase in loss trends. "Capacity is available for all lines, in particular property and casualty. You can get it placed."

Damien Magarelli, director, Standard & Poor's, said that his firm has not seen a change in terms and conditions. "Multi-year policies are very few and far between, and there have not been a lot of changes in profit commissions," he said. "After Hurricane Katrina, there were 30 to 40 percent price increases for some property lines; renewal rates in 2010 have exhibited declines from 0 to 10 percent. Additional capacity has contributed to declining prices," he said.

Magarelli noted that 2010 has so far been active with disasters. "The Chilean earthquake was a large event but much smaller than Northridge, with losses expected in the $8 to $10 billion range," he said. "But that won't be a catalyst to drive rate increases globally. Floods and storms in the northeast will not change the pricing cycle. If you have a regional carrier, their earnings will be affected, but not dramatic enough of an impact for a new pricing cycle."

According to Magarelli, the Gulf oil spill is about a $1.5 billion insured property loss and while there may be litigation in terms of the debris cleanup, this is "not expected to be a significant insurance industry event, in our view."

Venuto agreed and said he didn't see that any of these events had enough impact to suck capacity out of the market because it is an overcapitalized industry. "I don't see these events being enough to change anything dramatically."

Magarelli said that these catastrophe events have reduced the margin reinsurers had going into hurricane season, but it's not outside the normal budget. "At this point in time, cat losses were low last year, but there were losses in the Midwest, which impacted a different group of regional companies. This year it is affecting more Northeast regional companies."

"It's not so much where we are, but where we are going," said Magarelli regarding where the industry is in the cycle. "Frequency has been declining for a number of lines for many years. That has propelled earnings to a greater degree," he said.

"Severity is increasing; we see frequency now turning flat; buying habits have changed," he said. "You may see a larger pick up of loss costs trends. It's an issue for us," he said. "If there is an acceleration of loss cost trends, then you may see a dramatic increase in losses and reduced earnings."

Venuto thought that the industry may have a loss ratio environment similar to that of 1995. "We are getting close to where there's not much rate left to give back," he said. "Frequency has been flattish. The impact of the economy on what's happening, chasing fewer exposure dollars, will have a dampening affect."

Venuto said that there are more fail-safes today than in the late1990s. "It's not just actuaries looking at it; now everybody gives you a price monitor. We really see where trends have been. Terms and conditions have held and that was the monster under the bed in the late '90s. We'll come out of this soft market better than the last one mainly because actuaries are more involved than they were in the past."

"The difference between the late '90s versus now is the reinsurance appetite for risk," added Magarelli. "Most direct reinsurance companies in the '90s opened up a lot of capacity that companies were allowed to write against. There's more discipline now, better tools. Also a fundamental change -- reinsurance companies are more restrictive in terms of capacity. We're still going to have cycles, but we may not have as many peaks and valleys as we did in the past."

"Clearly there have been external influences that have reinforced the focus and improved the testing of setting reserves," said Magarelli. "Some companies still think there are rate declines that can be had; others think rates should go up. Our view is that reserves are adequate, but we still think companies are living off the 2002-2005 accident years."

Venuto said that the rules have changed to some extent and that there is more discipline. "Claims are settling quicker. There is definitely a movement on the claims side of best practices, driven by actuaries, underwriters and claims adjusters. Reserving and claims practices have improved dramatically."

Venuto said that pricing actuaries are the "gatekeepers to get something placed in this business." He advised actuaries to be more visible with clients. "The way you're going to outperform your peers is to know how a company works. Get out there with your underwriters; get to know your clients and how they view risk," he said.

Federal Judge Approves $72M Insurance Settlement with The Hartford

2010-06-16T13:52:00.000-04:00

A federal judge has given preliminary approval to a settlement under which The Hartford Financial Services Group Inc. will pay $72.5 million to more than 21,000 people nationwide who alleged the insurer engaged in fraud in settling their injury claims.

U.S. District Court Judge Janet C. Hall approved the agreement last week in Bridgeport to resolve the class action lawsuit. It was announced Monday by attorneys for those who sued.

The plaintiffs alleged The Hartford engaged in fraudulent settlement practices by deducting up to 15 percent of the value of their settlements in undisclosed annuity costs.

"It's a great settlement because people who have been victimized by corporate fraud are getting reimbursed,'' said David Golub, one of the attorneys for the plaintiffs.

The Hartford said the claimants received the promised amounts they were due. It said the company settled to avoid the uncertainty and cost of continued litigation.

The company did not admit to fraud as part of the settlement. Company officials said it disclosed the settlement in its first quarter earnings report.

Its shares rose 91 cents, or 3.8 percent, to $24.92 in midday trading.

The 21,000 people were due payments for claims dating to 1997 involving car accidents, workers compensation and other injuries. They are expected to receive an average of about $3,300 each as a result of the settlement.

At issue were structured settlements in which payments are made over time rather than in a lump sum paid at the time of settlement. Such settlement payments are typically funded with annuities.

The lawsuit alleged The Hartford developed a scheme in which its property and casualty companies purchased the annuities from its life insurance subsidiary, which then paid a kickback to the property and casualty companies. The lawsuit accused the company of violating a racketeering law.

The Hartford retained about 15 percent of the value of the structured settlements to cover profits, taxes and costs, according to the lawsuit.

The settlement, expected to receive final approval in September, came after extensive mediation and five years of litigation in which Hall certified a nationwide class action and an appeals court rejected the company's challenge to class certification last year. The trial was scheduled to start in September.

Lawyer for Alleged Ponzi Schemer Stanford Accused of Insurance Fraud

2010-06-15T14:24:00.000-04:00

The judge handling the criminal case against accused Ponzi schemer Allen Stanford is allowing parties to review documents related to allegations that the Texas financier's lawyers engaged in insurance fraud.

An order released Monday by U.S. District Judge David Hittner in Houston adds a twist to a case in which Stanford has cycled through many lawyers, prompting three co-defendants to ask that their trials be severed because the case has become a ''circus.''

Stanford was arrested in June 2009 and accused of running a $7 billion Ponzi scheme focused on his Stanford Financial Group's fraudulent sale of certificates of deposit issued by his Antigua bank. A January 2011 trial is expected.

Hittner's order relates to a separate insurance coverage dispute that Stanford and underwriters at Lloyd's of London and Arch Specialty Insurance Co. are litigating in the same court. The order lets the underwriters review documents filed under seal.

According to court papers, the underwriters learned that Michael Essmyer, who is Stanford's co-counsel in the criminal case, alleged that lead counsel Robert Bennett and his Bennett-Nguyen Joint Venture "may have engaged in insurance fraud'' in submitting a fee application.

Bennett denied engaging in insurance fraud, according to the papers, which were signed by him, Essmyer and a lawyer for the insurers.

It follows the June 9 request by Laura Pendergest-Holt, a former Stanford Financial chief investment officer, to sever her trial.

She said the "egregious and circus-like conduct'' by Stanford and his lawyers jeopardizes her right to a fair trial.

Former Stanford accounting executives Mark Kuhrt and Gilbert Lopez joined her motion, which uses the word "circus'' nine times and said the potential prejudice created by Stanford could prove "toxic.''

Bennett Monday declined to comment.

Earlier this month, Hittner rejected Essmyer's attempt to withdraw from the case after Stanford had fired him, and amid ''irreconcilable differences'' with Bennett over litigation strategy, but directed that Bennett serve as lead counsel.

Bennett is a Houston-based lawyer, not the prominent Washington, D.C., lawyer with the same name.

The case is U.S. v. Stanford, U.S. District Court, Southern District of Texas, No. 09-cr-00342.

24 South Florida firms closed for lack of workers' compensation

2010-06-10T13:52:00.000-04:00

A two-day sting has led to the closure of 70 Florida businesses -- including 24 in South Florida -- because of violations of the state's workers' compensation laws.

Random site visits by the state Department of Financial Services found the companies failed to provide workers' compensation insurance for their employees.

State law says construction-related companies must have workers' compensation coverage if they have one or more employee, including the owner. Other businesses must have the coverage if they employ four or more employees, excluding business owners.

More than 360 liens have been filed against delinquent employers since late 2009, totaling $13.7 million.

The companies caught without the right coverage or coverage violations were issued stop-work orders, which require businesses to shut down until proper coverage is obtained and a penalty is paid.

The South Florida firms include:

In Broward, BP Paving Inc., D&D Construction Group, Ideal Roofing Systems.

In Miami-Dade, Aldo's Pool, Americans Builders and Construction, Dianza Commercial Dry Wall System, Authentic Construction, Professional Carpentry USA, GA Stone, No Drip Plumbing, JJJ Finishing Master, Built Top Building Services, Superior Wood Floor, Unlimited Ceiling Corp., Reinolds H. Castro Inc., Laura's Management, J.R.F. Florida Painting Corp., ABC Seamless Rain Gutters, Jose Ber Tile, Zepol, Allen R. Greenwald, Mercado Enterprise, Articpolo Inc., Enloe Carpentry.

And the Best, Worst States for Tort Liability Costs Are...

2010-06-10T13:49:00.001-04:00

Alaska, Hawaii and North Carolina get thumbs up while New Jersey, New York and Florida get thumbs down for their tort liability costs in the latest ranking by a free-market think tank.

The states with the worst performance had the highest monetary tort losses and tort litigation risks, meaning they had more costly and riskier business climates due to larger plaintiff awards, larger plaintiff settlements, more lawsuits, or some combination of the three, according to the researchers.

The Pacific Research Institute (PRI), a non-profit free-market organization based in San Francisco, and the Manufacturers Alliance (MAPI), a public policy and economic research organization for manufacturers based in Arlington, Va., today released their 201o U.S. Tort Liability Index, a measure of which states impose the highest and lowest tort costs and risks.

States were also ranked according to their tort rules and reforms on the books to reduce lawsuit abuse and contain tort costs and risks, such as award caps, venue reforms to stop "litigation tourism," or judicial-selection reforms to hinder the types of abuses engaged in by the likes of now imprisoned "Kings of Tort" Dickie Scruggs and Paul Minor. The Index found that, in the wake of its comprehensive lawsuit reforms enacted in 2009, Oklahoma now has the best tort rules on the books, followed by its neighboring state of Texas.

The Index, now in its third edition, was authored by Lawrence J. McQuillan, Ph.D., director of Business and Economic Studies, and Hovannes Abramyan, M.A., adjunct public policy fellow.

"Direct tort costs account for almost 2 percent of GDP in the United States—that's the highest in the world," said McQuillan. "These high costs impact American businesses when firms have to divert revenue to fight lawsuits. But all of us ultimately shoulder the burden through higher prices and insurance premiums, lower wages, restricted access to health care, less innovation, and higher taxes to pay for court costs."

"If lawmakers want to put people back to work, without costing taxpayers another penny for so-called 'stimulus', they should enact needed lawsuit reform," added Abramyan. "Job growth was 57 percent greater in the 10 states with the best tort climates than in the 10 states with the worst tort climates."

The Best and Worst Tort Climates

The Best

1.Alaska
2.Hawaii
3.North Carolina
4.South Dakota
5.North Dakota
6.Maine
7.Idaho
8.Virginia
9.Wisconsin
10.Iowa

The Worst

1.New Jersey
2.New York
3.Florida
4.Illinois
5.Pennsylvania
6.Missouri
7.Montana
8.Michigan
9.Connecticut
10. California

Saints, Sinners, Suckers, and Salvageables

The Index sorts states into four groups based on their ranking for outputs (tort costs and tort litigation risks) and inputs (tort rules and reforms on the books).

Saints: States that have relatively low tort costs and/or low tort litigation risks and relatively strong tort rules on the books.

Sinners: States that have relatively high tort costs and/or high tort litigation risks and relatively weak tort rules on the books.

Suckers: States that have weak tort rules on the books because they currently have relatively low tort costs and/or low tort litigation risks.

Salvageables: States that have moderate to high relative tort costs and/or tort litigation risks, yet have moderate to strong tort rules, usually as a result of recent reforms.

"Only five states made 'Saint' status, whereas 20 states were labeled 'Sinners'," said McQuillan. "This signals a dire need for further reform in many states. The goals of our tort system are to efficiently deter harmful events and fully compensate true victims, not to line the pockets of system abusers."

Bank of America U.S. Workers Sue for Overtime

2010-06-08T08:42:00.000-04:00

Workers for Bank of America Corp, one of the nation's largest employers, have sued the company for allegedly failing to pay overtime and other wages.

The lawsuit filed Friday in federal court in Kansas City, Kansas, consolidates 12 lawsuits filed on behalf of employees in California, Florida, Kansas, Texas and Washington.

It seeks nationwide class-action status on behalf of employees at Bank of America retail branches and call centers over the past three years.

George Hanson, a lawyer for the plaintiffs, said the case could eventually cover more than 180,000 workers, based on information provided by the bank. That could lead to a recovery in the "hundreds of millions: of dollars, assuming a typical employee was deprived of $1,000 to $2,000 in pay, he said.

According to the 44-page complaint, the largest U.S. bank by assets requires employees to work in excess of eight hours a day or 40 hours a week, yet fails to pay them both for overtime and for all straight time worked.

The complaint also accuses Bank of America of requiring employees to work during unpaid breaks, failing to provide meal and rest breaks, and failing to timely pay terminated employees for earned wages and accrued vacation time.

"Bank of America enjoys millions of dollars in ill-gained profits at the expense of its hourly employees," violating either the federal Fair Labor Standards Act or various state labor laws, the complaint said.

Shirley Norton, a Bank of America spokeswoman, said the Charlotte, North Carolina-based bank would defend against the lawsuit, and had comprehensive policies and training to ensure compliance with all federal and state wage and hour laws.

Bank of America as of March 31 employed 283,914 people worldwide, and operated 5,939 U.S. branches.

The federal Judicial Panel on Multidistrict Litigation in April had directed that the 12 original cases be combined.

The lawsuit seeks class-action status, a halt to the alleged illegal conduct, compensatory and punitive damages and other remedies.

The case is In re: Bank of America Wage and Hour Employment Practices Litigation, U.S. District Court, District of Kansas, No. 10-md-2138.

Top 10 Hurricane Year Possible, AccuWeather Forecaster Says

2010-06-02T08:45:00.001-04:00

This year could be a top 10 hurricane year, according to Joe Bastardi, AccuWeather.com’s chief meteorologist and hurricane forecaster.

Last week, the National Oceanic and Atmospheric Administration issued its annual hurricane forecast.

AccuWeather compared Mr. Bastadi’s hurricane prediction to NOAA’s and noted while there are similarities, Mr. Bastadi’s prediction gives a narrower range than NOAA’s.

NOAA forecasts an “active to extremely active” year, while Mr. Bastardi said 2010 could be a “top 10 year” in terms of storm frequency and strength, adding that the Atlantic basin looks “textbook” for a major season.

“2010 will be above average,” said Mr. Bastardi in a statement. “And worst case scenario, it may be in the top 5 to 10 percent as far as impact to land areas in the western hemisphere.”

NOAA predicted a 70 percent chance of 14-23 named storms.

Mr. Bastardi narrowed the range to a projected a total of 16-18 named storms, with 15 reaching the western Atlantic, and at least six storms impacting the United States coastline, with a worst-case scenario of up to 10.

He said he believes more storms will threaten the land areas of North America and adjacent islands.

NOAA predicted there will between 8-12 storms that reach hurricane status, while Mr. Bastardi sees 10-11 storms becoming hurricanes this season.

As for major hurricanes—Category 3 and higher—NOAA forecasts between three and seven.

Mr. Bastardi said he expects five.

The Gulf of Mexico and the Caribbean will be of special concern this hurricane season, as both the Gulf oil spill area and Haiti will be vulnerable to storm impact, Mr. Bastardi said.

He added that in the heart of the season, there will be a “congregation of tracks,” or a concentrated area where many of the storm tracks will pass through. This area is centered near Puerto Rico to near the Southeast U.S. coastline.

The peak time for hurricane season, which runs from June 1 to Nov. 30, is considered to be September

Citizens Says Losses Rose 34 Percent Over Previous Year

2010-06-01T10:26:00.000-04:00

May 28--Citizens Property Insurance Corp. reported that losses rose 34 percent over a year ago, due largely to sinkhole claims from both residential and commercial policyholders. The state-run insurer of last resort posted net income of $191.3 million for the year ended March 31, down 41 percent. Citizens saw a 1 percent rise in the number of policyholders last year, to 1,051,373, but expects that number to grow with the recent liquidation of two private insurers, Magnolia and Northern Capital Insurance.

Future Trend: Fighting Fraud and Abuse with "Transparency"

2010-06-01T10:19:00.001-04:00

The following article is from Elizabeth Hogue, Esq,(ElizabethHogue@ElizabethHogue.net) an attorney who specializes in Medicare/Medicaid/Home Care. In any case, the issue of public disclosure of gifts is always a hot button for agencies and the article below goes into some detail on what is/is not allowable.

Physicians routinely expect or perhaps demand gifts from home health agencies, private duty agencies, home medical equipment (HME) companies, and hospices to which they make referrals.

Generally, the rules governing such gifts are as follows:

- No cash

- No cash equivalents, including gift cards and gift certificates

- Non-cash items of nominal value are permitted, so long as the value of such items does not exceed approximately $350.00 per calendar year.

- Non-cash items of nominal value given cannot induce referrals.

The stakes are high if providers were to violate these rules. Providers on “both sides of the fence” may be suspended or excluded from participation in federal and state health care programs. They may be required to pay large civil money penalties or fines. Providers may also lose their licenses or go to jail. Many providers, however, have heard stories about their competitors who do not comply with these rules.

Regulators are now adding something new to their “arsenals:” providers and physicians may be required to publicly disclose all of the gifts they give and receive. The rationale behind this requirement is that “transparency” may discourage providers and physicians from violating the law. Regulators expect that public disclosures will make criminal behavior more difficult to conduct and easier to detect. They also anticipate that disclosures may serve as deterrents for violators.

As part of settlements of alleged violations of the above rules, for example, regulators require a growing number of providers and manufacturers to post publicly all of the payments they have made to doctors. Corporate Integrity Agreements (CIA’s) entered into between alleged violators and the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services may also require such disclosures.

In Gardiner Harris’ article entitled Prosecutors Plan Crackdown on Doctors Who Accept Kickbacks, which appeared in the New York Times on March 4, 2009, Dr. David Rothman, President of the Institute on Medicine at Columbia University was quoted as saying: “The rules of the game have changed…You’ve got to presume that anything you take from a …company is going to be on a Web Site. Your colleagues will know; your patients will know. That’s going to stop a lot of doctors from pocketing their gifts and funds.” Doctors whose financial arrangements have already been made public are horrified.

For example, the above article describes Dr. Richard Grimm, a physician in Minnesota engaged in substantial amounts of research, who served on a government-sponsored panel that creates guidelines about when to prescribe medication for blood pressure. State records revealed that Dr. Grimm received payments of approximately $800,000 from drug companies over a period of eight years. Invitations to serve on such panels then dried up.

Undoubtedly, providers who are “bad actors” will continue to flout the rules. The proverbial handwriting, however, is on the wall. The game has changed and will continue to do so.

Flood Insurance Program to Expire Again May 31

2010-06-01T10:07:00.001-04:00

For the fourth time in the past year, the nation's flood insurance program will lapse because Congress has not voted to reauthorize it.

That's the latest on Capitol Hill, according to property/casualty lobbyists and other sources.

As a result, the National Flood Insurance Program will lapse at 12:01 a.m., June 1, the first day of the hurricane season.

According to the American Insurance Association, the House of Representatives was expected to strip the flood insurance provision from a larger bill dealing with unemployment benefits, Medicare payments to doctors and tax breaks that has been stalled by partisan fighting. The plan was to then conduct votes on extensions for the NFIP and other programs prior to adjourning for the Memorial Day recess.

However, according to AIA, Senate Majority Leader Harry Reid, D-Nev., announced last night that the Senate will not consider the legislation to extend the insurance and other programs until the week of June 7.

Dow Jones Newswire and The Washington blog, The Hill, reported that Democrats might make an offer to extend the NFIP and other programs for 14 days but that Republicans would only go along if stimulus finds were used to pay for it, something Democrats have opposed in the past and are expected to again.

