Specialty Insurance Blog

Bermuda Market – More Info

Following our recent commentary on the Bermuda market, Benfield has released its quarterly report (see here) on the market. The report notes that Bermuda insurers and reinsurers are maintaining their financial strength and underwriting discipline despite a market that is drifting downward. The consensus view appeared to settle on rates falling by between 5% and 15% overall. An aggregate combined ratio of 87.2% reflected not only a lack of any significant losses but, also reserve releases from all but two BBQ players. Despite a softening in the pricing environment, Bermuda appears well positioned to face the rigours of the forthcoming season. The soft market has arrived, and reserve releases are but one sign. eSpecialty Insurance is your specialty insurance expert.... Read more →

Federal Surplus Lines Bill

The new surplus lines bill, which was just passed in the US House, provides for simplified and consistent surplus lines placements for insurance agents around the country (see here & here). A companion Senate bill has been introduced and is awaiting action. A similar house version was passed last year 417-0. The bill works by defining national standards for how the surplus lines market is regulated by the states, and includes a uniform method for allocating and remitting surplus lines tax. The one-state compliance for multi-state risks provision is an important aspect of the bill. While many states have streamlined the surplus lines process, some have not. And inconsistencies between states’ surplus lines requirements can make it difficult for surplus... Read more →

American Insurance History

As insurance agents and underwriters we tend not to look at insurance with a historical perspective, except to the extent of 3 or 5 years of loss history. Insurance has a long and rich history, and continues to evolve, yet the industry has not done a good job of documenting its evolution for practitioners. A recent article (see here) provides a reminder and a brief historical perspective on insurance and risk management starting with the earliest forms of premium charges and the Code of Hammurabi in 1755 BC, and on to the development of the marine insurance market in London. The article was written by the authors of a book on the history of insurance in America called: Spreading the... Read more →

The Bermuda Market

Not only have insurance agents read about new insurance company formations and additional capital contributions in Bermuda, many are placing coverage with Bermuda-based companies. Bermuda has become a major insurance center, and it continues to grow. A summary of the Bermuda market is published every year by the Bermuda market (see here, go to Bermuda Market, Publications, Bermuda Market Solutions Bood). The combination of the tax advantage of being offshore and the regulatory and service support in Bermuda have resulted in Bermuda’s growth as a major international insurance center. Gross Written Premium for all insurers in Bermuda was $100 billion (yes, Billion) in 2005, and the capital & surplus was $110 billion at year end 2005. Some of the companies... Read more →

Duty to Notify Insurer of Changes

Insurance agents may wonder whether an insured has a duty to notify an insurer of material changes in exposure other than through the normal application process. According to a recent appeals court decision (see here & here) an insured does not. . The case involved a commercial auto policy which was renewed for 9 years with no renewal application requested or provided. During this time the insured owner stopped conducting his business through the company and conducted the business personally. He never notified the insurer, and said the agent never passed along any requests for information from the insurer. An insured was involved in an accident in 2003, and the insurer sought to void coverage due to the failure to... Read more →

Hurricane Regulation

The success or failure of the regulatory approaches utilized in Florida and Louisiana to ease the insurance crisis is critically important to the insurance industry, particularly insurance agents who bear the brunt of communicating the resulting market conditions to clients. We have followed the varying situations in each of these key states with interest, and have noted that each state has taken quite a different path. Last week we noted the shift of hurricane exposure to quasi-governmental entities (see here), and in February of this year noted that Louisiana had taken a different approach by encouraging the private market to provide the solution (see here). An article today in the Shreveport Times (see here) provides a summary and update on... Read more →

Hurricanes & Government Intervention

Earlier this week we noted that insurance agents will be watching closely as the hurricane gets underway (see here). A WSJ article (6/7/07, see here, $$) discusses the shift in hurricane risk from private insurers to government sponsored insurers: Insurers of last resort, generally quasi-governmental insurers, are filling the void left by the private insurers exiting hurricane prone regions. The result is much of the hurricane risk is being indirectly assumed by the general public These insurers of last resort have assumed huge liabilities (more than $650 billion) and do not have significant financial resources. The cost of a significant catastrophe will be paid by all insureds, through assessments, and taxpayers. This system shifts the risk from those who are... Read more →

D&O & Bankruptcy

Insurance agents provide Directors & Officers (D&O) liability insurance to both for-profit (public and private) companies and non-profit organizations, and in many cases do not consider the possibility of bankruptcy. The primary purpose for buying D&O insurance is to protect the personal assets of the Directors and Officers, especially when the organization is not in a position to indemnify the Directors and Officers. Bankruptcy creates additional and complex duties for Directors at a time when the organizational indemnifications are worthless (presumably, there is no money in the company to indemnify the Directors). In these situations the D&O policy can and should provide coverage for the Directors and Officers, but this is not always clear cut. Although rare, sometimes a court... Read more →

Florida Hurricane Season: Where the Rubber Meets the Road

Insurance agents and underwriters, along with many insureds, will be watching closely as the hurricane season gets underway, with an expectation that the projected hurricane activity and severity (see below) will test reforms in Florida. The insurance industry in Florida has undergone significant change in the last year as the State has effectively taken over the cat-exposed business. The impact of this experiment will be felt well beyond the borders of Florida. PCI recently announced the results of a study on the impact of the property insurance reforms enacted in Florida (see here, 5/15/07 news release). The study concludes that the new reforms provide an immediate savings for homeowners by shifting the payment of hurricane losses to households and businesses... Read more →