Insurance Blog

Dire fiscal conditions have forced many states to cut back programs, increase taxes and put a freeze on hiring in 2010 and these actions continue to impact public infrastructure spending and related insurance exposures.
Insurance regulators are also affected.
In the wake of landmark financial services reform signed into law this week that retains the state-based regulatory framework for insurance, SNL Financial reports that many state governments continue to cut back on the resources those regulators will have to do their jobs.
In a timely analysis of data reported in the NAIC’s recently released 2009 Insurance Department Resources Report, SNL reports:
Projections offered by insurance regulators from the 50 U.S. states, the District of Columbia and the Commonwealth of Puerto Rico show their departments expect to spend a combined $1.77 billion in 2011, or 0.7% less than the roughly $1.79 billion they are spending in 2010. The report projects budget cuts for 20 state insurance […]

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President Obama is expected to sign landmark financial services reform legislation into law this week after the U.S. Senate passed the bill by a 60-39 vote last Thursday.
Insurance Journal and National Underwriter have informative pieces on how the Dodd-Frank financial reform package affects the insurance industry and surplus lines, including reactions from trade associations.
Over at the D&O Diary, Kevin LaCroix reminds us that while the 2,319-page bill is headed to the President’s desk, this is not the end, it’s the beginning.
A statement responding to passage of the bill from the American Insurance Association (AIA) explains why. Leigh Ann Pusey, president and CEO of the AIA, observes:
With some 250 new regulations to be implemented by 11 different federal agencies, the stage is now set for an intense rulemaking process that will be AIA’s top priority. As was the case during the legislative process, AIA’s focus will remain on identifying how the nature of […]

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Lower insurance costs and lower risk management administrative costs led to a 3.1 percent drop in the average total cost of risk (TCOR) per $1,000 of revenue in 2009, according to a new report from the Risk and Insurance Management Society (RIMS).
The report also found that workers compensation insurance costs were down substantially in 2009. However, the average D&O premium per $1,000 of revenue increased sharply for banks.
A press release from RIMS quotes David Bradford, Advisen executive vice president and Editor-in-Chief of the survey:
Falling insurance premiums were the largest contributor to lower TCOR in 2009. Risk management administrative expenses also were lower. Both were likely influenced by the depressed economy.”

The 2010 RIMS Benchmark Survey – which presents data from three separate surveys in one book – is an annual guide to the cost of risk for commercial insureds in North America.
Its findings enable risk managers to compare their TCOR to […]

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The fact that property/casualty insurers recovered more quickly and completely than virtually any other segment of the financial industry is concrete proof that subjecting insurers to bank-style regulation would constitute a significant policy error, according to I.I.I. president Dr. Robert Hartwig.
Such a move would needlessly raise insurance costs for hundreds of millions of insurance consumers and would unfairly require insurers to subsidize the reckless lending practices and speculative activities of failed banks, he added.
Commenting on the industry’s first quarter 2010 financial results, Dr. Hartwig said the rebound in the industry’s claims paying capacity (otherwise known as policyholder surplus) was perhaps the most extraordinary sign of the P/C industry’s resilience over the past year.
Dr. Hartwig noted that policyholders’ surplus increased by $29.2 billion, or 5.7 percent, to $540.7 billion during the quarter, up from $511.5 billion at the end of 2009, although after adjusting for a unique transaction the figure stands at […]

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A federal judge has approved a renegotiated settlement to compensate about 10,000 workers whose health was damaged during the rescue and clean up at the World Trade Center following the terrorist attack of 9/11.
The new $712.5 million settlement increases payouts to those injured and caps the fees going to plaintiffs’ attorneys.
It comes a little more than two months after U.S. District Judge Alvin K. Hellerstein ordered the parties to renegotiate a deal saying that too much of the original $657.5 million settlement was going to plaintiffs’ attorneys and not enough to the victims.
Under the new deal plaintiffs’ attorney fees are capped at 25 percent, adding $50 million to the fund, the WTC Captive Insurance Co is paying an additional $50 million to $55 million in cash, and New York City is waiving certain workers’ compensation liens. As a result of those savings, the payout to WTC plaintiffs will increase by […]

