As motorcycle deaths rise, Feds urge states adopt strict helmet laws
States should require motorcycle riders to wear proper helmets, government investigators urged as part of several recommendations that seek to stem a steady rise in motorcycle deaths.
Members of the National Transportation Safety Board unanimously approved the motorcycle safety recommendations, wading into a contentious issue that has pitted motorcycle rights' groups against safety organizations in many states.
Iowa, Illinois and New Hampshire have no helmet laws.
"The simple act of donning that helmet can begin the process of preventing that type of fatality and serious injury," said NTSB chairman Mark V. Rosenker.
As motorcycle riding has become more popular, motorcycle deaths have more than doubled since 1997. In 2006, motorcycle deaths increased for the ninth straight year, to 4,810 motorcycle deaths, compared with 4,576 in 2005.
NTSB officials noted that non-helmeted riders were three times more likely to suffer a brain injury in a crash than those wearing a helmet.
Motorcycle groups questioned the ability of helmets to provide complete protection in a crash. They said more rider education programs are needed.
"If a truck pulls out in front of you and runs a stop sign, how is that helmet going to prevent an accident?" asked Steve Rector, state coordinator for ABATE Iowa, a motorcycle rights' group. He also noted that motorcycle registrations and the number of miles traveled by motorcyclists have increased in recent years.
Currently, 20 states, including Michigan, and the District of Columbia, require riders to wear protective helmets, a significant change since the late 1970s, when nearly every state required helmet use. Twenty-seven states only cover some riders, typically those under 21.
In six states that repealed their universal laws beginning in 1997, Arkansas, Texas, Kentucky, Louisiana, Florida and Pennsylvania, helmet use plummeted following the repeal of the laws, NTSB officials said.
Louisiana reinstated its mandatory requirement in 2004.
The agency also recommended that federal safety officials develop a plan for states and others to improve motorcycle safety and the government develop guidelines for states to gather accurate data on riders.
Source: National Transportation Safety Board: http://www.ntsb.gov
Knapp Joins IJ-Midwest
Lauren Knapp recently was named Midwest sales manager for Wells Publishing, publisher of Insurance Journal. Knapp brings a wealth of print, conference and online sales experience to Wells Publishing. She previously served as an advertising account manager at Ball Publishing, advertising sales manager for Thomson Financial Media, and marketing services sales manager at Maclean Hunter.
Lauren and her husband, Bryan, reside in the Wicker Park neighborhood in Chicago. She can be reached via phone, 619-584-1100 ext. 161; fax, 619-704-0242; or e-mail, lknapp@insurancejournal.com
Officials in Midwest seek Federal aid after August storms
Flooding concerns continue to plague states in the Midwest after the latest round of high winds, tornadoes and heavy rain in late August. Some state officials are seeking federal aid to help homeowners and businesses get back on their feet.
In Illinois on Thursday, Aug. 24th, the north and northwest suburbs of Chicago experienced winds of 75 miles per hour. Heavy rains socked the suburbs of Des Plaines, Mount Prospect, Glenview, Wilmette and Winnetka as well as the northwest side of Chicago. In addition to flooding, many homeowners were without electricity for more than four days.
In Ohio President Bush declared two more northwest counties major disaster areas, making more federal assistance available to residents and business owners in communities inundated by powerful storms and record flooding. Hardin and Seneca counties join Allen, Crawford, Hancock, Putnam, Richland and Wyandot counties, which were declared disaster areas Aug. 27, the Federal Emergency Management Agency said in a statement.
In Iowa, Gov. Chet Culver has requested federal aid for flood damage that occurred last month in northern and southern Iowa. Culver sent a letter to President Bush seeking a Presidential Disaster Declaration, which would allow Iowa to use an estimated $10.7 million in federal funds to repair homes, businesses, and other property damaged by storms that began Aug. 17.
Culver requested statewide assistance for debris removal, and assistance in more than a dozen counties to repair infrastructure and offer loans, counseling and other help. Sen. Chuck Grassley, R-Iowa, also sent a letter to Bush on asking for prompt assistance.
