ANOTHER NORTHRIDGE AFTERSHOCK
The Alliance of American Insurers, based in Downers Grove, Ill., along with several other insurance groups, filed an amicus curiae brief on Feb. 15 with the California Court of Appeal in Basich v. Allstate Insurance Co. The Alliance argues that SB 1899, which took effect this year and re-opened claims arising from the 1994 Northridge Earthquake, is an invitation for fraud or "non-meritorious" claims. The Alliance contends that SB 1899 violates the contract clauses of the U.S. and California constitutions by impairing insurance policies and settlement agreements. The case arises from a claim of loss submitted to Allstate following the Northridge quake by the owner of a three-unit residential rental property. Shortly after the lawsuit was filed in March 1997, Allstate paid the full policy limits for damage to the property. The owner then pursued his claims for bad faith based on Allstate's alleged delay in investigating and paying the claims. Following opening statements, the trial court granted Allstate's motion for non-suit, finding the remaining tort claim was barred by the policy's one-year contractual limitations period. Joining the Alliance in the brief is the National Association of Independent Insurers (NAII), the Association of California Insurance Companies, the Personal Insurance Federation of California and Century National Insurance Co.
CALLING ALL YOUNG AGENTS
The Young Brokers and Agents Committee (YBAC) has been hard at work planning the 26th Annual Young Brokers & Agents Conference. Named "Best in the Nation" for the past four years by the Independent Insurance Agents of America, this year's event will be held June 7-9 at the Westin Mission Hills in Rancho Mirage, Calif. In addition to networking opportunities, attendees of the conference will be able to earn 14 hours of CE credit. For more information, contact YBAC Chairman Rick Dinger, (818) 248-4500, or visit www.ibawest.com.
EXCESS CAPITAL AS BLESSING, CURSE
The property/casualty industry could return capital to its stakeholders without risking rating downgrades or insolvency, according to A.M. Best Company, which is conducting an ongoing analysis of risk-adjusted capitalization in the industry. However, this "decapitalization" would do little to boost anemic returns on surplus because of a lack of strong operating fundamentals and capital management skills in all but the most sophisticated organizations. The study, which assesses the capital adequacy of nearly 1,000 insurers based on their 1999 year-end capital positions, concludes the industry has excess capital, even after accounting for p/c insurers' most severe financial risks, led by catastrophe losses, reserve deficiencies and declines in stock values. The industry's excess capital position is expected to persist, but diminish somewhat in coming years because of lingering under-priced business, more adverse reserve development and an overall decline in surplus levels of 5 percent in 2001.
AIG ON THE MOVE
AIG gave further evidence of its confidence in Japan's economy on Feb. 6, with the announcement that the U.S. giant had agreed to acquire a 7.3-percent stake in H.I.S. Securities Co. Ltd. for $2.61 million. While it's a small investment by global standards, the move gives AIG an entry into Japan's retail brokerage business, which could become quite profitable if the country's expected economic recovery eventually occurs. H.I.S. Kyoritsu is a subsidiary of H.I.S. Co., one of Japan's largest travel agencies, which has made clear its intentions to unload the stockbroker in order to concentrate on its travel business. Two Japanese companies will become the majority shareholders following the transfer of ownership in March. AIG will then have the third largest share in the company.
NAII IN FAVOR OF FILE AND USE
The NAII testified Feb. 14 in favor of Senate Bill 4 before the Nevada Senate Committee on Commerce and Labor. Under SB 4, an auto or homeowners insurer must file its rates with the insurance commissioner, but the company may use its rate changes immediately upon filing them. Current Nevada law has special rules that require the commissioner to review and approve rates before they are put into effect. According to the NAII, the bill protects consumers by preserving the current rating standards. In addition, it allows the commissioner to order the company to discontinue use of its rates and requires the commissioner to impose prior approval on the insurer's new rates. SB 4 also requires the commissioner to monitor the auto and homeowners markets to ensure adequate competition. If there is a lack of competition in a market, prior approval is reinstated.
UTAH LEGISLATURE PASSES W/C BILL
The Utah State Legislature has passed HB 59, allowing subsidiaries of the state workers' compensation fund to sell insurance to employers outside Utah, in direct competition with private insurance companies. If signed by the Governor, it will allow the Utah Workers' Compensation Fund to sell in other states. The NAII opposed this bill throughout the legislative session because the group feels that the state fund does not operate on a level playing field with private insurers, according to NAII Counsel Ann Weber. HB 59, introduced by House Majority Leader Kevin S. Gard on Jan. 15, moved quickly through the Legislature. It was passed by the House on Jan. 17 and by the Senate on Feb. 5. Similarly, California's State Compensation Insurance Fund was chartered as a competitive market, but it does not offer coverage outside of the state.
AMWEST RESTRUCTURES BANK DEBT
Calabasas-based Amwest Insurance Group has reached an agreement with Union Bank of California, N.A. to restructure its outstanding $13,633,077 term note. The agreement is contingent on receiving approval from the Nebraska Department of Insurance. In exchange for the bank's forgiveness of a portion of the outstanding debt, the restructuring will include a $2-million cash payment; the issuance of $2 million in non-voting, non-convertible preferred stock; the issuance of 5-year immediately exercisable warrants to purchase 250,000 shares of Amwest common stock at fair market value; and the pledge to the bank of the capital stock of the company's insurance subsidiaries to secure the company's obligations under the preferred stock. Other terms were not disclosed. Amwest is an insurance holding company underwriting surety and property and casualty insurance through Amwest Surety Insurance Company and Far West Insurance Company.
NAAA FIRES BACK AT ALLIANCE
Following the American Agents Alliance's recent announcement that the organization was disaffiliating from the National Auto Agents Alliance, NAAA Past President Mark Schmoekel sent out a letter to California agents expressing his "disappointment" with the Alliance's actions. Schmoekel also gave his resignation as an Alliance board member and encouraged agents to join NAAA on an individual basis, saying it was "alive, well and growing."
