CONNING PREDICTS RISING COSTS
Property/casualty insurers are very likely to begin pricing "terrorist attack risk" separately from other coverages, according to a new forecast from Conning & Company. This and a reassessment of what constitutes maximum probable loss in a claim are two of the key enduring changes that are expected to sweep the p/c industry in the wake of the World Trade Center disaster. Another expected change related to the inevitable increase in losses is escalating premiums in commercial lines. The separation of terrorism exposure for coverage and pricing is another new factor. This should help facilitate better tracking of the losses and more precise pricing of the risk. Also likely is the recalculation of probable maximum loss (PML) estimates. The recalculation of PML may have a multiplier effect on prices. Insurers and reinsurers, faced with larger PML estimates, are likely to seek more reinsurance and retrocession support for their risks. As reinsurance capacity is consumed, prices will inevitably go up unless additional capacity is added.
SURVEY FINDS INSURERS USING WEB
Insurance companies are finally hitting their stride in finding practical uses for Internet technologies, according to a recent "Emerging Strategies in Insurance & Technology" survey sponsored by IVANS Inc. Executive level IT professionals at 80 insurers took part in the August 2001 survey of how their companies use technology. Respondents agreed that the insurance industry had initially been slow in embracing the Internet to improve overall efficiencies. Almost 56 percent felt that the industry ranked behind stock brokerage, banking and real estate in this regard. Almost 70 percent now have websites aimed at helping agents find the information they need, and although only about 15 percent of respondents are currently using the Internet as a distribution channel for insurance sales, over 75 percent consider their website a sales vehicle for selling policies.
HOLOCAUST LAW QUESTIONED
A California law enacted in 1999 requiring that insurance companies turn over information related to European insurance policies or face loss of their licenses has been ruled an unconstitutional violation of due process, according to the legal counsel for several insurers. The Los Angeles office of Milbank, Tweed, Hadley & McCloy LLP was retained by nine insurance companies affiliated with Winterthur Swiss Insurance Company after the state insurance commissioner sought to force them to obtain from their foreign affiliates detailed information on all policies issued in Europe in effect between 1920 and 1945. Counsel for other affected insurers successfully argued in U.S. District Court that the Holocaust Victim Insurance Relief Act (HVIRA) required tasks their clients could not meet because they lacked any such records and had no way to compel the European companies to produce them. When the state insurance commissioner's office threatened to lift the licenses, the companies sued. In an Oct. 2 ruling, U.S. District Judge William B. Shubb agreed with the insurers' argument that they had been denied due process because no sufficient hearing procedures existed. The insurance companies represented by Milbank are Winterthur International America Insurance Co., Winterthur International America Underwriters Insurance Co., General Casualty Co. of Wisconsin, Regent Insurance Co., Southern Insurance Co., Unigard Indemnity Co., Unigard Insurance Co. and Blue Ridge Insurance Co. Another firm, Republic Insurance Co., was sold by Winterthur during the case. In a petition before the U.S. Supreme Court, the insurers seek a ruling as to whether the HVIRA is unconstitutional because it interferes with the federal government's control over foreign affairs and interferes with commerce.
AIA URGES TOUGHER TRUCKING STANDARDS
The American Insurance Association (AIA) urged delegates from Mexico, Canada and the U.S. meeting in Ottawa under the North American Free Trade Agreement (NAFTA) to adopt and enforce more rigorous cross-border trucking safety and security standards in light of the threat of terrorism in North America. David Snyder, AIA assistant general counsel, testifying before NAFTA, noted that substantial improvements to cross-border safety and security must be an immediate priority for NAFTA. Items in need of urgent attention include equipment and staffing for crossings; uniform safety standards coordinated at the highest levels; complete data systems on drivers, vehicles, motor carriers and cargo; financial data available to safety enforcers and insurers; and cooperative enforcement programs among the three countries. Snyder stated that AIA would like to see the mutual recognition of insurance written in any one NAFTA country and the preservation of all existing insurance options.
IBN AFFILIATES WITH NAAA
The National Auto Agents Alliance accepted an application for affiliation from the Independent Broker Network. IBN is a 12-year-old organization headquartered in San Jose, Calif. IBN brings more than 380 California members to the NAAA, increasing its membership in California to more than 700. The recent affiliation of the Latin American Agents Association (LAAA) and now IBN has led to the N.A.I.L. Insurance Coalition. IBN and LAAA will offer speakers, company update information and other resources to give the NAAA a strong presence in California. N.A.I.L. will continue to expand into additional locations around the state as leaders from different geographic locations are identified to direct those meetings.
LIMITED LIABILITY FOR LOST ITEMS
After security workers at San Jose International Airport allegedly lost a carry-on bag containing more than $100,000 in jewelry, the bag's owner attempted to sue for damages. However, a split panel of the 9th U.S. Circuit Court of Appeals ruled that the Warsaw Convention limits the liability of the security company and the airline to $400 for lost carry-on baggage. According to the Associated Press, Ester Dazo placed her bag on the X-ray scanner and proceeded through metal detector machines before boarding a flight to Toronto in 1999. When she went to collect her bag, she claimed it was not there and sued Globe Airport Security Services, TWA, Continental and America West airlines. The 9th Circuit upheld the decision of a California federal judge, who threw the case out due to the limited liability outlined in the Warsaw Convention.