Culver has asked for household assistance for the following counties: Allamakee, Appanoose, Boone, Calhoun, Clarke, Davis, Humboldt, Mahaska, Palo Alto, Pocahontas, Van Buren, Wapello, Wayne, and Webster.
In Michigan, Gov. Jennifer Granholm requested federal disaster assistance for farmers in all 83 Michigan counties who face fruit, vegetable and field crop losses because of spring frost and freeze and the summer drought.
From April 4 to June 13, the following 29 counties experienced frost conditions that particularly affected fruit and vegetable production: Alger, Allegan, Antrim, Benzie, Berrien, Cass, Charlevoix, Cheboygan, Delta, Emmet, Grand Traverse, Gratiot, Hillsdale, Kalamazoo, Kalkaska, Kent, Leelanau, Manistee, Marquette, Mason, Muskegon, Newaygo, Jackson, Oceana, Otsego, Ottawa, Presque Isle, Schoolcraft and Van Buren.
Since April 1, drought conditions have devastated yields of corn, soybeans and other drought-sensitive crops in all 83 counties, Granholm said in a statement.
The Associated Press news accounts contributed to this article.
Judge throws out all federal antitrust charges against insurers, brokers
No evidence found to support charges of a global conspiracy among commercial brokers and insurers
Finding the charges lack any factual support, a federal judge has dismissed a big antitrust conspiracy case that was lodged against large commercial insurance brokers and insurers back in 2004 when bid rigging and account steering probes were in full sway.
In dismissing the antitrust complaint for the second time, Chief Judge Garrett E. Brown Jr. of the U.S. District Court for New Jersey said the plaintiffs had no proof that there was any sort of conspiracy among insurers and brokers to secretly allocate accounts, refrain from competing, or pay incentive bonuses on certain commercial accounts.
The plaintiffs alleged that the defendants had engaged in both a global conspiracy and so-called "hub and spoke" conspiracies in which brokers acted as hubs to coordinate illegal distribution of commercial insurance accounts among insurers (the spokes).
Defendants in the suit that have now been cleared of federal antitrust charges are some of the largest insurance companies and brokerages including American International Group, The Hartford, Fireman's, Liberty Mutual, American Re, Travelers, Chubb, Marsh, Willis, Aon and Hilb Rogal & Hobb.
Consolidation of suits
The case was a consolidation of suits from around the country brought under federal antitrust statutes. It developed in the wake of investigations by state attorneys general including New York's Eliot Spitzer over alleged bid rigging, account steering and improper contingent commission payments.
These consolidated lawsuits took those charges to another level claiming that they were part of a conspiracy among certain large insurers and insurance brokers and accusing the players of antitrust violations and racketeering.
Earlier this month, Brown put the antitrust conspiracy charges to rest in granting the defendants' motions to dismiss. He had also agreed with defendants in April but gave plaintiffs one last chance to amend their complaint.
But Brown found the amended complaint was even less convincing than the earlier one. In completely dismissing the conspiracy allegations, Brown wrote:
"While this Court previously held that the conspiracy allegations were faulty because they failed to show some sort of recognizable allocation of the market (a way for the insurers
to understand what they were actually agreeing to divide), it appears that the allegations as presently drafted suffer from a more serious defect. This hub and spoke conspiracy is devoid of a factual basis for this Court to infer that an agreement existed among the competitors -- in this case, the Insurer Defendants. Plaintiffs want this Court to view the specific facts regarding the 'incumbency protection racket' through their lens -- which colors each demand from a broker to an insurer as being part of an agreement to restrain competition that already exists. However, when stepping back and viewing these facts in the aggregate, there is nothing in this record to suggest that there was any sort of express agreement among the insurers. While it is not necessary for the agreement to be explicit, the facts are simply too tenuous to intimate an implied agreement -- a rim to this hub and spoke conspiracy. The brokers demanded certain behavior of the insurers, but that does not constitute a horizontal agreement among insurers to collude."
