SYNOPSIS ALL INDUSTRY CONFERENCE CALL June 23, 2010

Insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus (or statutory net worth) increased to positive 6.7 percent for the first quarter of 2010 from negative 1.2 percent for the first quarter of 2009, according to this Wednesday, June 23 news release from ISO, PCI and the I.I.I. The property/casualty (P/C) industry returned to profitability despite continuing declines in both written premiums and earned premiums. I.I.I. president Robert Hartwig’s commentary on the quarterly results was also issued on Wednesday.

Wall Street Journal reports some homeowners face property insurance problems as hurricane season begins:

M.P. McQueen’s Weekend Journal (June 19-20; subscription required) story quoted the I.I.I.’s Bob Hartwig and cited I.I.I.’s consumer information as part of a broader look at the issue of the affordability and availability of coastal property insurance. The piece also noted that flood damage is of particular concern this year as tainted water from the Gulf of Mexico oil spill could be pushed ashore by a hurricane, affecting property owners from Louisiana to Cape Hatteras, North Carolina. The National Flood Insurance Program expired on June 1 and has not yet been renewed by Congress, McQueen notes.

Front page WSJ article chronicles arrest of stranger-originated life insurance agent:

In the years before the financial crisis, Steven Brasner was a sales agent specializing in arrangements for hedge funds to invest in stranger-originated life insurance (STOLI) policies, according to a front page story in the Tuesday, June 22, edition of the Wall Street Journal (subscription required). The story goes on to say that in April 2010 Florida authorities arrested Brasner and charged him with grand theft, fraud and other crimes related to the issuance and sale of $78 million in STOLI policies for which Brasner received nearly $2 million in commissions.

The Biloxi Sun Herald reported in its Thursday, June 24, hard-copy edition that this development came as part of  a whistle-blower lawsuit against State Farm over its handling of Hurricane Katrina claims. The suit, brought by former claims adjusters Cori and Kerri Rigsby, is set for trial in December 2010, and a number of motions are being filed ahead of a July 1 deadline for pretrial discovery.

Christian Science Monitor reports on project aimed at enhancing early-warning tornado systems:

In mid-June VORTEX 2, the largest tornado research project ever undertaken, completed its mission of collecting data, with the ultimate goal of increasing warning times and reducing false alarms, according to this Tuesday, June 22, CSR story. Joshua Wurman, president of the Center for Severe Weather Research and one of the lead scientists on the project, said, “Right now, we have an average 13-minute warning with a 70 percent false-alarm rate. If VORTEX 2 can get us up to 15 or 18 minutes, that’s still a substantial improvement. That’s a lot of extra time for people to seek shelter. And if you can get the false alarm rate down to 60 percent or 50 percent, people will have a lot more confidence that when a warning is issued, it really means business.”

Government Accountability Office (GAO) finds Natural Catastrophe Insurance Coverage Remains a Challenge for State Programs:

The 70-plus page GAO document reports that most states’ catastrophic insurance programs do not charge rates that fully reflect the risk of loss.  Dated mid-May but released publicly in mid-June, the GAO report says that the public policy goals of state-run property insurance programs should be to charge adequate rates, and encourage broad participation and private market involvement.

The Florida jury assigned 55 percent of the liability to drywall distributor Banner, 35 percent to manufacturer Knauf, and 5 percent each to the importer and the shipper, according to this Friday, June 18, New Orleans Times-Picayune story. In Louisiana drywall manufacturer Knauf settled two cases that were set to go to trial in federal court in New Orleans, the article adds. The attorney for the owner of 21 contaminated apartments in Slidell, Louisiana, said Knauf agreed to pay John Campbell and Slidell Property Management about $20,000 for lost rental income and to replace and test the drywall in one apartment. Knauf also agreed to pay for remediation and testing in a Metairie, Louisiana, home whose owner was among 2,000 plaintiffs in a class action suit filed in 2009, the piece notes.

