Currents

$120M in disaster aid approved for storm-battered Okla. in 2007

More than $120 million in federal disaster aid has been approved so far in 2007 for storm-battered Oklahoma.

According to the Federal Emergency Management Agency (FEMA), more than 4,500 Oklahoma residents affected by storms between June 10 and July 25 have applied for assistance.

There is an Oct. 5 deadline to report damage from the June 10 and July 25 storms to FEMA.

Federal assistance does not cover damages already covered by private insurance.

The $120 million includes aid for the June and July disasters, as well as that for two declarations made before that in the aftermath of severe ice storms.

In addition, on Sept. 17, the Oklahoma Department of Emergency Management (OEM) and FEMA announced that 12 additional counties had been approved for individual disaster assistance and 20 counties for public disaster assistance as the result of damages from the severe storms, flooding and tornadoes occurring August 18 - September 12. With those declarations, federal assistance to the state is likely to rise.

Records show that the Small Business Administration has approved more than $11.5 million this year in loans for business owners, homeowners and ranchers in Oklahoma.

About $11.8 million has been approved for local governments in eastern Oklahoma to pay for repairs of infrastructure damage, according to the OEM.

More than $8.2 million of that amount is headed toward Ottawa County, which was especially hard-hit by flooding.

CORRECTION:

An article in the sept. 3, 2007, issue of Insurance Journal South Central, "New Rules for Residential Contractors in Ark.," contained an error. it incorrectly states, "all business owners who opt to exclude themselves must hold a certificate of non-coverage." in fact, business owners who have their own policy may exclude themselves by writing a letter to the insurer requesting exclusion.

Humberto lands in Texas, sweeps across La.

Total insured losses estimated at around $500M

Hurricane Humberto, a category 1 hurricane that formed quickly off the coast of Texas, plowed into the southeast corner of the state on Sept. 13 bringing with it heavy rains and 80 miles per hour winds. The hurricane made landfall near where Hurri-cane Rita hit two years ago. The storm moved ashore near the town High Island and drenched nearby Beaumont with 6.5 inches of rain, according to the National Hurricane Center.

California-based Risk Management Solutions (RMS) estimated total insured losses associated with Humberto likely will not exceed $500 million. This figure includes wind damage to residential, commercial and industrial properties and business interruption resulting from power outages or damage to property.

Due to Humberto's relatively small windfield, damage is mainly confined to Jefferson, Orange and Galveston counties in southeast Texas with the most severe damage seen in coastal communities, such as High Island, RMS said.

Texas Gov. Rick Perry declared the three southeast Texas counties disaster areas as a result of damage from the hurricane.

Associated Press reported that one death attributed to the storm occurred in Bridge City, Texas, when 80-year-old John Simon was killed as his backyard patio collapsed on him in the high winds.

After Perry issued the disaster declaration, Texas Attorney General Greg Abbott warned Gulf Coast residents to be wary of price gouging, charity scams and other fraudulent attempts to bilk consumers in Humberto's wake.

Texas: 32 workers' comp carriers high performing

In its initial assessment of workers' compensation carriers and providers, the Texas Department of Insurance Division of Workers' Compensation found that 32 of the insurance carriers reviewed were high performers.

The insurance carriers in the initial assessment included 89 commercial carriers, three state entities, 43 self insureds and 12 certified self-insureds.

As part of the Performance Based Oversight (PBO) process required by House Bill 7 from the 79th Legislature, insurance carriers were assessed on their performance for the timeliness of medical bill processing, the timeliness of payment of initial Temporary Income Benefits (TIBs) checks and for how frequently they prevailed when disputes were resolved at Contested Case Hearings.

In addition to the 32 high performing insurance carriers, 96 were found to be average performers and 20 were rated poor performers.

The agency reviewed a total of 325 health care providers, rating them on their administrative duty of filing the DWC Form-69, Report of Medical Evaluation Form, in a timely manner. Health care providers were not assessed on the quality of care provided to injured employees in the PBO process.

Of the total, 101 health care providers were high performers, 159 health care providers were average performers and 65 health care providers were poor performers.

TDI-DWC said it will focus its regulatory oversight on the poor performers, as well as develop incentives within each tier that promote greater overall compliance and performance.

More information regarding PBO is available on TDI-DWC's Web site at: www.tdi.state.tx.us/wc/pbo/pbo.html

Another Katrina levee failure case heard by La. appeals court

Oral arguments in a lawsuit over whether an insurance company must pay for damage from the failure of levees in New Orleans after Hurricane Katrina were heard by Louisiana's 4th Circuit Court of Appeal on Sept. 12.