No global conspiracy found
Brown found no evidence to support the charges of a global conspiracy among brokers to keep secret
their contingent commissions and not tell clients about them. Plaintiffs had argued that the defendants' membership in the same trade group, the Council of Insurance Agents and Brokers, was proof. But for Brown, "membership in various trade groups and the sharing of information are insufficient to support an inference of actual concert of action."
He wrote that since plaintiffs failed to prove that the insurer defendants colluded among themselves in the broker-centered conspiracies, "it is improbable that they colluded to further this global agreement as well."
While this dismissal affects the antitrust complaint brought against the defendants, charges of violating federal racketeering laws are being judged separately and remain before the court.
Some insurers and brokers have settled similar antitrust complaints with officials in New York, Connecticut and other states, although they have not admitted doing anything illegal. Among those that have settled are insurance broker Arthur J. Gallagher & Co. and Zurich American Insurance Co.
Industry skeptical, while Treasury opposes natural disaster pool
Federal legislation that encourages states to pool their catastrophe pool risks and then transfer them to the private market has been greeted with a lukewarm insurance industry reaction at best and outright opposition from the Bush Administration.
The bill, H.R. 3355, the Homeowners' Defense Act of 2007, introduced by Representatives Ron Klein, D-Fla., and Tim Mahoney, D-Fla., on Aug. 3, aims to address the availability and affordability of homeowners insurance by providing an opportunity for states to plan for disasters ahead of time, while also offering emergency relief for those states that may be in lower-risk regions.
Insurance industry representatives testified on the proposal this month before a joint hearing of the House Committee on Financial Services Subcommittee on Housing and Community Opportunity, and the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.
Agents suggested that the legislation, while it has some commendable provisions, is not the answer.
The Independent Insurance Agents & Brokers of America, the nation's largest insurance association, said that the bill deserves serious consideration when addressing the growing problem of natural disaster risks, but did not offer its full support of the legislation as is.
Steve Spiro, an independent agent and president of Spiro Risk Management Inc., in Valley Stream, N.Y., testified on behalf of IIABA, saying proposals such as this bill could potentially be a part of a comprehensive solution to the problem of natural catastrophe insurance. But he also pointed out that the key to the success of any solution is how the private market will react and whether it will result in increased coverage.
"We strongly believe our industry must come together with policymakers to find a common solution that will encourage participation in at-risk markets," Spiro said.
Robert Joyce, chairman and CEO of Ohio-based Westfield Group, who testified on behalf of the Property Casualty Insurers Association of America (PCI), said one of the most promising aspects of the bill is a provision to create a federal liquidity facility to provide financial support for qualified state catastrophe funds.
"The liquidity facility proposed in the bill has considerable merit and could play an instrumental role in a long-term solution to America's natural disaster problem," Joyce said. "The liquidity proposal would offer solvency protection to state catastrophe funds in order to stabilize markets." However, Joyce also said that any federal program must be carefully structured so that it does not mask the true cost of insuring against catastrophes, encourage reckless development in high-risk areas, or hinder the flow of new private capital to the market.
Including the liquidity proposal, the bill has three parts.
According to the sponsors, the bill sets up a consortium for state-sponsored insurance funds to voluntarily pool their catastrophe risk with one another, and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts. Sponsors maintain that following the risk transfer, state-sponsored insurance funds would be better protected and increasingly able to provide services for those who are not able to find insurance on their own.
The second part, the "liquidity loan" program, contains a provision that would make credit financing available to qualified state catastrophe funds.
The third part would make loans to state or regional catastrophe funds that are not qualified reinsurance plans or to state residual market entities.
Joyce noted that the bill's provisions do not specify how catastrophe loans would be repaid.
Opposition
The U.S. Treasury Assistant Secretary for Economic Policy Phillip Swagel testified that the Treasury strongly opposes H.R. 3355 because its provisions are at odds with its goal to ensure that there is a stable and well-developed private market for natural hazard insurance and reinsurance.
Allowing private insurance and capital markets to fulfill their roles is the best way to maintain the economic sustainability of communities at greatest risk of natural catastrophes, Swagel testified. "Federal government interference in a functioning natural hazard insurance market would crowd out an active and effective private market, increase the incentive for people to locate in high-risk areas, result in potentially large federal liabilities, and be unfair to taxpayers."
