Day: February 26, 2009

BREAKING: S&P Downgrades 10 Life Insurers. Death Rattles Reportedly Heard in Hartford Connecticut

Marketwatch has the story:

S&P said it lowered its counterparty credit and financial strength ratings on 10 groups of U.S. life insurers, and its counterparty credit ratings on seven U.S. life insurance holding companies.

“In response to the extreme pressures in the global economy, we recently published criteria that outlined the incremental stress analysis we are now applying to U.S. insurers’ bond holdings, commercial mortgages, and commercial mortgage-backed securities when we assess these companies’ capital adequacy,” S&P said.

The ratings firm added that, “Although today’s rating actions reflect our opinion of a general decline in the overall creditworthiness of the U.S. life insurance sector, we continue to believe the credit fundamentals of the life insurance industry are strong.”

Insurers affected by the ratings changes include Conseco Inc., which saw its counterparty credit rating cut to CCC, denoting very weak security characteristics. Genworth Financial Inc. saw its rating cut to BBB, denoting good but more likely to be affected by adverse business conditions than higher-rated insurers, while Hartford Financial Services Group Inc.’s rating was cut to BBB+

The S&P report, which can be found here if you sign up for a free account has many salacious tidbits backing what I’ve been saying for several weeks now on a topic we’ve blogged about for months beginning with Senate Majority Leader Harry Reid’s welcome here last fall. Here are some excerpts:

Standard & Poor’s also said that it placed its ratings on two groups of U.S. life insurers, one of which was also downgraded, on CreditWatch with negative implications. At the same time, Standard & Poor’s revised its outlook on an additional U.S. life insurer to negative from stable……………. Continue reading “BREAKING: S&P Downgrades 10 Life Insurers. Death Rattles Reportedly Heard in Hartford Connecticut”

Treading Water – claims handling in Texas following Hurricane Ike

While the National Insurance Law Forum waited a bit longer than most to ask Hurricane Ike Insurance Litigation: Will it be as bad as Katrina?,  the November 17, 2007 post also suggested the answer.

It didn’t take long for the first bad faith suits arising from Hurricane Ike to be filed in Texas. Last week, the first two Ike bad faith lawsuits that I am aware of were filed in Galveston and Ft. Bend Counties…These are first of several thousand Ike lawsuits expected to be filed across Southeast Texas over the next several years…

The big question being asked by carriers across the country is whether Hurricane Ike will generate the type and volume of litigation generated by Hurricane Katrina. In the three years since Hurricane Katrina, it has been estimated that between 27,000 and 30,000 hurricane insurance suits were filed in southern Louisiana alone. Of the 12,565 suits filed in federal court, only slightly more than half — 7,837 — cases, have gone to judgment or settled.

The seventh edition of the Hurricane Ike Insurance Newsbrief (January 26, 2009) quotes the Texas Department of Insurance reporting that in the three months after Hurricane Ike… over 730,000 insurance claims have been filed and the number continues to rise.

From the policyholder’s perspective, the numbers indicate a mixed blessing.  The longer it takes for a case to get to court the more likely it is that new case law will replace Leonard and other of the 5th Circuit’s poorly reasoned opinions on Katrina litigation.  Chip Merlin’s post on the 5th’s decision in Leonard, Fifth Circuit got it wrong,  points out where the Court’s reasoning failed.

In their rationale…the 5th Circuit provides a less than stellar (okay really absurd) example of non-coverage that virtually all insurance companies issuing an all-risk policy would heretofore pay. After finding that the anti-concurrent causation language was not ambiguous, Judge Edith Jones went too far and provided the following:

“If, for example, a policyholder’s roof is blown off in a storm, and rain enters through the opening, the damage is covered. Only if storm-surge flooding – an excluded peril – then inundates the same area that the rain damaged is the ensuing loss excluded because the loss was caused concurrently or in sequence by the action of a covered and an excluded peril…

Where did that come from? Virtually every adjuster and claims manager I have ever deposed with that similar hypothetical situation in a Katrina loss has said coverage would be granted under the all-risk policy for the full amount of the loss…From a practical standpoint, where is there going to be any coverage if the flood policy has the typical exclusions regarding pre-existing loss or “roof leaks or wind-driven rain” as found in the National Flood Policy?

That seems to be one of the big questions in Texas following Ike, according to Thousands waiting for windstorm payments, the article from the Galveston County Daily. h/t Dimechimes. Continue reading “Treading Water – claims handling in Texas following Hurricane Ike”

ABA throws up recommendations for flood insurance reform

Rebecca Mowbray’s usual fine writing wasn’t enough to keep me from seeing Pepto Bismol pinks as I read American Bar Association recommends flood insurance reform after picking up the link posted with this suggestion on a finance message board:

This Tulane Law professor needs to teach a course in securities fraud, or better yet take one, maybe at the Reinsurance University of Bermuda!

However,  this “Tulane Law professor” turns out to be the former Dean of the Law School, not just a professor – a fact that does nothing to improve the recommendations but better explains the how they came about.

Edward Sherman served as Dean of Tulane Law School from July 1996 through June 2001…Professor Sherman is an expert on civil procedure, complex litigation, and dispute resolution and is co-author of widely-used casebooks and treatises on those subjects… He has been…active as an arbitrator and mediator.

Before I say more, take a look at Mowbray’s story (emphasis added).

The American Bar Association recommends that insurers offer customers the option of buying insurance policies that cover flooding from storm surge to help cut down on legal disputes after events like Hurricane Katrina.

The suggestion is part of a set of recommendations issued by the ABA’s tort, trial and insurance practice section after a year and a half of study.

“The insurance industry needs to get creative in offering all kinds of policies, rather than just saying, ‘No, we don’t cover it,'” said Ed Sherman, a professor at Tulane Law School who served on the task force and helped draft the proposals.

The majority of the 25-person task force represented an insurance company perspective.

As such, the report includes a number of proposals that companies have advocated, such as seeking a greater federal role in insurance regulation and giving insurers incentives to build catastrophe reserves over multiple years. Continue reading “ABA throws up recommendations for flood insurance reform”

Jim Brown on Bobby Jindal

Thursday, February 26th, 2009

Baton Rouge, Louisiana

JINDAL A TOUGH SELL ON A NATIONAL STAGE

Bobby Jindal had an uphill fight to begin with this past Tuesday evening when he was the Republican pick to give a response to the President’s State of the Union speech.  He was thrown into the lion’s den to give reaction to comments of a popular president, just coming into office, with a major segment of the American public pulling for him and giving him high marks.  No matter what Jindal might have said, he really could not, and did not gain any traction or score any substantive points.

Jindal was called on to mouth the national party line, and right now, that line is a big stumbling block for the GOP.  They are dealing with a President whose popularity ratings stay above 60% in every major recent poll.  Tuesday night, MSNBC tracked the reaction of both Obama voters and McCain voters in several focus groups around the country.  Both sides were consistently and solidly positive throughout Obama’s speech.  In fact, when the President talked about unfreezing credit markets and ending tax breaks for companies that ship jobs overseas,  McCain voters were stronger for the President that the Obama group.  The Republicans are trying to mould an alternative to a President who, so far, seems to be right on with an acceptable message to a solid majority of the country, leaving Jindal little wiggle room to respond. Continue reading “Jim Brown on Bobby Jindal”