The stalemate means the Senate will adjourn for the Memorial Day recess without taking action needed to extend the NFIP.

"This is now the fourth time Congress will have let this program lapse and it's beginning to feel like Groundhog's Day. The country has seen record flooding this spring. Congress needs to pass a long-term extension because homeowners living in flood prone regions of the country don't have anywhere to turn should another major flood occur during this Congressional recess," said Blain Rethmeier, spokesman for the American Insurance Association.

NFIP has previously issued a memo with guidelines for operations during a hiatus. During its suspension, agents will not be able to issue any new or renewal flood insurance policies or increase limits on any existing policies. The hiatus will not affect claims paying. The program insures more than 5 million properties

Congress has been working on longer-term legislation to authorize NFIP for up to five years, which would be welcomed by the insurance industry

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

2010-05-28T14:37:00.000-04:00

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

2010-05-28T09:33:00.001-04:00

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

2010-05-26T14:36:00.000-04:00

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

2010-05-25T13:16:00.001-04:00

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

2010-05-24T13:30:00.000-04:00

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

2010-05-20T15:04:00.001-04:00

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

2010-05-20T14:59:00.002-04:00

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

2010-05-19T14:48:00.000-04:00

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

2010-05-19T08:45:00.000-04:00

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

2010-05-18T14:50:00.000-04:00

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

2010-05-18T13:58:00.000-04:00

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

2010-05-17T14:43:00.000-04:00

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

2010-05-17T13:45:00.001-04:00

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

2010-05-14T14:49:00.001-04:00

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

2010-05-13T13:18:00.000-04:00

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

2010-05-12T13:52:00.000-04:00

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

2010-05-12T13:51:00.000-04:00

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

2010-05-12T13:50:00.000-04:00

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

2010-05-12T13:49:00.000-04:00

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

2010-05-10T11:11:00.001-04:00

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

2010-05-05T09:10:00.000-04:00

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

2010-05-05T09:09:00.001-04:00

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

2010-05-05T09:07:00.001-04:00

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.

U.S. Targets Crop Insurers' Profits

2010-04-29T13:31:00.000-04:00

The federal government wants to save taxpayers billions of dollars by reducing spending on crop insurance after years of big profits by insurers, but the industry claims the reductions could hurt rural areas.

The U.S. Department of Agriculture is negotiating a new deal with crop insurance companies, which posted profits of 26.4 percent last year.

Crop insurance covers part of farmers' losses when their crops fail and helps them get credit for spring planting because lenders know they will be able to repay their loans. While participating farmers pay premiums, the government subsidizes the program to keep it affordable. Last year, it paid crop insurers $3.8 billion.

"The federal crop insurance program is an important part of the farm safety net, but costs have escalated to an unsustainable level and we need to take steps protect taxpayers,'' U.S. Agriculture Secretary Tom Vilsack said.

Earlier this year, the U.S. Department of Agriculture proposed cutting $8.4 billion in spending on crop insurance over 10 years. Its first revision brought that down to $6.9 billion. The agency is now preparing its third draft, which Bill Murphy, administrator of the USDA's Risk Management Agency, expects to release in early May.

A study done for the Risk Management Agency found the crop insurance industry's profit in 2009 was the second-highest in 21 years and more than double the 10.7 percent the agency considered "reasonable'' for last year. Over the past 21 years, the study said, the companies averaged a 17 percent return, compared with a "reasonable'' rate of 12.7 percent.

The agency also said government payments to crop insurance providers have more than doubled in the past three years while the number of policies hasn't really grown.

"If you look back since the mid-1990s, the companies have only lost money in this program one year, 2002, and it wasn't that much of a loss,'' Murphy said, noting a 2002 loss of 0.5 percent. "They certainly have been making far more than they've been losing.''

Brian Riedl, a budget analyst at the conservative Heritage Foundation, said he doesn't like the government telling people what a reasonable profit should be, but the crop insurance system needs reform.

"I have no sympathy for those who are making a killing off the crop insurance program on the backs of the taxpayers,'' he said.

Farmers say crop insurance gives them crucial protection against unpredictable weather.

Dale Shelley, who grows corn, soybeans, oats, alfalfa and grass seed on about 2,700 acres about 60 miles northwest of Minneapolis, said insurance helped him through a drought and hail damage in 2008. Without it, he would have had to borrow money to buy seed and fertilizer in 2009 instead of paying cash.

"The government wants cheap food,'' Shelley said. "To raise cheap food, we have to have a guarantee of something to keep us afloat.''

Insurers said they're not simply trying to guarantee themselves fat profits, although they acknowledge they're doing well.

Bob Parkerson, president of National Crop Insurance Services, a trade group based in Overland Park, Kan., said the companies are legally required to maintain huge reserves. That's because they have to pay out large sums when there are widespread crop failures, he said.

The industry employs some 18,000 people, mostly in rural communities, and those jobs could be at risk if the federal government cuts too deep, Parkerson said. That could mean too few employees to serve farmers well, he said, adding that writing policies and handling claims for crop insurance is much more labor intensive than for auto or home insurance.

Policies must be rewritten every year, so if there are fewer agents, they might not have as much time to drive out to farms, sit down with clients, determine their needs and provide advice, Parkerson said.

His group points to a study that concluded crop insurance is less profitable than the broad segment of the industry that includes insurance on homes, cars, businesses and individuals. The USDA's proposal would likely cut profits by up to 30 percent, which could prompt some companies to end or scale back their participation, it said.

Senate Agriculture Committee Chairwoman Blanche Lincoln and 29 other senators wrote Murphy late last month about the magnitude of the proposed cuts.

"We remain concerned about proposals that may undermine the program, reduce the quality of service and availability of the program, and harm rural America through job loss,'' they wrote.

Farm groups also have objected to the potential loss of several billion dollars in federal spending on agriculture. They fear any cuts now would mean less money for agriculture in the 2012 Farm Bill.

Chandler Goule, vice president of government relations for the National Farmers Union, said any savings should be put back into other risk management tools for farmers.

Despite the apparent opposition, Murphy said one-on-one discussions with companies have gone very well.

"At the end of the day, it is going to be an offer that's fair to the companies, it's fair to the government, it'll maintain accessibility of farmers and it's also fair to the taxpayer,'' Murphy said.

A.M. Best: U.S. P/C Industry Results Rebound

2010-04-26T14:18:00.001-04:00

The U.S. property/casualty industry reported a strong fourth quarter topping off a solid year, according to rating analysts.

Net income climbed to $31.1 billion in 2009, driven by improved underwriting results, the continued recovery of the financial markets and disciplined capital management, said A.M. Best Co.

The rating agency said the industry's underwriting results were buoyed by a quiet hurricane season, significant reserve releases and a sizable reduction in underwriting losses in the mortgage and financial guaranty segments. The industry's much improved investment returns were driven by the significant upturn in the financial markets in 2009.

The rating agency noted that for the first time in A.M. Best Co.'s recorded history, net premiums written (NPW) have declined in three consecutive years. NPW fell approximately 5.9% to $419.3 billion in 2009.

The industry's combined ratio improved to 101.2 in 2009, down approximately 3.0 percentage points from 104.0 recorded in 2008.

Overall net investment gains also increased approximately 31 percent to $43.5 billion in 2009 from $33.1 billion in 2008.

A.M. Best's data shows the industry recognized about $11.0 billion of favorable prior year loss reserve development in 2009.

Also, the agency reported that the U.S. P/C industry's policyholders' surplus position rebounded by approximately 9 percent to $519.3 billion in 2009 from $477.2 billion at year-end 2008.

"The overall industry's conservative operating strategy and effective capital management leave it sufficiently capitalized to navigate the underwriting cycle and volatility in the financial markets, but challenges remain," A.M. Best wrote in its special report.

Judge: Fraud Case Against Ex-AIG CEO Greenberg 'Devastating'

2010-04-26T11:11:00.000-04:00

New York state prosecutors have "a devastating case'' against Maurice "Hank'' Greenberg, the former American International Group Inc. chief executive accused of fraud over a reinsurance transaction 10 years ago, the presiding judge said in court Tuesday.

After four hours of oral arguments, New York State Supreme Court Justice Charles Ramos reserved ruling on Greenberg's motion to dismiss the case or the office of New York Attorney General Andrew Cuomo's request for summary judgment. The judge did not indicate when he would rule.

Greenberg's attorney David Boies argued that much of the attorney general's case relies on hearsay disputed evidence regarding two conversations Greenberg had with onetime General Re Corp. Chief Executive Ronald Ferguson that purportedly sealed the deal.

The judge told Boies that David Ellenhorn, a lawyer in the attorney general's office, "has put together a devastating case, a very strong case, and we both know it. I am very, very much focused on those two conversations Mr. Greenberg had with Mr. Ferguson.''

Brought in 2005 by former Attorney General Eliot Spitzer, the case involves a 2000 reinsurance transaction with General Re, a unit of Warren Buffett's Berkshire Hathaway Inc, that boosted AIG's loss reserves by $500 million without transferring risk.

Federal prosecutors have obtained five criminal convictions and two guilty pleas of former General Re and AIG officials over the transaction, including a conviction of Ferguson. He was sentenced to two years in prison.

Robert Morvillo, another Greenberg attorney, told the judge that there was "no independent, non-hearsay evidence that Mr. Greenberg became part of a conspiracy.''

He argued that out of 50 depositions in evidence, only the testimony of convicted former GenRe executive Richard Napier said there was an oral side agreement on the transaction. Napier pleaded guilty to a conspiracy charge and was sentenced to probation.

The transaction at issue long preceded taxpayer bailouts of about $180 billion for AIG after it nearly collapsed from mortgage-related losses. The revelation of the GenRe case contributed to Greenberg's ouster in 2005.

"This transaction is material because it was designed to, and did in fact, mislead investors about AIG's reserves,'' Ellenhorn told the court.

He said that when he deposed Greenberg two weeks ago, 90 percent of his answers were "I don't know,'' despite the now 84-year-old's fame for knowledge of the insurance business and attention to detail.

"He drills down so deep, to the Arctic ice, and yet he tells us he doesn't know the details of what he discussed with Ferguson,'' Ellenhorn said. "It's ridiculous.''

Greenberg is trying to rehabilitate his reputation by settling lawsuits over the transaction and his departure from AIG.

Former AIG Chief Financial Officer Howard Smith also was charged in the civil lawsuit, which seeks to hold the two former executives of what was once the world's largest insurer liable under the Martin Act, New York's powerful securities law.

Last August, Greenberg agreed to pay $15 million to settle U.S. Securities and Exchange Commission charges that he altered AIG's records to boost results between 2000 and 2005.

Three months later, Greenberg and AIG resolved years of litigation that followed his exit. AIG agreed to reimburse him and others for as much as $150 million of legal expenses.

Investigators have questioned Buffett about the General Re transaction, but the billionaire has not been accused of any wrongdoing in respect to the transaction in question.

The case is New York v. Greenberg et al, New York State Supreme Court, New York County, No. 401720/2005.

Auto Insurers Begin Process of Recouping Losses from Toyota

2010-04-20T14:50:00.000-04:00

Insurance companies are gearing up to recoup from Toyota money they paid for claims in crashes involving sudden acceleration, the subject of major safety recalls by the Japanese automaker. It could also mean money back for some drivers who paid deductibles.

At least six major insurers, including State Farm Insurance Cos., Allstate Corp. and Geico, have begun examining past claims involving the recalled vehicles, which number about 6 million in the U.S. and 8 million around the world. Insurers can request that Toyota pay them for the claim if a vehicle defect is proven to be a key factor in a crash, a long-standing industry practice known as subrogation.

Many insurers have begun notifying Toyota Motor Corp. that they will do just that.

"We're seeking to have them share in some of the financial liability, because part of it is their fault,'' said State Farm spokesman Phil Supple.

The move could repay some Toyota owners their out-of-pocket costs due to crashes but probably wouldn't have much of an impact on the premiums drivers pay. And it would mostly involve crashes in which people weren't seriously injured, because those cases frequently find their way into lawsuits.

Insurance companies typically refund deductibles -- the amount a policyholder must pay before the insurance takes over -- to their customers when they are repaid in such cases, officials of several companies said this week. None would release any financial estimates or the number of potential crashes, but given the sheer size of the Toyota recalls the liability could be in the millions of dollars.

State Farm has sought reimbursement from Toyota in cases where cars have sped out of control on their own at least as far back as 2007, according to a letter the company provided to federal regulators. The letter, dated Sept. 18, 2007, sought a formal Toyota investigation into a crash involving a 2005 Camry that surged forward at a stop sign and hit another car.

"We are aware of several complaints to your company of unexpected or sudden acceleration involving the Toyota Camry,'' the letter says. "Please accept this letter as notification of State Farm's rights of recovery for the damages we paid to both vehicle owners.''

Toyota issued a limited floor mat recall in 2007, but it didn't cover the 2005 Camry at issue in the State Farm letter. In the past few months, the automaker has issued two unwanted acceleration recalls for several of its popular models, one to fix floor mats the company says can jam floor pedals and one to repair what it calls a problem with pedals that can stick. Prius hybrids have also been recalled for brake issues.

A Toyota statement declined comment on the insurers' attempt to recoup claims but added it was "a common practice in the automotive industry,'' which was echoed by Allstate spokesman Mike Siemienas.

"This is business as usual for Allstate,'' he said.

Experts say most insurers have agreements with automakers to negotiate a confidential settlement over defect-related claims -- and automakers such as Toyota usually have insurance to cover most of the costs. Toyota declined to comment beyond its statement.

"It will be a whole bunch of small claims. What you have here are the fender benders,'' said Mark Bunim of the mediation firm Case Closure LLC in New York. "The major claims, where someone's a paraplegic, they will not be part of that group.''

Not every accident in a recalled Toyota can be blamed on a defect like sudden acceleration, said Insurance Information Institute spokeswoman Jean Salvatore.

"Just because you drive one of the cars that was recalled doesn't mean the accident was caused by the faulty accelerator,'' she said. "It would have to be determined that the cause of the accident was because of the defect.''

That can take a great deal of time, particularly with such a large volume of recalls. The paperwork for each potential claim is painstakingly reviewed on a case-by-case basis before the insurer submits it to the automaker for possible reimbursement.

Salvatore also said vehicle recalls by themselves usually have little impact on whether a driver's insurance premiums will rise. She said there are so many other factors, such as a person's driving and credit history, the car's safety record in crashes, whether the vehicle is frequently targeted by thieves, and so on.

"So, it's very difficult to say that rates will go up or down because of this,'' she said.

The National Highway Traffic Safety Administration has linked 52 deaths to claims of sudden acceleration in Toyotas, and more than 100 wrongful death and personal injury lawsuits have been filed against the automaker around the country. Those are being consolidated before a California federal judge for pretrial matters along with more than 130 lawsuits filed by Toyota owners claiming their cars have lost value since the recalls. An initial hearing is set for May 13.

Despite the lawsuits, Toyota reported March sales of new vehicles rose 41 percent compared with February numbers. Toyota has mounted an aggressive advertising campaign to counter the negative impression left by the recalls and offered sweet deals such as 0-percent financing, cheaper leases and free maintenance for some customers.

Many of the lawsuits contend problems with Toyota's electronic throttle control are the true culprit in the sudden acceleration cases, but the company has insisted electronics are not to blame.

N.Y. Agent Disclosure Rule Will Be Challenged By Another Group

2010-04-20T12:10:00.001-04:00

The Council of Insurance Brokers of Greater New York said it will join the legal effort to defeat New York’s compensation disclosure rule for agents and brokers.

CIBGNY said yesterday it will be part of the suit being developed by the Independent Insurance Agents & Brokers of New York challenging the New York State Insurance Department’s new disclosure rule due to take effect next year.

CIBGNY is an association representing independent insurance brokers in the New York City Metropolitan area.

Tim Dodge, IIABNY spokesman, said he believes the associations plan to file the Article 78 action sometime next month, but he had yet to confirm that timeline.

CIBGNY President Anthony Aquilino said in a statement: “The Insurance Department’s insistence on forcing an overbearing and burdensome regulation on our members is more than troubling. Once our board decided recently to initiate an Article 78 proceeding, it was a logical next step to work with IIABNY and protect the interests of both our members.”

CIBGNY legislative chairman Anthony Calafiore added, “While we have no problems in disclosing that we are compensated for providing the insurance, it should be at the time of sale and not when quoting the account.”

Under the new department regulations, slated to take effect on Jan. 1, 2011, producers will be required to describe to consumers their role in the transaction and how they get paid. If the client requests it, the agent or broker will have to provide a more detailed statement about compensation.

IIABNY has claimed the new rules place an undue burden upon agents for no justifiable reason and has questioned whether the department has the authority to promulgate the regulation.

The proposed regulation was published after extensive hearings. It was developed in response to a 2005 New York attorney general’s investigation revealing that some commercial insurance brokers took hidden payments to steer clients to insurers involved in a bid-rigging scheme.

The Professional Insurance Agents of New York (PIANY) previously announced it would not join IIABNY in filing the suit.

PIANY president Kevin M. Ryan has stated that while he sees the value in filing a suit, he believes PIANY can best represent producer interests by retaining its seat at the negotiating table with the department.

The department has said it would be “very difficult” to have open discussions about the regulation with any entity that is party to a lawsuit against it.

Charges Against Goldman Could Unleash Torrent of Lawsuits

2010-04-19T14:31:00.000-04:00

The fraud charges against Goldman Sachs & Co. that rocked financial markets Friday are no slam dunk, as hazy evidence and strategic pitfalls could easily trip up government lawyers.

Yet that hardly matters, experts say, because the allegations will kick off a new era of litigation that could entangle Goldman and other banks for years to come.

The charges against Goldman relate to a complex investment tied to the performance of pools of risky mortgages. In a complaint filed Friday, the Securities and Exchange Commission alleged that Goldman marketed the package to investors without disclosing a major conflict of interest: The pools were picked by another client, a prominent hedge fund that was betting the housing bubble would burst.

Goldman said the charges are "unfounded in law and fact.'' In a written response to the charges, the bank said it had provided "extensive disclosure'' to investors and that the largest investor had selected the portfolio -- not the hedge fund client. Goldman said it lost $90 million on the deal.

That doesn't contradict the SEC complaint, which says the largest investor selected the mortgage investments from a list provided by the hedge fund. And the fact that Goldman lost money has no impact on the fraud charges.

The charges will unleash a torrent of lawsuits, and likely signal that the government is prepared to file more lawsuits related to the overheated market that preceded the financial crisis, experts said.

"This is just the tip of the iceberg,'' said James Hackney, a professor at Northeastern University School of Law. "There are a lot of folks out there in different deals who played similar roles, and once it starts building steam, plaintiffs' lawyers will figure out this is where the money is and there should be a lot of action.''

Among the legal action expected in the coming months:

• Class-action suits by Goldman shareholders who believe Goldman alleged misconduct made their stakes less valuable could come as early as Monday. Such suits are common when companies are accused of wrongdoing. Goldman shares fell almost 13 percent Friday as the bank lost $12.5 billion in market capitalization.

• Suits by investors who believe Goldman sold them on deals that were doomed to fail. The investors in the transaction at the heart of the SEC case could sue first, followed by others who believe their losses were similar.

• Possible criminal charges, if the SEC's civil case reveals evidence that meets the higher standard of "proof beyond a reasonable doubt.'' Experts said it's unlikely the company as a whole will face criminal charges, but evidence could emerge that would expose the Goldman executive named in the SEC complaint, 31-year-old Fabrice Tourre, to criminal prosecution.

• Charges by regulators about other mortgage investments at Goldman and elsewhere. SEC enforcement chief Robert Khuzami told reporters Friday the agency is racking up evidence on other deals in the overheated market that preceded the financial crisis.

Already the case has provoked legal questions from foreign governments, according to published reports. That's because the financial crisis forced many countries to bail out banks that lost money on investments arranged by Goldman.

German regulators are considering legal action against Goldman, newspaper Welt am Sonntag reported, quoting a spokesman for Chancellor Angela Merkel.

The charges would be on behalf of IKB Deutsche Industriebank AG -- an early victim of the financial crisis that was rescued by the state-owned KfW development bank among others. IKB invested in the deal regulators are targeting.