The Reinsurance Association of America (RAA) also testified that the reinsurance industry does not support the Homeowners Defense Act of 2007 citing concerns with provisions of the legislation that would unnecessarily disrupt private reinsurance market dynamics.
"We cannot support this legislation as introduced because of the emphasis on encouraging the creation of state catastrophe reinsurance funds," said Franklin W. Nutter, president of RAA. "Notwithstanding the extraordinary losses from natural catastrophes in 2004 and 2005, the capital markets and the insurance and reinsurance industry have shown their ability to meet natural catastrophe risk transfer needs of insurers and consumers when market dynamics are allowed to work."
Nutter added that the legislation appears to provide incentive for states to replace or compete with the private sector by under-pricing catastrophe risk. "These programs," he said, "serve to concentrate catastrophe risk in a state, rather than spread it to the global private reinsurance markets, turning sound risk management on its head."
Nutter said that while RAA could not support the legislation as introduced, he expressed the desire to work with the committee to improve HR 3355 as it moves through the legislative process.
Health premiums rise 6.1%; average family coverage costs $12,000
Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers' wages (3.7 percent) or the overall inflation rate (2.6 percent), according to the 2007 Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research and Educational Trust.
The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent.
The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.
"We're seeing some moderation in health-cost increases, but premiums for family coverage now top $12,000 annually," Kaiser President and CEO Drew E. Altman, Ph.D. said. "Every year health insurance becomes less affordable for families and businesses. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by about $1,500."
"The number of options for low wage earners is limited and the greatest burden of all health care costs falls to this segment of the population," said Health Research and Educational Trust President Mary A. Pittman, Dr. P.H. "Although the economy seems to be strong, between 2005 and 2006 the total number of uninsured still rose by 5 percent, including a 9 percent increase in the number of uninsured children."
The annual Kaiser/HRET survey provides a detailed picture of how employer coverage is changing over time in terms of availability, costs and coverage for the 158 million people nationally who rely on employer-sponsored health insurance. It was conducted between January and May of 2007 and included 3,078 randomly selected, non-federal public and private firms with three or more employees (1,997 of which responded to the full survey and 1,081 of which responded to a single question about offering coverage).
While premiums continue to rise faster than workers' wages, this year's gap of 2.4 percentage points is much smaller than the 10.9 percentage point gap recorded four years ago, when premiums rose 13.9 percent and wages grew just 3 percent.
However, "despite the comparatively low rate of increase in premiums and a strong labor market, the percentage of the workforce obtaining coverage from employer-sponsored plans remained unchanged since 2006," reports the Health Affairs article by Kaiser's Gary Claxton and coauthors. The 60 percent of firms offering health benefits to at least some of their workers is statistically unchanged from last year's offer rate (61 percent). The offer rate remains significantly lower than it was in 2000, when 69 percent of firms offered health benefits. Nearly all (99 percent) large businesses with at least 200 workers offer health benefits to their workers this year, but fewer than half (45 percent) of the smallest firms with three to nine workers do so.
Contributions, cost-sharing
Covered workers on average pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage -- shares that have remained relatively stable over the past years. However, workers in small firms (three to 199 workers) pay significantly more on average toward the cost of family coverage ($4,236 annually) compared to larger firms ($2,831 annually). For single coverage, the opposite is true, with workers at small firms annually contributing less on average than workers at large firms ($561 vs. $759).
Among firms that offer health benefits, 10 percent vary how much workers contribute based on the workers' earnings, about the same share as in 2005. About 6 percent of firms vary premium contributions based on employees' participation in wellness programs, up from 3 percent in 2005. In addition, 10 percent of firms offer financial incentives for workers to enroll in a spouse's health plan, which can reduce the firm's health care costs.
In spite of the extensive attention paid to consumer-driven health plans, the survey finds that these relatively new types of arrangements have made only a small inroad into the employer market. Such plans cover about 5 percent of all covered workers, which is not statistically different from the 4 percent share recorded in 2006.
