REINSURANCE FOR FREMONT GENERAL
Fremont General Corp. entered into an adverse development reinsurance agreement with Fremont Indemnity, a subsidiary of Fremont General, and XL Mid Ocean Reinsurance Ltd., a subsidiary of XL Capital Ltd. This agreement will provide coverage for the company's workers' compensation losses that occurred primarily on or prior to June 30, 2000, and will mitigate the impact of Fremont General's losses recognized in the second quarter ended June 30, 2000. The agreement is subject to regulatory approval and other conditions, and is expected to close in the fourth quarter of 2000.
PLUS EXPANDS ITS FRONTIERS
The 13th Annual Professional Liability Underwriting Society (PLUS) International Conference will take place Nov. 8-10 in San Antonio, Texas. In addition to the educational sessions, there will be some prestigious speakers, including Brian M. O'Hara, president and CEO of XL Capital Ltd., who will give a keynote address. The agenda covers many of the current and emerging topics in the arena of professional liability. Registrants will be able to receive credit for attending one, two or three parts of the educational agenda. For more information or to register, visit www.plusweb.org.
LOW KNOWS BEST
Newly inaugurated Insurance Commissioner Harry Low announced plans to reorganize the California Department of Insurance (CDI). Low, who has been meeting with employees in the CDI's offices in San Francisco, Los Angeles and Sacramento, said the streamlining changes will facilitate more efficient service to Californians. Changes include: the creation of an Office of Community and Constituent Affairs; the creation of a Special Projects Office; the Conservation and Liquidation Office will report directly to the Commissioner's Office; the Administration Branch expanded to include the Producer Licensing Bureau and is now called the Administration and Licensing Services Branch; the Fraud Division combined with the Investigations Bureau to create the Criminal Investigations Branch; the creation of an E-Government and Technology Solutions Branch; and the creation of a Strategic Planning, Policy and Research Branch.
High Roller In Today's ECONOMY
The insurance industry contributes almost $200 billion to the United States' gross national product each year, approximately 2.4 percent of the total GNP, according to the latest edition of a study compiled by the Alliance of American Insurers. The Alliance study, 'The Insurance Industry: A Key Player in the U.S. Economy,' provides facts and figures on insurance industry employment and payroll by state, industry investments and how much households spend on insurance. According to findings of the report, the industry currently directly employs 2.5 million people, with a total payroll of approximately $100 billion. Of the total employment figure, 700,000 are employed by p/c insurers, one million employed by life/health insurers and 800,000 employed as agents, brokers and in other directly related service industries. The report also revealed that the insurance industry as a whole paid $9.2 billion in state premium taxes in 1998, ranging from nearly $12 million in Wyoming to $1.2 billion in California.
CALIF. FIGHTS DISASTER INSURANCE
Despite efforts by the Federal Emergency Management Agency (FEMA) and U.S. Senators Christopher Bond of Missouri and James Inhofe of Oklahoma, a proposal to require local and state government entities to insure public buildings was defeated on Oct. 3. The proposed mandate met fierce opposition from California's entire 52-member House delegation. California, they claimed, would be more seriously affected by the requirement than the rest of the country, due to potentially serious damage inflicted by even moderate earthquakes. An amended bill with the insurance provision taken out was presented on the floor of the House soon after the defeat of the original. It remains to be seen whether the amended measure will pass. In the meantime, FEMA has consented to devote additional study to the matter.
SAFECO TAKES ANOTHER HIT
SAFECO will experience higher than expected underwriting losses in its large commercial and homeowners lines, slowing third-quarter profit improvement sharply. The company's overall combined ratio is expected to be in the 110-111 range, a slight improvement over the second quarter, and operating earnings are expected to be between 5 and 10 cents a share. Continuing adverse trends in workers' compensation and commercial auto, and adverse development of claims from catastrophe losses in homeowners in the second quarter are expected to impact third-quarter results. The company will report third-quarter results on Oct. 23. SAFECO has also hired Russell Reynolds Associates, a global executive search firm, to conduct the search for a new chief executive officer. The announcement comes two months after Roger Eigsti, current chairman and CEO, announced his retirement, effective Dec. 31, 2000. Russell Reynolds will conduct the search through its Chicago office on behalf of SAFECO's board of directors.