The flurry of legal activity is likely to proceed separately from the SEC's case against Goldman, which experts said faces numerous pitfalls.

To prove its fraud case against Goldman, the government must show that Goldman misled investors or failed to tell them facts that would have affected their financial decisions.

The government's greatest challenge, experts said, will be boiling the case down to a simple matter of fraud. The issues involved are so complex that Goldman may be able to introduce enough complicating factors to shed some doubt on the government's claims.

"If you wanted to go after Goldman with a complaint that wouldn't stick, this would be perfect,'' said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm. "If you look at these products, almost all of them look like hoaxes because of the junk inside.''

Legal experts pointed to the paucity of evidence in the government's lawsuit, which contains short excerpts from e-mails but lacks key information about what the various investors knew and what actions they took.

The quality of the evidence was not clear from the complaint, said Jacob Frenkel, a former SEC enforcement lawyer now with Shulman, Rogers, Gandal, Pordy & Ecker PA.

Frenkel said there's been an uptick in "cases where the government chooses select excerpts from e-mails as the basis for its allegations only to find the balance of the text or other e-mails prove otherwise.''

For example, prosecutors last fall tried unsuccessfully to use a series of e-mails to convict two Bear Stearns hedge fund executives. They wanted to convince jurors that there was behind-the-scenes alarm at the hedge funds as investments in complex securities tied to mortgages began to slide.

The jurors were not swayed. After the verdict, some jurors told reporters they found the evidence against the two executives flimsy and contradictory. Others suggested the pair were being blamed for market forces beyond their control.

Goldman already has advanced a similar argument. "Any investor losses result from the overall negative performance of the entire sector, not because of which particular securities'' were in the investment pool, the bank said in a written response to the charges Friday.

That's part of a time-honored tradition of defusing accusations by bringing in details that may or may not be relevant, said James Cohen, a professor at Fordham University School of Law.

"Traditionally it's in the interest of the party that has Goldman's role to muddy the waters -- it's rarely in their interest to have the picture as sharp as HDTV,'' Cohen said.

Several legal experts suggested Goldman and the SEC had reached an impasse over a settlement before the charges were announced. They speculated that Goldman was unwilling to admit that it allowed the hedge fund to create a portfolio of securities that was designed to fail because that admission could do irreparable harm to Goldman's reputation.

"Goldman could've easily paid a fine already,'' said John Coffee, a securities law professor at Columbia University. "So I don't think it's money they're fighting over.''

The case has been assigned to U.S. District Judge Barbara Jones of New York. Jones is the federal judge who five years ago presided over the $11 billion criminal fraud case that toppled WorldCom Corp. and sent its former CEO Bernard Ebbers to prison for 25 years.

Senate Hearings to Explore Federal Mine Safety Regulation Flaws

2010-04-16T14:42:00.000-04:00

The Senate plans to explore weaknesses in federal mine safety laws when it convenes the first of a series of hearings this month on the deadly mining disaster in West Virginia.

Iowa Sen. Tom Harkin says the Health, Education, Labor and Pensions Committee will meet April 27 to look at whether the system encourages mine operators to challenge safety violations and delay penalties.

"What we will be looking at are weaknesses in our laws that provide incentives for employers to skimp and cut back on health and safety measures,'' Harkin, D-Iowa, said in an interview.

Harkin, who chairs the committee, said he doesn't expect the initial hearing to explore specific causes of the explosion that killed 29 mine workers.

There is no witness list yet, but it could be the first time that Massey Energy CEO Don Blankenship is called to testify about the accident at the Upper Big Branch mine his company owns.

President Barack Obama is meeting on Thursday with federal labor and mine safety officials to discuss preliminary data on what may have caused the accident.

Harkin said a future hearing by a panel that oversees the Labor Department budget will look at whether Congress has provided federal mine safety agencies enough money to process appeals. No date has been set for that hearing.

A key question will be how to curb the massive backlog of challenges to mine safety citations that is currently overwhelming the understaffed agency handling enforcement cases, Harkin said. Since 2006, the backlog of cases has jumped from roughly 2,700 cases to more than 16,000 now.

The Upper Big Branch mine was repeatedly cited for problems with its methane ventilation system and for allowing combustible dust to build up in the months leading up to the accident. But Massey filed legal challenges to many of those citations.

By tying up the violations in legal proceedings for months or years, Massey was able to delay the Mine Safety and Health Administration from using them in determining whether the mine showed a potential pattern of violations.

Blankenship has defended his company's record and disputed accusations from some miners that he puts coal profits ahead of safety.

Harkin said the committee also expects to discuss a measure that stalled two years ago under opposition from the mining industry and the Bush administration.

The S-Miner Act would have given MSHA greater enforcement power to crack down on companies that show a pattern of violations. It passed the House in 2008, but it stalled in the Senate after the Bush White House threatened a veto.

Mine operators opposed the S-Miner Act at the time because they said they were still struggling to put in place the comprehensive changes demanded of earlier legislation passed in the wake of the 2006 Sago mine disaster, said Luke Popovich, a spokesman for the National Mining Association.

Popovich said the industry expects more congressional scrutiny of the regulations and the law to see where adjustments have to be made.

"Clearly we expect there to be a heightened scrutiny of how this process got to be so dysfunctional,'' Popovich said.

Injured Workers' Drug Costs Higher in Florida Than Other States

2010-04-15T15:07:00.000-04:00

The payment per claim for prescription drugs used to treat injured workers in Florida was nearly 40 percent higher than in most study states, according to a new study by the Workers Compensation Research Institute (WCRI).

The 16-state study by the Cambridge, Mass.-based WCRI found that the average payment per claim for prescription drugs in Florida's workers' compensation system was $565—38 percent higher than the median of the study states.

The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.

The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. For example, Carisoprodol (Soma, a muscle relaxant) was prescribed for 11 percent of the Florida injured workers with prescriptions, compared to 2 to 4 percent in most other study states.

Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state.

The study reported that the average number of prescriptions per claim in Florida was 17 percent higher than in the median state. Similar results can be seen in the average number of pills per claim.

WCRI also noted that prices paid to Florida pharmacies were at the median of the 16 study states, due to Florida's typical pharmacy fee schedule, which is set at the level of the Average Wholesale Price.

The WCRI study is the first in an annual series that benchmarks the cost, price and utilization of pharmaceuticals in workers' compensation.

WCRI is a nonpartisan, not-for-profit workers' compensation research organization.

Malpractice Concerns Lead to Unnecessary Health Tests, Study Says

2010-04-14T14:44:00.000-04:00

Concerns about malpractice suits influence how often cardiologists order some potentially unnecessary tests — resulting in significant variations in healthcare use and spending across the United States, according to research reported in Circulation: Cardiovascular Quality and Outcomes, a journal of the American Heart Association.

According to the study, only fear of malpractice was associated with differences in the level of healthcare services used within specific geographical regions, although malpractice and peer pressure factors were both significantly associated with doctors' likelihood to aggressively test and treat heart patients,.

"In an era of escalating healthcare costs and focus on the delivery of high-quality care at the lowest possible cost, it is critical to understand why some regions experience so much higher rates of healthcare utilization than others," said F. Lee Lucas, Ph.D., lead author of the study and associate director of the Center for Outcomes Research and Evaluation at Maine Medical Center in Portland.

Researchers focused on cardiac catheterization in the study as a representative measurement of the intensity of heart-related services offered by physicians. (Cardiac catheterization allows doctors to examine blood flow to the heart and how well the heart is pumping.)

When asked about circumstances under which they order cardiac catheterization "for other than purely clinical reasons," nearly 24 percent of the 598 cardiologists surveyed said they recommended the procedure out of fear of malpractice claims.

The survey also showed more than 27 percent of doctors reported ordering cardiac catheterization because of perceived peer pressure, calling for the procedure if they thought another colleague would do so.

The doctors were also given hypothetical patient vignettes and assigned a Cardiac Intensity Score based on their self-reported recommendations for high-tech or invasive tests and treatments. Cardiac Intensity Scores generally corresponded with the degree of healthcare services used within the physicians' respective regions.

Researchers evaluated region-specific healthcare utilization in 306 Hospital Referral Regions, using two Medicare population based factors – one was specific to cardiac catheterization rates and the other depended on overall healthcare spending among Medicare beneficiaries.

The study suggests that malpractice concerns may be a target for intervention to reduce regional variations.

Greater use of healthcare services doesn't necessarily result in better outcomes or better patient satisfaction, Lucas said.

The study was funded in part by the National Institute on Aging. Co-authors were: Brenda E. Sirovich, M.D., M.S.; Patricia M. Gallagher, Ph.D.; Andrea E. Siewers, M.P.H.; and David E. Wennberg, M.D., M.P.H.

Florida Man Sued for $15K Over Negative Remark Posted on eBay

2010-04-13T15:20:00.001-04:00

Can posting your opinion on eBay cost you in real life?

So far Michael Steadman of Florida has spent $7,000 for his, and he isn't yet done defending himself in a $15,000 defamation lawsuit brought by the man who sold him a reportedly defective time clock.

Steadman bought the clock for $44 in 2008, and said it arrived in three pieces that didn't fit together or even seem to be the same model. He got a refund through PayPal's buyer protection plan and sent the merchandise back, but wanted other potential buyers to beware.

So on the profile of emiller1313, he wrote: "Bad seller; he has the ethics of a used car salesman.''

Steadman thought that was the end of it until a process server arrived with a court summons.

It turned out that emiller1313 was a Miami Beach lawyer, and he wanted damages for ruining his 100 percent customer approval rating and "commercial reputation.''

"The laws don't work for us. Because I don't have the money to fight them, I'm losing,'' Steadman said. "It's not right. I'm speechless.''

Steadman recently lost his lawyer in the Miami-Dade County Court case because he ran out of funds.

Seller Elliot Miller said in the lawsuit the time clock was "plainly offered for sale with the following language: 'we can not give you any guarantees and must offer it on an as-is, where-is basis only.'''

Steadman said he joined eBay about six months earlier hoping to find bargains for his new welding shop. He thought he lucked out on the time clock, which he said Miller advertised as tested and proven to work.

Now, he says, "I warn everyone that goes online not to leave feedback.''

Up To 4 Hurricanes May Hit U.S. Shores, Says TSR

2010-04-13T09:39:00.001-04:00

Between one and four hurricanes may hit the U.S. coast, according to a new forecast from a team at University College London in the United Kingdom.

Tropical Storm Risk, an Aon Benfield-sponsored forecast group, issued that prediction in its April forecast for the 2010 Atlantic Hurricane Season.

TSR’s Mark Saunders and Adam Lea said they expect the Atlantic Hurricane Season to be 60 percent more active than the long-term average.

The group now forecasts around 16 named storms, nine hurricanes and four major Category 3 hurricanes with winds of 111 mph to 130 mph.

Nine hurricanes is one more than the eight predicted last week by the Colorado State University forecast team, which also said it foresees a higher than normal hurricane season.

TSR’s forecast anticipates a year that has a high probability (77 percent) of being in the top 33 percent of all hurricane seasons in terms of activity.

The meteorologists said the anticipated active season is mainly due to forecasted trade winds in the upper levels of the atmosphere during the August to September timeframes, which enhances the ability for the atmosphere to generate tropical low pressure areas, as well as expected above-average sea surface temperatures.

April’s forecast from TSR was an increase from the December 2009 forecast. It cited “anomalous warming of the waters in the Atlantic Main Development Region, a region that lies between the Cape Verde Islands and the Caribbean Lesser Antilles,” as a major factor in the storm activity.

TSR said the probability of storms making landfall in the United States at an above-average level is 76 percent; the chance that it will be near normal is 18 percent and below normal is 6 percent.

The London group also said it sees the possibility of three-to-seven named tropical storms impacting the use.

It explained that the July to September trade wind speed will be influencing the spinning up of storms (cyclonic vorticity) in the main hurricane track region and the August to September main storm development region sea surface temperature provides heat and moisture to power incipient storms in that main track region.

The Colorado team predicted 15 named storms will form in the Atlantic. Eight are expected to become hurricanes, and four will develop into major hurricanes Category 3,4, or 5 on the Saffir-Simpson scale, with sustained winds of 111 mph or more.

Olympus Is Latest Insurer Under Scrutiny by Florida Regulators

2010-04-12T14:58:00.000-04:00

Another young Florida property insurance company is in trouble with state regulators and could lose its license if it does not cut back on business, boost its reinsurance and explain some if its accounting.

Olympus Insurance Co. reported a surplus of $21 million at the close of 2009 and a profitable outlook for 2010. However, Insurance Commissioner Kevin McCarty and his Office of Insurance Regulation (OIR) say the surplus is now only $14 million.

OIR also said the insurer is continuing to increase its premium writings beyond what it did when it reported $50 million in surplus. In an official order last Friday. McCarty ordered the firm to "significantly" reduce its business.

According to the OIR, Olympus does not have adequate reinsurance to pay claims if there is a catastrophic event. OIR said that Olympus' catastrophic plan for 2010 calls for it to retain $6 million in losses and pay $16 million for reinsurance in the event of a $47 million catastrophic event. However, even with surplus of $21 million, Olympus would become insolvent if it had to purchase reinsurance for a second event, according to OIR.

OIR also questioned a Sept. 2009 quota share reinsurance agreement that generated $18.2 million in commission and boosted underwriting income and surplus, as well as a deferred tax asset worth $3.1 million.

Regulators are also concerned that the company has been overpaying its affiliated managing general agent. OIR says Olympus MGA Corp. has been paid a 34 percent commission, even though the licensing agreement filed with the state was for a 22 percent commission with additional underwriting expenses capping this payout at 29 percent.

Olympus has filed a new MGA agreement with OIR that caps the fee to its MGA at 25 percent and caps total underwriting expenses at 28 percent.

Regulators told the Orlando-based company it has until May 7 to submit a corrective plan that addresses its reinsurance program, reduced business volume, profitability for 2010, the accounting of its quota share arrangement and the reasonableness of the $3.1 million deferred tax asset. Olympus must also attempt to gain addition capital form its holding company, Gemini Financial Holdings.

Its failure to comply could mean the loss of its license.

Olympus started writing insurance in the state in 2007.

Olympus is one of a half dozen smaller insurers caught up in a compliance crackdown by OIR in recent months.

Senate to Consider Restarting Flood Insurance Program Today

2010-04-12T13:18:00.001-04:00

Congress today could advance a provision reinstating the flood insurance program as part of a bill extending unemployment benefits and subsidies for COBRA health insurance premiums.

The Senate is scheduled to vote on whether to end debate on the legislation, which it did not do before it left two weeks ago for a recess. The House approved the bill on March 17.

Senator Tom Coburn, R- Okla., blocked the Senate from voting on the bill, arguing that to do so would add to the deficit. Democrats argued that the measure qualified as emergency spending and revenue sourcing could be dealt with later.

At least one Republican will have to agree to end debate if Democrats are to get the 60 votes needed advance the measure.

Congress could reinstate the NFIP and other affected programs retroactively. However, even if the legislation passes, it would only extend the flood insurance program until April 30, 2010 so lawmakers will have to revisit the issue.

Due to the partisan stalemate, the federal flood insurance program's authority to write new policies ended on March 28 at midnight. Insurance agents have not been able to provide new or renewal flood insurance policies, which are required by lenders to close on some real estate sales.

A similar impasse occurred at the end of February and the NFIP was closed for several days until Congress renewed it on March 2.

The NFIP expirations have caused headaches for insurance agents and their customers as well as delays for some consumers waiting to close on the sale of a property within a flood hazard area.

While no new policies can be issued during a lapse in NFIP authorization, consumers with current flood insurance policies remain covered. Claims payments are not affected.

AmWINS May Top Its Sector After Colemont Brokerage Buy

2010-04-12T10:02:00.001-04:00

AmWINS Group Inc. said it has acquired Colemont Insurance Brokers in Dallas, in a move which may make it the nation’s largest wholesale brokerage, a consultant suggested.

Financial terms of the transaction were not released.

In a statement, Charlotte, N.C.-based AmWINS said the two companies combined will distribute over $4.8 billion in annual premiums with more than 1,800 employees in 16 countries worldwide.

The combined companies will operate under the AmWINS Group name and be comprised of four divisions:

• AmWINS Brokerage, which distributes property and casualty and financial services products through retail brokerage clients.

• AmWINS Underwriting, which is the managing general agent.

• AmWINS Group Benefits, which designs, distributes and administers specialty group insurance products through retail insurance brokerage clients.

• Colemont Global Group, the company’s International Division, which operates as a full-service, worldwide insurance and reinsurance brokerage network headquartered in London with more than 25 offices in 16 countries.

The combined firm will be led by M. Steve DeCarlo, chief executive officer; Skip Cooper, president; James Drinkwater, president, U.S. Brokerage division; Sam Fleet, president, Group Benefits division; Michael Lapeyrouse, Underwriting division leader and president, The American Equity Underwriters Inc.; and Surinder Beerh, CEO of Colemont Global Group.

Mr. DeCarlo said in a statement, “Not only does this combination strengthen our geographic footprint, but more importantly, we have expanded the expertise and capabilities available to our clients.”

The combination, he added, “results in broadened placement expertise, deepened collaboration and an overall ability to offer more solutions to our retail customers with an enhanced distribution system for our markets.”

Gene Eisenmann, retired founder of Colemont, noted, “From the beginning, the two firms have had similar cultures—strongly founded in being independent and doing what is best for the client.”

He remarked, “Bringing the two firms together provides an opportunity to combine the best talent in the industry with access to the most diverse product solutions and unparalleled relationships with insurance carriers and markets.”

AmWINS said this acquisition will mark its first foray into the international insurance marketplace. “We have studied and evaluated many opportunities to grow our firm beyond the U.S. borders,” said Mr. Cooper. “The opportunity to build upon the international network and capabilities of Colemont Global Group is an exciting part of this combination.”

Audra Szollosy, senior vice president for the agency consulting firm Hales & Company (which was not involved in this deal), said the acquisition could put the firm ahead of CRC Insurance Services, which reportedly has over $3 billion in premium and is owned by Winston Salem, N.C., bank BB&T Co.

“I was shocked,” she said. “This is a big deal and could be the sign of things to come.”

With Colemont’s overseas presence, she called it a “fabulous combination.”

After a very quiet 2009 in regard to merger and acquisition activity, she said this could be a sign of the beginning of additional consolidation, possibly among the top 10 insurance broker wholesalers.

AmWINS is a wholesale broker distributor of specialty insurance products in the United States. The company operates through more than 45 offices across the United States and handles premium placements in excess of $3.5 billion dollars annually.

Additional information about AmWINS is online at www.amwins.com.

Colemont, with 700 globally located employees, was founded in 1992 and placed over $1.3 billion in gross premium last year.

P&C Sector First Quarter Profits Foreseen By KBW

2010-04-09T12:03:00.000-04:00

The property and casualty insurance group is looking at limited top-line growth, but should record a profitable first quarter despite Chilean earthquake and winter storm losses, an investment bank’s analysts said.

Keefe, Bruyette & Woods equity researchers said for the sector, their first quarter projections also foresee some glimmers of price increase in personal lines, a slowing of favorable loss reserve development and merger and acquisition activity that targets smaller regional U.S.-based insurers.

Reinsurers, their report said, did not do well in the quarter being hit hard by catastrophe losses. Bermuda merger action is projected for that sector.

Insurers’ loss ratios, according to KBW are still likely to benefit from reserve releases although at a slower pace than 2009.

The analysts said they believe the companies’ top-line will continue to be a challenge, noting that “competition remains tough and underlying exposures have not grown. We expect investment portfolios to report a good quarter and that the industry was active with capital management.”

KBW said as a result of first-quarter loss events, including the Chilean earthquake that might involve insured losses as high as $10 billion, Europe’s Windstorm Xynthia and U.S. storms, it has reduced earnings per share estimates for a number of companies that have preannounced losses and has made its own estimates of losses for those that did not.

U.S. storm claims will largely be due to roof damage and should be small enough to fall below reinsurance coverage, the firm projected.

Despite losses, EPS estimates are still within the range of what KBW analysts said they view to be a “normal” year. The firm said 2009’s low level of loss events was the anomaly, not 2010’s activity.