Overall, an estimated 3.8 million workers are enrolled in consumer-driven plans, about equally divided between high-deductible plans that qualify for a Health Saving Account (HSA) and plans with a Health Reimbursement Arrangement (HRA). These plans feature a high-deductible plan and a tax-preferred savings option, from which employees can pay for their out-of-pocket medical expenses. Such plans are often described as consumer-driven because people pay directly for a greater share of their health care and may have an incentive to minimize its cost. They also may offer tools to help consumers choose providers based on cost and quality.
This year, 10 percent of firms offered a consumer-driven plan to their workers, up from (but not statistically different than) the 7 percent of firms reporting this for 2006. Firms with at least 1,000 workers are more likely to offer such plans, with nearly one in five (18 percent) offering one. Looking toward 2008, few firms that don't already offer such plans report that they are very likely to add a HRA plan (3 percent) or a HSA-qualified plan (2 percent).
Premiums for these high-deductible plans are generally lower than for other types of plans, though in addition to the premiums, employers may also contribute money to the savings accounts. The survey finds that firms on average pay a total of $7,815 toward the cost of family coverage for a HSA-qualified plan (including $714 for the account) and $10,179 toward the cost of family coverage for a high-deductible plan with a HRA (including $1,800 for the account). Compared to the $8,879 average firm contributions for other types of plans, employer contributions are lower for HSA-qualified plans and higher for plans with HRAs.
Businesses made no contribution at all to the savings account for roughly half of all workers enrolled in an HSA for family coverage, leaving workers to pay the generally higher out-of-pocket costs associated with their high-deductible plan.
"Consumer-driven plans have established a foothold in the employer market, but they haven't grown as much as one might think, given all the attention that they receive," said Kaiser Vice President Gary Claxton, co-author of the study and director of the Foundation's marketplace research.
"Despite the economic expansion that added 2 million new jobs from April 2006 to April 2007, the employer-based system can do no better than tread-water," said co-author Jon Gabel, senior fellow at the National Opinion Research Center at the University of Chicago.
Other findings
Cost-sharing. In 2007, for firms with deductibles, the average general annual deductible for single coverage is $461 for PPOs, $401 for HMOs, $621 for POS plans and $1,729 for consumer-driven plans. For plans with three- or four-tiered drug cost-sharing, the average co-payments were $11 for generic drugs, $25 for preferred drugs, and $43 for non-preferred drugs. Co-payments for fourth-tier drugs, which may include costly biological agents and lifestyle drugs, averaged $71.
Domestic partner benefits. Nearly half (47 percent) of all firms that offer health benefits make them available to unmarried opposite-sex domestic partners, and nearly 37 percent offer such benefits to same-sex partners. Large firms (with at least 200 workers) were less likely than small firms to offer domestic partner benefits to unmarried opposite-sex partners at 28 percent.
Market share of health plans. Preferred Provider Organizations continue to dominate the employer market, enrolling 57 percent of covered workers. Health Maintenance Organizations cover another 21 percent of workers, with 13 percent in Point-of-Service plans, 5 percent in consumer-driven plans, and 3 percent in conventional indemnity plans.
Other pre-tax benefits. Overall, 61 percent of firms that offer health benefits allow workers to use pre-tax dollars to pay for their share of their health premium costs. Fewer firms (22 percent) offer a Flexible Spending Account, in which workers can set aside pre-tax money to cover out-of-pocket health care spending. In both cases, large firms are far more likely to offer these benefits than smaller firms.
Future outlook. Many employers indicate that they expect to make significant changes to their health plans and benefits in 2008. Overall, 21 percent of firms say they are "very likely" to raise workers' premium contribution next year. Some firms also say they are "very likely" to increase office visit cost-sharing (13 percent), increase deductibles (12 percent) and increase prescription drug cost-sharing (11 percent). Very few firms say they are "very likely" to restrict eligibility for coverage or drop coverage altogether.
Progressive combines personal lines management
The Progressive Corp. in Mayfield, Ohio, is consolidating management of its two distribution channels for personal lines. Since 2000, Progressive's personal lines segment has been organized into two businesses -- the agency business and the direct business. The company said it will continue to price products based on how they are distributed to reflect the channel cost structure, but it is combining the operations of the two businesses into a single personal lines organization, consolidating the product research and development and management functions.
