COLO. COMMISSIONER RESIGNS
Colorado Insurance Commissioner William Kirven III announced his resignation from the Division of Insurance. "The governor asked for his resignation, and he will pursue other career options," spokesperson and Public Affairs director Deborah Collette told Insurance Journal. The Denver Post cited Kirven's resignation as due his "inability to work with his supervisor," executive director of the Colorado Department of Regulatory Agencies Michael Cook. Collette offered no comment, saying "That is an internal issue." Colorado Gov. Bill Owens, who appointed Kirven in March of 1999, requested Kirven's resignation July 2. According to the Post, state Democrats said Owens was attempting to distance himself from Kirven's reputation as a weak consumer advocate who supported the insurance industry. Ironically, Kirven was well-known for his creation of a consumer insurance council, comprised of 15 volunteer representatives around the state. The group shared feedback from a consumer's point-of-view in light of insurance industry events and issues in Colorado. Kirven is also very active in the National Association of Insurance Commissioners (NAIC). Maryellen Waggoner, deputy commissioner, also recently announced her resignation. A 30-year veteran of the Division of Insurance, Waggoner "will be going to work for a non-profit affiliate of NAIC in Kansas City," Collette said.
SAFECO REPORTS 2NDQ GAINS
Seattle-based SAFECO has reported second-quarter income before charges and gains of $46.8 million, or $0.37 per diluted share. This compares with a loss of $33.4 million, or $0.26 per share, in the second quarter of last year. Net income, including realized gains, for the quarter was $105.2 million, or $0.82 per share, compared with a net loss of $14.4 million, or $0.11 per share, for the same period last year. During the second quarter, SAFECO incurred a $3.6 million net charge as part of a previously announced restructuring. "We are very pleased with our performance this quarter," SAFECO president and CEO Mike McGavick said. "We keep doing what we said we'd do, and what's most exciting is that it's showing up in the numbers." McGavick reiterated that he "remains comfortable" with financial analysts' range of estimates of SAFECO's performance for the full year. Currently, published estimates of SAFECO's performance for the year range between $1.50 and $1.80 per diluted share, with the consensus, according to Thomson Financial First Call, of $1.67 per share. Net written premiums for SAFECO's Property and Casualty products increased 3.3 percent in the second quarter compared with the same period in 2001. This increase was primarily the result of higher sales of SAFECO's automobile product. "We are seeing the positive results of our new business entry model, improved product offering and our new commission structure," McGavick added. SAFECO's losses due to WorldCom were $43.2 million after taxes. Those losses were more than offset by gains resulting from a change in the Property and Casualty investment strategy initiated during the second quarter to shorten duration and reduce equity holdings. Personal Auto, SAFECO's largest product line, reported underwriting losses of $7.3 million—an improvement over the $37.7 million underwriting loss recorded in second quarter 2001.
SWISS RE DETERMINES ACTUAL VALUE AMOUNT FOR WTC
Swiss Re announced that there are no circumstances under which World Trade Center leaseholder Larry Silverstein can ever recover more than $3.5 billion of insurance proceeds under the coverage he purchased. Swiss Re's experts established the true value of Silverstein's claim in the range of $2.4 billion, an amount consistent with Silverstein's internal calculations. Swiss Re reported that Pearson Partners, an independent real estate appraiser has estimated the actual cash value of the WTC complex at $2.156 billion under the Willis Property form (Wilprop) that Silverstein used to bind the insurance coverage. Swiss Re further reported that, in any event, Silverstein is not entitled to actual cash value proceeds at this time, because under the Wilprop form he must first disclaim any intention to rebuild. Silverstein's only course of action then is to seek replacement cost value proceeds up to the policy limit of $3.5 billion. Regardless of what is rebuilt, or by whom it is rebuilt, the WTC will be rebuilt over eight or nine years. Calculating rebuilding costs at slightly less than $300 per square foot, the replacement cost value of the property approaches the policy limit of $3.5 billion. When discounted to net present value, the amount is approximately equal to Silverstein's own pre- litigation estimate of $2.4 billion. Not all of these proceeds will be available for rebuilding, given the amounts of business interruption proceeds that would be paid from the same policy limit.
AAI ENCOURAGED BY SENATE CONFEREE APPOINTMENTS
The Alliance of American Insurers called the recent appointment of U.S. Senate conferees for the terrorism insurance bill a great stride toward ultimate passage of the legislation. "We're very encouraged that the Senate conferees have been appointed," David Farmer, Alliance senior vice president of federal affairs, said. "After Congress returns, we believe the conference committee will be able to successfully complete their work and bring a bill back to Congress for a vote by mid-September. There clearly is new energy being brought to the process, and we applaud members of both parties." The Senate conferees are Democrats Paul Sarbanes (Md.), Christopher Dodd (Conn.), Jack Reed (R.I.) and Charles Schumer (N.Y.), and Republicans Phil Gramm (Texas), Richard Shelby (Ala.) and Michael Enzi (Wyo.). The Senate bill (S 2600), passed this June, provides in 2002 for an 80/20 reinsurance arrangement after an individual insurer's deductible has been met and a 90/10 arrangement after aggregate losses of $10 billion have been incurred. The Treasury Secretary could extend the program until the end of 2003. In that year, the initial threshold for government assistance would increase to $15 billion. The bill also would require civil lawsuits to be brought in federal court, with existing state law to apply. The House passed a terrorism insurance bill (HR 3210) in the fall of 2001. It authorized loans to the p/c industry to cover 90 percent of future terrorism-related losses, after a loss of either $1 billion to the industry or individual company losses that exceed 10 percent of surplus and 10 percent of written premium, with a minimum retention of $5 million.
GUY CARPENTER UPDATES MANAGING TERROR RISK
Success in managing terror risk will come only through unprecedented collaboration between the public and private sectors, and the insurance and reinsurance industries must play a leading role as the tools to assess, quantify and manage this risk are within their grasp, according to a new study released by Guy Carpenter & Company Inc., the leading risk and reinsurance specialists worldwide. The report, "The Terror Risk: Can It Be Managed?", is based on a recent seminar sponsored and moderated by Guy Carpenter as an industry forum for sharing perspectives and updates on the critical issues surrounding terror risk. Participants at the seminar were in general agreement that terror risk is a permanent issue and more severe and unpredictable attacks are a virtual certainty. In their presentations, which are provided in the Guy Carpenter report, industry and government experts explored ways that insurance and reinsurance companies can manage terror risk and thrive in this new environment: "The Terror Risk: Can It Be Managed?" is available by e-mailing a request to marketing@guycarp.com.
WILLIS CHOOSES THE HARTFORD'S BMG
The Hartford Financial Services Group announced its Business Management Group (BMG) will provide agency management expertise to Willis Commercial Network as the latter prepares to expand its U.K. operation throughout the United States, starting in the first quarter of 2003. Business Management Group, a management consulting firm specializing in the insurance industry, provides consulting services to independent agencies and brokerage firms throughout the United States and Canada. BMG will consult with Willis on agency operations, industry trends, and agency-carrier relations.