In Joseph Sher vs. Lafayette Insurance Co. (Dist. Court No. 2006-9276), Lafayette Insurance Co. maintains a state judge mistakenly concluded that the company's policy language was ambiguous and didn't specifically exclude damage from a levee breach from coverage.

Orleans Parish Civil District Court Judge Robin Giarrusso sided with policyholder Joseph Sher, a 91-year-old Holocaust survivor who owned an apartment complex in New Orleans and sued Lafayette for denying most of his claim after Katrina.

The case before the 4th Circuit mirrors one already decided by the 5th U.S. Circuit Court of Appeals. In that case, the 5th Circuit ruled that insurers aren't obligated to cover water damage from a levee failure.

Sher, who lived in one of the five units at his apartment complex, rode out the storm at home and blames much of the damage to his property on water from levee failures in Katrina's aftermath.

Lafayette paid Sher about $2,700 for wind damage, but he estimates his home sustained a total of $223,488 in damage that should be covered.

In March, a jury awarded Sher $369,077 for property damage and lost rent, plus $184,538 in penalties. Giarrusso also ordered Lafayette to pay $258,728 in attorney fees.

Lafayette says its policies cover damage from wind but not flood water. Water from a levee breach is clearly excluded from coverage, whether it's a man-made event or an act of God, the company argues.

"No non-flood policy has ever been called on to cover flood damage," Lafayette attorney Howard Kaplan told a five-judge panel of the 4th Circuit, which didn't immediately rule on the company's appeal.

Sher's attorneys argue that water damage from a man-made event, such as a levee breach, aren't specifically excluded from coverage under the company's policies. The U.S. Army Corps of Engineers has conceded that the city's levees were poorly designed and constructed.

James Garner, one of Sher's attorneys, said Lafayette could have written policy language that specifically excluded damage from a levee breach from coverage, but didn't. "They wrote the contract," he said. "It's their job to make it clear."

Sher's lawyers cite a ruling last November in New Orleans by U.S. District Judge Stanwood Duval Jr., who sided with policyholders against several insurance companies and ruled that policy language excluding flood damage from coverage was ambiguous. But the 5th Circuit overturned Duval's decision and ruled that water from a levee failure is a "flood" and is unambiguously excluded from coverage.

Lafayette attorney Ralph Hubbard said the issues raised in the federal appeal are virtually identical to those in Sher's case.

"While you have your own road to follow, the 5th Circuit has given you a road map that will show you the right way," Hubbard told the 4th Circuit panel.

Attorney General Charles Foti's office has sided with Sher in the case, arguing that Lafayette and other insurers are obligated to pay for water damage from levee breaches.

La. Supreme Court: Lack of hospital evacuation plan not malpractice

The Louisiana Supreme Court on Sept. 5 ruled that allegations that hospitals' lack of evacuation plans led to injuries or deaths during Hurricane Katrina are not medical malpractice claims. Instead, such cases should be considered under general tort law, according to the Court.

As a result of the ruling, lawsuits against hospitals that lacked evacuation plans during Katrina need not be delayed until the completion of a medical review before they can go to trial. Such reviews are required by law in Louisiana in medical liability lawsuits.

The decision opens the potential for larger jury awards in such cases. Louisiana has a $500,000 limit on malpractice awards but none in liability lawsuits.

In a 4-3 ruling in Stephen B. LaCoste, et al., v. Pendelton Methodist Hospital LLC (No. 2007-CC-0008 consolidated with No. 2007-CC-0016) the Court reiterated that the "limitations on the legal liability of qualified health care providers in Louisiana, as set forth in the Louisiana Medical Malpractice Act (LMMA), are to be applied only and strictly to cases of medical malpractice as defined in the LMMA."

In the Court's written opinion, it explained that the case concerned a "civil action against a private hospital for survival and wrongful death damages." The plaintiffs contend that while a patient in the hospital the decedent "died during a natural disaster as a result of the failure of the hospital to design, construct, and/or maintain a facility so as to provide sufficient emergency power to sustain life support systems and/or to prevent flood waters entering the structure, as well as the result of the failure of the hospital to implement an adequate evacuation plan, to have a facility available for the transfer of patients, and/or to have in place a plan to transfer patients in the event of a mandatory evacuation."

The Court maintained it "has steadfastly emphasized that the LMMA and its limitations on tort liability for a qualified health care provider apply only to claims 'arising from medical malpractice,' and that all other tort liability on the part of the qualified health care provider is governed by general tort law."

The decision reverses an appeals court ruling that said such claims amount to malpractice because they involve decisions affecting patient care. According to the Associated Press, attorneys involved with the case noted that a judge still could find hospitals liable for malpractice after a trial.

