Category: regulation

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formulas for calculating natural catastrophe capital requirements under the proposed Solvency II Standard Formula are outdated and ignore 15 years of evolution in the field of risk modeling.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.

Keep Yer Filthy Hands off my Oysters (Updated)

Has the FDA lost their f#cking minds? Just saying there is gonna be some cranky sum bitches down here if Drago’s does not have fresh oysters year round including me. I’m gonna have to contact my congressman on this one.

sop

Update: Gene’s Letter (h/t Steve in comments) Continue reading “Keep Yer Filthy Hands off my Oysters (Updated)”

Jim Brown on Chinese Drywall, the Pollution Exclusion and Corban

Thursday, October 15, 2009
Baton Rouge, Louisiana

BLEAK LOUISIANA INSURANCE CLIMATE IN MONTHS TO COME!

There should be plenty of good news on the property insurance front, both in Louisiana and throughout the gulf south. Hurricane season is over, the third year in a row without the threat of a major storm. One would think this would be both good news and the beginning of price drops. But that’s not the case. There are bad financial storm clouds arising that bode ill for Louisiana policy holders in the coming year. Look for higher rates and less coverage. Here are some of the problem areas.

The new troubling insurance buzzword for homeowners? Chinese drywall. Thousands of Louisiana homes have been infested with defective drywall from China that was imported during the construction boom following Katrina to meet heavy demand. For reasons yet unknown, the drywall was contaminated with various sulfur compounds. This reaction causes quick metal corrosion allowing plumbing and appliances to fail. The foul odor that follows makes these homes unlivable and expensive to repair, and the defective sheetrock has to be torn out.

So you call you insurance company – right? Unfortunately, in most cases, insurance companies have been rejecting drywall claims, and even going so far as to not renew the homeowner’s policy. Property insurance companies, particularly in Louisiana, argue that drywall damage was not a “sudden event” like wind damage or flooding. Since 1984, insurance companies have been adding “pollution exclusion” to all their homeowner policies, stating that no coverage exists when a pollutant cases damage. Drywall problems, according to the insurance industry, cause damage over a period of time, and therefore the homeowner should have taken action for damage control.

This is not supposed to be the case in Louisiana. The Louisiana Insurance Department, back in the late 1990s, specifically defined the scope of such exclusion more narrowly than most states and allowed it to be applied “only to those injuries or damage caused by environmental pollution.” Simply put, nothing like drywall damage should be excluded, said the Insurance Commissioner at that time (obviously, a pretty bright guy). The Louisiana Supreme Court followed the Insurance department’s reasoning in the landmark case of Doerr v. Mobil Oil Corp. in 2000. Continue reading “Jim Brown on Chinese Drywall, the Pollution Exclusion and Corban”

Jim Brown devotes a radio segment to the dysfunctional Louisiana insurance market and AIG’s insolvency

Yep he did. Keep pounding Jim, AIG policyholders need not also be bagholders too.

[youtube=http://www.youtube.com/watch?v=IEoK2BdDtj4]

Suppose you are a consumer who reads slabbed…..

And you’ve read every detail of the aberrant behavior of many insurance companies that do not pay legitimate claims in companies like Allstate, State Farm, USAA and Nationwide. The larger question becomes is there an insurance company that actually treats their customers fairly come claim time?

I don’t know why I haven’t yet linked the FBIC website rankings of insurer claims practices here on Slabbed because they rank not only the worst bad faith insurers but also the ones that treat their customers right. Here is the FBIC’s list of the top 10 bad faith insurers which includes life and health insurers as well as P&C insurers:

1. The Hartford
2. State Farm
3. Allstate
4. Unum (UnumProvident)
5. Berkshire Hathaway
6. CNA
7. American Family (Of pink pig fame)
8. AIG
9. Lumbermens (Kemper)
10. Assurant Health

And the good faith insurers?: Continue reading “Suppose you are a consumer who reads slabbed…..”

SLABBED Daily – May 18

Now, it’s no secret we’ve got insurance problems here in Mississippi; but, Texas has one that I had not contemplated until I stopped by Merlin’s blog.  Over in the Lone Star state, insurance is making things tacky.

Suppose some shingles on a roof are damaged, but not all. Does a policyholder get a hideous looking checkerboard roof which affects the value of the structure and possibly the neighborhood? If part of a carpet is damaged, is it patched leaving a new part slightly different looking in the middle of a room? Many of these issues never arise because many insurance companies pay to match, trying to maintain a happy customer. Some pay for only the damaged amount, and end up fighting with their customers.