USA Today pegs auto insurance story to InsWeb study which found Massachusetts drivers pay lowest premiums, as a percentage of household income:

Sandra Block, in her weekly Your Money column, also talked about ways consumers can save on auto insurance, no matter where they live, such as reducing coverage on an older vehicle, or raising deductibles.  The article was published on Tuesday, June 22.  InsWeb’s Affordability Index study was released on Wednesday, June 16, and found Louisiana drivers paid the most for auto insurance, based on the criteria outlined by InsWeb.

The rate of fatal crashes per licensed driver aged 70 and over dropped between 1998 and 2007, IIHS found.

The Associated Press reported on Tuesday evening, June 22, that 750 homes on the outskirts of Flagstaff were in danger due to wildfires, which covered an expanse of nearly 10,000 acres.

Rimrock Auto Arena in Billings was among the larger commercial buildings hit by a Sunday, June 20, tornado, according to the Bozeman Daily Chronicle.

The number of P/C insurer impairments increased to 18 companies from five over the past three years, according to this Tuesday, June 22, Business Insurance analysis of the A.M. Best findings.

The U.S. House of Representatives approved an NFIP extension through September 30, 2010, but the U.S. Senate has not yet acted to do the same, according to a Wednesday, June 23, BestWire (subscription required) story.

North Carolina insurance commissioner approves mitigation credits for qualifying homeowners insurance policies in beach and coastal territories:

The credits will go into effect on May 1, 2011, and apply to policies written in the voluntary market and the Beach Plan within the 18 coastal counties. The credits stem from a North Carolina Rate Bureau filing required by the 2009 enactment of H.B. 1305, which sought to reform the state’s coastal property insurance. The North Carolina Insurance Department issued this news release on Wednesday, June 23, and the story was covered in the Wilmington Star News.

Crain’s NY Business reported in a Tuesday, June 15, online story that the Paterson administration is considering the imposition of a “surcharge on property and casualty insurance carriers as a way to wipe out deficits incurred by the state’s Medical Malpractice Insurance Pool, or MMIP.  Due to [New York’s two-year] moratorium on medical malpractice rate hikes, the MMIP does not currently have enough in reserve for the $362 million it is likely to need to cover doctors insured by the MMIP,” the article states.  The MMIP guarantees doctors malpractice coverage when they cannot buy it on the open market, usually because they have been sued too often, according to this story.

Michigan bill to ban use of credit-based insurance scoring in auto, homeowners markets faces uphill battle in GOP-controlled state Senate:

The Detroit News reported on Saturday, June 19, that, even though House Bill 5634, which would also bar insurers from using either a policyholder’s education or occupation as part of its rate-setting criteria, passed the Democrat-controlled House of Representatives, it has considerably less support in the state Senate, where Republicans lawmakers are in the majority.  Rep. Woodrow Flint (D-Flint) is the sponsor of H.B. 5634, and he organized a Wednesday, June 16, march and public hearing in Lansing on the issue. The article notes that the Michigan Supreme Court is expected to rule on a pending credit-based insurance scoring case no later than August 2010.

Commissioner John Oxendine began running television advertisements on Monday, June 21, in advance of the Tuesday, July 20, Republican gubernatorial primary election, according to this same-day Atlanta Journal-Constitution (AJC) blog entry.

Georgia state Ethics Commission cancels public hearing on Commissioner Oxendine’s gubernatorial campaign contributions:

Originally scheduled for Thursday, June 24, the Ethics Commission hearing may not be held any time soon, the AJC reports. The commission was looking into whether Alabama-based political action committees illegally routed more than $100,000 to Insurance Commissioner John Oxendine’s gubernatorial campaign last year. The PACs were allegedly linked to State Mutual executive Dee Yancey, a Rome, Georgia-based businessman with ties to Commissioner Oxendine, the AJC has said in previous articles. 

“The association plans to file a 5 percent rate increase with regulators in August. The state insurance commissioner then has until October to review the rates, which would be implemented starting in January,” wrote Purva Patel, in this Wednesday, June 23, Chronicle article. “The board of the state-created insurer, which met Tuesday [June 22] in Galveston, voted 5 to 3 to raise rates 5 percent next year, with the intention of filing the same increase in each of the following four years.”