WCIRB SUSPENDS ISSUANCE OF MODIFICATIONS BASED ON RELIANCE DATA
The California Workers' Compensation Insurance Rating Bureau (WCIRB) has suspended the issuance of experience ratings based on unit statistical data submitted by Reliance Insurance Company. The action was taken as a result of growing concern regarding the accuracy of the Reliance data following receipt of information from Reliance's Pennsylvania liquidator that the data being submitted is incomplete. The WCIRB has requested that the liquidator provide additional information regarding the completeness and accuracy of the Reliance data submitted to the WCIRB. The WCIRB will issue a subsequent notice once the additional information is received and evaluated, and once a determination is made as to the reliability of the Reliance data for experience rating.
CDI APPROVES AB 749 PREMIUM INCREASE ENDORSEMENT FORMS
Calif. Insurance Commissioner Harry Low recently issued a decision regarding the WCIRB's pure premium rate filing, which was submitted to the Commissioner on July 31, 2002. In his decision, the Insurance Commissioner approved (a) increases in the 1999, 2000, 2001 and 2002 advisory pure premium rates to reflect the cost impact of Assembly Bill 749 on pre-Jan. 1, 2003 injuries and (b) a 4.9 percent increase in the advisory pure premium rates applicable to the unexpired portion of outstanding policies with anniversary rating dates on or after Jan. 1, 2002, as of Jan. 1, 2003, to reflect the cost impact of AB 749 on the cost of injuries incurred on or after Jan. 1, 2003. The Insurance Commissioner has approved four advisory endorsement forms (WC 04 04 12, WC 04 04 13, WC 04 04 14, and WC 04 04 15) for use by insurers that choose to apply the approved rate increases.
GARAMENDI ANNOUNCES BAUM AS TRANSITION LEADER
California Insurance Commissioner-Elect John Garamendi announced that Rick Baum, former Chief Deputy Insurance Commissioner during Garamendi's first administration, will head the Garamendi transition team. "I am very pleased that Rick Baum will be leading our transition efforts," said Garamendi. "Rick was instrumental in helping me create the nation's best consumer protection agency during my first term. His knowledge and experience will allow me to begin rebuilding the Department of Insurance to once again be the national leader." Garamendi was elected Insurance Commissioner Nov. 5, as California voters returned him to the office that he held from 1991-95. Garamendi will take office on Jan. 6, 2003.
AAI TELLS PANEL OPPORTUNITIES EXIST TO ADVANCE ASBESTOS REFORM
Proponents of asbestos reform have a tremendous opportunity to make advances in many different arenas, Kenneth Schloman, Washington counsel for the Alliance of American Insurers, told participants of the sixth annual Cambridge Reinsurance Symposium, recently in Philadelphia. "Federal legislation will be introduced that, while not as comprehensive as past efforts, would move reform forward. This is an opportunity that the business community must pursue," Schloman said. Advocates of reform should better coordinate the development of a legislative, political and/or strategic defense, according to Schloman. "The business and insurance communities cannot afford to limit themselves to one particular effort to reform the asbestos litigation system. We have to look not only at a federal solution, but also at opportunities in problem states and the courts," he said. The volume of asbestos-related litigation is on the rise and the cost of such claims has forced about 30 U.S. companies into bankruptcy. Several prominent actuarial firms have pegged ultimate asbestos costs for the U.S. insurance industry at a range of $55 billion-$70 billion. Total costs for the U.S. economy, including costs borne by non-U.S. reinsurers and uninsured amounts, are estimated at $200 billion-$275 billion. Asbestos was once considered a "miracle mineral." A naturally occurring substance, its versatility led to its use as a component in numerous parts (e.g., building materials such as insulation, roofing and flooring, brake and boiler linings, wire insulation, gaskets and shipbuilding—especially during World War II).