SLAVE INSURANCE PROBES LAUNCHED
A new California law passed this session has given Insurance Commissioner Harry Low the authority to ask all insurers in the state to produce details of slave policies issued in the 1850s and 1860s. Aetna Inc. and New York Life Insurance Co. are part of the first batch of insurers asked to deliver such information. The information is the first move in potential reparations to descendants of slaves, who were denied payment on life insurance when family members died. Proceeds were paid out to slave owners. The practice of insuring slaves was not illegal at the time, though certainly immoral by today's standards. The legislation included two portions: the first law, the Slaveholder Insurance Policies Bill (SB 2199), calls on California's Insurance Commissioner to request records on slave policies from insurers in the state; the second law, the UC Slavery Colloquium Bill (SB 1737) asks the University of California to hold a conference to look into 'the economic legacy of slavery.' California has also taken a leading role in compensating heirs to victims of the Holocaust. The state and its insurance department have doggedly pursued information on policies written during that time period.
NATIONAL INSURES THE JACKPOT
Warren Buffett's National Indemnity is up to the challenge of insuring a $1-billion lottery, the world's largest ever. Experts say the chances of National having to pay out are about 2.4 billion to one. National Indemnity wrote the policy for Grab.com, a recently launched Internet lottery, covering the possibility of a $1-billion payout. The coverage cost Grab.com 'several million dollars,' according to Grab.com co-founder and President Andrew Warner. The insurer will pay the enormous prize if any players match seven randomly selected numbers from 1 to 77 in a drawing to be held Dec. 29. Should someone happen to win the lottery, the winner would have a cash option, receiving $175 million right away, or an installment option over 40 years. The non-interest installments would start with 20 annual payments of $5 million, followed by 10 installments of $10 million, nine payments of $20 million and a final balloon payment of $620 million in the 40th year. Berkshire Hathaway will likely make money on the deal, as Grab.com will pay National a small sum for every player who enters the contest.
FRANKEL'S FRIENDS OR FOES'
Robert Guyer and Robert Todd Bennett, associates of former Greenwich financier Martin Frankel, pleaded guilty on Sept. 18 and Sept. 20, respectively, to federal securities fraud and other charges. Guyer pleaded guilty to federal securities charges in the U.S. District Court in New Haven, Conn. Authorities accuse Guyer of running a security brokerage house that served as a front for Frankel's illegal operations. Bennett admitted that he pocketed at least $35,000 from the sale of a Cadillac and Mercedes belonging to Frankel. Frankel is accused of bilking more than $200 million from insurance companies in five states. He is under arrest in Germany and fighting extradition.
LAW FOR GENOCIDE VICTIMS, HEIRS
Gov. Gray Davis signed legislation that will permit Armernian genocide victims and their heirs to file suits in California against insurers for unpaid policies purchased by people or companies in Europe or Asia between 1897 and 1923. SB 1915, authored by state Sen. Chuck Poochigian (R-Fresno), applies to individuals who were victims of the Armenian genocide of 1915 to 1923, during which time approximately 1.5 million Armenians lost their lives at the hands of Turks. The new law also provides for an extension of the statute of limitations to 2010 on legal claims brought by an Armenian genocide victim or heir. An original provision of the bill requiring insurers to create a list of Armenian clients and their policies for the specified period was dropped in light of the court entanglements a similar law created for individuals seeking resolution of Holocaust-era insurance policies. The Los Angeles Times reported that the legislation could help strengthen a class-action lawsuit filed in Los Angeles against New York Life. In that suit, 45 plaintiffs are seeking restitution of approximately $3 billion for 7,671 policies issued between 1895 and 1915.
