P/C INSURERS' PREMIUMS SURGE $28B IN FIRST THREE QUARTERS OF 2002

Premiums earned by the nation's property and casualty insurers surged $27.8 billion, or 12 percent, during the first three quarters of 2002, to $258.7 billion from $230.9 billion during the same period in 2001, according to Weiss Ratings Inc. The jump in premiums propelled the industry's profit to $10.8 billion during the first nine months of 2002, compared to an $814 million loss in the same period the previous year. Despite the overall increase in profits, 32 percent of companies lost money for the period. "Increased premiums of this magnitude indicate that the underwriting cycle may be nearing its peak, which means that rate increases experienced for the past three years could start slowing down," Melissa Gannon, vice president of Weiss Ratings Inc., commented. "If, at the same time, investment losses continue to mount, companies may find themselves fighting to preserve financial stability." Property and casualty insurers suffered a $3.7 billion, or 54 percent, decline in capital gains during the first nine months of 2002, to $3.1 billion from $6.8 billion during the same period in 2001. In analyzing the industry's capital gains
(profits earned from the sale of investments), Weiss found that five companies reported gains greater than $100 million, while one insurer, Hartford Fire Insurance Company, contributed $3.9 billion. Excluding Hartford Fire's gain, which represents profits on the exchange of shares in affiliated companies, property and casualty insurers lost $830.8 million on sales of investments, representing a $7.7 billion
decline in capital gains.

AUTO INSURANCE, WORKERS' COMP EMERGE

New state laws concerning workers' compensation and automobile insurance make up the majority of the property/casualty-related
insurance laws enacted by state legislatures last year, according to an analysis of trends in new state insurance legislation published by the National Association of Mutual Insurance Companies(NAMIC). "NAMIC has placed online a summary of the 239 new property/casualty-related laws enacted in 44 states during 2002," Roger Schmelzer, vice president-regulatory affairs, said. Some very distinct issue trends emerge from the many new state insurance laws enacted during 2002. The 60 new auto insurance laws identified in the NAMIC survey account for the single largest issue trend among the property/casualty-related laws enacted in 2002. The survey
also identifies 45 new workers' compensation laws, making this the second most common issue trend.

"Together, these two categories account for nearly half of the new property/casualty laws covered in this report," Schmelzer continued. "Some other very distinct issue trends in the survey include new laws pertaining to licensure, insurance scoring, financial regulations and rate and form regulation." California enacted the greatest number of new laws in the survey with 15. Florida had 12. Arizona and Colorado approved 11 each. Washington passed 10 new laws. Minnesota and Oklahoma each approved nine new property/ casualty laws. At the other end of the scale, there were no new significant property/casualty laws approved in Indiana last year. Montana and Ohio passed just one new significant property/ casualty law each. Alabama, Delaware, Hawaii, Mississippi, New Jersey and Wyoming each enacted only two new laws.

In addition to auto and workers' comp, the survey identified 22 distinct issue trends. Among them: 18 licensure laws enacted in 15 states; 12 insurance scoring laws enacted in 11 states; 10 financial regulation laws enacted in eight states; 10 laws concerning investment tax credits enacted in seven states; and 10 laws regulating rates and forms enacted in nine states.

NAMIC's Survey of 2002 State Insurance Laws identifies a number of other important new law issue trends as well—including state building codes, captive insurers, electronic commerce, fraud, mold, premium finance arrangements, privacy/disclosure, tax issues, records retention, structured settlements, telephone marketing, unfair trade practices, uniform arbitration, and uniform commercial code changes. This is the fourth consecutive year NAMIC has released an analysis of new property/casualty-related law trends. The full report is a value-added service available to NAMIC members. A summary of NAMIC's 2002 Survey of New State Insurance Laws is available to the public as a featured link at NAMIC Online. "Based on its consistent Web traffic popularity over the past three years, we are excited to be able to announce the posting and availability of the survey of 2002 laws," Schmelzer added. "This report is comprehensive and features a complete summary analysis of the major new law trends and separate state and issue specific listings with descriptions and hot links to the complete text of each new measure."

CALIF. COMMISSIONER WILL NOT APPEAL BOE PREMIUM TAX

Calif. Commissioner John Garamendi announced he is not appealing the Board of Equalization's unanimous decision that overturned former Commissioner Low's determination that the gross premium tax applies to workers' compensation deductible reimbursements. "In the unlikely event we were able to convince the Board of Equalization to change its position and impose the tax on workers' compensation deductibles, it is likely the insurance industry would sue the state leading to years of litigation and ultimately ending up in the Supreme
Court. With the workers' compensation insurance market already in turmoil, more uncertainty is the last thing we need. This is an issue for the Legislature to decide," Garamendi said. The California Department of Insurance will recommend to the Legislature this year that the gross premium tax be imposed on workers' compensation deductibles in the future.