Catadjuster’s comment on the post tells more about Tacky in Texas:

I have one case in which State Farm is replacing only 2 sheets (8×4) of paneling in a bedroom of home where the paneling has been there for over 20 years. I have another case in which TWIA is replacing ceramic tile in the family room but not the breakfast area or the foyer even though the floor is continuous to both areas, this tile is over 30 years old. In each of these cases neither party can find these items available. Continue reading “SLABBED Daily – May 18”

Familar Problems in Alabama’s X-Wind Homeowners Insurance Market

The first week of April, Jeff Amy at the Mobile Press Register authored an excellent story on the coastal X-wind HO market in Alabama. His story, unlike our coverage of it, is very timely. However, unlike justice delayed, Mr Amy’s piece has gotten better with time. The reason for that also explains my detour back to November 29, 2006 and the deposition of State Farm Senior Vice President Mr Robert Trippel, an otherwise useless character who still managed to provide some enlightening commentary when he was deposed in Watkins v State Farm about several Katrina related matters. While the meat of Mr Trippel’s depo is dedicated post on its own he had a few things to say about X-Wind policies in his zone, which includes Mississippi and Alabama so it is on page 103 of his deposition that we begin as the Watkins lawyer Jeff Marr questions Mr Trippel:

Q All right, Mr. Trippel, after you identified — what are these called, initiatives, is that what we’d call them — in these different states these things that are being conducted, what are they called?

A I would say it’s the new underwriting guidelines.

Q Okay. And you covered Mississippi and Georgia. Which state is next? What’s another state in this zone that’s been affected by the change of underwriting guidelines following Katrina?

A Alabama.

Q How has Alabama’s underwriting guidelines been changed following Katrina?

A Very similar with a mile setback off the coast and hurricane deductibles for new business.

Q Okay. So similar to Mississippi in that new business is only a mile off the coast, correct? Is that correct?

A Correct.

Q And then the wind hurricane — excuse me, hurricane deductible is now 2 percent to 5 percent?

A Correct.

Q Any others?

A No.

Mr Marr, like Nowdy and I must have been scratching his head wondering what skills besides the ability to recite the company line Mr Trippel brought to his very senior position on the Farm. He certainly does not know the basics of insurance finance as we continue on the bottom of page 104: Continue reading “Familar Problems in Alabama’s X-Wind Homeowners Insurance Market”

kudos for Wilson – not yet

Regulate me, please, the opinion column written by Allstate CEO Tom Wilson, appeared in the April 15 NYT in the guise of Wilson’s on-going effort to garner support for national regulation of the insurance industry.

Calling  it his CDS mea culpa, Option ARMageddon gave Wilson “kudos” for coming clean:

My company, Allstate, serves more than 17 million American households.  While we played only a small role in unregulated insurance markets, we have a duty to help stabilize the financial system. It was, after all, an insurance product that contributed to the risk that almost brought down the global economy.

New York State’s Insurance Superintendent, Eric Dinallo, on the other hand, had no kudos to offer:

“While the credit default swap market is not regulated, insurance company use of credit default swaps is,” Mr. Dinallo said in a statement. “In New York, no insurance company can use credit default swaps except under very specific and limited ways and only with approval.”

Was Option ARMageddon spot on or was Wilson’s agenda to set up Dinallo and DOI to the advantage of his efforts to secure national regulation of the insurance industry?  Dinallo’s press release suggests Wilson may have had another agenda – one that would lead to Hank Greenberg, AIG, and, perhaps, other insurers. Continue reading “kudos for Wilson – not yet”

The Chickens are Coming Home to Roost in the Sunshine State: A Sup guest post

We’re always happy to feature Sup here at Slabbed whenever he gets the urge to author a post. Unlike many in the insurance industry Sup isn’t afraid to engage us and we’re very happy to have his perspective. (Note I’ve “blogified” the text minimally to add the links inline)- sop

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Two articles published last week at the New York Times and Tampa Tribune indicate the folks in charge in Florida may have gotten their heads out of the sand. Governor Crist and the Legislature seem to have come to the realization that Citizens Property Insurance Corporation is broke.

What does this mean to the citizens of the state of Florida? It means they will be paying higher insurance premiums and they all must pray the state escapes hurricanes for a few years. “Citizens’ life expectancy in a storm: ‘a few short hours’ “ is stated in the New York Times article. It is clear the politicians and regulators were playing politics with this issue and it has now backfired. What these folks have done is criminal and if they were a private organization they would be prosecuted for the sham.

The second article reflects the Feds are not going to help. This article states by state law the Cat fund should be able to cover up to $29 billion, but state officials say the fund could only cover about $11 billion. Continue reading “The Chickens are Coming Home to Roost in the Sunshine State: A Sup guest post”

Be Sure to Mark Your Calendars….

Dr Ed Duett of Mississippi State has all the finest insurance crooks coming to speak at MSU’s annual insurance day set for April 23, 2009. Our readers may recall he brought in Rossie for I day 2008. This year’s list of crooks and charlatans is very impressive and includes a record number of participants with ties to companies under current federal investigation and/or hogs at the taxpayer TARP trough. The complete speaker list is here but I thought I’d summarize the various sessions for our reader’s convenience:

The Revolving Door Panel:

Mike Chaney, MS DOI
Jim Ridling, AL DOI
Scott Richardson, SC DOI
George Dale, Adams and Reese
Walter Bell, Chairman of Swiss Re America

What happened to Robert Wooley?

The White Collar Crime Panel:

Walter Bell, Chairman of Swiss Re America
Jay Barbour, Carroll, Warren & Parker
Lorrie Brouse, Regional Counsel, Allstate
Steve Iler, President, AIG Claims
Wade Sweat, Copeland, Cook, Taylor & Bush

The Policyholders, what policyholders? You mean those schmucks? Panel:

George Dale, Adams and Reese Continue reading “Be Sure to Mark Your Calendars….”