The new personal lines organization will be led by John Sauerland, currently president of the direct business group.
John Barbagallo, currently the agency group president, will become commercial lines group president, assuming responsibility for the commercial auto business and professional liability business. He will continue to manage the company's agent relationships and field sales.
Earlier this year, Brian Silva, currently the commercial auto group president, will retire in mid-2008. After helping with the transition, Silva will shift his focus to several of the company's key projects until his retirement date.
U.S. reinsurers report premiums dropped in 2Q
The Reinsurance Association of America (RAA), a group of 22 U. S. property and casualty reinsurers, reported writing $12.2 billion of net premiums during the six-months ended June 30, 2007, a decrease of $7.5 million from the same period in 2006.
The combined ratio for the group was 90.0 percent, an improvement from the 96.5 percent combined ratio reported for the same period in 2006. The combined ratio is attributable to a 62.8 percent loss ratio and an expense ratio of 27.2 percent, according to RAA.
Policyholders' surplus was $77.3 billion.
According to RAA, its underwriting members and their affiliates write more than two-thirds of the gross reinsurance coverage provided by U.S. professional reinsurance companies.
Insurers have manageable exposure to subprime turmoil, report says
The vast majority of U.S. insurers have little or no exposure to the volatility in the subprime mortgage market because a substantial percentage of their investments are in the highest-rated bonds or stocks with no direct ties to lenders, according to an Insurance Information Institute (I.I.I.) white paper, "Subprime" Home Mortgage Loans and the Insurance Industry.
"This conclusion is based on the recognition that both by law and by the nature of their business, insurers generally limit themselves to the low-risk end of the investing universe. Even for the very small share of their investments directly exposed to subprime and near-prime loans, insurers mainly invest in 'slices' of those investments that, according to the bond-rating agencies, are as safe as the safest corporate bonds," writes Dr. Steven Weisbart, the I.I.I.'s vice president and chief economist. "Thanks to conservative portfolio management strategies and restrictive state regulations, insurance companies have a very small portion of their total investments in risk loans of any type."
The I.I.I. report notes that about 53 percent of life/health insurers' invested assets were in the highest-rated class of bonds and 19 percent were in the next highest-rated class as of year-end 2006. The comparable percentages for the invested assets of property/casualty insurers in the bond market were 67 percent and 4 percent, respectively, the white paper says.
"Common and preferred stocks are a small part of the investments of life/health insurance companies, at 4.6 percent of net admitted assets, as of year-end 2006," Dr. Weisbart adds. "They are a moderate part of the investments of property/casualty companies, at 16 percent, as of year-end 2006." While a comparatively small percentage of insurers' investments, insurers do have sizable equity stakes in U.S. markets. U.S. life/health insurers, for instance, cumulatively owned preferred and common stocks valued at $138 billion as of Dec. 31, 2006, according to the National Association of Insurance Commissioners' (NAIC) annual statement database. This figure stood at $237 billion for U.S. property/casualty insurers, as of year-end 2006, the NAIC reported.
"Insurers' portfolios are still vulnerable to broad market sell-offs caused by fears originating in the subprime sector, such as occurred during July and August 2007," Dr. Weisbart states. "Nevertheless, direct losses will be very limited and insurers' tendency to hold securities on a long-term basis implies that the effects of short-term market volatility will likely be minimal."
The I.I.I.'s analysis of the subprime mortgage market's recent turmoil did hold out the possibility that claims may be filed by directors and officers liability insurance policyholders as well as those with errors and omissions coverage.
"It is likely that some actions will be brought that will trigger the defense benefits in these policies, and possibly also some payouts under the liability benefit provisions. Typically, these claims take a long time to develop. As such, it is much too early to estimate the dimensions of the claims experience that may emerge from the recent credit market developments," Dr. Weisbart writes.
"Major providers of D&O coverage tend to be among the largest and most financially sound insurers."
