Category: Insurance Regulatory Reform

Europeans Seeking Reinsurance Solvency again!

Solvency II is the updated set of regulatory requirements for insurance firms that operate in the European Union.

Based on this new European regime, Aon Benfield  reports in a press release [November 4, 2010]  that the formulas for calculating natural catastrophe capital requirements under the proposed Solvency II Standard Formula are outdated and ignore 15 years of evolution in the field of risk modeling. In response they are offering a suite of services to help re/insurers [game the system] make the most of the catastrophe requirements.

The basic calculation methodology being used under Solvency II overlooks these key aspects of risk and data modeling says Aon:

  • Location granularity (CRESTA zone data is insufficient)
  • No differentiation by occupancy (residential, commercial or industrial) or construction, age and height
  • Single damage function so no differentiation between buildings, contents and business interruption cover
  • No application of limits and deductibles

Unrelated to any of the above, it was released today [November 10. 2010] that:

Andrew Appel, chief operating officer of global broker Aon, will leave the company at year-end.

One should always endeavor to make the innocuous seem conspiratorial.  Of course one might argue that in the someone opaque world of global reinsurance the conspiratorial is at least mundane if not exactly innocuous.

$1.3 million reinsurance price fixing settlement announced

Attorney General Richard Blumenthal…announced a $1.3 million settlement with The Hartford Financial Services Group, Inc., resolving claims that it participated in several anticompetitive schemes that illegally inflated insurance and reinsurance costs nationwide. h/t Insurance and Law

The Hartford and Guy Carpenter have a different spin on the story.  Naturally.

A spokesman for The Hartford said in a statement by e-mail, “We are pleased to have come to an agreement with the attorney general’s office. The Hartford has been out of the property and casualty reinsurance business since 2003, and we agreed to this settlement to avoid ongoing expenses related to the case.

“We believe our participation in the reinsurance facilities was lawful. We settled to avoid the costs of litigating with the attorney general over a business that The Hartford exited years ago.”

In an e-mail response to the attorney general’s accusations a spokesperson for Guy Carpenter said, “Guy Carpenter shares the view expressed earlier today in a statement made by The Hartford that: participation in these reinsurance facilities was, and is, lawful.

“Guy Carpenter continues to believe that the Connecticut Attorney General’s complaint is unfounded. These facilities result in improved terms and pricing of reinsurance for small- and mid-sized clients.”

Back now to Attorney General Blumenthal’s release:

“The Hartford is making history by this first-in-the-nation settlement—and drawing back the cloak of secrecy of a series of illegal price-fixing conspiracies that inflated insurance costs by hundreds of millions of dollars nationwide at the expense of 170 insurance companies and their customers,” Mr. Blumenthal said. Continue reading “$1.3 million reinsurance price fixing settlement announced”

BREAKING: Gene Taylor Joins 14 Other US Representatives Urging Speaker Pelosi to Revoke the Anti-Trust Exemptions for Health Insurance Companies

 

TAYLOR, DEFAZIO, WELCH, STUPAK URGE SPEAKER TO REVOKE ANTI-TRUST EXEMPTIONS FOR HEALTH INSURANCE COMPANIES

WASHINGTON, DC – Reps. Gene Taylor (D-MS) Peter DeFazio (D-OR), Peter Welch (D-VT), and Bart Stupak (D-MI) today sent a letter to Speaker Pelosi urging her to include language in the health reform bill that would require the health insurance industry to operate under the same anti-trust laws as all other industries.

“Insurance companies should not be above the law.”  Rep. Taylor stated. “While this effort applies only to health insurance, Congress should follow up and repeal the antitrust exemption for all lines of insurance.”

The health insurance industry–as well as all other lines of insurance–has operated beyond the reach of America’s anti-trust laws since the McCarran-Ferguson Act was passed by Congress in 1945. This exemption was intended to be temporary, but it has not turned out that way. The insurance industry claims that are currently subject to state anti-trust laws. The truth is many states have limited resources to investigate and go after anti-trust violations.

Repealing the antiquated McCarran-Ferguson law would effectively end insurance company collusion and bring much-needed competition to the industry. The Consumer Federation of America has said that this action alone would save consumers more than $40 billion in insurance premiums.

The letter, also signed by Reps. John W. Olver, Daniel Lipinski, Pete Visclosky, Raul Grijalva, Betty Sutton, Elijah E. Cummings, Dennis Kucinich, Eric Massa, Earl Blumenauer, Brian Baird and Bob Filner, is available below: Continue reading “BREAKING: Gene Taylor Joins 14 Other US Representatives Urging Speaker Pelosi to Revoke the Anti-Trust Exemptions for Health Insurance Companies”

Dear Mr President We Still Have Insurance Problems: Gene Taylor Writes a Letter to the Prez


Congressman Gene Taylor
U.S. House of Representatives
Fourth District of Mississippi

————————————

2269 Rayburn HOB
Washington, DC 20515
(202) 225-5772
Fax (202) 225-7074

For Immediate Release
Contact: Ana Maria Rosato (202) 253-1308
October 13, 2009

Rep. Gene Taylor (D-Miss.) Urges President Obama to Reform National Flood Insurance Program, Act on Multiple Peril Insurance legislation 