KBW said its top equity picks in the sector include ACE Limited, Arch Capital Group, Allied World Assurance Holdings, Chubb Corporation, and Tower Group Inc.

According to the analysis, rates will be down in the mid-single-digit range with personal lines the only sub-segment which manages rates that are flat or increased at a low-single-digit level.

Auto and homeowners insurers, it was noted have been continuing to gradually and selectively increase prices in loss-hit areas, albeit cautiously in markets with less favorable economic conditions.

The “bright spot” for the p&c industry, according to the research report, will be share repurchase programs with most of the insurers and reinsurers that KBW studies using buybacks “as excess capacity grows despite recent loss events.”

For most p&c companies loss favorable loss reserve development will slow, said KBW, but noted that companies it studies actually saw increased favorable development in 2009, which it attributed to better than anticipated accident year loss trends or firms being over optimistic about loss trends and bringing down reserves too aggressively--possibly a combination of both.

Regarding reinsurers the researchers said they were off to a tough start, impacted by the Chilean quake, Windstorm Xynthia, Australian hailstorms and floods and U.S winter weather. “We expect abut a third of the group to lose money in the first quarter with the remainder having earnings reduced in a meaningful way,” they wrote.

Northern Capital in Hazardous Financial Condition

2010-04-08T10:50:00.001-04:00

On May 27, 2009, Northern Capital Insurance Company (Northern Capital) was placed in Administrative Supervision by the Office of Insurance Regulation (Office). The Office has been continuously monitoring operations and reviewing corrective action and other measures undertaken during this extended period of supervision.

Even after these extensive efforts, Northern Capital no longer meets the minimum capital and surplus requirements, is unable to raise sufficient additional capital to continue operations, and all other discussions to sell the company have come to an end.

On April 7, 2010, the Office notified the Department of Financial Services (DFS), that the company is insolvent and is in hazardous financial condition.

It is anticipated that in short order DFS will petition the Court to order Northern Capital into receivership. If the company is ordered into liquidation all policies will be cancelled no later than 30 days from the date of the liquidation order. Based on the financial statements filed with the Office by the company, liquidation appears to be a strong possibility.

Agents and policyholders should look now for new coverage

• Agents and policyholders should cancel coverage with Northern Capital and shop for new coverage in the voluntary market now.

• Unearned premium will be refunded to the policyholder as quickly as possible to facilitate the purchase of new coverage.

• If replacement coverage is not available in the voluntary market, Northern Capital insureds are eligible now to apply for coverage with Citizens.

Florida Jury Awards $10 Million in Ambulance Birth

2010-04-07T14:42:00.001-04:00

A jury has awarded $10 million to a Volusia County who sued an ambulance transport service over injuries her son received during his premature birth in 2003.

The jury decided last week that EVAC Ambulance was negligent for transporting Margarita Chess, who gave birth to her son while en route to the hospital. Her son was left with cerebral palsy after suffering a lack of oxygen to the brain.

EVAC spokesman Mark O'Keefe said the company stands behind the paramedics and intends to appeal the verdict.

Court records show Chess went to one hospital for premature labor. She was going to be treated at another hospital, but the ambulance was called to transport her to a different hospital. The hospitals and doctors named in the lawsuit settled the case last year for $1.4 million.

The Hartford to Restructure for Growth, Target Small to Medium Accounts

2010-04-05T15:06:00.002-04:00

Hartford Financial Services Group Inc. will restructure itself under a plan to reignite growth by courting small- and medium-sized businesses as clients and reining in risk.

The announcement of the plan comes a day after the insurer, the 10th-oldest company in the United States, repaid $3.4 billion of U.S. government bailout aid that was made necessary by massive losses during the financial crisis.

Chief Executive Liam McGee, speaking at Hartford's New York City investors meeting on Thursday, unveiled a strategy that included above-market growth goals and realigning the company into three main business units.

"We're too complex a firm right now,'' McGee said, during a question and answer session with investors.

He said Hartford will focus on limiting company-wide risk, and avoid concentrating too heavily in the sales of certain products -- like variable annuities.

Hartford reported in fourth quarter 2009 its first quarterly profit in nearly two years, after suffering massive losses on stock-market related annuities and investments throughout the financial crisis. The company reports first quarter earnings on April 29.

The new plan focuses on small and mid-size business customers for insurance, retirement plan and group benefit sales.
Hartford also plans to grow its wealth management business by courting business owners' as clients, and aims to sell up to $5 billion in annuities annually by 2012.

Finally, the company is ending mass marketing of personal insurance lines, and will court customers above 40 years old, primarily through affinity groups like AARP.

McGee said Hartford is targeting high single-digit core earnings growth between now and 2012, along with an 11 percent return on shareholder equity by 2012.

As part of the restructuring, the company will split its operations into three major business units -- consumer markets, commercial markets, and wealth management -- and focus on a narrower set of insurance, wealth and annuity services and clients.

The change was first announced to employees on Tuesday, and the restructuring is expected to be completed by summer, McGee said in an interview with Reuters.

"It was clear the company had significant capabilities, but it was unduly difficult to get things done,'' said McGee.

The commercial markets unit will oversee all insurance catering to business and corporate customers, as well as Hartford's legacy property and casualty holdings. It will be run by former property and casualty chief Juan Andrade.

The new wealth management division will oversee the annuities, individual life insurance and traditional wealth advisory services, and will be managed by John Walters. Walters formerly oversaw the company's life division.

The consumer markets division will manage the company's AARP relationship, other affinity programs and general development.

McGee said the search is continuing internally and externally for an executive to run consumer markets, and he expected to name someone by the summer.

Although the company is making major changes in its operations, it has no immediate plans to divest pieces of the company, McGee said.

"We like the businesses we're in,'' he said.

GOALS

During the presentation, company executives said the higher-than-expected earnings would come via a mix of cost-savings initiatives and pricing its products to produce a 13 percent to 15 percent return on equity.

Hartford Chief Financial Officer Chris Swift said the company was revising its 2010 earnings forecast of $3.70 to $4.00 per share, announced in February, to $2.60 to $2.90 per share, reflecting the repayment of the U.S. government's bailout aid.

But longer term, Hartford executives said they are interested in expanding the insurance and other units to cover emerging industries, like renewable energy.

"That's going to evolve,'' McGee said.

Hartford shares closed up 1.6 percent at $28.88. Company shares have rebounded strongly from a 52-week low of $6.52 a year ago and have gained 24 percent this year.

Federal Flood Insurance Program Closed for Weeks

2010-04-05T11:05:00.000-04:00

As insurance and real estate agents and homeowners feared, Congress left Washington without extending the federal flood insurance program.

Congress adjourned until April 12 after failing to agree on an unemployment benefits bill that included a provision with an extension of the National Flood Insurance Program.

As a result, the federal flood insurance program's authority to write new policies ends on Sunday, March 28 at midnight. After that time, insurance agents will not be able to provide new or renewal flood insurance policies, which are required by lenders to close on some real estate sales.

Senator Tom Coburn, R- Okla., blocked the Senate from voting on the bill to extend the jobless benefits arguing that to do so would add to the deficit. Democrats argued that the measure qualified as emergency spending.

A similar impasse occurred at the end of February and the NFIP was closed for several days until Congress renewed it on March 2.

But this time the hiatus will be longer.

Congress could reinstate the NFIP and other affected programs retroactively when it returns on April 12.

The NFIP expiration last month caused headaches for insurance agents and their customers as well as delays for some consumers waiting to close on the sale of a property within a flood hazard area.

While no new policies can be issued during a lapse in NFIP authorization, consumers with current flood insurance policies remain covered. Claims payments are not affected.

The NFIP has issued guidance for operating during an interruption.

FEMA is expected to issue updated guidance soon.

A Buyers Insurance Market May Persist To 2011, Advisen Finds

2010-04-02T08:38:00.000-04:00

Insurance buyers are likely to enjoy another year of favorable pricing through 2010, although brokers will continue to struggle, according to a new Advisen Ltd. Special Report.

“It’s increasingly looking like the soft market’s going to continue, at least well into 2011, unless something rather dramatic happens,” Dave Bradford, an Advisen executive vice president and author of the briefing said in an interview.

Does this mean more good deals for commercial lines buyers? “Absolutely,” he said, “at least through 2010. There’s nothing right now that suggests it’s going to harden any time in the foreseeable future, but there are too many moving parts to project it out too far.”

While the commercial lines insurance market has been pummeled by the combined impact of depressed rates and declining written premiums resulting from the global recession, insurers will nonetheless post a profit for 2009 and capacity remains abundant. According to the report, “The Insurance Market in 2010: The Lingering Impact of the Recession on Capacity and Pricing,” sponsored by FM Global.

The report found that capacity for insurance is abundant in most lines, but demand for that capacity has been diminished by the ravages of the recession.

“Decreased demand as a result of the damaged economy will keep rates from rising in 2010,” Mr. Bradford said in a statement. In addition, he said, premium volume “for lines of business that are based on factors such as payroll and revenues will continue to be suppressed by the lingering impact of the recession. It is going to be a challenging year for insurers and, especially, brokers.”

As premium volume falls, insurers seeking to deploy their excess capacity are considering new avenues for growth. “The continuing soft market further encourages insurers to introduce new products and move into new markets,” Mr. Bradford said.

“New products and markets can provide new revenue streams, but they can also cause erratic insurer results,” he noted.

With several exceptions, property & casualty insurers were largely unscathed by investment losses directly attributable to the meltdown of the subprime mortgage market in 2007, the report found.

Economists generally agree that the recession has ended, but recovery will be slow. Unemployment hovers at about 10 percent, and business bankruptcies are well above long-term averages. As a result, the commercial lines insurance industry has seen revenue fall with little hope of a material rebound in 2010, said the report.

Additionally, the soft phase of the insurance pricing cycle shows few signs of loosening its grip. The average commercial lines premium fell about 2 percent in 2009, and likely will fall by a similar amount in 2010, Advisen found.

Brokerage firms, which derive most of their revenue from commissions on insurance premiums, have been especially challenged by declining written premium. Organic growth turned negative during the first three quarters of 2009, though profitability remained relatively stable for the largest firms, the firm said.

According to the report, the most likely scenario for 2010 is continued soft market conditions. The recession will suppress demand for insurance capacity and as a result, the market will remain comparatively overcapitalized. Some policyholders will see modest rate increases, but on average rate levels will erode slightly in most lines.

But while commercial lines insurance buyers can plan on a competitive insurance market for 2010, the seeds of the next hard market have been sown, and above-average catastrophe losses could contribute to a reversal of the market cycle, the report said.

The inevitable hard market may begin to emerge as early as 2011. In the absence of large catastrophe losses, the sudden and severe premium hikes that characterized the 2001-2003 hard market are unlikely to be repeated. Rather, rates will rise slowly and erratically, Advisen forecasted.

How high rates rise, and how long the hard market persists, will depend in part on how much new capital is attracted to the market, the report said. Insurers already have successfully raised funds in the depths of the soft market, suggesting that abundant capital is waiting in the wings, the report said.

The wild card in the market cycle, as always, is catastrophe losses, Advisen noted. One mega-catastrophe, such as another Hurricane Katrina, or an accumulation of smaller catastrophes could soak up excess capacity and contribute to a turn of the market in all lines of business, the study said.

So far, 2010 is shaping up as an active and expensive year for natural catastrophes. Nonetheless, it would take an exceptional level of catastrophe losses to trigger the type of sudden and sharp market rebound that was seen in 2001-2003, according to the report.

Reinsurers See Worst 1st Quarter From Storm Events

2010-04-01T08:58:00.000-04:00

An unprecedented $16 billion in first-quarter reinsurer losses from the Chilean earthquake, European storm Xynthia and other natural catastrophes is a record worst for the period, said Willis Re.

The reinsurance broking arm of Willis Group Holdings’ 1st View renewals report said this year’s first-quarter result followed a year of historically low frequency and severity for losses with resulting excellent financial performance.

Now, the report said, reinsurers will, for the first time in many years, see results worse than those of their primary insurance company clients.

The Willis Re report, titled “Calm Amid Calamity,” tracks reinsurance rate movements across numerous territories and product classes. The review said the difficult first quarter does not bode well for reinsurers because their largest losses are coming from smaller markets, where they are less able to generate significant premium volumes to accelerate post-loss payback.

At the same time, losses in the first three months of the year leave reinsurers exposed to the historically more loss-prone third and fourth quarters, Willis Re said.

Adding to the potential for future market volatility, some forecasters are now predicting a more-active-than-usual North Atlantic hurricane season, the firm added.

Willis said there are two other potential areas of concern in the reinsurance arena: less plentiful reserve releases and excessive exposure to sovereign debt.

A close analysis of reinsurers’ 2009 performance found that results are showing some evidence of reserving stress, with fourth-quarter 2009 releases not as plentiful as in earlier quarters.

In addition, as a result of the financial crisis, many reinsurers have aggressively “de-risked” their investment portfolios by investing in government debt as a seemingly secure alternative, the report said.

This, Willis Re said, is starting to raise concerns over excessive exposure to sovereign debt at a time when many governments are under increasing fiscal strain.

Other renewal trends highlighted in the report are:

• Despite increasing uncertainty and loss activity, the reinsurance market has yet to react in terms of pricing, conditions and capacity. April 1 renewals have seen continuing modest risk-adjusted reductions and hardening only in specific territories and classes with consistently poor results.

• Capacity in all lines has been ample as the issues of rate exchange volatility affecting capacity no longer have any impact.

• Merger and acquisition activity has picked up following the Max Capital and Harbor Point deal. Willis Re predicts the pace will quicken over the next six months as financial organizations that received government bailouts seek to divest their insurance assets as part of the recovery process.

“While one poor quarter, which is an earnings issue for reinsurers, will not be sufficient to trigger a general market turn on its own, it is likely to stiffen reinsurers’ resolve on renewals later in the year as the size of the recent catastrophe losses develop and back-year reserve releases reduce,” said Peter Hearn, chief executive officer of Willis Re.

“This is balanced by the remaining reinsurance capacity oversupply and the continuing difficulties companies face in achieving any top-line growth to offset claims and expense increases. Against this background, absent any other major losses, buyers who will be renewing loss-free programs later in the year can continue to budget for stability or modest reductions in their reinsurance costs,” Mr. Hearn concluded.

Nurse Practitioner Liability Claims Costs Rising 2.3% a Year: CNA HealthPro

2010-03-26T14:50:00.000-04:00

The average indemnity and expense payments in nurse practitioner liability claims have increased at a rate of 2.3 percent per year over the past 10 years, according to an insurer's review of claims.

Pediatric/neonatal specialty has the highest average severity, professional liability insurer CNA HealthPro also reported.

The new report -- Understanding Nurse Practitioner Liability: CNA HealthPro Nurse Practitioner Claims Analysis 1998-2008, Risk Management Strategies and Highlights of the 2009 NSO Survey -- suggests that nurse practitioners are at a "paradigm shift" in today's health care system. Whereas 10 years ago they did not have a prominent role, today physician groups, hospitals, aging services and other healthcare organizations increasingly depend upon them.
A nurse practitioner is a registered nurse who has received advanced training and may perform some of the duties of a physician.

The document draws on CNA HealthPro claims data and NSO's survey of nurse practitioners.

The data showed that the average indemnity payment increased from $168,600 in 1999 to $189,300 in 2008. Average expenses including legal costs went from $28,500 to $42,900 over the same span.

CNA HealthPro paid $64.8 million in claims over the 10 years and placed $24.9 million in reserves.

"In the last 10 years, nurse practitioners have increased their role in patient care; and, as a result, there is a greater focus on nurse practitioners in malpractice litigation," said Bruce Dmytrow, vice president of Specialty Risk Control, CNA.

Other highlights of the CNA report:

•the medical care office is the location with the highest number of claims;
•adult/geriatric, family and pediatric/neonatal medicine specialties continue to have the most claims;
•several closed claims that settled at the policy limit ($1 million) resulted from allegations of failure to diagnose or failure to properly assess.

The report's data excludes claims for registered nurses, certified registered nurse anesthetists and certified nurse midwives. Nurse practitioners in the report include clinical nurse specialists.

Hacker Gets 20-Year Prison Sentence for ID Theft from Retailers

2010-03-26T14:48:00.000-04:00

One of the world's most notorious computer hackers was sentenced to 20 years in prison Thursday after he pleaded guilty to helping run a global ring that stole tens of millions of payment card numbers.

Albert Gonzalez, a 28-year-old college dropout from Miami, had confessed to helping lead a ring that stole more than 40 million payment card numbers by breaking into retailers including TJX Cos Inc, BJ's Wholesale Club Inc. and Barnes & Noble.

It was the harshest sentence ever handed down for a computer crime in an American court, said Mark Rasch, former head of the computer crimes unit at the U.S. Department of Justice.

Gonzalez and conspirators scattered across the globe caused some $200 million in damages to those businesses, said Assistant U.S. Attorney Stephen Heymann.

Heymann said it was not possible to quantify how much money was stolen from individuals. "They would quite literally go to ATMs and take out bundles of money from victims' accounts,'' Heymann told the court in Boston.

Under his plea agreement, Gonzalez had faced up to 25 years in prison, but asked the judge for leniency in sentencing, saying he had been addicted to computers since childhood, had abused alcohol and illegal drugs for years and suffered from symptoms of Asperger's disorder, a form of autism.

"I stand before you humbled by the past 22 months sober,'' he told U.S. District Court Judge Patti Saris with his parents and sister watching from the front row of a packed gallery.

Gonzalez, who buried $1 million cash in the backyard of his parents' home, said that his crimes got out of control "because of my inability to stop my pursuit of curiosity and addiction.''

Heymann urged Saris to issue a stiff sentence, saying it would send a strong message to potential criminals that the government takes computer crimes seriously.

"He shook a portion of our financial system,'' Heymann said. ''What matters most is that teenagers and young adults not look up to Albert Gonzalez. They need to know that they will be caught. That they will be punished and that the punishment will be severe.''

In a statement, TJX said, "We are grateful that the investigation and prosecution of cyber crime continues to be a top priority of the U.S. Secret Service and Department of Justice,'' and added that the number of retailers hit highlighted how widespread a problem hacking is.

Gonzalez's prison term could be extended as another judge on Friday will sentence him on a second set of charges for which he has also pleaded guilty -- stealing tens of millions more payment card numbers from companies including payment card processor Heartland Payment Systems, 7-Eleven Inc. and the Hannaford chain of New England grocery stores.

With Few Cats To Pay For, Lloyd’s Sees Record Results For 2009

2010-03-24T15:20:00.001-04:00

Lloyd’s of London announced that its 2009 pre-tax profits more than doubled, to £3.86billion ($6.2 billion) compared to £1.89 billion in 2008 ($2.82 billion at today’s rate).

In an interview Luke Savage, director, finance, risk management and operations at Lloyd’s, cited a benign year for disasters and catastrophes as a big factor in the results.

The chairman of Lloyd's, Lord Peter Levene, said in a statement, “The hard work and very careful attention to risk in the Lloyd’s market have resulted in a pre-tax profit of $6.2 billion, the highest that we have ever recorded.”

The result was achieved, he noted, “despite the economic turbulence that characterized most of 2009, although we were certainly helped by a low level of catastrophe-related losses, helped by a benign Atlantic hurricane season. The market can be proud of what it has achieved in 2009.”

Lord Levene also commented that the results illustrate that “not all parts of the financial services sector are the same and, at Lloyd’s, our strength and resilience means that we can face the future with confidence.”

Mr. Savage mentioned that Lloyd’s provides a lot of cover to the hurricane-affected areas of the United States.

He said last year’s particularly benign environment “helped to keep the contribution to our combined ratio down to just 2 percent for major losses.” For context, he noted, “the average catastrophes over the past eight-to-nine years have added about 10 points to the combined ratio.”

The major losses for 2009, he said, were the Air France disaster over the Atlantic Ocean, Windstorm Klaus in Europe and several bushfires in Australia. Those losses averaged £60-to-£70 million each ($89.3-to-$104.2 million), “and those were the biggest things we saw last year,” Mr. Savage said.

This was a marked contrast to the prior year, he said, when Hurricanes Gustav and Ike in the United States “cost us significantly more than that.” Hurricane Ike came in at £1.2 billion ($1.78) and Gustav at £200 million ($297.8 million), he said.