U.S. fire report: More fires; fewer deaths and injuries; rise in property losses
Fire departments in the United States responded to an estimated 1.6 million fires during 2006. These fires caused 3,245 civilian deaths and 16,400 injuries, according to the National Fire Protection Association (NFPA).
The number of fires increased slightly by about 3 percent from 2005 to 2006 while fire deaths fell 12 percent and fire injuries were down by 8 percent.
The total number of people who died from fires in 2006 (excluding firefighters) was the lowest since NFPA began collecting this data in 1977, and 4 percent lower than the previous low of 3,380 in 2002. The number of fire death varies from year to year, with most of the variation in fire deaths occurring in communities with populations under 10,000.
NFPA's study, Fire Loss in the United States During 2006, offers a detailed account of fire loss for the previous year and an analysis over time based on new information.
In 2006, the annual snapshot of fire loss in the United States showed that every 19 seconds a fire department responded to a fire somewhere in the U.S. Someone died every two hours and 42 minutes from a fire and someone was injured every 32 minutes. A fire occurred in a structure every minute, in a residence every minute and 16 seconds, and in a vehicle nearly every 2 minutes.
Direct property loss from fires in 2006 was roughly $11 billion, an increase of 6 percent from 2005. Nearly $7 billion of these losses resulted from fires in residential dwellings.
As in previous years, most fire deaths occurred in homes; home fires accounted for about 80 percent of all fire deaths. Eighty percent of all structure fires also occurred in the homes. One and two-family dwellings accounted for 58 percent of the structure fires and apartments accounted for 17 percent. In 2006, 2,580 people died from home fires, a decease of 15 percent from the prior year.
Although vehicle fires declined 4 percent from the previous year, they remained second to structures as the second leading cause of fire deaths in the United States in 2006. There were 278,000 vehicle fires that resulted in 490 deaths, 1,200 injuries, and $1.3 billion in property damage.
Guy Carpenter finds Lloyd's market at its 'healthiest in 300 years'
Findings boast stellar results for London market with Lloyd's leading the way
Guy Carpenter & Co., Marsh's reinsurance broker and risk management division, has released "The Lloyd's Market in 2007," its fifth annual review of Lloyd's financial and operational performance.
The finding are exceptionally good -- overall Lloyd's is probably in the healthiest position it has been in for the last 300 years. It reported record results for 2006, with net pre tax profits of £3.662 billion ($7.417 billion*), gross premiums written of £16.414 billion ($33.25 billion*), and a combined ratio of 83.1 percent. Underwriting capacity for 2007 is at an all-time high of £16.1 billion ($32.61 billion).
The report indicated that the strong performance was chiefly "driven by rising rates on U.S. catastrophe-exposed business, favorable claims experience and improved returns on investment. It also stressed that Lloyd's is "in an increasingly strong competitive position, as recognized in recent rating upgrades to 'A+' from both Standard & Poor's and Fitch."
Guy Carpenter's CEO Nick Frankland pointed out: "In 2006, leading players demonstrated once again that it is possible to achieve outstanding returns on equity at Lloyd's, which is crucial to the continuing strength of the market. In addition, the significant strengthening of the balance sheet over the last five years provides a good platform for the future."
The author of the report, Senior Vice President Mike Van Slooten, added: "Substantial mitigation of legacy issues has resulted in a reappraisal of the market's competitive advantages, with the result that new investors are being attracted to the platform. Lloyd's focused efforts to reduce the cost of mutuality, widen access to the market and improve service standards can only be to the benefit of policyholders."
Legacy issues
The "legacy issue" Lloyd's managed to get rid of were the liabilities it has carried since 1996 when it set up Equitas as a run-off vehicle for its pre-1992 claims, principally asbestos and environmental. In March Lloyd's completed the first phase of the transfer of its Equitas liabilities to National Indemnity Company (NIC), a member of the Berkshire Hathaway group of insurance companies.
The arrangement with NIC initially reinsures all of Equitas' liabilities, and provides a further $5.7 billion of reinsurance cover to Equitas. In addition NIC acquired Equitas Management Services Limited and will continue to conduct the run-off of its liabilities. The transaction received the approval of the UK's Financial Services Authority (FSA) and the Equitas Trustees.