Bay St. Louis, Miss. — With the President’s upcoming visit to New Orleans on October 15, 2009, Rep. Gene Taylor (D-Miss.) wrote Mr. Obama urging the Administration to reform the National Flood Insurance Program and revisit the Multiple Peril Insurance Act of 2009, his proposed solution to the homeowner insurance crisis that is sweeping America’s homeowners throughout the Gulf and Atlantic coastal states. Rep. Taylor urged the Administration to engage in “more actively in reforming the National Flood Insurance Program, providing for better disaster insurance coverage, and improving other disaster response and recovery programs.”

Rep. Taylor’s letter opened by reminding President Obama that since Hurricane Katrina ravaged the Mississippi Gulf Coast on August 29, 2005, he has not yet visited the area either as a Senator, a candidate for President, or as President. In the letter, the Mississippi Congressman stated:

“Immediately after [Hurricane] Katrina, we learned that some of the largest insurance companies in America were not going to honor their [homeowner] policies.” Continue reading “Dear Mr President We Still Have Insurance Problems: Gene Taylor Writes a Letter to the Prez”

Chip Merlin asks Why is the property insurance industry against its own customers?

Many of my retail corporate clients and their general counsel have told me that if they advertised and then performed in the manner of their insurer, the federal and state trade commissions would be holding “bait and switch” hearings. But, this is exactly the type of treatment insurance executives are calling for when they support the propaganda against their own customers through spokespersons such as Hartwig.

I am not the only one to have noticed this…The editors of Slabbed were pretty blunt about what they think about Hartwig.

Chip linked two recent SLABBED posts –  Bam Bam’s The Push Back on Corban – “You’re gonna pay for this” and Sop’s Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news – and added his thoughts as he raised the question Why Is the Property Insurance Industry Against Its Own Customers?

The response by Robert Hartwig of the Insurance Information Institute to the landmark Corban decision typifies how executives at many insurance companies feel about their customers. If not, Hartwick would be out of a job. Here is his quote taken from Anita Lee’s article: Continue reading “Chip Merlin asks Why is the property insurance industry against its own customers?”

State Farm to Coast: Get ready to grab yer ankles

STATE FARM TO COAST:

“FUGETTABOUDIT, YA WANT ‘DA POLICY, GET ‘DA 45%“

We’ll talk State Farm in a minute. It’s a small pleasure to me that readers of Slabbed can tell you in a single sentence why we’re being devoured by insurance companies – they operate regional monopolies, and keep them going by purchasing judges, legislative bodies, and regulators who could take away the anti-trust exemptions. Coached by people like McKinsey & Co., we know how big insurers follow a scripted Machiavellian model:

risk transference is sales pretext only;

the objective is profits;

claims threaten profits;

policyholder dollars go to defeat, not pay claims;

↑ premiums + ↓ scope of coverage = ↑ profits.

America is being eaten from within. Wall Street pigged-out and bankrupted our treasury. Health insurance pigged-out and drove consumers to go uninsured and file bankruptcy in record numbers (62% of all). Banks pigged-out and destroyed home values and credit markets, and auto makers cowboyed a world class manufacturing business into oblivion. On the legal side, so-called “pro business” types – mere bribe payers to me – replaced the jury system with forced arbitration, repealed punitive damage law and bought off the appeals courts. If our Constitution was a car note, I’d say we’re “upside down.”

At the moment, the Machiavellian health insurance model is under attack. In recent months, health insurance monopolies have forked out $380 million in new Congressional bribes to protect their profit model. Their business model: sell a promise to cover medical bills, exclude most medical needs and all pre-existing, don’t pay claims, keep the money. It’s a simple but solid racketeering strategy that spits out money like an ATM machine run amuck. In the seven years from 2000 to 2007, profits rose 428%, while insurers steadily shrank coverage.

Ok, on to State Farm’s latest. Continue reading “State Farm to Coast: Get ready to grab yer ankles”

Same old song – this time to the tune of $1.88billion

Insurance risk specialist Verisk Analytics Inc. raised $1.88 billion Tuesday in the biggest IPO by a U.S. company since March 2008 after pricing its shares at a higher-than-expected $22 each, according to the Insurance Journal.

The sale of the shares, which had been expected to price at between $19 and $21, marked the biggest IPO by a U.S. company since a $19.6 billion offering by credit card operator Visa Inc .

Verisk, which does most of its business through its subsidiary ISO and is owned by a group of insurance companies, collects actuarial and underwriting data related to U.S. property and casualty insurance risks.

Sing it with me, Mr. CLS! Continue reading “Same old song – this time to the tune of $1.88billion”

Save the date! FEMA sets up “Listening Session” on NFIP reforms

Thou shall not claims dump! H/T to a reader:

The Federal Emergency Management Agency will host a Listening Session to discuss reform of the National Flood Insurance Program (NFIP) on November 5th and 6th in Washington, DC. The goal of the session will be to engage our partners, stakeholders and customers to hear about the key issues facing the program, identify where there is common understanding and to document the diversity of opinions concerning the optimum implementation of the flood insurance program.