So far, he observed, 2010 has had a more volatile start with earthquakes in Haiti and Chile, but those most likely will not see losses near those from Hurricane Ike. He added that Lloyd’s focus for these disasters is not on costs, but in seeing that policyholders are paid as soon as possible.

Mr. Savage said another reason 2009 did so well was because “globally we saw rebounding stock markets.” He said, “Even if we have a similarly low level of catastrophes, we’re not going to see the same level of investment income in 2010.”

What will make it even more difficult in 2010 is pressure on rates, “particularly in things like property, where one year without any windstorms and everyone expects their premiums to start coming down,” he said, adding that all these factors combined make 2010 look “pretty gloomy in comparison.”

Lloyd's Chief Executive Richard Ward said the 2009 results are built on a “resolute focus on underwriting discipline coupled with a strong balance sheet and a conservative investment strategy.”

This has meant, he said, that during testing times for the financial services industry “we continued to be a stable partner for businesses seeking to manage their risks.”

Mr. Ward cautioned, however, that “while the results are a testament to our strength, we cannot afford to be complacent and in 2010 we must work to continue to develop the attractiveness of the market, whilst focusing on profitable underwriting and sound risk management.”

Other Lloyd’s financial highlights:

• Combined ratio of 86.1 (2008: 91.3), which compares favorably with an estimated average of 100 for U.S. property and casualty insurers; 94 for U.S. reinsurers; 99 for European insurers and reinsurers; and 84 for Bermudian insurers and reinsurers.

• Central assets increased to £2.08 billion ($3.35 billion), (2008: £2.07 billion).

• Investment return of £1.76 billion ($2.84 billion), (2008: £957 million).

• Profit before tax excluding currency movements on non-monetary items of £4.24 billion ($6.83 billion), (2008: £1.52 billion).

• Surplus on prior years’ reserves of £934 million ($1.5 billion), (2008: £1.26 billion).

Insurance Agents, Carriers Make Progress in Modifying Dodd Bill

2010-03-24T13:34:00.000-04:00

Insurance agents and carriers are reporting progress in their efforts to modify a proposed federal financial services regulation bill passed by the Senate Banking Committee, while risk managers have extended their support to the legislation.

Lobbyists for the Independent Insurance Agents & Brokers of America (Big "I") were pleased that an amendment, filed by Sen. Tester (D-Mont.), which clarified that the definition of "insurer" for mandatory data collection does not include insurance agents and agencies, was attached to the act. The amendment makes it clear that only entities that issue contracts and write insurance or reinsurance are to be included.

"Without this amendment, the proposed Office of National Insurance (ONI) would have inadvertently had the ability to require countless agents and brokers to produce any data and information demanded by ONI," said Robert Rusbuldt, Big "I" president and CEO.
Tester said his amendment ensures that individual agents, brokers and adjusters will "not have to go through the hassle" of reporting information to a federal bureaucracy.

The financial reform measure, Restoring America's Financial Stability Act, sponsored by Sen. Christopher Dodd, D-Conn., who is chair of the Senate Banking Committee, passed the committee on a 13-10 party line vote, with Republicans opposing it. The bill will now be debated before the full Senate, where many other amendments are expected to be introduced.

While agents sought to amend the ONI provision, they do not oppose the formation of the national insurance information office within the U.S. Treasury Department. The ONI is intended to serve as a knowledge base on insurance in Washington, D.C. and represent the U.S. in international insurance negotiations. It is not supposed to interfere with the jobs of state insurance regulators.

"While the Big 'I' believes that the state regulatory system should be preserved and reformed, it has become evident that the state system needs assistance to effectively address some inefficiencies that exist today in the regulation of insurance," said Charles Symington, Big "I" senior vice president of government affairs. "The Big 'I' has long supported the use of targeted federal legislation to help reform the state system without creating a federal regulator, and we believe this insurance informational office adheres to these principles."

Also included in this legislation, and supported by the Big "I," is the Nonadmitted and Reinsurance Reform Act, which aims to streamline the regulation of surplus lines insurance and reinsurance through state-based reforms.

Property/casualty insurance carriers, meanwhile, remained concerned with the Dodd bill and are working to amend it to guarantee they are not called upon to help support a $50 billion fund that would be triggered by a major ($50 billion) financial services institution collapse. The original bill left open the possibility that some insurers could be assessed if the fund fell short.

Insurers argue that they pose no systemic risk to the economy and did not contribute to the financial crisis and therefore should not be on the hook for other financial firms' mistakes.

The committee agreed to narrow the population of insurers that could be assessed for the fund by limiting it to any non-bank institution supervised by the Federal Reserve System, which would apply to only the very largest insurers.

But insurers still aren't happy.

"It remains a one-way proposition for property and casualty insurers to be compelled to pay for a system that will likely never resolve an insurer -- and pay for losses not incurred by an insurance company. Consistent with the approach taken in other parts of the bill, we believe insurers should not be included in the assessment mechanism at all," said Leigh Ann Pusey, president and CEO of the American Insurance Association.

Insurance buyers, meanwhile, have thrown their support behind the Dodd bill.

The Risk and Insurance Management Society (RIMS) said it believes the legislation will promote greater efficiencies in the insurance marketplace for commercial insurance consumers, as well as require consideration of enterprise-wide risk for certain financial entities.

"The print put forth this week by Sen. Dodd is a multifaceted piece of legislation that contains critical measures that impact the U.S. economy on many fronts," said Terry Fleming, president of RIMS and director, division of risk management for Montgomery County, Maryland. "RIMS believes its passage will usher in not only a more effective insurance market within the United States, but will also further the country's influence abroad with regard to insurance issues."

The bill requires large financial institutions to establish risk committees in order to ensure greater consideration of the management of risk on an enterprise wide basis. Fleming said RIMS views this requirement as recognition of the committees' value to shareholders and to the greater financial stability of the U.S. economy.

In addition, RIMS praised the decision to include the legislation to streamline requirements for surplus lines insurance market.

RIMS also supports the creation of the federal insurance office "as a necessary first step" to helping the federal government acquire an expertise in insurance matters, as well as the ability to speak with one voice on international insurance issues. RIMS said it views this as a precursor to the creation of an optional federal charter for commercial property and casualty insurers.

Health Care Reform Legislation Update

2010-03-24T12:27:00.003-04:00

Yesterday President Obama signed into law a piece of legislation that will transform America’s Healthcare system. Over the last year, Congress has discussed many different healthcare reform ideas, and now we can start to focus on what is included in the 2000+ pages of actual legislation.

Below is a brief timeline of when certain provisions of the bill will take effect. This is only a highlight of the provisions that are going to affect many mainstream employers who sponsor a Health Plan.

Please understand that even though the law has passed, there are going to be
changes(primarily the reconciliation act that is going to be taken up by the Senate shortly). Also, the law now has to go through the regulatory process where the actual rules will be written so that the law is followed. As more information becomes available, we will continue to keep you updated.

Health Reform Implementation Timeline:

2010

Within 6 months of enactment:

•Regulations prohibiting insurance contracts containing lifetime limits, rescission (canceling of medical policies already issued), and excessive waiting periods go into effect.
•Coverage available for children up to age 26 on their parents plan.
•Employer tax credit (sliding scale) for employers with fewer than 25 employees who offer coverage.

2011

Fee on Name Brand Drugs implemented (costs are expected to be passed along to consumers)

2013

FSA Limits‐ annual contribution limit of $2,500 for Flexible Spending Accounts

Medicare Tax Increase‐ Imposes an additional 0.9% tax on income in excess of $200,000 (individual)/ $250,000 (couple) and a 3.8% tax on investment income for taxpayers with an adjusted gross income of more than $250,000

2014

Health Insurance Exchanges‐ Each state is required to create a marketplace where individuals and small business (under 50 employees) can buy coverage and possibly be eligible for a Premium subsidy.

Individual Obligation- Individuals will be required to carry Health insurance. The fully phased in penalty for not carrying insurance is $695 or 2.5% of income

Employer Obligation‐ Employers with 50 or more employees (part time employees count) who do not offer health coverage will be assessed penalties up to $2000 per employee. For Employers who provide coverage, but the coverage is deemed too expensive, they could be fined up to $3,000 for each employee who obtains a premium credit from the government.

Fees on Health Insurance Providers‐ $8 billion will be assessed in 2014, $11.3 billion in 2015 and 2016, and 13.9 billion in 2017, and $14.3 billion in 2018.(Most experts believe these “fees” will be passed directly to the consumer).

Pre-Existing Conditions Exclusions prohibited

Annual Limits on contracts prohibited

2017

State may allow Large Employers (over 50 lives) to participate in the Exchanges

2018

High Premium Excise Tax‐ the “Cadillac tax” takes effect. This tax imposes a 40% tax on health coverage in excess of $10,200 for a single employee or $27,500 for a family.

Insurers Get A Break In Financial Services Bill

2010-03-23T13:41:00.000-04:00

WASHINGTON— Insurers have secured key changes in financial services reform legislation easing a proposed financial requirement for large firms and eliminating tighter regulation of financial product sales.

One revision to the bill reported out of the Senate Banking Committee yesterday means only one life and property and casualty insurer will be required to pay into a fund to finance a Resolution Authority for the liquidation or reorganization of huge financial services companies whose bankruptcy would pose a systemic risk to the economy.

The other change calls for a study of a proposal to establish a “standard of care” for the sale of investment products and create a financial planning oversight board.

Originally the proposal, by Sen. Herb Kohl, D-Wis., chairman of the Senate Aging Committee, would have created the standard and board creation as part of the bill.

The life insurance industry, both underwriters and agents, strongly opposed such a provision, fearing that it was a back-door way to impose a uniform fiduciary standard on the sale of investment products.

The bill was passed by a party-line, 13-10 vote. But comments from both committee Republicans and Democrats reflected optimism that such legislation could ultimately become law this year.

Specifically, both Sen. Chris Dodd, D-Conn., chairman of the committee, and Sen. Richard Shelby, R-Ala., said they would meet over the coming two-week Easter recess to see if they could craft bipartisan legislation that would secure the 60 votes needed to limit debate on the measure.

The hope is that they could agree to a bipartisan bill that could be put on the Senate floor by the end of April.

That would set the stage for talks with the House and the Obama administration on a final bill. The administration and Democrats in Congress want a final measure approved before Congress leaves in late June for the July 4 recess.

In a statement, Sen. Shelby said that Sen. Dodd’s latest proposal contains a number of positive steps forward and could form the foundation for broad bipartisan agreement.”

“I do not view today’s markup as the end of the road, but rather just another step in the process,” he said.

And Sen. Bob Corker, R-Tenn., who negotiated with Sen. Dodd on a compromise before the Connecticut senator decided to go ahead with his own bill last week, said in comments at the late afternoon committee meeting and in an answer to a reporter’s question, that he thought that there was a 90 percent chance of passage.

"I think it's probably true that we have a better opportunity with a different cast of characters -- the full Senate -- to do something that is sound, policy-wise," Corker said.

For insurers, the bill creates an Office of National Insurance. It also makes systemically risky insurers subject to federal oversight and contains provisions similar to the House financial services reform measure by modernizing and streamlining the surplus lines and reinsurance industry by facilitating regulation of insurers and reinsurers by their state of domicile.

Insurance industry representatives have said they regard inclusion of these provisions as a key step forward, and believe it non-controversial and therefore likely to survive melding of the House and Senate bills into a bill that can be enacted into law.

In a memo to members of the Council of Insurance Agents and Brokers obtained by the National Underwriter, Joel Wood, CIAB senior vice president for government relations, said, “After eight years of effort, and House passage of surplus lines reform legislation on four occasions, we’re closer than ever to final enactment of these reforms.”

“To the extent that Sen. Dodd, Shelby and Corker have all had optimistic statements in the past day that consensus can be reached on the Senate floor, we’re optimistic too,” he said adding that, “the Senate is the Senate, and this is a tough political environment.”

Richard Bouhan, executive director of the National Association of Professional Surplus Lines Offices, said, "We are pleased to see the Senate make this important first step toward approving needed surplus lines reform legislation. With the inclusion of these reforms in the bill we are moving closer to more efficient and effective regulation of the surplus lines insurance market."

Under the bill section dealing with Resolution Authority pre-funding issue, use of the fund would be determined by a new Financial Stability Oversight Council, consisting of 11 federal regulators led by the Treasury secretary and one insurance representative appointed by the president.

According to Sen. Dodd, this body will focus on identifying, monitoring and addressing systemic risks posed by large, complex financial firms as well as products and activities that spread risk across firms.

It will make recommendations to regulators for increasingly stringent rules on companies that grow large and complex enough to pose a threat to the financial stability of the United States, Sen. Dodd explained.

Under the original bill, any financial services company with assets of more than $50 billion would have been assessed for the creation of a $50 billion fund in 5 years.

But, in a manager’s amendment Sen. Dodd changed the provision to read, “and any nonbank financial company supervised by the Board of Governors [of the Federal Reserve System]. According to a lawyer for one of the insurance companies involved, who asked not to be quoted by name, that means that only MetLife would have to contribute to the pre-funding of the Resolution Authority.

However, if the failure of a large company depletes the fund, a larger universe of companies, likely to include all non-health insurers with assets of more than $50 billion, would be forced to contribute, the industry lawyer said.

Amongst the companies that will benefit from the change will be 11 property and casualty companies, ACE, Allstate, Chubb, CAN, Liberty Mutual, Nationwide, State Farm, Travelers, W.R. Berkley, Zurich and Hartford Insurance Group.

Amongst the life companies who will benefit are Prudential, New York Life, Northwestern Mutual, Mass Mutual, TIAA-Cref, ManuLife, Lincoln Financial Group, The Principal, Pacific Life, Aflac, Riversource, Jackson National, Genworth, Sun Life and Thrivent Financial, the source said, citing the American Council of Life Insurers annual Fact Book.

This change was a priority of both the property casualty and life insurance industries.

Leigh Ann Pusey, American Insurance Association president and CEO, said in a statement that, AIA appreciates the bill’s changes. However she said insurers will continue to lobby to be exempt from the post-funding and other provisions that the industries fear would impose dual regulation on property and casualty and life insurers.

AIA, she said, is “concerned with a resolution mechanism that envisions assessing low-risk, low-leveraged property and casualty insurers for losses outside our industry, particularly where the failing firms are high-risk, high-leveraged entities.”

Under the mandate for the Government Accountability Office to study the effectiveness of state and federal financial product sales regulations the GAO would have to report back to Congress within six months of the date of enactment of the bill.

U.S. Offers Grants for Research Using Weather Data to Improve Road Safety

2010-03-18T14:51:00.000-04:00

The U.S. Department of Transportation will sponsor up to seven innovative ideas for using the new Clarus live weather information system to improve roadway safety during severe weather. The department intends to provide up to $80,000 per award in an open competition.

Launched in 2004, Clarus provides near real-time atmospheric and pavement observations from more than 2,000 environmental sensor stations and 45,000 road sensors deployed by state departments of transportation. The result is a comprehensive picture of the weather along the nation's roads that is available to any user, at anytime, anywhere in the U.S.

Transportation managers and weather providers in 36 states and three Canadian provinces currently contribute data to Clarus and use it to make critical decisions.

The incentive program was announced by Research and Innovative Technology Administrator (RITA) Peter Appel, who believes that by offering researchers and other innovators full access to Clarus' live weather data, the department can tap into the program's vast potential.

"Applications developed using Clarus data could help someone decide not only whether to grab an umbrella, but also when they should travel and what routes they should take," said Appel. "This competition will lead to new safety products and ideas that are bound only by the limits of our imagination."

"Nearly a quarter of all vehicle crashes happen when severe weather strikes, and many of those crashes can be prevented using available technology," said U.S. Transportation Secretary Ray LaHood. "Having access to highly accurate, live weather information will raise the level of safety on our roads and save lives."

The Federal Highway Administration's Road Weather Management Program, in conjunction with the Intelligent Transportation Systems (ITS) Joint Program Office, established the Clarus Initiative in 2004 to reduce the impact of adverse weather conditions on surface transportation users. Proposals will be accepted until April 14, 2010. Additional information on how to submit a proposal can be found at www.fbo.gov, Solicitation number DTFH61-10-R-00015.

Industry Reps See Finance Bill Exempting Big Insurers

2010-03-18T14:00:00.000-04:00

Insurance representatives said they may get a deal for Senate financial services reform legislation with no financial assessments and little regulatory impact for high-asset insurers.

But nothing is certain at this point, said an industry lobbyist who asked not to be identified because of the sensitivity of the negotiations.

In talks going on now, the insurance industry is seeking to ensure that carriers with assets of more than $50 billion will not be subject to the assessments in the pre-funding provisions of the resolution authority that the bill would create.

The authority would be, in essence, a guarantee fund for institutions posing a systemic risk to the financial system.

Insurance industry representatives also hope to win clarifying language in the bill ensuring that large insurance companies would be subject to federal oversight only under extremely limited conditions.

The changes being sought by the industry would be included in legislation from the Senate Banking Committee being marked up in a drafting process beginning Monday.

The changes are being negotiated with Sen. Chris Dodd, D-Conn., chairman of the committee, and Sen. Mark Warner, D-Va..

An industry lobbyist said, "While the language will still need some additional clarification, it appears the intent of Chairman Dodd was not to have insurers assessed to capitalize the initial $50 billion fund." The lobbyist cautioned that the compromise is tentative, “and nothing has been secured,” as yet.

The fund is to be used to resolve troubled financial services companies that federal regulators determine constitute a systemic risk to the system.

A copy of the changes the insurance industry has proposed in the regulatory reform bill that Sen. Dodd introduced Monday were obtained today by National Underwriter.

Sen. Dodd hopes to complete the markup of the bill by next Friday, when Congress starts a 10-day Easter recess. But, Sen. Richard Shelby, R-Ala., cautioned today that the bill as proposed by Sen. Dodd may be reported out by the committee on a party-line vote, but is unlikely to pass the full Senate.

Sen. Shelby said the “door remains open a crack” for bipartisan legislation.

The changes in language negotiated by the life and property and casualty insurance companies were made even as a Federal Reserve Board official gave testimony today that insurance companies and other financial institutions whose failure could pose systemic risks should be regulated under the same plan used for banks and financial holding companies.

In his testimony, Jon Greenlee, the associate director for the Fed's Division of Banking Supervision and Regulation, said that, "The current financial crisis has clearly demonstrated that risks to the financial system can arise not only in the banking sector, but also from the activities of other financial firms--such as investment banks or insurance companies."

He added that, "To close this important gap in our regulatory structure, legislative action is needed that would subject all systemically important financial institutions to the same framework for consolidated, prudential supervision that currently applies to bank holding companies and financial holding companies."

He made his comments at a hearing on insurance holding company supervision held by the Capital Markets Subcommittee of the House Financial Services Committee.

Mr. Greenlee said the Fed's customary focus on protecting the bank within a holding company is no longer sufficient because risks can arise outside of a commercial banking unit.

"The crisis has highlighted the financial, managerial, operational, and reputational linkages among the bank, securities, commodity, insurance and other units of financial firms," he said.

The language proposed by life and property and casualty insurance organizations and accepted by Sen. Dodd and Sen. Warner for inclusion in the bill clarifies that the language is intended “to exclude insurance companies (including those that are part of non-bank financial holding company structures) from the pre-event assessment.”

Specifically, “this provision is only meant to apply to banking holding companies that meet the total consolidated asset threshold and to nonbank financial companies that are determined by a 2/3 majority vote of the Financial Stability Oversight Council, pursuant to section 113, to be subject to prudential supervision by the Board of Governors of the Federal Reserve System because ‘material financial distress’ at the company ‘would pose a threat to the financial stability of the United States’.”

Another industry lobbyist, was more specific. “Insurers do not want to be the cash cow that provides the federal government with funding to use its resolution authority against banks, hedge funds, securities firms etc.,” he said.

The lobbyist insisted that, “Just because insurers are big doesn’t mean that they present systemic risk and should be subject to federal assessment. Insurers already pay for their industry competitors’ insolvencies through the state guaranty funds.”

He also noted that the American Council of Life Insurers had at one time suggested that insurers ought to be able to deduct their annual state guaranty fund assessments from any federal assessment.

