GREENBERG TO RETIRE AS AIG CHARIMAN:
Maurice "Hank" Greenberg will step down as Chairman of American International Group's Board of Directors, ending his more than 40-year relationship with AIG. Also, Warren Buffett, the well-known investor and chairman of Berkshire Hathaway, owner of General Reinsurance, one of whose transactions with AIG is part of the probes, will be questioned by regulators on April 11, one day before Greenberg is to be grilled. Greenberg resigned as AIG's CEO earlier this month. Since then pressure has continued to mount from investors that he step aside entirely as the probes continue to erode the world's largest insurer's share price. His full resignation follows reports that AIG had uncovered evidence that some of the company's filings with the Securities and Exchange Commission and the New York State Insurance Department might have contained inaccuracies worth as much as $1.5 billion. Greenberg was one of 12 directors who received supoenas on March 28, asking him to give evidence concerning AIG's finances. Most of the accounting transactions being audited involve AIG's relationships with various reinsurers, including General Re and Barbados-based Richmond Insurance Co. and Union Excess Reinsurance Co. AIG's relationship with Starr International Co., which handles deferred compensation for AIG executives, is reportedly also under review. Greenberg announced his retirement in a letter from his lawyer, David Boies. Frank Zarb, the former NASD chairman and chief executive, who is the lead director on the AIG board currently, will assume Greenberg's duties as non-executive chairman until a new chairman is selected. Meanwhile, Buffett has been called by regulators interested in whether he had any knowledge or involvement in a reinsurance transaction in 2000 between General Re and AIG. AIG's stock has lost almost a quarter of its value since Feb. 11, when it first reported receiving subpoenas from the SEC and Spitzer.
CIGA EXEC. DIRECTOR TORETIRE:
The California Insurance Guarantee Association, an organization that pays the claims of insolvent insurance carriers, recently announced that Executive Director Lawrence Mulryan will retire after 13 years of service. Mulryan will continue to serve as executive director until June 30, when Gray Gordon Davis will become the new executive director. Davis' insurance background includes working for Hartford and Kemper. Mulryan said that the biggest challenge he faced during his time at CIGA was the virtual collapse of the workers' compensation market in California. "All of a sudden we had one company after another (25 companies in all) that became insolvent and major parts of the California workers' comp market became insolvent and became our obligation," Mulryan said. "We moved up to a high of 85,000 open files and we had a payout of claims of $100 million a month. The challenge was not only how to handle that from an administrative standpoint but also to fund it. We did both. I think we did both without missing a payment. Also, no claimant was harmed or hurt at all by this." Mulryan explained that CIGA had to eventually get additional assessment capacity, so he came up with the idea of floating a bond, which nobody tried before. "We got that passed by the Legislature so I went to the market and got those bonds sold and we're now using that for our workers' comp," he said. "We were able to successfully continue to handle our claims in a professional and cost-effective way even though we had virtually run out of money. We've done a lot of things; we've computerized our functions and done a lot of good things but I think that's the one area where I'm most proud of our organization." Mulryan said that he will continue to work on some projects for CIGA through the end of 2005. His future plans may include joining a law firm on a for-counsel basis.
WYO. GOVERNOR SIGNS MEDICAL PANEL BILL:
A bill recently signed into law by Wyoming Governor Dave Freudenthal will create a medical review panel in the state, according to the Associated Press. The goal of the panel is to eliminate frivolous medical malpractice lawsuits. Physicians say that the high costs of medical malpractice insurance are causing doctors to leave the state, retire, or cut back on services. The panel was created after voters approved a constitutional amendment last November. But the final bill that emerged from the Legislature gives judges authority to conclude whether decisions made by the panel are admissible in court.
IDAHO PASSES CONTRACTOR BILL:
A bill requiring building contractors to carry at least $300,000 in liability insurance recently passed the Senate and will now go to Governor Dirk Kempthorne, according to the Idaho Press-Tribune. The bill, which passed 23-11, also requires contractors to register with the state. It would deny property liens to unregistered contractors. Bill supporters said that the legislation will help protect the people of Idaho from unethical actions by construction contractors. A spokesperson for Kempthorne did not indicate whether or not the governor would sign the bill. Several contractor bills have been introduced over the past 40 years, but this is the first one to clear the Legislature.
