N.Y. KILLS 'DRACONIAN' AGENT PENALTIES

Insurance agents have succeeded in removing from the New York State budget a provision to substantially boost fines against insurance professionals.

The proposal would have increased fines from $1,000 for the first violation and $2,500 for each subsequent violation to $10,000 and $25,000 for running an insurance business without a license.

The Independent Insurance Agents & Brokers of New York, Inc. said they would have resulted in "draconian penalties" and might have inadvertently punished agencies for simple bookkeeping errors, such as not renewing a license before its expiration date.

"The government is right to punish criminally negligent insurance wrongdoers and, at the same time, increase the state's revenues," said Mark J. Hagan, IIABNY chair and president of Perry & Carroll, Inc. in Elmira.

"However, the financial weight of these penalties could have hurt many small, well-intentioned family run businesses, who might not have survived such a crushing blow.

"These fines would have been the equivalent of losing your house or car because of one late payment," he added.

LEXINGTON EYES 2004 REPEAT

Lexington Insurance Group, the largest U.S.-based surplus insurance company, said it is assuming this year will look more like 2004 than 2005 as it goes about deciding where and what properties to write at what prices and terms.

In 2004, the industry lost $27 billion, compared to twice that or $55 billion in 2005. If the patterns of 2004 return this year, Lexington would make a profit, Kevin Kelly, Lexington chairman and chief executive of the American International Group affiliate, told investors during a Domestic Group Brokerage presentation.

The company plans to reduce its net coverage in catastrophe areas by 20 to 25 percent this year, targeting New Orleans and Hawaii.

Noting that the company suffered more than $2 billion in hurricane losses in 2005, Kelly said that "our market couldn't swallow a repeat of 2005 right now." In 2005, the company began reducing its exposure in Florida, Texas and California.

Lexington will employ a number of strategies including raising rates up to 30 percent in catastrophe-prone areas, raising wind and flood deductibles, and placing more limits on coverages to achieve better results in 2006.

HARTFORD TO CHARGE INSURERS FOR EMERGENCY SERVICES

Fire protection and medical help remains free, but the Hartford, Conn. Fire Department is set to begin charging insurers for other emergency services. The department will begin billing insurers for certain situations such as getting people out of crushed vehicles and handling hazardous material spills.

"We do have the funds to provide fire protection," Fire Chief Charles Teale Sr. said. "But there's not enough money to do (extrications and hazardous materials) safely and effectively." Teale said the department is planning to charge between $350 and $750, depending on the type of emergency call. He said New London and Bridgeport have also begun billing for emergency responses.

The American Insurance Association's David Snyder said the practice is unfair to motorists. "This raises profound questions for taxpayers as to what their tax dollars go for. If they don't go for essential services, what is their money being spent on?" Snyder suggested.

In 2005, city firefighters responded to 37 highway accidents, according to department records. Hartford's tactical rescue unit, which performs extrications and hazardous material cleanups, went on more than 4,500 calls alone in 2005, Teale said.

LLOYD'S HOLDS 2005 LOSS TO $180.6 MILLION

Despite last year's disastrous hurricane season, Lloyd's posted a relatively small 2005 loss of $180.6 million, not a great result compared to the $2.4 billion profit it made in 2004, but it could have been a lot worse. The financial results for 2005 showed net claims from last fall's hurricanes totaled $5.802 billion.

Lloyd's Chairman Lord Levene, noted: "2005 was the worst year on record for natural disasters, costing the insurance industry far more than the impact of the 9/11 attacks on New York. For Lloyd's to emerge from such a year with just a small loss represents an excellent performance by the market."

S&P UPS REINSURERS' OUTLOOK TO STABLE

In two recently issued reports Standard & Poor's Ratings Services revised its outlook on the global reinsurance industry to stable from negative, "indicating that there will be little near-term movement in ratings or outlooks." S&P credit analyst Simon Marshall indicated: "The industry has managed the massive losses of the 2005 hurricane season and is enjoying the profits and healthy balance sheets that have resulted from a continued hard market."

PUERTO RICO'S COUNTER-SIGNATURE LAW UPHELD

The U.S. Court of Appeals for the First Circuit has refused to overturn a ruling striking down Puerto Rico's controversial countersignature law that required non-resident commercial insurance brokers to have the countersignature of a Puerto Rico resident agent before they could do business on the island.

The decision in Puerto Rico is not yet final because the Commonwealth still has 90 days to seek a Supreme Court review of the ruling. Although it is unlikely the Supreme Court will accept the case for review, agents and brokers must continue to comply with existing law until the Commonwealth has exhausted its review rights.