The concern of both the life and property and casualty industry, he explained, is that the industries do not want the financial services reform bill to constitute dual regulation.

“We are concerned that large insurance companies could be subject to federal solvency standards, such as capital and surplus requirements, reserving restrictions by the federal systemic regulator over and above state insurance regulation or dual and conflicting with state regulation,” the industry official said. “That would be the worst of all worlds.”

More Than One-Third of U.S. Facing High Risk of Flooding

2010-03-17T13:51:00.000-04:00

Major flooding has begun and is forecast to continue through spring in parts of the Midwest, according to the National Weather Service. The South and East are also more susceptible to flooding as an El Niño influenced winter has left the area soggier than usual.

Overall, more than a third of the contiguous United States has an above average flood risk –– with the highest threat in the Dakotas, Minnesota and Iowa, including along the Red River Valley where crests could approach the record levels set just last year.

Supporting the forecast of imminent Midwest flooding is a snowpack more extensive than in 2009 and containing in excess of 10 inches of liquid water in some locations. Until early March, consistently cold temperatures limited snow melt and runoff. These conditions exist on top of: above normal streamflows; December precipitation that was up to four times above average; and the ground which is frozen to a depth as much as three feet below the surface.

"It's a terrible case of déjà vu, but this time the flooding will likely be more widespread. As the spring thaw melts the snowpack, saturated and frozen ground in the Midwest will exacerbate the flooding of the flat terrain and feed rising rivers and streams," said Jane Lubchenco, Ph.D., under secretary of commerce for oceans and atmosphere and NOAA administrator. "We will continue to refine forecasts to account for additional precipitation and rising temperatures, which affect the rate and severity of flooding."

In the South and East, where an El Niño-driven winter was very wet and white, spring flooding is "more of a possibility than a certainty and will largely be dependent upon the severity and duration of additional precipitation and how fast existing snow cover melts," said Jack Hayes, Ph.D., director of the National Weather Service. "Though El Niño is forecast to continue at least through spring, its influence on day-to-day weather should lessen considerably."

Without a strong El Niño influence, climate forecasting for spring (April through June) is more challenging, but the Climate Prediction Center of the National Oceanic and Atmospheric Administration (NOAA) says odds currently favor wetter-than-average conditions in coastal sections of the Southeast; warmer-than-average temperatures across the western third of the nation and Alaska; and below-average temperatures in the extreme north-central and south-central U.S.

This is national Flood Safety Awareness Week. Floods are the deadliest weather phenomena — claiming an average of 100 lives annually.

Lloyd's Must Pay Alleged Swindler Stanford's Legal Fees, Court Says

2010-03-16T14:21:00.001-04:00

A federal appeals court said Monday insurer Lloyd's of London must pay claims related to alleged swindler Allen Stanford's defense.

Stanford, his former chief investment officer Laura Holt, and former accounting executives Gilbert Lopez and Mark Kuhrt sued Lloyd's after the firm stopped providing coverage under a directors and officers policy last year, citing a money laundering exclusion.

But U.S. District Judge David Hittner in Houston ruled in January that Lloyd's must pay costs and expenses that had been submitted by Stanford and his attorneys. Lloyd's appealed that decision to the U.S. Court of Appeals for the Fifth Circuit in New Orleans.

AdvertisementThe appeals court Monday upheld Hittner's ruling but also sent the case back to the district court for additional arguments on the coverage question. Lloyd's must pay in the meantime, the court said in a 24-page ruling.

"The underwriters are enjoined from refusing to advance defense costs as provided for in the D&O policy unless and until a court 'determines in fact' by clear and convincing evidence ...'' that money laundering occurred, the ruling said.

Stanford, Holt, Lopez, and Kuhrt face criminal and civil charges for for defrauding investors in a $7 billion Ponzi scheme centered around certificates of deposit issued by Stanford's Antiguan bank.

They have denied any wrongdoing. Stanford, 59, is waiting in a Houston jail for his January 2011 trial.

The case is Laura Pendergest-Holt, R. Allen Stanford, Gilbert Lopez and Mark Kuhrt v Certain Underwriters at Lloyd's of London and Arch Specialty Insurance Co, U.S. Court of Appeals for the Fifth Circuit, No. 10-20069.

Global ’09 Insured Cat Losses Fell More Than $26 Billion: Swiss Re

2010-03-16T12:36:00.000-04:00

Swiss Re said worldwide natural catastrophes and man-made disasters, which killed 15,000 people last year, cost insurers $26 billion, $26.5 billion less than the firm reported for 2008.

In 2009 the total economic loss was $62 billion compared with $269 billion for 2008 when insured loss was $52.5 billion, the company said in its latest sigma report.

Insured losses, Swiss Re said, were below average due to a calm U.S. hurricane season. The portion of insured losses last year attributable to 133 natural catastrophes was put at $22 billion and losses from 155 man-made disasters totaled $4 billion.

North America’s insured loss was listed at more than $12.7 billion.

The death toll was far below the 240,500 Swiss Re counted last year. The highest number of 2009 fatalities was in Asia, where nearly 9,400 people died.

Swiss Re’s report said the $36 billion gap between economic loss and insured loss for 2009 suggests lack of insurance coverage leaves many individuals and governments vulnerable after a catastrophe. With yearly losses increasing, so is the need for insurance coverage.

The report noted that a higher value concentration of wealth in loss prone regions and a trend towards more insurance coverage, plus global warming and the related higher risk of extreme weather conditions contribute to the loss trend.

Thomas Hess, Swiss Re chief economist, in a statement warned “The probability that we see natcat losses as low as those in 2009 is less than 35 percent. We have already seen significant events in 2010 with winter storm Xynthia in Europe or the earthquakes in Chile and Haiti.”

Estimates of the Chile quake insured loss have been as high as $10 billion with a possible $30 billion economic loss. Insured loss estimates for Xynthia have reached $4 billion.

Mr. Hess said, “Given their high volatility, [2010] losses could easily be three to five times what they were in 2009. In 2005, insured losses set a record when they soared to $120 billion. I would not be surprised if this record is broken in the not too distant future.”

Six 2009 events each triggered insured losses in excess of $1 billion. The costliest event was the European winter storm Klaus, which struck France and Spain in January, and led to insured losses of €2.35 billion (nearly $3.4 billion), said Swiss Re.

The report said secondary perils such as flooding, landslides, hail storms, tornadoes, winter storms outside Europe, snow and ice storms, droughts and bush fires are important loss sources but receive little attention with most of the focus on earthquakes, hurricanes and winter storms.

In 2009, more than half of the natural catastrophe loss burden was caused by secondary perils, the report said.

Jens Mehlhorn, co-author of the study, suggested in a statement that “more advanced probabilistic risk assessment models would help to better gauge and price the risk of secondary perils.”

Examining earthquakes, the report noted that since 1970, 360 damaging earthquakes have claimed over 1 million lives. Brian Rogers, co-author of the sigma study commented, “The deadliest earthquakes tend to occur in less economically developed countries and in regions that are usually densely populated and prone to earthquakes. These countries typically have low per-capita income and fewer resources for prevention- and post-disaster management.”

The report said that, “Even in developed economies the current earthquake insurance take-up rates in heavily exposed areas seldom surpass 20 percent.”

Concerning global warming, the report said climate change effects would lead to stronger rainstorms, more flooding and more powerful hailstorms. It said in addition to heavy storms in Europe, climate change may also result in more U.S. tornadoes.

Forecasters Predict Active Hurricane Season

2010-03-15T14:42:00.000-04:00

Meteorologists are predicting an active 2010 hurricane season with above-normal threats on the U.S. coastline.

Hurricane Forecaster Joe Bastardi, with the AccuWeather.com Hurricane Center, said Wednesday that he predicts seven landfalls. Five will be hurricanes and two or three of the hurricanes will be major landfalls for the U.S.

Bastardi forecasts 16 to 18 tropical storms in total, 15 of which will likely be in the western Atlantic or Gulf of Mexico.

In a typical season, there are about 11 named storms, with only two or three impacting the coast of the United States.

The rapidly weakening El Nino, warmer ocean temperatures, weakening trade winds and higher humidity levels will all contribute to greater storm activity.

More New Florida Property Insurers in Trouble?

2010-03-15T10:30:00.000-04:00

Florida insurance regulators this week notified a Jacksonville-based insurer that it has until the end of the month to comply with solvency requirements to avoid suspension or losing its license.

And the warning to Southern Oak Insurance Co. is just the first in what regulators said will be a series of similar messages to companies on the brink of insolvency.

Officials expect some will fail.

"You'll lose some companies,'' said Robin Westcott, who monitors property and casualty insurers for solvency and compliance with the state's financial requirements. "That's the natural process of the market. There will be at least three or four.''

Southern Oak has until March 30 to comply with Tuesday's order. Regulators are concerned the insurer funneled too much profit to its managing general agent while claiming underwriting losses, held too much risk in South Florida and retained an insufficient amount -- approximately $3 million -- for catastrophic loss.

The Office of Insurance Regulation has been running audits in recent weeks on smaller companies to ensure they could pay claims if their policyholders were hit with a destructive hurricane this summer.

Florida's chief financial officer wants to know how any of the property insurers could be faced with insolvency after several years without much storm damage.

"What gives in an environment with four years of no storms?'' CFO Alex Sink asked after a Tuesday meeting of the governor and cabinet. "Our insurance companies ought to be making good profits.'' Sink asked OIR for a status report on troubled insurers by March 21.

Three property insurers went into receivership last year, two others are under administrative supervision and several more are expected to follow soon, potentially leaving tens of thousands of business and homeowners looking for a new company as the 2010 hurricane season approaches June 1.

The Republican-led Legislature is reviewing some of its decisions from 2007 that now seem too lax on low-budget startups. The days are over when a new insurer can be licensed with as little as $5 million in startup capital. Westcott now wants to see at least $15 million in startup capital.

The Senate Banking and Insurance Committee discussed a bill Wednesday aimed at balancing the state's risk with consumer considerations and keeping plenty of insurers healthy.

"There are systematic issues in the property insurance market that must be dealt with by this Legislature,'' said Sam Miller, vice president of the Florida Insurance Council, an industry group. "It's important that they find out why these companies are failing.''

But with the highly capitalized companies like AllState and State Farm reducing their risk in the state, Florida needs the new, smaller insurers in business, Miller noted.

"Smaller Florida-grown property insurers have found a niche by selecting smaller, more manageable pools of risk,'' Miller said. While the new Florida-based insurers now write close to 50 percent of the residential insurance market, he said, most are nowhere near well enough capitalized to pay off should catastrophe strike.

Sink, a Democrat who is running for governor, doesn't want homeowners worried about the solvency of their insurance company.

"The people of Florida need to feel confident that their insurance companies can pay claims in the case of a storm or any property loss in that matter,'' Sink said.

U.S. Traffic Fatality Rate Fell to Lowest Ever Recorded in 2009

2010-03-11T14:10:00.001-05:00

The number of overall traffic fatalities reported at the end of 2009 reached the lowest level since 1954, declining for the 15th consecutive quarter, the U.S. Department of Transportation reported.

According to early projections, the fatality rate, which takes into account the number of miles traveled, reached the lowest level ever recorded.

The projected fatality data for 2009 places the highway death count at 33,963, a drop of 8.9 percent as compared to the 37,261 deaths reported in 2008. The fatality rate for 2009 declined to the lowest on record, to 1.16 fatalities per 100 million Vehicle Miles Traveled (VMT) down from 1.25 fatalities per 100 million VMT in 2008.

"This continuing decline in highway deaths is encouraging, but our work is far from over," said National Highway Traffic Safety Administrator David Strickland. "We want to see those numbers drop further. We will not stop as long as there are still lives lost on our nation's highways. We must continue our efforts to ensure seat belts are always used and stay focused on reducing distracted and impaired driving."

The National Highway Traffic Safety Administration attributes the decline in 2009 to a combination of factors that include, high visibility campaigns like Click It or Ticket to increase seat belt use, and Drunk Driving. Over the Limit. Under Arrest which helps with the enforcement of state laws to prevent drunk driving and distracted driving. In addition, the decline is also the result of safer roads, safer vehicles and motorists driving less.

Supreme Court to Rule If Vaccine Makers Are Immune from Lawsuits

2010-03-09T13:33:00.000-05:00

The Supreme Court said Monday that it would decide whether a federal law protects vaccine manufacturers from lawsuits in state court seeking damages for alleged design defects.

The high court agreed to hear a Pennsylvania case involving a lawsuit by the parents of a child who suffered seizures after her third dose of a diphtheria-tetanus-pertussis (DTP) vaccine. They sued the vaccine manufacturer, Wyeth, which Pfizer Inc. purchased last year.

Pfizer shares fell 1 percent to $17.30 in morning trading on the New York Stock Exchange.

At issue was the National Childhood Vaccine Injury Act of 1986. It says no manufacturer "shall be liable in any civil action'' for any injury that "resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warnings.''

The justices agreed to decide the issue after conflicting lower-court rulings.

The Georgia Supreme Court ruled the federal law allows some design defect claims against vaccine manufacturers while a U.S. appeals court based in Philadelphia ruled Congress expressly prohibited such lawsuits in an effort to shield manufacturers from liability.

The Obama administration said the federal law expressly prevented design defect lawsuits in state court, but said the uncertainty caused by the conflicting rulings warranted the Supreme Court getting involved.

While the issue remains unsettled, manufacturers' uncertainty about potential liability may harm the public health by deterring development and production of vaccines, administration attorneys said.

Pfizer, in a statement, said it was "hopeful that the Supreme Court will affirm'' the Philadelphia appeals court ruling in Wyeth's favor.

"Pfizer is pleased that the U.S. Supreme Court has agreed to resolve this legal issue, which is of critical importance to national public health policy,'' the company said.

There are about 5,000 claims pending under the process set out under federal law alleging a link between childhood vaccines and neurological damage such as autism. The legal issue would affect whether those claimants can also seek damages under state law, the attorneys said.

The case from Pennsylvania involved Hannah Bruesewitz. Her parents in their lawsuit alleged her seizure disorder and serious developmental delay stemmed from toxins inherent in the vaccine design.

After their claims were rejected under the federal compensation process, they filed a lawsuit in state court. But a federal judge and the appeals court based in Philadelphia both ruled that the federal law barred such lawsuits.

The Supreme Court is expected to hear arguments in the case and to issue its decision during its upcoming term that begins in October. Chief Justice John Roberts did not take part in considering the case, an action he usually takes when he owns stock in a company in the case before the court.

Insurance Industry Chile Quake Loss May Hit $10B: PartnerRe

2010-03-09T13:25:00.000-05:00

PartnerRe Ltd. said it expects insurance industry losses from the Chile earthquake could hit $10 billion and its own expected claims could exceed $300 million.

Its estimate for the impact on the industry is $2 billion higher than the largest catastrophe modeling firm estimate of $8 billion. PartnerRe also released an industry loss estimate for European Windstorm Xynthia of up to $4 billion.

The Bermuda-based company said it expects between $220 million and $320 million in pre-tax claims from the Chile quake and total insured industry losses from the magnitude 8.8 event will be in the range of around $6 billion to $10 billion.

The company said its loss estimate is net of reinstatement premium and retrocession and is based on a top down analysis as well as on model output, the assessment of individual treaties and client data, and is consistent with the company's market position in the region.

It said its claims relating to the earthquake are expected to be contained primarily within the Global Property & Casualty, Catastrophe and Paris Re subsegments.

PartnerRe noted that its estimate is preliminary, as there is limited actual loss data. As additional information is received, particularly relating to potential structural damage in the capital of Santiago, the company said it will update its estimate.

European Windstorm Xynthia, which struck Europe over the weekend of February 27-28, PartnerRe said is estimated to have caused industry losses in the range of $2 billion to $4 billion.

The storm swept across several European countries including Portugal, Spain, France, Belgium, the Netherlands, Luxembourg and Germany. The company said it expects its claims relating to Windstorm Xynthia will be $40-to-$70 million pre-tax and are expected to be contained primarily within the Catastrophe and Paris Re subsegments. This estimate is net of reinstatement premium and retrocession.

More Males Filing Sexual Harassment in Workplace Claims

2010-03-08T10:44:00.000-05:00

John Pilkington's boss wouldn't take no for an answer.

During more than two years as a food runner at an upscale steakhouse in Scottsdale, Arizona, Pilkington says his male supervisor groped, fondled and otherwise sexually harassed him more than a dozen times.

"It was very embarrassing,'' Pilkington said. "I felt like I had to do something because the situation was just so bad.''

Now Pilkington, a married father of two, is the star witness in a U.S. federal lawsuit against Fleming's Prime Steakhouse & Wine Bar and one of a growing number of American men claiming they are victims of sexual harassment in the workplace.

From 1990 to 2009, the percentage of sexual harassment claims filed by men has doubled from 8 percent to 16 percent, according to the U.S. Equal Employment Opportunity Commission.

Lawyers at the commission say they've noticed the increase in complaints by men -- more than 2,000 were filed in 2009 out of about 12,700 cases.

"It's certainly possible that there's more sexual harassment of men going on, but it could just be that more men are coming forward and complaining about it,'' said Ernest Haffner, an attorney in the commission's Office of Legal Counsel.

While some cases allege harassment by female supervisors or co-workers, most charges involve men harassing other men. Sometimes it's unwelcome romantic advances. Other times, men are picked on because they are gay, perceived as being gay or not considered masculine enough for the work setting.

In the past, some employers might have shrugged off such antics as "boys will be boys'' horseplay or fraternity-type behavior. But the Equal Employment Opportunity Commission has been filing more lawsuits involving male victims, saying it wants to send a message that such behavior is unacceptable and unlawful.

In November, for example, the Cheesecake Factory restaurant chain agreed to pay $345,000 to six male employees who claimed they were repeatedly sexually assaulted by a group of male kitchen staffers at a Phoenix-area restaurant.

The commission said the abusers would drag some victims kicking and screaming into a walk-in refrigerator, touching and grinding against the victims' genitals and take turns simulating rape. The company denied the allegations but agreed to make a financial settlement and educate its employees and managers about sexual harassment.

Susan Strauss, a consultant who advises companies about how to avoid sexual harassment in the workplace, said she's seeing more cases in which men are subject to a sexualized form of hazing.

"If you don't fit the masculine stereotype or are viewed as effeminate, you get picked on in a sexual way to demean you,'' Strauss said.

Cases involving women making unwanted advances toward men may also be rising as women make up a growing part of the work force. Last year, the Regal Entertainment Group, which operates a national chain of movie theaters, agreed to pay $175,000 to settle a lawsuit by a male employee who claimed a female co-worker repeatedly grabbed his crotch at work.

When the employee complained to his supervisor and the theater's then-general manager, he claims, she failed to stop the harassment and instead retaliated with unfair discipline and lower performance evaluations.

The number of cases filed by men has grown steadily since a landmark Supreme Court ruling in 1998 held that same-sex harassment is a valid claim under federal anti-discrimination laws. That ruling involved an offshore oil rig worker who said he was subject to humiliating sex-related treatment by other workers, including being sodomized in the shower with a bar of soap.

In Pilkington's case, he claims the restaurant's chef would grope and pinch his genitals or grab his backside when Pilkington walked to the kitchen or stock room. Despite his complaints to the restaurant's operating partner, he says the conduct didn't stop.

After one incident, Pilkington lost his composure and yelled at the chef. Days later, he was fired -- an action he claims was retaliation for his complaints. An Equal Employment Opportunity Commission lawsuit on behalf of Pilkington and three other current and former employees is pending.

"I think maybe it's just harder for males to come out and file a complaint because of how embarrassing it is,'' Pilkington said. "When I talk about it I get this nauseous feeling in my stomach.''

The restaurant has denied the charges. In a statement, the company that owns Fleming's said the restaurant "has always been committed to providing a safe and healthy workplace free of harassment for all of its associates.''

Many victims are hesitant to come forward because they are afraid of being considered unmanly or being derided by co-workers, said Mary Jo O'Neill, a regional attorney in the EEOC's Phoenix District office.

"All sexual harassment victims feel humiliated, lacking control and power,'' O'Neill said. "This has a different twist because everyone expects that they would be able to handle it and take care of it themselves.''