The Court said it agreed with an earlier "district court's reasoning that the plaintiffs' allegations of misconduct do not relate to medical treatment or the dereliction of professional medical skill; instead, they relate to deficient design of the hospital, including lack of emergency power, a failure to implement an evacuation plan, and a failure to have a facility to which a transfer of patients could be made."

A lack of any evacuation plan at all or failure to make sure a building is safe from floods "is not 'treatment related' or the result of a dereliction of professional medical skill," Chief Justice Pascal Calogero wrote.

No medical personnel or health care provider was accused in the lawsuit.

Calogero said "the hospital's decisions affected all persons present in the hospital whether employee, patient or visitor."

No new injuries
Justice Jeanette Knoll wrote in the dissenting opinion that the case should be heard as a malpractice claim. She noted that "importantly, [the deceased, Mrs. LaCoste] died from the illness for which she was admitted, and did not sustain any new injuries."

The AP reported the ruling could affect as many as 194 claims filed with the Louisiana Patients Compensation Fund Oversight Board, which manages malpractice suits. The board's executive director, Lorraine LeBlanc, said she did not know the number of lawsuits that might have been filed by people who did not file claims with the board.

Associated Press reports contributed to this story.

Ohio Casualty officially joins the Liberty Mutual agency family

With $7.3 billion in premium, Liberty Mutual Agency Markets becomes the largest regional independent agency force

Boston-based insurance giant Liberty Mutual Group is now the largest regional provider of property and casualty insurance distributed through independent agents in the country.

Th insurer finalized its acquisition of Ohio Casualty Corp. on Aug. 24. The company then announced a realignment of its $5.9 billion net premium regional agency company organization to make room for Ohio Casualty and its $1.4 billion in premium.

The transaction was valued at $2.7 billion. Liberty Mutual said it funded the purchase with cash on hand and short-term debt. The value per share was $44.00.

The move strengthened Liberty Mutual's agency presence in Midwestern and Atlantic states, complementing its position in other regions.

"The addition of Ohio Casualty enhances the scale and geographic diversification of our Agency Markets business unit while strengthening the overall Liberty Mutual Group," said Edmund F. Kelly, Liberty Mutual Group chairman, president and chief executive officer, in a statement.

Based on 2006 results compiled by A.M. Best Co., the combined $7.3 billion in net written premium makes Liberty Mutual's Agency Market division the largest regional provider of property and casualty products sold through independent agents in the country.

"We are today a stronger family of regional and specialty companies that remains committed to local decision-making, strong agency relationships and ease of doing business that have made us the company of choice for independent agents; and we add Ohio Casualty's talented and dedicated employees across the country to our already strong team," said Gary Gregg, president of Liberty Mutual Agency Markets, a division that includes eight insurers selling through independent agents and brokers.

The companies in Liberty Mutual Agency Markets have more than 6,800 employees and approximately 6,500 appointed agencies. Ohio Casualty, which has approximately 2,100 employees and operations in 48 states, has approximately 3,400 appointed agencies.

Gregg said there would be some employee layoffs in the future but that the company hoped to retain most of the agents.

Ohio Casualty Corp. is the holding company of The Ohio Casualty Insurance Co. and five property and casualty insurance companies (Ohio Casualty, West American, American Fire and Casualty Co., Ohio Security, Avomark and Ohio Casualty of New Jersey, Inc.).

Gregg said the acquisition has resulted in a realignment of Agency Markets in order to take advantage of Ohio Casualty's strength in Midwest and Atlantic states. Ohio Casualty will retain its name and cover Delaware, Kentucky, Maryland, Ohio, Pennsylvania, Virginia, D.C. and West Virginia.

The overall new line-up of Agency Markets companies is:

America First Insurance: Arkansas, Kansas, Louisiana, Missouri, Oklahoma and Texas

Indiana Insurance: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin

Montgomery Insurance: Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee

Ohio Casualty: Delaware, Kentucky, Maryland, Ohio, Pennsylvania, Virginia, Washington, D.C., and West Virginia

Peerless Insurance: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont

The three additional agency companies -- Colorado Casualty (Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming), Golden Eagle (California) and Liberty Northwest (Alaska, Idaho, Montana, Oregon and Washington) will continue to operate in their current territories, Also, the specialty lines operations will be combined into the Specialty Products Group.

The operations of the former Hawkeye-Security Insurance are being split between America First and Indiana Insurance. Hawkeye-Security sold personal lines in Iowa, Kansas, Missouri, and Wisconsin and commercial insurance in Iowa, Kansas, Minnesota, Missouri, Nebraska, and Wisconsin.