The record underwriting capacity (up 8.9 percent compared to 2006) was bolstered by six new start-ups, who contributed a further £217 million ($440 million). Guy Carpenter's study indicated that, given the excellent result, "investor interest remains strong, driven by Lloyd's wide access to business and strong ratings."
The report also noted:
1) "Reinsurance recoverables have reduced by a third, with no collection issues reported on the 2005 hurricanes. Net resources (defined as total assets less policyholder and other liabilities) have increased by 21 percent to £13.3 billion [$27 billion]," bolstering Lloyd's balance sheet strength.
2) The issuance of £500 million [$1.014 billion] of debt in June 2007 "has allowed syndicate loans to be repaid and discontinued and will facilitate an expected halving of the Central Fund contribution rate for 2008." As a result, Lloyd's has reduced the amounts the Syndicates are required to contribute to the Central Fund. The ending of these assessments makes doing business at Lloyd's less expensive and more competitive.
3) "Business process reform has significantly improved controls over placement and is continuing to improve the control environment for claims and accounting and settlement."
Changes at Lloyd's
In recent years, Lloyd's brokers and underwriters have experienced vast changes in how they conduct business. Chairman Lord Peter Levene, who just announced that he will seek a third term in the post, former CEO Nick Prettejohn and his successor, Richard Ward, are dedicated to seeing that the mountains of paper Lloyd's produces, eventually joins the sailing ships Lloyd's used to insure in the pages of history.
After a few false starts -- notably the Kinnect fiasco -- they're now on the way to achieving that goal. Xchanging and RI3K, who just introduced a new e-message system, have rolled out complementary platforms and software that are broker/underwriter friendly, use ACORD standards, and enable more and more of Lloyd's back office work to be processed electronically. The days of the slipcase appear to be numbered.
Two factors have made the changeover a first priority at Lloyd's. The FSA has said in no uncertain terms that the policies based on "deal now, details later" are no longer acceptable. London got the message. In January the FSA acknowledged that "90 percent of contracts in the subscription market [Lloyd's] and 88 percent in the non-subscription market are now achieving contract certainty."
The second factor is cost. Lloyd's is more expensive than places like Bermuda, and, unless it brings those costs down, it stands to lose business. Companies like Hiscox, Catlin and Kiln moved their respective domiciles to Bermuda because it's quicker, easier and cheaper to do business. Instituting electronic processing will cut the costs of doing business in London, and make the entire market, especially Lloyd's, more competitive.
Market access, cats and the cycle
Guy Carpenter's report also listed:
Market Access: Lloyd's continues to focus on enhancing local distribution platforms in emerging markets and streamlining the broker accreditation and cover-holder approval process.
Catastrophe Exposure: Lloyd's reports that, based on its Realistic Disaster Scenario output, U.S. windstorm exposure has been reduced by one third since 2005, and
Cycle Management: The Franchise Performance Directorate is expected to be successful in limiting the downside of underwriting in softening market conditions.
Concerning that last point, Frankland observed: "The primary threat to Lloyd's remains the possibility of a marked downturn in the insurance cycle. In the absence of a major loss, we expect underwriting conditions to become difficult in most classes as we move into 2008, presenting a significant challenge to the Lloyd's franchise model.
We are already seeing leading players returning capital to shareholders and proposing sizable capacity cuts for next year, but it remains to be seen whether the same degree of discipline will extend across the broader market. There is no room for complacency if Lloyd's is to emerge in a position to fully capitalize on the next upswing."
At this point complacency doesn't appear to be a significant concern. Lloyd's leaders have their priorities firmly in mind and the reins of control, in the form of the Franchise Board, firmly in their hands.
A full copy of the report is available for download at: www.guycarp.com. Printed copies can be obtained by contacting Guy Carpenter at: marketing@guycarp.com.
Editor's Note: * The recent strength of the pound, currently worth more than $2.00, has somewhat inflated the dollar equivalent figures since they were first calculated.
