TUDOR APPOINTED ACTING PRESIDENT OF CALIFORNIA STATE FUND:
California's State Compensation Insurance Fund's board of directors has appointed James Tudor as acting president. Tudor has served as executive vice president since Jan. 1, 2003. Tudor has served for 10 years on State Fund's Executive Committee and brings 34 years of workers' comp insurance experience to the organization's top post. During his tenure on the Executive Committee, Tudor engineered and managed technological initiatives, including creation of statewide regional service networks, which enhanced State Fund's operational efficiencies and was instrumental in establishing the State Fund's broker program. When Dianne Oki announced her retirement, Board Chair Jeanne Cain announced that a nationally recognized consultant had been hired to search for a new president and to review State Fund's operations.
EX-SAIF PRESIDENT ACCUSED OF VIOLATING LAW ON LOBBYISTS:
The former president of Oregon's State Accident Insurance Fund, Katherine Keene, reportedly failed to register as a lobbyist and report her expenses, according to the Associated Press. A new state ethics report stated that Keene was reimbursed by the workers' comp company for meals with legislators between October 2000 and December 2003 but failed to report her lobbying expenses. The Oregon Government Standards and Practices Commission also found that Keene did not notify the legislators of the value of the meals, which exceeded $100, so they could include the information in their ethics reports. Participants in the dinners reportedly could not remember the specifics of their conversations, but that they discussed SAIF at the meals. Keene's attorney said that Keene did not violate any laws. The ethics report lists 36 violations with fines of $1,000 per violation, and the commission may dismiss or accept the report. In December 2003, Keene resigned from SAIF after reports that she mismanaged the company.
WELLPOINT AND CALIF. COMMISSIONER LAUNCH COMMUNITY GRANT PROGRAM:
WellPoint Inc. joined California Department of Insurance Commissioner John Garamendi in announcing the launch of a $35 million Community Clinics Grant Program. The program and its funding are a direct result of the merger between Anthem Inc. and WellPoint Health Networks Inc. completed last year. Its purpose is to provide funding for projects in community clinics that demonstrate an ability to expand and improve access to health care for the indigent, uninsured and underinsured who reside in California. "This $35 million investment in community clinics is one of several initiatives WellPoint is undertaking in order to address California's health care needs," said David Helwig, president and CEO of the West Region for WellPoint Inc. "We are beginning to create real solutions to the needs of the uninsured and underinsured populations in California." Under the agreement with Commissioner Garamendi and Department of Managed Health Care Director Cindy Ehnes, the California Health Facilities Financing Authority will administer WellPoint's $35 million contribution to the program. The CHFFA previously developed a model process in administering a similar program funded under the Cedillo-Alarcon Community Clinics Investment Act of 2000 and currently has the infrastructure to administer the program efficiently and effectively.
INSURERS CLAIM MITIGATION EFFORTS DO NOT REPLACE THE NEED FOR TRIA:
Officials in the Department of Homeland Security have introduced a proposal to mitigate losses from a future terrorist attack by establishing corporate security standards, or "best practices," that will help protect American businesses from terrorism. However, the Property Casualty Insurers Association of America claims that mitigation will not replace the need for renewing the Terrorism Risk Insurance Act, which is set to expire on Dec. 31, 2005. "Mitigation should be a part of any long-term private sector solution to managing terrorism risks," said Carl Parks, senior vice president, federal government affairs for the PCI. "But reducing exposure to catastrophes by incorporating better risk mitigation techniques does not address the issue of financing the losses from these mega-catastrophes. That's the important role that the Terrorism Risk Insurance Act plays and a component that must remain in place if we are serious about protecting Americans and the American economy from terrorist threats." PCI said that its members are concerned that mandated loss control measures, such as those stated in the Department of Homeland Security's proposal, could increase the cost of doing business, invite litigation, and fail to deliver any real benefits to business owners, workers, or consumers. The basic concept of the proposal would be to have the government or each industry develop a minimum set of security "best practices," reported the Boston Globe. Insurance companies could then audit their business clients for compliance against the set standards, offering reduced premiums for compliance. The trade association of insurance companies continues to claim that a private market solution for terrorism coverage will not work without some level of federal involvement.
CAAA SAYS WORKERS' COMP PROFITS UP 25%-36%:
Fourth quarter and 2004 annual earnings statements from leading California workers' comp insurance carriers are coming in, and profits are reportedly up by 25 to 36 percent over 2003--and 2003 was already the most profitable year on record, according to the California Applicant Attorneys Association. Zenith National, with California workers' comp insurance representing almost two-thirds of its business, reported 2004 fourth quarter net income of $25.4 million, up 57 percent over the $16.1 million in 2003. AIG, the state's largest private workers' comp insurer, reported record profits of $11.05 billion for 2004, up 19 percent from 2003. This record profit came despite a 1300 percent increase in catastrophe losses from hurricanes, earthquakes and tsunamis. Zenith National reported 2004 fourth quarter after-tax net income of $43.7 million, more than double the $20.8 million profit in the fourth quarter of 2003. Profits for the entire year were up similarly, climbing from $67 million in 2003 to $119 million in 2004. Income (before taxes) from Zenith's workers' comp operations grew at an even faster rate in 2004, climbing more than 250 percent from $29.3 million in 2003 to $104 million in 2004. American Financial Group reported that "solid underwriting profits" from its California workers' comp business contributed to the record profits reported for 2004. Earnings from insurance operations were up 43 percent in the fourth quarter of 2004. The company reported sharply improved results following the recent reforms enacted in California.