The listening session will be held at the Marriott Renaissance M Street Hotel at 1143 New Hampshire Ave, NW Washington, DC 20037. The session will begin at 1:00 pm on November 5th and conclude at noon on November 6th. A block of rooms has been reserved for those traveling from out of town. To make your hotel reservations, call reservations at (800) 468-3571 or (202) 775-0800. Reference “NFIP Stakeholder Listening Session” when inquiring about reservations. Space will be limited for the meeting. Please RSVP your attendance via email to Nancy Betress at [email protected] or phone (202) 646-3680.

More details will be sent to you along with an official invitation. For more information on the NFIP reform, contact Butch Kinerney, Communications Chief, FEMA Mitigation, at (202) 646-3228 or by email at [email protected]

Thank you very much for your interest in the NFIP and we look forward to seeing you in November.

Jim Brown Compares Florida

Thursday, September 24, 2009
Perdido Key, Florida

LOUISIANA AND FLORIDA-
NIGHT AND DAY ON PROPERTY INSURANCE!

All this week, Florida’s largest newspaper, the Miami Herald, has been writing both feature articles and editorials about the problems facing Florida property owners in finding affordable insurance. Day after day, headlines conveyed the intensity of the struggle: “Storm Warning: Prop up insurance,” was a typical lead, along with “Is Citizens Insurance ready for the big one?” and “Lawmakers still scrambling on wind insurance.” Florida, like all gulf coast states, has problems of both insurance affordability and availability. But here’s the difference between the Sunshine state and the Bayou state. Florida is giving the problem serious attention. It’s a front and center concern for the governor, the legislature, insurance regulators, and the news media. In Louisiana, there is hardly a whisper.

When Florida Governor Charlie Crist took office a few months before Governor Bobby Jindal in 2007, his first words of commitment were: “The lack of available and affordable property insurance is the biggest threat to our economy. We cannot wait until the regular legislative session to find solutions.” Crisp immediately called a special session of the legislature and offered a litany of changes and reforms that led to cheaper insurance rates.”

Florida has significantly more hurricane exposure than does Louisiana. Ninety percent of all homeowners live within a few miles of the Gulf or the Atlantic Ocean. A hurricane crossing the Florida peninsula slows down, at best, only 15 miles per hour. Yet in spite of all this exposure, property insurance rates are cheaper in Florida than in Louisiana. In Perdido Key, on the Florida-Alabama border, many Louisianans have beach homes or condos. On average, they pay significantly less on these properties than they do on their homes in New Orleans, Baton Rouge and other Louisiana cities. Property insurance rates for commercial real estate have gone down, somewhere in the neighborhood of 30% to 40%, according realtor Steve Ekovich of the Tampa office of Marcus & Millichap, and insurance is more available. Continue reading “Jim Brown Compares Florida”

The ACC Bee Is Still In My Bonnet

ACC, the anti-concurrent cause issue, is burning up my head again. With health care insurance all the rage, it don’t hurt to remind ourselves how Big Insurance grew to be cracked-out body slammers. Most people don’t know that way back in 1945 the McCarran-Ferguson Act exempted Big Insurance (“Big-I”) from federal anti-trust law so long as long as the states “regulated” insurance. What a farce. Big-I and ISO hand out cash Tootsee Rolls to puppet commissioners and presto, before you know it, we’ve got regional, full-blown monopolies. Take health coverage: Wellpoint controls 71% of the Maine market; Blue Cross controls 90% of the North Dakota market and 100% of the Alabama market. All that said, keep your fingers crossed, the House Judiciary Committee (Senator Leahy) introduced an amendment to the health bill which would strip Big-I’s anti-trust exemption.

George Dale
George Dale

But, let’s revisit the magnolia ACC a minute. In prior posts, I talked about how Nationwide (probably with ISO’s help) quietly slipped the ACC into Mississippi in the ’80’s. By “slipped,” I mean they submitted a new policy form to the Commissioner for approval. Natch, it was instantly accepted. Recall, Mr Commissioner was indicted in ’94 for taking bribes from Big-I, but never went to trial. Undaunted, a mere 5 years later the legislative PEER committee caught him approving rate requests for State Farm, Allstate, Nationwide et al without any actuarial review. Over 380 rate requests, 59% of all, weren’t even looked at by actuaries.

MID Peer Report

Lee Harrell

  Some of you may recall that Dale’s deputy commissioner was the one who incessantly chatted with sycophantic law clerks overseeing Katrina, and probably caused the so-called “MID mediation plan” to be crammed down the throats of Katrina homeowners. Using Dale to the fullest, State Farm employed this sham mediation procedure to defraud hundreds and perhaps thousands of insureds. Evidence was produced showing State Farm staged the mediations in advance and actively concealed material evidence from homeowners during the “mediation” process. Continue reading “The ACC Bee Is Still In My Bonnet”