P/C Insurers Post Record Results in 2005: The U.S. property/casualty industry recorded an underwriting profit of $13.2 billion, with a net income of $32.1 billion during the first six months of 2005, a substantial gain from the record results posted during the comparable period of 2004, according to A.M. Best Co.
Robust operating results drove the industry’s surplus base to a new high, despite unrealized capital losses, increased shareholder dividends and other losses in surplus as insurers continued to reap the benefits of the hard market.
However, these results were driven largely by rate increases earning through on policies that were written in prior periods. Most indicators prior to Hurricane Katrina proved rate decreases and competition on many lines of business had begun to emerge during the first half of 2005. This trend will be decidedly reversed in the third quarter on many lines of business, Best reported.
Despite the solid results posted for the first six months of 2005, Best is concerned with the reduction of year-over-year premium rate increases that persisted for consecutive reporting periods since 2003 and gave way to premium decreases across most lines of business and sizes of accounts in 2005.
Through the first six months of 2005, the property/casualty industry continued to build upon its capital base through strong operating results. However, while the first half of the year had relatively low catastrophe losses, the full year 2005 will end up being one of the worst catastrophe years for the U.S. property/casualty industry.
Study Shows Decline in Med-Mal Claims: While the severity of malpractice claims continues to rise-growing at a rate of 7.5 percent annually-the frequency of malpractice claims has decreased by 1 percent over the past year, according to the 2005 Hospital Professional Liability and Physician Liability Benchmark Analysis released by Aon. This is the first time in the history of the study the frequency trend decreased in claims for both hospitals and physicians, the report states.
Greg Larcher, assistant director and actuary of Aon Risk Consultants and author of the analysis, explained, “We believe that legislative reforms in several states over the last few years are contributing to the reduction in claims. In addition, the medical malpractice availability and affordability crisis of the last several years has resulted in a rapidly growing alternative market.”
The study examines more than 200,000 hospital bed equivalents and represents approximately 10 percent of the hospital professional liability market, and 15 percent of the alternative segment of the market, reportedly making it the largest analysis of its kind.
New Law May Erase Gun Makers Lawsuits: President George W. Bush is expected to sign into law a bill (S.397) to shield the gun industry from most lawsuits filed by victims of gun crimes. The House approved the bill by a bipartisan vote of 283 to 144, with 59 Democrats joining 224 of 228 Republicans in voting in favor. The Senate passed the bill in July. The bill has been a top priority for the National Rifle Association for several years and has been supported by the White House.
In addition to shielding manufacturers against future lawsuits, the bipartisan-backed bill could also wipe out any remaining lawsuits against them relating to gun violence that are already in the nation’s court system.
According to the bill’s supporters, gun makers and dealers would still be subject to lawsuits over product liability or negligence. The bill contains a provision that allows lawsuits where there is a gun defect or a gun maker or dealer knowingly sells a weapon to someone who has failed a criminal background check.
Supporters say the bill would protect firearms makers and sellers dealers from the financial disaster that massive damages would bring. They also hope it will stabilize liability insurance rates.
Opponents of the shield law and gun control advocates think the new bill goes too far and would not, as supporters claim, hold manufacturers responsible in situations, such as the Washington, D.C., sniper tragedy in 2002. Opponents have decried the retroactive application of the shield law.
RAND Study Supports TRIA Renewal: A new report from the RAND Corporation indicates that the Terrorism Risk Insurance Act, which will expire in December unless extended by Congress, “creates an effective mechanism for sharing the financial risk that businesses face from terrorism.”
The report suggests that the federal government consider encouraging uninsured businesses to buy terrorism insurance coverage. Somewhat less than half of all businesses now do so.
In addition, the study says that terrorism insurance provided under TRIA “would not require federal subsidies unless there is a very large terrorist attack on the scale of the Sept. 11, 2001 terrorist strike on the World Trade Center, or a series of large terrorist attacks within a year. This is because federal subsidies to insurance companies are only triggered if TRIA-covered insured losses exceed $15 billion.”
The report also concludes: “In considering whether to extend or modifying TRIA, Congress should give concerns over the uninsured a higher priority than concerns about possible federal payments to insurance companies.”
The researchers at RAND who conducted the study also indicated that during the debate about extending TRIA, lawmakers should consider decreasing “the cost of terrorism risk insurance to buyers by adjusting the cost-sharing formula for insurance providers and policyholders.
“Another change to consider would be to require that all businesses purchase terrorism insurance coverage as a part of commercial insurance policies,” the report says. However, such a requirement would be controversial and difficult to implement.
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