Liberty Mutual Agency Markets also includes Wausau Insurance, a national commercial property and casualty insurer; and Summit Holding Southeast, Inc., workers compensation insurer in the Southeast.

Dan Carmichael, president and chief executive of Ohio Casualty, will stay on as an executive consultant to Gregg and will help with implementation of the acquisition.

David Lancaster has been named president and chief executive officer of Indiana Insurance, and Michael Winner has been named president and chief executive officer of Ohio Casualty. John Busby has been named senior vice president and chief operating officer, Specialty Products Group.

What's ahead for Liberty Mutual, Ohio Casualty independent agents?

For agents, the Liberty Mutual Agency Markets acquisition of Ohio Casualty promises to be a matter of addition, not subtraction. For the most part, Ohio Casualty's 3,400 agents will join with and not replace or be replaced by Liberty Mutual's existing 6,500 independent agents, according to Gary Gregg, president of Liberty Mutual Agency Markets. "The idea is not to subtract but add," said Gregg.

This is possible because Ohio Casualty's strength in the Midwest and Atlantic regions largely complements rather than overlaps with the territories where Liberty Mutual Agency Markets regional carriers write. There is "very little overlap" among agencies for the two companies -- less than 15 percent by location, Gregg maintains. "Companies and agencies are always reevaluating their relationships but this is not about cutting, it's about growing," he insisted.

The marriage presents opportunities to "bring more products to more agents," Gregg says. For example, Ohio Casualty is known for its artisan contractors program, which will now be available to more agents across the country.

Growth looks promising in specialty lines including surety. Where Ohio Casualty tended to focus on small contractors and Liberty Mutual focused on larger contractors, now agents will be able to go after both.

The regional companies' managers plan to move quickly to communicate with agencies and start re-licensing procedures. Over the next six to 24 months, the company hopes to complete the transition to common technology system, upon which so many products depend.

The merger strengthens his Agency Markets' national footprint and promises to bring new growth as well. But even this major addition may not be enough. "This doesn't mean we are done with acquisitions," Gregg added.

Federal appeals court sides with Nationwide in Katrina storm surge case

A federal appeals court sided with Nationwide Mutual Insurance Co. on Aug. 30 in a key case related to hundreds of lawsuits over damage caused by Hurricane Katrina.

The 5th U.S. Circuit Court of Appeals in New Orleans ruled that language in the insurer's storm policy that was used to deny coverage for flood damage is not "ambiguous."

"The reason the term 'ambiguous' is important in insurance matters is because ambiguity in insurance contracts is almost universally decided in favor of the policyholder," said Robert Hartwig, vice president and chief economist for the Insurance Information Institute in New York.

The appeal arose from the first trial among hundreds of Katrina insurance lawsuits filed in Mississippi.

Paul and Julie Leonard sued Nationwide after it refused to pay for storm surge damage to their home in Pascagoula. Nationwide said Paul and Julie Leonard's policy did not cover damage from rising water and the company was only responsible for wind damage.

The Leonards said the total damage to their home was $130,253 and the Columbus, Ohio-based insurer only paid them $1,661.

In last year's trial, U.S. District Judge L.T. Senter ordered Nationwide to pay the Leonards an additional $1,228 for wind damage from the 2005 storm.

Both the Leonards and Nationwide viewed Senter's ruling as a victory. However, the insurance company appealed because it wanted clarification on whether a provision in the policy was ambiguous.

The company said the policy's anti-concurrent causation provision means that if a policyholder has wind coverage but not flood insurance, then the company is not responsible for damage from a combination of wind and water. A ruling that the clause is ambiguous could have been used against the company in lawsuits involving so-called "slab cases," in which a home was reduced to its foundation, Hartwig said.

"While we are studying the implications of the ruling, it does appear that the court's ruling fixes the issues Nationwide addressed in its appeal," Nationwide spokesman Joe Case said. "Had the district court ruling been allowed to stand, it may have meant that Nation-wide's Mississippi homeowner policies could have been forced to cover losses for which premium had never been collected."

Zach Scruggs, an attorney representing dozens of policyholders on the Gulf Coast, called the ruling "disappointing" but said its effect is limited.

"This ruling will have no effect on our remaining cases pending in Mississippi state and federal courts, because all of the damage in those cases was caused exclusively by wind before any water arrived," said Scruggs, who along with his father, high-profile attorney Richard "Dickie" Scruggs, is part of the legal team that represents the Leonards.

Scruggs said the Leonards will appeal the ruling.