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U.S. property/casualty insurers’ full year 2009 results show a strong but incomplete recovery from the recession and financial crisis, according to figures just released by ISO and the Property Casualty Insurers Association of America. The industry reported an annualized statutory rate of return on average surplus of 5.8 percent in 2009, up sharply from 0.6 percent in 2008. However, net income after taxes in 2009 totaled $28.3 billion, nearly 10 ten times the $3.0 billion earned in 2008, but less than half the $62.5 billion earned in 2007. Similarly, insurers’ 5.8 percent overall rate of return for last year was less than half the 12.4 percent rate of return for 2007. In his commentary on the results, I.I.I. president Dr. Robert Hartwig observes that the magnitude and speed of the turnaround is truly remarkable given the length and depth of the crisis, though the industry’s profit recovery is incomplete. According […]

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As President Obama signs landmark healthcare legislation today, a question for us to consider is how the property/casualty insurance sector may be affected by changes in the nation’s healthcare system. Here’s what the bill means for three key areas that have an impact on p/c insurers and that we’ve highlighted in previous posts:

Antitrust exemption: The healthcare legislation does not include a repeal of the industry’s limited exemption from federal antitrust rules that has been in place for 64 years under the McCarran Ferguson Act. The Property Casualty Insurers Association of America (PCI) has applauded the decision: “We appreciate that Congress recognized repealing McCarran-Ferguson would not provide any benefits to the consumer or the insurance marketplace.” Check out I.I.I. info on antitrust law and insurance.
Tort reform: Despite President Obama’s earlier pledge to address medical malpractice liability concerns as part of healthcare reform, the bill does not contain any meaningful tort reform. […]

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A federal judge has sent a proposed settlement of up to $657.5 million to compensate about 10,000 workers whose health was damaged during the rescue and clean up at the World Trade Center following the terrorist attack of 9/11 back to the drawing board. The decision came just a week after New York City officials and plaintiffs’ lawyers announced the settlement. U.S. District Judge Alvin K. Hellerstein Friday ordered the parties to renegotiate a deal, saying that too much of the settlement – about one-third – was going to plaintiffs’ lawyers and not enough to the victims. According to a New York Law Journal report via law.com Hellerstein also indicated he would demand that attorneys’ fees not come from the money set aside for the settlement, but from other assets of the federally funded WTC Captive Insurance Co which was established to provide coverage for the city. In a statement, […]

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Introduction of the Restoring American Financial Stability Act of 2010 by Senate Banking Committee chairman Christopher Dodd (D-CT) yesterday has prompted a slew of headlines on financial services reform and the pros and cons of giving enhanced powers to the Federal Reserve Board. Apart from the establishment of an Office of National Insurance within the Treasury, there are a couple of key takeaways from the insurance industry perspective. On systemic risk: the proposed legislation would establish a Financial Stability Oversight Council that would subject to Fed oversight any nonbank financial companies that pose risks to the financial stability of the United States. The plan would also create a $50 billion fund, financed by assessments on the largest financial firms, including insurers. Check out the following articles in the New York Times, Business Insurance and Insurance Networking News for more on this story. The American Insurance Association issued the following statement, here, in […]

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The Singapore navy has warned that a terrorist group may be planning attacks on oil tankers in the Strait of Malacca, one of the world’s busiest shipping lanes, according to CNN and Reuters reports. They cite an advisory issued by the Singapore Navy Information Fusion Centre (IFC) recommending that ships should “strengthen their on-board security measures and adopt community reporting to increase awareness and strengthen the safety of all seafarers.” They also note that the terrorists’ intent is probably to achieve widespread publicity and showcase that it remains a viable group. The advisory did not name a particular terrorist group, according to the reports. The maritime terrorist threat is a rising concern for ship owners and their insurers. The World Economic Forum’s Global Risks 2010 report recently warned that a major terrorist attack that closed a port for weeks would have severe economic consequences on world trade because it would […]

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