WASH. COMMISSIONER ENDS MED MAL PROGRAM:
Washington Insurance Commissioner Mike Kreidler announced March 22 that he is closing the voluntary Market Assistance Program for medical malpractice insurance due to a lack of business. Kreidler pointed out that the availability of medical malpractice insurance is improving and costs are beginning to go down. The MAP will cease taking new applications effective March 31. Kreidler requested the creation of a voluntary market assistance program to assist physicians and medical providers who were having difficulty finding medical malpractice insurance. Under the MAP, participating insurers formed a voluntary partnership with local insurance agents and brokers to shop applications for coverage among each other to determine which insurer was best suited to accept the risk. More than half of the applicants to the MAP--32 of 62--were successfully placed with one of the participating liability carriers. Most of the physicians and medical providers unable to obtain coverage through the MAP were denied for prior claims histories or gaps in coverage. Only two doctors applied for assistance in the last eight months. In early 2002, nearly 1,300 physicians and medical providers had to find new coverage when the state's second largest med mal insurer, Washington Casualty, announced it would no longer offer liability insurance to physicians. The St. Paul Group also had withdrawn from the medical liability market nationwide. The Office of the Insurance Commissioner assisted in finding new coverage for hundreds of health care providers before the MAP was formally created in July 2002.
FIGHT OVER CREDIT BAN MOVES TO COLO. SENATE:
Legislation that would prohibit insurers' use of credit information narrowly advanced out of the Colorado Senate State Affairs Committee on a 4-3 vote and will be opposed by the insurance industry on the Senate floor, according to the Property Casualty Insurers Association of America. Earlier this session, the insurance committees in both the Colorado House and Senate defeated bills that would have banned insurers' use of credit information. However, a third bill, SB 195, was introduced and assigned to the State Affairs Committee, which includes many legislators who were more inclined to oppose insurers' use of credit information. "Senate Bill 195 will be vigorously opposed by the insurance industry on the Senate floor," said Michael Harrold, assistant vice president and regional manager for PCI. "This legislation is unfair to consumers who are less likely to file a claim and should pay lower premiums. Legislators on the insurance committees recognized that most of their constituents would be harmed by a ban on credit information and rejected measures that would ban insurance scoring." Colorado adopted the National Conference of Insurance Legislators Model Insurance Scoring Act, which allows insurers to use credit information and requires companies to notify applicants for insurance that credit information will be used for underwriting or rating. The law prohibits insurers from denying, canceling or non-renewing policies solely on the basis of credit information. "This legislation would also be disruptive to Colorado's automobile insurance market, which is adjusting to the tort-based automobile insurance system," Harrold said.
NAMIC OPTIMISTIC ABOUT UTAH'S LEGISLATIVE SESSION:
The National Association of Mutual Insurance Companies is pleased that the Utah Legislature's 2005 property/casualty approved legislation contains some elements sought by NAMIC member companies. "The Legislature adopted industry supported amendments to its insurance cancellation and nonrenewal restrictions bill," said Christian Rataj, western region state affairs manager for NAMIC. "The Legislature also took a reasoned approach in the area of uninsured motorist property damage coverage." While the Insurance Cancellation and Nonrenewal Restrictions Bill, SB 48, places new restrictions on underwriting freedom, NAMIC applauded the Utah Legislature for adopting several insurance industry supported amendments that ameliorated some of the provisions of the new restrictions on insurance cancellation and nonrenewal. SB 48 would prohibit cancellation or nonrenewal of motor vehicle or homeowners policies based solely on specified circumstances. NAMIC generally opposes legislation mandating insurance coverages, but another bill, SB 4, takes a reasoned approach to the new mandate that uninsured motorist property damage coverage must be provided to insurance consumers by: allowing for a reasonable damage limit for the policy; preventing claims for loss of use of the vehicle; requiring the insured to provide the license plate number of the uninsured motor vehicle; and requiring the insured to report the occurrence within 10 days of the accident to the insurer.