Senate Approves U.S. Flood Program After Delay

2010-03-03T15:05:00.000-05:00

After a lawmaker agreed to drop his objections, the Senate voted final approval last night for legislation that included a reauthorization of the National Flood Insurance Program.

Senate action followed an agreement by Sen. Jim Bunning R-Ky., to end his filibuster and allow the Senate to move forward with H.R. 4691, a composite spending measure that in addition to reviving the NFIP until March 28 extended several other federal programs that had expired last Sunday.

Mr. Bunning had objected to the measure because it does not detail what revenues will be used to fund it.

Officials of the American Insurance Association said that in the wake of the temporary extension the Senate has begun consideration of a broader extensions package, which will extend the NFIP till Dec. 31, 2010.

The short-term extension will allow Congress to get the broader flood program bill through the legislative process, according to Blain Rethmeier, an AIA spokesman.

Approval for the bill extending the flood insurance program came on a 78-19 vote, and President Obama is expected to quickly sign the bill, according to officials of the Property Casualty Insurers Association of America.

“We applaud the Senate for recognizing the urgency in extending the National Flood Insurance Program,” said David Sampson, president and CEO of PCI.

“This vitally important program protects over five million families across the country,” he said.

“The recent debate in Congress underscores the need to bring greater certainty and stability to the flood program in 2010 and advance a long-term extension that ensures the program’s fiscal soundness,” he added.

An official of the Federal Emergency Management Agency said it hopes to finish work on a memo to Write-Your-Own companies offering guidance on the reauthorized program by the end of the day.

A PCI official clarified that the agency guidance is needed because the legislation extending the program is not retroactive—but the FEMA guidance will address the gap.

At the same time, the spokesman, Harriette Kinberg, chief of the Industry and Public Relations Branch of the Federal Insurance and Mitigation Administration/Risk Insurance Division of the Federal Emergency Management Program, clarified that a “talking point” document issued by the agency last week in anticipation of a lapse in the program said the document incorrectly stated that flood insurance policies will expire and claims will not be paid during the lapse period.

In responding to the reauthorization, Mr. Rethmeier said, “This feels like living paycheck to paycheck… At some point, this short-term extension game needs to stop and more meaningful reform needs to be enacted.”

Other industry officials were also critical.

“This is only a short reprieve for the flood insurance program,” said Mike Becker, director of federal affairs for the National Association of Professional Insurance Agents.

“Congress continues to pass short reauthorizations that fail to address the need to enact comprehensive reforms,” he said.

In order to do that, he added, a longer authorization is necessary. “PIA believes that the next NFIP reauthorization should be for at least six months—with a one-year extension an even better way to ensure that there is enough time to accomplish meaningful reforms.”

Mr. Becker added, “This episode illustrated what can happen if Congress continues to use NFIP reauthorization as a political football.”

“Real estate closings can get delayed when mortgage holders require flood insurance, putting the financial security of millions of Americans at risk,” he said.

“This can have a negative effect on the overall health of our economy,” Mr. Becker said. “We agree that the flood insurance program needs common-sense reforms, but the reform process must be conducted in a manner that does not destabilize markets.”

Matt Brady, a spokesman for the National Association of Mutual Insurance Companies, said, “We applaud the extension of the NFIP and hope that, given all that happened, Congress will work to enact a long-term extension for the program.”

He noted that this was the second time in a row that the NFIP was allowed to expire for reasons that have nothing to do with the program itself.

“With the next deadline just a few weeks away, we believe this experience should serve as a reminder to make extending the program on a long-term basis with common-sense reforms a priority for the government,” Mr. Brady said.

Winners, Losers in Obama Health Proposal

2010-03-01T11:16:00.001-05:00

Health insurers, makers of brand-name drugs and generic drugmakers are among the industry players who see further pressure in President Barack Obama's health care proposal released Monday.

The White House plans to hold a summit with Democratic and Republican congressional leaders on Thursday to discuss Obama's plan.

Following are some of the changes health care industries face in the Obama administration's proposal, which was posted on the White House website at http://www.whitehouse.gov/health-care-meeting/proposal.

LOSERS

Health Insurers

•Insurers such as WellPoint Inc, UnitedHealth Group Inc and Aetna Inc overall face increased regulations and payment cuts.
•Insurance plans would face a new federal Health Insurance Rate Authority to help U.S. states review "unreasonable rate increases and other unfair practices of insurance plans.''
•Restrictions on companies that aim to protect consumers are expanded to add new protections, such as prohibiting all annual and lifetime limits, and ban pre-existing condition exclusions, among others.
•Private Medicare plans called Medicare Advantage would see payment changes that aim to compromise between the U.S. House of Representatives and Senate bills. Reimbursement rates for the plans, which can offer more benefits than traditional fee-for-service Medicare coverage at a higher cost, would set benchmark payments at a certain percentage of traditional Medicare and then phase them out.
•Medicare Advantage plans would also see payment adjustments for unjustified billing practices.
•One small positive for health insurance companies: The 10-year $67 billion in fees they would face would be delayed until 2014.

Brand-Name Drugmakers

•The brand-name pharmaceutical industry faces another $10 billion in fees over 10 years on top of its earlier agreement with the Senate Finance Committee to provide savings and rebates.
•The industrywide fees, to be parceled out among companies such as Pfizer In and Merck & Co Inc, will be used to eliminate a gap in Medicare's prescription drug coverage known as the "doughnut hole.'' That could help brand-name companies by getting patients to continue taking their medication rather than switching to a generic or stopping medication altogether.
•In a positive move for the companies, the fees will be delayed by one year until 2011.

Generic Drugmakers

•Companies that make cheaper, generic versions of brand-name medicines would see an end to lucrative ''pay-to-delay'' settlements with brand-name drugmakers.
•Obama's measure gives the Federal Trade Commission authority to address the settlements and makes it illegal to pay generic manufacturers "to limit or forego research, development, marketing, manufacturing or sales of the generic drug.''
•Exemptions would only be allowed if the companies can show their settlement would "outweigh the anti-competitive effects of the agreement.''

WINNERS

Device Makers

•Medical device makers such as Boston Scientific and Medtronic Inc maintained their earlier win of reducing their costs to $20 billion, down from $40 billion, and won a two-year delay until 2013.
•The industrywide fees were replaced with an excise tax that raises the same amount of revenue over 10 years.

Hired and Non-Owned Automobiles, Large Loss Lessons Learned

2010-02-26T11:35:00.003-05:00

In an effort to educate our policyholders in preventing or mitigating losses from occurring in the future, this Large Loss Lessons Learned bulletin both illustrates specific details of the loss and reviews factors which contributed to the loss.

We believe it is important to inform our customers of past losses so that we both can learn from these accidents. This Large Loss Lessons Learned bulletin evaluates the controls that were missing at the time of the loss. More importantly, it addresses key recommendations that if implemented would have prevented, eliminated or mitigated the loss.

Personal Vehicle Usage Bulletin: Employee/Volunteer Use of Personal Vehicles

Non-Owned Auto Liability

An employer can be held liable for the actions of its employees and volunteers while driving on the employer’s business. Any time an employee or volunteer operating his or her own vehicle on agency business is involved in an accident, the agency will almost certainly be sued. Employer’s Non-Owned Auto coverage protects your agency in the event that it is named in a law suit arising out of the use of a vehicle owned by an employee or volunteer driving on behalf of your organization.

This coverage is designed to protect only the agency, not the employee or volunteer operator of the vehicle. It also does not pay for damage to the vehicle being driven by the employee or volunteer. Non-Owned Liability coverage can be written either as a part of the automobile policy for the agency’s vehicles or as a part of the agency’s general liability policy, if the agency does not own any vehicles.

Important: Remember that a loss suffered by an employee or volunteer utilizing their personal auto for agency business will be experience rated for their future premium just as it would if they suffer a nonagency related loss.

Recommendations:
1) Personal auto use should be restricted where possible (use agency vehicle for medical appointments, deliveries or pick ups or any time consumer transported).

2) Employees and volunteers using their personal vehicles for agency business should be reviewed as any staff member using an agency vehicle would:

a. MVR checked and analyzed on annual basis.
b. Ensure proper driver training to include DDC, PAT, Emergency Evacuation, other
c. Annual Update of primary insurance and MVR
d. Follow agency’s standard policies and procedures when using personal vehicles; ie: driver eligibility, use of seatbelts, etc.

3) Employees and volunteers using a personal vehicle should provide proof of insurance, confirmation that there are no exclusion regarding vehicle use, proof of inspection and the agency should determine appropriateness of personal vehicle (condition, type, etc.)

4) Agencies should have a policy in place to require both employees and volunteers to maintain minimum liability limits on their personal auto policies. The preferred limits should be at least $300,000 unless the person is transporting clients, in which case the limit should be $1,000,000.

5) Insured’s can institute periodic checks on employees’ and volunteers’ personal insurance and require copies of their declaration showing limit of liability carried.

6) Verify that applications submitted include the volunteer count so we may charge accordingly.

Summary of Employee / Volunteer Use of Personal Vehicles

1.Employee using “Agency” vehicle– Liability coverage is Primary and provided for the insured and the employee.

2.Volunteer using “Agency” vehicle– Liability coverage is Primary and provided for the insured and the volunteer.

3.Employee using “Own” vehicle on Agency Business– Employees’ Personal Auto Policy is primary for Agency and self, the Agency’s policy is Excess Only for the agency and the employee. (Employee is included due to “Additional Insured Employee Endorsement”). In most states UM/UIM coverage is only applicable to bodily injury. However, there are a few states that require coverage for property damage also. It is important to determine if your underwriting state requires this coverage.

4.Volunteer using “Own” vehicle on Agency Business– Volunteers’ Personal Auto Policy is primary for Agency and self, the Agency’s policy isExcess Only for the agency NOT for the volunteer. In most states UM/UIM coverage is only applicable to bodily injury. However, there are a few states that require coverage for property damage also. It is important to determine if your underwriting state requires this coverage.

Driver Eligibility Criteria Bulletin

MVR Guidelines:

No driver under the age of 25 or over the age of 75 is eligible to drive 15-passenger transporation vehicles or buses.
No driver over the age of 79 is eligible unless the special exceptions are met as outlined.
No statutory or major violations listed on the MVR

Ages 21-70

A. Any driver with any of the following the past three years does not meet our underwriting criteria and is an unacceptable driver:
1. More than three moving violations in the past three years
2. More than two accidents in the past three years
3. More than one accident in any one year
4. Speeding over 80 miles per hour or 21 miles per hour over the posted speed limit

B. Any driver with any of the following is unacceptable:
1. Operating a motor vehicle during a time of suspension or revocation
2. Operating a motor vehicle without a license
3. Driving under the influence of alcohol or drugs
4. Careless driving
5. Negligent homicide arising out of the use of a motor vehicle
6. Aggravated assault with a motor vehicle

Ages 71-74

A. Any driver with any of the following over the past three years does not meet our underwriting criteria:
1. More than two moving violations in the past three years
2. More than two accidents in the past three years
3. More than one accident in any one year
4. Speeding over 80 miles per hour or 21 miles per hour over the speed limit

B. Any driver with any of the following is unacceptable:
1. Operating a motor vehicle during a time of suspension or revocation
2. Operating a motor vehicle without a license
3. Driving under the influence of alcohol or drugs
4. Careless driving
5. Negligent homicide arising out of the use of a motor vehicle
6. Aggravated assault with a motor vehicle
C. A physician's statement is required for any driver operating a passenger transportation vehicle (i.e. vans or buses). Physician's statements are required on an annual basis.

Ages 75-79

A. Review MVR - driver is subject to same MVR criteria as above
B. Physician's statement is required on an annual basis.
C. Ineligible to drive passenger transportation vehicles

Ages 80 and over

A. Ineligible*

* Exception:
Approval will be considered providing the following conditions are satisfied:
1) Provides evidence of a strong Risk Management program
2) Physician's statement is required on an annual basis.
3) Review MVR – driver is subject to the same MVR criteria as ages 21-79 above.
4) Ineligible to drive passenger transportation vehicles.

Driver Training and Motivation Bulletin

Training and motivating drivers is an important part of any Fleet Loss Prevention Program. An effective program will integrate both activities into the role of the fleet manager and will serve to enhance the knowledge, skills and performance of the drivers.
Training is necessary to supplement the driver selection process because individuals cannot always be selected who have all of the knowledge and skills required for the job.

Driver Training

Training should be used to supplement your driver selection process. The amount of training needed varies directly with the complexity of the job as well as with the knowledge and experience of the driver. An effective driver-training program will highlight the knowledge and skills necessary for an employee to perform at a satisfactory level. Proper training will help reduce operational disruptions and minimize unnecessary costs due to accidents and equipment abuse.

When implementing or enhancing a driver-training program, there are three levels of training that need to be addressed:

Orientation training – to indoctrinate new drivers to your company and your policies/procedures

Refresher training – to update drivers on specific changes in relation to driving routes, cargo, equipment, regulations, company procedures and other pertinent information

Remedial training – to address substandard performance issues
At a minimum, your company’s driver training program should include specific instruction on topics such as:

• Government regulations
• Company policies and rules
• Familiarization with company vehicles
• Driving routes and schedules
• Client handling procedures
• Emergency procedures and warning devices
• Accident reporting procedures

To facilitate the driver training program, a driver trainer should be designated. In larger companies, several driver trainers may be designated. The use of designated trainers tends to make training more consistent and uniform. It is not always necessary to maintain a full-time driver trainer, depending on the size of your fleet. Many companies designate a part-time trainer from the existing drivers. An individual selected as a driver trainer should be one who commands the respect of the other drivers, has a good driving record and has the ability to convey information in a stimulating manner. If the
appropriate resources needed to hire an outside driver trainer are unavailable, please contact your local insurance agent or PIC Production Underwriter for assistance.

Driver training can be completed either in a classroom or in-vehicle setting. Classroom training can be accomplished using either a one-on-one or group training approach. This setting is effective for presenting topics such as government regulations, accident reporting procedures and company policies and rules. In-vehicle training provides one of the best methods of giving practical instruction to a driver under closely controlled conditions. This setting is effective for presenting topics such as familiarization with company vehicles, driving routes and schedules, client handling procedures,
emergency procedures and warning devices.

To establish a driver training program or to enhance an existing one, several training programs are available from agencies such as the National Safety Council and the American Trucking Association.

Driver Motivation

Some drivers will perform exceptionally for wages alone or the self-satisfaction of accomplishing the task, while other drivers require additional forms of motivation. One motivational technique commonly used is a driver incentive program. Incentive programs can be used for accident-free driving, fuel efficient driving, or whatever other parameter is suitable for your particular operations.

A driver incentive program can provide many different types of awards (pins, belt buckles, patches, gift certificates, etc.) and may provide a substantial return on your investment if they are administered properly and stimulate driver interest. The goal of the incentive program can only be reached if there are established rules and procedures to assure that the drivers and supervisors alike understand the program. Awards should be made promptly upon reaching established goals, preferably by top management, and in the presence of peers. Whenever possible, publicity should be arranged through local newspapers, company newsletters and other forms of communication.

U.S. House Passes Repeal of Health Insurers' Antitrust Exemption

2010-02-25T14:02:00.001-05:00

The U.S. House of Representatives voted Wednesday to take a 65-year-old antitrust exemption away from health insurance companies, leaning hard on an industry that has been the focus of criticism for fast-rising rates.

The chamber voted 406 to 19 to effectively repeal an antitrust exemption that has meant that states take the lead in enforcing antitrust law for health insurers. Consumer groups say states often lack the resources to effectively regulate insurers.

"Just recently 80,000 Iowans were told that their insurance rates would go up 18 percent,'' said Rep. Leonard Boswell in debate before the vote. "Iowans in the 3rd district are struggling to make ends meet.''

The debate took place on the margins of a larger healthcare debate. On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of his domestic policy priorities.

Supporters portrayed the bill as a way to tamp down sharply rising health insurance costs, such as those from WellPoint Inc , which raised rates an average of 25 percent for some Anthem Blue Cross customers in California.

WellPoint Chief Executive Angela Braly, at a hearing on the issue Wednesday, said the company was concerned that it would lose the ability to share data with other companies. ''It's not going to affect healthcare costs one way or another,'' she said.

The Senate Judiciary Committee's version of the legislation is narrower in some ways than the House version, although the Senate bill also strips medical malpractice insurers of their antitrust exemption. Obama has said that he would sign the repeal into law.

Obama Backs Repeal of Health Insurers' Antitrust Exemption

2010-02-24T13:48:00.000-05:00

The Obama administration on Tuesday threw its weight behind a bid to repeal an anti-trust exemption protecting health insurers, keeping the industry in its crosshairs as it prepares to host a bipartisan summit on revamping U.S. healthcare.

"Today the president announced the administration's strong support for repealing the anti-trust exemption currently enjoyed by health insurers,'' White House spokesman Robert Gibbs said at a daily news briefing.

On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of Obama's domestic policy priorities.

"At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition and have greater control over their own healthcare. Repealing this exemption is an important part of that effort,'' Gibbs said.

Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts.

The insurance industry said the exemption is narrow in scope and warranted and that its repeal would not lower health care costs.

"Health insurance is one of the most regulated industries in America at both the federal and the state levels,'' said Karen Ignani, president and chief executive of the industry trade group America's Health Insurance Plans.

"The real focus should be on addressing the rising cost of medical care, which is putting an unsustainable burden on families, employers, and the federal budget,'' she said.

Gibbs said he expected the House to vote on legislation to revoke the exemption over the next few days. Obama's support was transmitted to Congress as a statement of administration policy.

INDUSTRY IN THE CROSSHAIRS

The Obama administration has stepped up its rhetorical attacks on health insurers as it fights to push through the healthcare overhaul. New regulation of health insurers was a key part of the overhaul plan Obama announced on Monday, and administration officials have pointed repeatedly to a premium increases of up to 39 percent set by WellPoint Inc.'s Anthem Blue Cross unit in California as evidence of the need for a healthcare overhaul.

A number of House Democrats have said repealing the antitrust exemption is a high priority.

"We want to open up competition. This bill is about making sure that anyone in America who wants to offer health insurance will do so in a free and open market,'' House Democratic Leader Steny Hoyer said.

"I surely hope it will pass with a significant bipartisan vote.''

Democrats said revoking the exemption would prevent health insurance price-fixing or other anti-competitive practices, but did not offer evidence of any. The industry said state laws already forbid such practices.

The American Medical Association released a study on Tuesday showing that many U.S. insurance markets are dominated by just one or two insurance companies. In 24 of the 43 states covered in the report, the two largest insurers had a combined market share of 70 percent or more, up from 18 of 42 states in last year's report.

The House version of the healthcare revamp bills that have stalled in Congress included a repeal of the exemption. The Senate version did not. Obama's proposal in general more closely resembled the Senate plan, and did not address the antitrust exemption.

A number of consumer groups support repeal, saying states often lack the resources to effectively regulate insurers.

NAIC Would Fight Obama Plan For U.S. Insurance Rate Regulation

2010-02-23T12:25:00.000-05:00

The National Association of Insurance Commissioners is ready to oppose any provisions in proposed health care reform legislation that would allow federal preemption of state insurance rate regulation, an official said.

Oklahoma Insurance Commissioner Kim Holland, the NAIC Secretary-Treasurer, said rate regulation is a prerogative of the states.

If White House health care reform proposals grant power to a federal rate authority to disallow increases approved by the states, Commissioner Holland said, “I think we would work hard to make a strong case to not do that.”

Yesterday the White House released a proposal by President Barack Obama designed to help bridge the gap between plans passed in the House and Senate.

The president’s plan would create a new “Health Insurance Rate Authority” that would provide “needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior.”

Commissioner Holland said the NAIC is in a “wait and see” mode at the moment and she had not yet seen the details of President Obama’s plan.

She is pleased, she said, that Health and Human Services Secretary Kathleen Sebelius is charged with engaging state regulators, as Ms. Sebelius has previously served as Kansas insurance commissioner and understands state regulation and authority.

Renewed attention has been given to rate regulation in the wake of the recent announcement by Anthem Blue Cross in California proposing rate increases of as much as 39 percent for individual health policies.

Commissioner Holland said a federal approach to address the rate increases should not be “one size fits all.” She said in Oklahoma, the individual market covers just four-and-a-half percent of residents, and there are 19 companies competing for that business.