NEW REPORT SAYS HAZARD PLANNING REDUCES INSURED LOSSES FROM DISASTERS
Communities that incorporate natural disasters in their land use planning experience fewer insured losses than those that do not, according to a new report presented at the Institute for Business & Home Safety's (IBHS) Annual Congress in New Orleans. An analysis of IBHS data by Dr. Raymond Burby, professor of city and regional planning at the University of North Carolina, found that residential insured losses per capita were at least one-third higher in states that do not mandate hazard planning. Dr. Burby reported that the mean insured residential loss per capita was $92 in states with no hazard planning requirements, while the mean insured loss per capita was $64 in states which mandate hazard plans. The losses studied occurred as a result of 226 natural disasters in the U.S. over the seven-year period between Jan. 1, 1994 and Dec. 31, 2000 and do not include losses from earthquakes. The difference was even more significant in metropolitan areas where the mean per capita insured residential losses were $155 in states that do not require hazard plans, while it was $86 in states where hazard planning is mandated. "Communities that pay attention to natural hazards have lower insurance losses," Dr. Burby said. "Unfortunately, in three-quarters of the counties in the United States, state governments do not mandate hazard planning." He said only 10 states require hazard plans—Florida, Maryland, North and South Carolina (coastal areas), Colorado, California, Oregon, Nevada, Idaho and Arizona. He further pointed out that many local governments do not have up-to-date land use plans and those plans have poor hazard-mitigation elements. "But, this situation can change with active state intervention," Dr. Burby commented. He cited an IBHS survey of local land use planners throughout the United States that reported community comprehensive land use plans fell short in disaster safety. The survey also found a consensus among land use planners that state mandates result in better hazard plans. "Land use plans are a powerful tool that can be harnessed to bring about safer communities with a reduction in catastrophe losses," Dr. Burby added.
LIQUIDATOR SEEKS RECOVERY FROM AUSTRALIAN GOV'T FOR HIH LOSSES
Tony McGrath, the KPMG accountant who's in charge of liquidating failed Australian insurer HIH, has filed a claim against the Australian government alleging that negligent supervision on the part of its insurance regulatory agencies substantially contributed to the collapse of HIH. He's seeking at least a partial recovery of the approximately A$5.3 billion ($2.97 billion) in debts that HIH is estimated to have, plus A$310 million ($174 million) in costs involved in HIH's takeover of FAI Insurance Ltd. in 1998. McGrath's accusations are focused on the failure of the Insurance and Superannuation Commission (ISC) and its successor the Australian Prudential Regulatory Authority (APRA) to properly investigate FAI's solvency and the terms of the takeover. He's indicated that the purchase of FAI, which apparently had a large number of undisclosed losses, contributed substantially to the collapse of HIH in March of 2001. The affair is politically charged as well. A rarely employed Royal Commission is currently investigating the company and its officers and directors for possible criminal acts. McGrath's final report on HIH's debts and plans for its liquidation will coincide with the release of the Commission's report, which is expected early in 2003.
ALLIANZ POSTS $2.52B Q3 NET LOSS, $933M 1st NINE MONTHS
Germany's Allianz announced that it would report a net loss for the third quarter of 2.5 billion Euros ($2.525 billion) and a net loss of 924 million Euros ($933 million) for the first nine months of 2002 due to a number of exceptional events. Allianz results were heavily affected by losses at its subsidiary Dresdner Bank, which contributed 972 million Euros ($981 million) to its parent's losses. Even Allianz admits Dresdner will not begin earning any money until next year at the earliest. During the third quarter Allianz also increased reserves at its Fireman's Fund subsidiary by $750 million, mainly due to higher provisions for asbestos related liabilities, and set aside 664 million Euros ($670 million) to handle flood losses in Germany and Eastern Europe. Writedowns in the value of investments in what Allianz characterized as "the extremely weak capital markets" amounted to 1.9 billion Euros ($1.92 billion) during the period. The huge losses should be viewed in light of the overall weakness of the German economy which continues to experience high unemployment, falling investment values and company failures. These in turn have caused banks, insurers and other financial providers to make higher porovisions for bad loans and has decreased the overall value of their investment portfolios. The poor quarterly performance obscures the real growth in the company's insurance operations. Excluding the 3.5 billion Euros Allianz booked earlier in the year from the unwinding of its investments with Munich Re, P/C net grew from 2.276 billion Euros ($2.3 billion) for the first 9 months of 2001 to 2.886 billion Euros ($2.91 billion) this year. Overall, P/C premium income for the first 9 months rose 4.6 percent to 33.6 billion Euros ($34 billion). Allianz remains the world's largest P/C insurer measured by sales.