NEW RRG TO OFFER GL TO CALIF. CONTRACTORS AND ARTISANS:
United Contractors Insurance Company Inc., a new risk retention group domiciled in the District of Columbia, will offer general liability coverage to California contractors and artisans in commercial and residential construction. Acting as the RRG's managing general underwriter, Palm Springs-based United Contractors Insurance Agency will provide underwriting and policy issuance, along with other services. UCIC will insure several types of contractors' risk, including remodeling contractors, plumbers and painters. "We've been in a really hard market situation, and especially for contractors; many of them are finding it's difficult or impossible to obtain coverage," said Annette Singer, president of UCIA. Licensed on Oct. 17, 2004, UCIC will be headed by President Douglas R. Holmes, a Whittier, Calif.-based attorney. Holmes previously served as a director of Florida-domiciled Insurance Company of the Americas, which is owned by New York-based PIA Acquisitions Inc., which provided initial capital to start up the RRG in the amount of $600,000. The RRG will be reinsured by Illinois-domiciled Reinsurance Company of America Inc. For more information, contact Annette Singer at asinger@ucisg.com.
S&P REPORT SAYS HURRICANE LOSSES PUT PRESSURE ON INSURERS' EQUITY:
The shareholders' equity of many insurers and reinsurers is coming under greater pressure than anticipated as P/C losses from the 2004 hurricane season continue to rise with new estimates, according to a report by Standard & Poor's Ratings Services. The report, titled "Shareholders' Equity Suffers As Insurers and Reinsurers Restate Hurricane Losses," cited two issues that continue to plague insurers, reinsurers and, ultimately, investors. S&P indicated: "First, companies initially underestimated claims because of assumptions they made for construction costs and structural soundness of insured property, and obstacles they faced in gathering accurate information while the storms were still raging. Second, primary insurers were not adequately reinsured for the frequency of the storm season, which brought four hurricanes to the U.S. East Coast in August and September 2004 instead of just one." The rating agency said that in its opinion the increasing estimates affect, among others, American International Group, Everest Re Group, IPC Holdings, RenaissanceRe Holdings, St. Paul Travelers Cos., XL Capital, and Zurich. The report cites a steep restatement by RNR, which revised its losses from hurricane-related claims in the third quarter of 2004 upward by 22.4 percent, to $520 million--equivalent to 21.2 percent of shareholders' equity.
CA DWC UPDATES PROGRAM FOR INJURED WORKERS:
The California Division of Workers' Compensation has reportedly reinvigorated a state program that provides information and assistance to injured workers through monthly workshops at local DWC offices. "In the midst of this much-needed overhaul of the workers' comp system, it's vital that we ensure injured workers get the help they need," said DWC Administrative Director Andrea Hoch. "These workshops will allow us to answer workers' questions, as well as advise them about their rights and options under the law." In recent years, most workshops for injured workers were reportedly suspended due to a lack of adequate funding, a lack of proper staffing levels, and outdated materials. Hoch, however, has committed the financial resources necessary to revitalize the program. The free, one-hour workshops will consist of a structured presentation followed by a question and answer session, and will be held on a regular basis at local DWC Information and Assistance Unit offices around the state, during hours workers can easily attend. To find out about an injured worker workshop, visit the DWC Web site at www.dir.ca.gov/dwc/.
PINAULT, ARTEMIS NOW SOLE DEFENDANTS IN EXEC. LIFE TRIAL:
French billionaire financier François Pinault and his holding company, Artemis S.A., are the sole remaining defendants in the civil lawsuit seeking to recover some $4 billion on behalf of policyholders of the failed Executive Life Insurance Company. In a statement he deplored the last minute settlement reached between the French government's CDR, Credit Lyonnais and other defendants and the California Department of Insurance. Although Artemis had earlier settled criminal charges brought by the U.S. Attorney's Office in Los Angeles for $110 million, Pinault has steadfastly refused to settle the civil case. The other defendants agreed to a settlement just before the civil trial was scheduled to start. Originally reported to be in the $525 million range, the amount is slightly higher at $600 million. News reports have indicated that Pinault has offered as much as $260 million, but the CDI is asking for $445 million. His attorneys have pointed out that Artemis wasn't even formed when the Executive Life sale was concluded between the Commissioner John Garamendi and Altus Finance, the vehicle, which, it is now admitted, was controlled by Credit Lyonnais to avoid federal and California restrictions on banks owning insurance companies. Artemis subsequently bought both Executive Life--since renamed Aurora Life--and the junk bonds. The CDI claims Pinault made $2 billion on the deal at the expense of policyholders. Pinault has also argued that former and present Insurance Commissioner Garamendi, who is scheduled to testify at the trial, was fully informed concerning all the parties to the transaction, and that it was an arm's length deal with no illegal implications.