"We are disappointed that this particular appellate panel misinterpreted and misapplied established Mississippi law by reversing the well-reasoned ruling of Judge Senter, who has been a Mississippi state and federal court judge for over 40 years and is well versed in the issue of Mississippi insurance law," he said.

Report: Insurers did not shift wind claims

A preliminary report from the federal government found no evidence to support allegations that private insurers improperly shifted wind damage claims from Hurricane Katrina onto the federal government's flood insurance program.

At the same time, the Department of Homeland Security says although its "limited review" did not uncover any evidence, it could not rule out the possibility that such shifting of claims by insurers participating in the Write-Your-Own program occurred.

DHS said it reviewed 98 National Flood Insurance Program claim files in Missis-sippi and interviewed officials from the Federal Emergency Management Agency, homeowners and insurance experts.

"Our sample revealed no evidence that wind damages were improperly attributed to flooding," DHS reported.

After reviewing the 98 flood claims, DHS found only two had clear mention of wind damage involvement in the claim. Overall, the report concluded, "There was no indication that wind damage was attributed to flooding or that flood insurance paid for wind damage."

DHS said it spoke with 20 flood adjusters who did damage investigations and reviewed their files but found nothing improper.

"Most adjusters were not involved in any wind damage assessments and felt they were not under pressure from WYOs to attribute wind damage to flooding," the report states.

June Holmes, interim CEO for the Property Casualty Insurers Association of America (PCI), said insurers hope the report "will put to rest the plethora of misstatements accusing insurers of improperly shifting wind claims to the National Flood Insur-ance Program (NFIP), and that we can move forward to identify the best solutions to the nation's natural catastrophe crisis."

DHS did, however, note that certain "complicating factors" meant it "could not rule out the possibility" that shifting of claims occurred. Among the "complicating factors" the report cites are difficulty in distinguishing between wind and flood damage, especially when all that is left on a property is slab; policy language that excludes coverage if flooding occurs concurrent with wind or other causes of damage; adjusters working for WYO insurers which it said creates a perception of conflict of interest; and limited oversight of WYO by FEMA.

DHS said it plans to issue a final report but gave no date.

The DHS report follows another one on the subject issued earlier in the summer from the U.S. Government Accountability Office. The GAO report suggested there could be a conflict of interest when the private insurer for a damaged property allocates wind and flood losses between itself and the federal program.

Officials for FEMA, which administers the NFIP, told GAO staffers they do not have authority to collect wind damage claims data from WYO insurers, even when the insurer services both the wind and flood policies on the same property.

"As a result, for hurricane-damaged properties, such as those damaged by Hurricanes Katrina and Rita, NFIP does not have all the information it needs to ensure that its claims payments were limited to damage caused by flooding," the GAO found. "Concerns over the processing of these flood claims are heightened when the same insurance company serves as both NFIP's WYO insurer and the property-casualty (wind) insurer for a given property. In such cases, the same company is responsible for determining damages and losses to itself and to NFIP, creating a potential conflict of interest."

GAO also said that the lack of both flood and wind damage data limits the usefulness of FEMA's quality assurance reinspection program for NFIP flood claims. GAO found that the NFIP reinspection program does not incorporate a means for systematically collecting and analyzing both the flood and wind damage data together to reevaluate the extent to which wind and flooding were deemed to have contributed toward damages to the property.

According to FEMA, the NFIP paid nearly $16 billion in flood claims in 2005. Since 1978, the NFIP has paid $31.4 billion for flood insurance claims and related costs.

Overbilling lawsuit
Meanwhile, the Associated Press reported that the U.S. Department of Justice is weighing whether to intervene in a lawsuit that accuses insurers of overbilling the federal government for flood damage from Hurricane Katrina, according to a judge who unsealed the case.

Two sisters who worked for E.A. Renfroe & Co., a Birmingham, Ala.-insurance adjusting firm that helped State Farm Insurance Co. adjust claims after Katrina, filed a whistlblower suit in April 2006. High-profile litigator Richard "Dickie" Scruggs filed the suit on behalf of the women, Cori and Kerri Rigsby.

The suit remained under seal to allow the Justice Department to weigh whether to intervene. U.S. Magistrate Judge Robert Walker in Gulfport, Miss., unsealed the case over objections from the DOJ that doing so could undermine its decision-making process. The suit accuses insurance companies of pressuring engineers to falsify reports so storm damage could be blamed on flood water instead of wind, which transferred the costs to the NFIP.

The Rigsbys' suit isn't the only one of its kind. In Louisiana, a group of former adjusters has a suit pending that also accuses insurers of overbilling the NFIP for Katrina.

U.S. Attorney David Dugas decided against intervening in that proceeding.

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.