I-DAY SET FOR MARCH 25

"Insuring America" I-Day comes to the Sheraton Universal on Tuesday, March 25. The annual I-Day event for the San Fernando Valley, Los Angeles, and Burbank, Glendale and Pasadena Associations of the Independent Insurance Agents and Brokers, will have two concurrent one unit continuing education seminars available. The morning seminars will be by Lisa Rehburg of Word and Brown on "The Use of a General Health Insurance Agent," and also by Robb Greenspan on "A Review of the Fair Claims Act and of How Proposed Changes Will Affect Brokers." The afternoon Bonus CE will be by Mike Harris of the California Fair Plan on "The Use of the Residual Market." Steve Young of IBA West will join the activities for lunch, and as an added benefit for every full day registrant, an unlimited number of others from the same agency/office can attend the Exhibit Hall for free. For information, contact I-Day chairperson Robert Mulein at (818) 223-8383, ext. 46, or I-Day coordinator Julie Ehret Chui at (626) 229-9990.

FOURTH ANNUAL EDUCATIONAL FORUM SET FOR APRIL 17 IN WALNUT CREEK, CALIF

The Mt. Diablo Chapter CPCU and the Insurance Industry Charitable Fund-Child Abuse Prevention Program (IICF-CAPP) are presenting their Fourth Annual Insurance Educational Forum "Insuring the Future" for the benefit of IICF-CAPP at the Dean Lesher Regional
Center for the Arts in Walnut Creek, Calif. on Thursday, April 17, 8:30 a.m. to noon. This fourth annual event, moderated by Richard Coskren, president & CEO of Insurance Educational Association, looks at the future of the industry from the perspective of: John Lamberson, president, Lamberson Consulting, a Construction
Risk Consultant; Jack Miller, executive vice president, Zenith Insurance Company, a California Workers' Comp Executive; David McManus, president, Arthur J. Gallagher & Co., Bermuda, a Bermuda Market Executive, and Francis Bouchard, Director of Government Affairs, Zurich Financial Services Group, with a legislative view
from Washington, D.C. The celebrity speaker is Bob MacKenzie, feature reporter, KTVU Channel 2 News. The beneficiary is IICF-CAPP the child abuse prevention focus of IICF as part of the Good Works Project of the Mt. Diablo Chapter CPCU. IICF works to bring together all elements of the insurance industry to provide financial and volunteer support to local non-profit community organizations. This year grants will be made to child abuse prevention organizations in Contra Costa and Alameda counties. This education presentation is approved for three continuing education credits for Fire/Casualty and Life Agents. For more information and registration forms go to: www.iicf.com/ pdf/2003IICF-CAPPRegistration.pdf or for ticket information call: Susanna Lum @ 415-445-7196 or M. Lou Pinney @
415-445-7183.

NEV. FLEX-RATING SYSTEM FOR RATES PROPOSED

A flex-rating bill introduced in Nevada would foster competition and modernize rate regulation in the state, according to the National Association of Independent Insurers (NAII). Senate Bill 12 would create a flex-rating system, allowing an insurer to make average rate
adjustments of up to 7 percent for personal lines insurance without first obtaining the insurance commissioner's approval. Under current Nevada law, auto and homeowners insurance rate modifications are subject to the insurance commissioner's prior approval. "SB 12 is an important reform that merits enactment because the bill creates a more efficient, reasonable and competitive regulatory environment that benefits Nevada consumers," said Sam Sorich, vice president and western regional manager of the NAII at a Senate committee hearing recently. "The measure will encourage greater price competition and create incentives for insurers to lower their rates. We encourage the Senate Commerce and Labor Committee to approve SB 12." The bill does not affect the basic authority of the insurance commissioner to regulate or disapprove homeowners and automobile insurance rates or allow an insurance company to use rates that are excessive, inadequate or unfairly discriminatory.
But the bill does affect the timing of the commissioner's review of a range of rate changes, Sorich said. "Nevada's current prior approval system creates an inherent delay that comes with the need to submit, review and approve rate changes," Sorich said. "The time lag between the rates that an insurer is charging and rates that is should be charging often puts an insurer's rate analysis out of date.
Companies in Nevada are currently restrained from vigorously competing on rates by the restrictions of the prior approval law," Sorich continued. "SB 12 would moderate the level of rate changes, helping to avoid the jolt of major rate adjustments and assisting consumers to work insurance rate modifications into their household
budgets."