She contrasted the Oklahoma market with California, where the individual market makes up a greater percentage of the health insurance marketplace but there are fewer companies providing that coverage.

She also maintained that rate increases cannot be addressed in a vacuum, but rather must be addressed alongside the rising costs of health care. “All pieces must work together,” Commissioner Holland said. She added, “You can’t beat the drum of rate increases without beating the drum of rising health care costs.”

Regarding rising health care costs, Commissioner Holland said there have not been discussions about hospital surpluses or Medicare fraud, for example. “There are a lot of issues causing dramatic cost increases,” she said.

She noted the NAIC will continue to judge reform proposals against the set of principles the association released early last month (online at http://www.naic.org/Releases/2010_docs/health_reform_insight.htm).

Obama Health Care Reform Bill Calls For Health Insurer Rate Regulation

2010-02-22T13:43:00.001-05:00

Authority to regulate health insurers at the federal level—including the power to roll back rate increases—will be included in President Obama's proposal for a new health care reform bill.

The new proposal attempts to “bridge the gap” between the current House and Senate bills, according to a copy of the proposal obtained by National Underwriter.

Among other provisions, it includes a requirement that everyone have health insurance or pay a penalty, as well as elements of both the House and Senate health care bills restricting the compensation rate for private providers who serve the Medicare Advantage program.

It also would extend prescription drug program coverage. At present Medicare stops paying for prescriptions after the plan and beneficiary have spent $2,830 on prescription drugs, and only starts paying again after out-of-pocket spending hits $4,550. This gap or “doughnut hole” would be removed under the proposal.

It would also implement health insurance exchanges but does not indicate whether these would be state, regional or nationally based.

The president’s proposal would also include the Community Living Assistance Services and Supports (CLASS) Act, which would amend the Public Health Service Act to create a national, voluntary disability insurance program.

The summary said the president’s proposal “makes a series of changes to the Senate bill to improve the CLASS Act program’s financial stability and ensure its long-term solvency.”

Concerning the Senate’s so-called “Cadillac tax” on expensive health insurance plans, the president’s proposal changes the effective date from 2013 to 2018 to provide additional transition time for high-cost plans to become more efficient.

It also raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500, and indexes these amounts for subsequent years at general inflation plus 1 percent.

The proposal imposes a responsibility on employers to shoulder the cost of health insurance for employees.

Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.

“Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” the summary said.

In dealing with health insurer rate increases, the president’s proposal would seek to ensure that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.

“A new Health Insurance Rate Authority will be created to provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior,” the summary said.

In responding to the proposal, a spokesman for America’s Health Insurance Plans defended the current spate of large increases in health insurance, especially in the individual and smaller markets.

“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” said Robert Zirkelbach, an AHIP spokesman.

He explained, “In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs.”

He added, “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”

Currently, only 26 state insurers have the power to set rates.

The summary also said the president’s proposal would seek to strengthen a provision of the Senate bill that includes a “grandfather” policy allowing people who like their current coverage to keep it.

The president’s proposal would add certain important consumer protections to these “grandfathered” plans.

Specifically, the summary said, “Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate review, backed up by the oversight of the secretary of the Department of Health and Human Services.”

When the exchanges begin in 2014, the president’s proposal adds new protections that prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals.

Beginning in 2018, the president’s proposal requires “grandfathered” plans to cover proven preventive services with no cost sharing.

Regarding Medicare Advantage, the president’s plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area.

“It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” the summary said.

It provides bonuses for quality and enrollee satisfaction and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating.

Under the proposal, plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate).

Finally, the president’s proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggest is warranted, based on actuarial analysis.

“This is the primary source of additional savings compared to the Senate proposal,” the summary said.

Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers, reacted to the president’s proposal by voicing concern rate regulation “in a vacuum.”

He explained, “It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority intact. We don't fear federal oversight; we fear Balkanization of the oversight.”

Louisiana Insurance Commissioner rejects a rate revision filed by State Farm

2010-02-18T08:47:00.003-05:00

Louisiana Insurance Commissioner Jim Donelon has rejected a rate revision filed by State Farm that would have raised homeowners insurance rates by a statewide average of 19.1 percent.

After reviewing the request, filed in December 2009, the Louisiana Department of Insurance determined the increases, which would provide the company with an estimated $67,625,043 in additional premiums, were unreasonable and that in its filing, State Farm relied on an excessive loss trend, as well as an unreasonable hurricane risk provision.

Regulators noted State Farm relied heavily on the latest version of the EQECAT hurricane model in justifying its revision. The EQECAT model’s projected hurricane loss provisions are 150 percent higher than projected hurricane loss provisions in two other industry hurricane models used by State Farm in this filing, without adequate supporting evidence, the department said.

“In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude,” Donelon said in a statement.

With a market share of 27 percent, State Farm is the largest homeowners policy provider in the state. The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.

Meanwhile, in Florida, where State Farm also dominates the property insurance market, policyholders are seeing increased premiums – but not as a result of the 14.8percent rate increase the state Office of Insurance Regulation (OIR) approved in December, part of an agreement to keep the insurer in Florida.

Many customers have lost marketing discounts that could cause premiums to rise in addition to the pending 14.8 percent rate increase. The subsidiary of State Farm Mutual Insurance Co. announced last July that it would discontinued the discounts in an effort to bolster the company’s solvency.

“The notice to the customer is the renewal notice,” said State Farm Florida spokesman Justin Glover. “That way they have time to look at the renewal notice before the bill is due.”

Multi-line and claims-free discounts, among others, will no longer be offered for customers who also insure their autos through the firm. Because of the change, policies renewed beginning in December increased by a statewide average of 28 percent.

OIR spokesman Jack McDermott acknowledged that State Farm notified state officials of the plan to discontinue the market discounts, and that the state does not regulate such discounts.

”There’s no requirement they tell you exactly what discounts are discontinued,” he said. ”They just need to notify the office if there is a premium effect.”

Both Glover and McDermott recommended that State Farm Florida customers contact their insurance agents to confirm their policy information.

On February 1, State Farm began sending out letters of nonrenewal to thousands of homeowners.

The 125,000 dropped policies are part of the settlement reached with the OIR. The company claimed it needed to dramatically reduce its hurricane exposure in the state to remain solvent.

The notifications, to be sent out on a rotating basis, give policyholders at least six months to find another insurer.

Most of the policies will be dropped on the west coast of Florida rather than in South Florida, as State Farm no longer insures many homes in the area.

At least 13 companies, including American Integrity, Florida Peninsula, Security First and United Property & Casualty, have been approved by State Farm to work with its agents to provide new coverage for the policies being dropped.

House to Vote on Repeal of Health Insurers' Antitrust Exemption

2010-02-03T14:28:00.000-05:00

The U.S. House of Representatives will vote next week on repealing the antitrust exemption for health insurers, but Democrats remained uncertain Tuesday on how to proceed on a broader healthcare overhaul.

Senate Democratic leader Harry Reid and House Speaker Nancy Pelosi during a Tuesday meeting reached no decisions on the sweeping healthcare legislation that has been in limbo since Democrats lost their crucial 60th Senate vote in a Republican election upset in Massachusetts last month.

"We have a number of options,'' Reid told reporters after the meeting with Pelosi. "We are going to proceed. We just don't know at this time how we are going to proceed.''

Democratic leaders are searching for a strategy to merge the two versions of the healthcare bill passed last year by the House of Representatives and Senate and pass it again before sending it to President Barack Obama for his signature.

The repeal of the antitrust exemption for health insurance companies was included in the House-passed healthcare overhaul bill but not in the Senate's version. The repeal has been a top priority for some House Democrats.

Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts. The insurance industry has said the exemption is warranted because health insurers are regulated by states.

But a number of lawmakers and consumer groups support repeal of the exemption. They argue that states often lack the resources to regulate the insurance industry effectively.

"Eliminating this industry giveaway will create more choice for consumers and create more competition for insurance companies,'' said Representative Louise Slaughter, chairwoman of the House Rules Committee and one of the authors of the repeal language included in the broader House bill.

"Getting this done is critical to getting real meaningful health insurance reform that will benefit all Americans by lowering costs,'' she said.

'HAPPY TO TAKE A LOOK'

If the House passes the antitrust exemption repeal bill, the Senate would have to approve it before sending it to Obama to sign into law. "We'll be happy to take a look at it,'' Reid said.

Pelosi spokesman Nadeam Elshami said the House antitrust vote scheduled for next week did not signal the House would break up the broader healthcare reform measure and try to move it piecemeal through Congress.

That has been one suggested strategy for the healthcare bill. Under another strategy, the House would pass the Senate bill without changes, eliminating the need for another Senate vote, and use a process known as budget reconciliation to make final changes in the two measures.

That process requires only a simple majority of 51 votes in the Senate.

Obama has urged lawmakers to pass the healthcare bill but has shifted his domestic agenda to make job creation and economic recovery his top priority.

"It's not over,'' Obama said of the healthcare debate during a town hall meeting in Nashua, New Hampshire Tuesday. "We just have to make sure that we move methodically and that the American people understand exactly what's in the bill.''

Reid said reconciliation remained an option for passing the bill, but refused to say if a strategy would be agreed upon before Congress leaves town for a one-week break at the end of next week.

"As I've learned, especially on healthcare -- no arbitrary deadlines. It just doesn't work,'' Reid said.

Travelers Sees Record Profits

2010-02-01T10:53:00.001-05:00

The Travelers Cos. saw its fourth-quarter profits climb 60 percent, driven largely by investment gains.

The insurer posted record net income for the quarter of $1.285 billion and full year net income of $3.622 billion. It marked the best quarter for profits Travelers has seen since 2002.

“Our retention rates remained high and the impact of renewal rate changes on premiums remained positive across all three of our business segments,” said Jay Fishman, chairman and chief executive officer of Travelers.

Total revenue in the fourth quarter was $6.456 billion, up 11 percent from the year-ago period. The insurer saw a 4-percent decline in net written premiums from the fourth quarter a year ago, which the insurer attributed to reduced insured exposures due to lower levels of economic activity.

Travelers fourth-quarter combined ratio was 83.4, down from 85.9 in the fourth quarter of 2008. For the year, Travelers combined ratio was 89.2, down from 91.9 in 2008.

Travelers Business Insurance segment had a combined ratio of 78.8, down from 85.7 in the prior-year period. “Business Insurance achieved strong underwriting results in the quarter as evidenced by its combined ratio. Although the impact on net written premiums from the economic downturn remained evident during the quarter, we once again produced positive renewal rate changes, strong retentions and stable new business levels,” said Brian MacLean, president and chief operating officer.

Travelers Personal Insurance segment had a combined ratio of 90.4 in the fourth quarter, up from 85.6 in the prior-year period. Personal Insurance net written premiums for the fourth quarter increased 3 percent to $1.735 billion. The company attributed the increase to continued positive renewal premium changes and strong retention rates. “Although we experienced a seasonality impact within our automobile business, we are pleased with our rate levels and new business quality,” MacLean said.

Louisiana Comp Costs Per Claim 35% Higher than Most States

2010-01-29T14:02:00.000-05:00

The costs per all paid workers’ compensation insurance claims in Louisiana averaged 35 percent higher than the typical study state, according to a Massachusetts-based research group that studies workers’ comp.

In its “CompScopeBenchmarks for Louisiana, 10th Edition,” the Workers Compensation Research Institute (WCRI) found that injured workers in Louisiana were off the job longer than in other states with similar workers’ compensation benefit systems, resulting in higher-than-typical indemnity benefits per claim than in other study states, even though the workers’ weekly benefits were capped at lower levels in Louisiana.

In addition, medical costs and expenses per claim were among the highest of the 15 states in the study.

The study found that indemnity benefits per claim with more than seven days of lost time were 36 percent higher than the typical study state as a result of a longer duration of temporary disability.

WCRI reported that injured workers in Louisiana were off work 34 weeks on average, which was nine to 10 weeks longer than Massachusetts and Pennsylvania and 15 weeks longer than Michigan.

Medical costs per claim were 20 percent higher than in the typical study state, the result of higher utilization and higher nonsurgical prices paid. In addition, the duration of medical treatment was 6.5 weeks (16 percent) longer than in the median study state.

Despite little change in the medical fee schedule rates since 1994, the 2006 medical fee schedule in Louisiana was higher than the median of 42 states with fee schedules for all service groups except surgery.

Payments per claim for hospital outpatient services also were higher than the median study state, WCRI said. Hospital inpatient payments per claim, however, were lower compared to other study states.

Expenses to manage claims were among the highest of the study states, including higher than average medical cost containment expenses per claim, defense attorney payments, and medical-legal expenses per claim.

WCRI reported defense attorney payments per claim with more than seven days of lost time were the highest among the 15 study states, at an average of nearly $6,500 per claim with defense attorney payments greater than $500.

AIG Without Help Would Have Killed U.S. Economy, Say Paulson, Geithner

2010-01-28T09:16:00.000-05:00

Former Treasury Secretary Henry Paulson and current Secretary Timothy Geither both told a skeptical congressional committee today that if U.S. action was not taken to bail out American International Group it would have been a catastrophe for the nation.

Their comments came at a hearing before the House Oversight and Government Reform Committee, which has questioned all elements of federal bank and U.S. Treasury actions to supply billions of dollars to bail out the insurance conglomerate and pay its bank trading partners in full for claims against depreciated assets.

Mr. Geithner was scrutinized about his role as Federal Reserve Bank of New York president before he became secretary and the FRBNY's steps to squash disclosure of how much the banks were getting.

Two lawmakers on the committee doubting his denials in that effort asked for his resignation.

Mr. Geithner said that Federal Reserve Board acted to bail out American International Group because it was “the only fire station in town.”

Republicans on the panel, in a report, have said the FRBNY), which Mr. Geithner headed in 2008, pushed through the bailout by the Federal Reserve that provided a bonanza to banks that were AIG trading partners. They attacked the decision to pay off AIG’s bank counterparties to complex and highly speculative collateralized debt obligations in full and not to press them to take “a haircut” and accept only a percentage of what was owed.

At the conclusion of the testimony from Mr. Geithner, who denied he was part of the FRBNY demands that AIG withold information about the 100 percent payout to bank counterparties Rep. Darrell Issa, R-Calif., the committee’s ranking Republican member, said he “no confidence” in the secretary and called for his resignation. He told him “you are either incompetent” or tried to cover up the details of what was going on through payoffs of the CDS [credit default swaps].”

Rep. John Mica, R-Fla., said Mr. Geithner had given "lame excuses" and asked, "Why shouldn't we ask for your resignation." Mr. Geithner said that was his right, but, he still takes pride in decisions made by federal banking officials.

Committee Chairman Edolphus Towns, D-NY, while complianing in opening remarks that, "In the case of AIG nobody got a haircut. Instead, everybody got a piggy bank full of taxpayers money, said after questioning Geithner, “I don’t know what else you could have done.”

Mr. Geithner testified it was “important to remember that the Federal Reserve, under the law, had no role in supervising or regulating AIG, investment banks,.." but Congress gave the Federal Reserve authority to provide liquidity to the financial system in times of severe stress, he added.“Given that responsibility, the Federal Reserve had to act,” he said, because the Federal Reserve was “the only fire station in town.”

The AIG bank trading partners had hedged their investment in collateralized debt obligations backed by U.S. residential mortgages through purchase of insurance through credit default swaps issued by AIG.

Mr. Geithner said that “imprudent risk-taking in better times” at AIG “meant that, when the financial cycle turned, AIG had hundreds of billions of dollars in commitments without the capital and liquid assets to back them up.”

He said such “excessive risk-taking should not have been allowed. But it was.”

He added, “Despite regulators in 20 different states being responsible for the primary regulation and supervision of AIG’s U.S. insurance subsidiaries, despite AIG’s foreign insurance activities being regulated by more than 130 foreign governments, and despite AIG’s holding company being subject to supervision by the Office of Thrift Supervision (OTS), no one was adequately aware of what was really going on at AIG.”

He defended the decisions of the FRBNY, the Board of Governors of the Federal Reserve and the U.S. Treasury by saying that the steps the government took to rescue AIG “were motivated solely by what we believed to be in the best interests of the American people.”

“We did not act because AIG asked for assistance,” he said. “We did not act to protect the financial interests of individual institutions. We did not act to help foreign banks.

“We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses.”

Mr. Paulson called AIG “an unregulated holding company” and a “mismanaged and misguided enterprise.”

The former treasury secretary said, “Although the road to complete recovery is slow and unemployment is still high, had AIG failed I believe we would have seen a complete collapse of our financial system, and unemployment easily could have risen to the 25 percent level reached in the Great Depression.”

The committee as part of its inquiry is probing whether the FRBNY acted inappropriately in limiting disclosures that as part of the bailout arrangements AIG would be paying off the banks in full.

“The rescue of AIG was necessary, and I believe that we in government who acted to rescue it—including [Treasury] Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and me—acted properly and in the best interests of our country,” he said.

Mr. Paulson said AIG needed rescue because it was “incredibly large and interconnected,” it was “seriously underregulated,” and because “it could not have been effectively wound down.”

Specifically, he said it had a $1 trillion dollar balance sheet; a massive derivatives business that connected it to hundreds of financial institutions, businesses and governments; tens of millions of life insurance customers; and tens of billions of dollars of contracts guaranteeing the retirement savings of individuals.

“If AIG collapsed, it would have buckled our financial system and wrought economic havoc on the lives of millions of our citizens,” Mr. Paulson said.

The second reason was that it was not effectively regulated. “Although many of AIG’s subsidiaries—including its insurance companies—were subject to varying levels of regulation, the parent entity was, for all practical purposes, an unregulated holding company.”

Consequently, there was no one regulator with a complete picture of AIG or a comprehensive understanding of how it was run. “It was not until AIG started to fail that regulators began to understand how badly managed it had been and how much the toxic aspects of parts of its business had infected otherwise healthy parts,” Mr. Paulson said.

Third, AIG could not be effectively “wound down,” he said. “Unlike failed depository institutions which can be taken over by the FDIC with little or no harm to depositors, or the GSEs [government sponsored enterprises] which were seamlessly placed into conservatorship by Treasury and the Federal Housing Finance Agency, there was—and is—no resolution authority available to wind down a failing institution like AIG.

“The only option is bankruptcy, a process that is simply not capable of protecting the millions of Americans whose finances are intertwined with AIG’s,” he said.

Mr. Paulson commented, “I do not mean to say that I am happy that we needed to intervene,” noting that taxpayer money should not have to be spent to save a “mismanaged and misguided enterprise.”

But, he added, “the fundamental problem lies not in how we intervened, but in why we needed to intervene.”

He said the U.S. needs to modernize its regulatory structure by creating a systemic risk regulator and resolution authority so any large firm that fails can be liquidated without de-stabilizing the system.

“Large financial enterprises in this country will always play a role that is essential to our economic growth, but they must only be permitted to grow and interconnect throughout our economy under careful oversight and with a mechanism for allowing those connections to be broken safely,” he added.

Meanwhile, Federal Reserve Board Chairman Ben Bernanke said stabilizing AIG, not the financial health of the trading partners, was the reason the Fed decided to pay off the AIG credit default swaps at par.

His statement came in a written response to Rep. Issal, who oversaw the minority report suggesting AIG bank counterparties were paid too much and the FRBNY and Federal Reserve attempted a cover up of bailout details.

Mr. Bernanke said, “The overriding motivating factor in structuring the payments to the counterparties was to relieve AIG of the destabilizing drains on its liquidity caused by the requirement to continue to post collateral as required by the CDS [credit default swaps] contracts.

“All counterparties were treated the same for payment purposes. Whether the individual counterparties were in relatively sound financial condition or not was not a factor in the decision regarding the amount paid to the counterparties or whether concessions should be sought from them.”

Mr. Geithner In response to a question, said the Fed had no legal or other authority to take any other action than it did in paying off the CDS. He said there was no way to put AIG in bankruptcy.

“To stand back and let it burn,” he said would be irresponsible and the Fed acted to protect the innocent through the bailouts and made an effort to reduce the cost to the American taxpayer to the lowest amount possible,.

He noted that the protections in place against bank bankruptcy do not exist for insurance companies.