Specialty Insurance Blog

D&O & Securities Claims

Insurance agents are probably aware that the D&O market, particularly the public company D&O market, is softer, but the underlying claims activity did not improve in 2006. An excellent summary of the current state of public company D&O claim activities can be found at SEC Actions (see here). Key points: The number of securities class actions filed last year declined The cost of settlements increased Outside directors contributed personally to the settlements in a number of cases Derivative actions are increasing Also noted is the amount of the increasing average settlement: in 2006 the average settlement in a securities class action was $45 million (excluding the five cases in excess of $1 billion). The most disturbing trend may be the... Read more →

Reinsurance - Eating Your Own Cooking?

Should insurance agents care whether an insurer is underwriting responsibly? In a recent opinion piece, an insurer not only says yes, but makes the point that insurers heavily utilizing reinsurance should be avoided (see here). Key point: The question is, if the carrier can’t or won’t “eat its own cooking” – that is, own its gross underwriting result – why would a buyer feel good about buying that carrier’s insurance product? While the article concedes that reinsurance has a reason for being, it takes issue with those insurers who are overly dependent: Reinsurance helps carriers create artificial spread of risk within portfolios, reduce volatility in high-severity lines, spread catastrophe risk, manage financial results, grow business with smaller surplus requirements, and... Read more →

Lawyers & Awards

This is a blog for insurance agents about insurance, and much of insurance revolves around the law and lawyers. So there is a share of topics on this blog devoted to various aspects of the law. It seems, however, that we are on a legal streak this week, which may be a little much, but we could not let this latest example of court-approved tort excess and self dealing pass. The case at hand involves tainted gasoline, damaged fuel gauges, 79 class action lawyers and Shell Oil. Shell volunteered to repair the gauges as consumer complaints began, and processed approximately 81,000 claims (see here). The lawyers brought a class action in New Orleans, and reached a settlement with Shell for... Read more →

Docs & Juries

Insurance agents’ medical malpractice insurance clients will be interested to learn that juries more consistently side with doctors than plaintiffs. In other words, the tort system favors the physician. [Bear with us here - we are not buying this.] A recent study in the Michigan Law Review (see here) compared jury verdicts with the outcomes predicted by a set of independent reviewers, and concluded that physicians consistently win the cases they should win, and win about half of the cases they should lose. The studies reveal that juries treat physicians very favorably, perhaps unfairly so. The study concluded that negligence matters. The degree of negligence has a significant impact on outcomes, and weak cases rarely win. The study found that... Read more →

Specialty Insurance Expert

Insurance agents depend on creative and expert insurers to respond (with a quote, not a declination) when presented with their unusual, higher risk submissions. Practitioners know that the majority of insurance written is standard business, but that the specialty (or surplus lines) segment is a significant and important part of the market. A leading specialty insurer is Markel Corp., an extremely well run insurer and the owner of a series of specialty insurance companies. A recent article in the New York Times describes Markel from the investor’s perspective (see here). Their approach has brought good returns to investors over a long period of time, and their strategy, while easy to understand, is difficult to execute well. Like some other insurers,... Read more →

Identity Theft Close to Home

Identity theft (Cyber Insurance) is a significant and growing concern for insurance agents, and not only for their clients. We hear and read about loss of personal data and identity theft every day, such as the massive loss of customer information at TJX (see here, here and here). And identity theft can be costly for companies, as TJX is finding out (see Euclid here). But can it happen to insurance agents? The answer is yes. On May 9, 2006 an Illinois-based insurance broker, an affiliate of Marsh, lost a computer with the names, social security numbers and addresses of approximately 540,000 New Yorkers (more info here, here, here & here). The computer was located a few weeks later, but the... Read more →

Lawsuit Climate

The litigation climate is likely to impact your insurance agency clients’ key decisions, including where to locate, according to a new study. In addition, you might be interested in how your state’s tort system compares to other states’. This information can be found in The 2007 State Liability Systems Ranking Study (see here). Some interesting findings: The most important issues including punitive damage reform, the judicial process, tort reform in general, and the elimination of unnecessary lawsuits. The cities/counties with the least fair and reasonable litigation environment include: Los Angeles, California Chicago/Cook County, Illinois Madison County, Illinois Mississippi New Orleans/Parish, Louisiana Miami/Dade County, Florida The states doing the best job to create a fair and reasonable litigation environment include: Delaware... Read more →

Employers Fear Firing

Insurance agents are offering comprehensive EPL (employment practices liability) insurance to their clients, but according to a recent article it appears that employers fear firing even when a firing is warranted. And with good reason. The Business Week article (see here) chronicles an increasingly hostile legal environment for employers. It has never been easier for U.S.workers to go to court and allege that they've been sacked unfairly. Lawmakers have steadily expanded the categories of workers who enjoy special legal protection Once a case is in court, it's expensive The fear of firing is particularly acute in the HR and legal departments Regular, and accurate, evaluations are critical Fairness in the courtroom is an additional issue: A company can easily spend... Read more →

Disaster Preparation

Insurance agents can point to the recent grounding and subsequent sinking of the cruise ship Sea Diamond in the Greek Isles as a reminder to their clients to practice good risk management by being prepared for the unexpected. More importantly, in planning for disaster, the expected unexpected will not develop as expected. Reports indicate that despite evacuation procedures and some emergency training, the initial response was slow, communications were poor, and there was considerable confusion. We have no idea whether this is accurate. In any case, assuming the owner was adequately insured for the vessel, now in 500 feet of water (at the bottom, not the top), Louis Cruise Lines’ management should be breathing a sigh of relief that there... Read more →

New Business Survival

The odds of a new business surviving its first year are very low, many people incorrectly believe. Starting a new business is not easy. A recent article from Business Week (see here) notes that new business survival rates are actually quite a bit higher than most people think. Of approximately 671,000 new businesses started in 2005: 66% survive the first two years 44% survive the first four years eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We look forward to working with you. Read more →