INSURANCE MARKET UPDATE
"Reinsurers today like specialties, coupled with due diligence and participation, a carriers' sign-on risk of 20% to 30%, actuarially supported rates, balance in the reinsurance layer and profit margins in the 10% to 20% range," C. Douglas Bennett told attendees of a reinsurance panel at the first Mid-Year Member Meeting of the Target Markets Program Administrators Association in Lafayette Hill, Pennsylvania. Bennett, who is with Benfield, Inc., added: "There is good appetite among reinsurers now for specialized excess and surplus lines (E&S), inland marine, builders risk and miscellaneous professional liability. There is a more limited appetite for workers compensation, long-haul trucking, auto, BOPs, D&O, and umbrella coverages."
Joining Bennett on the Program Business Reinsurance Panel were: James Buysse, Benfield, Inc.; Jacques Q. Bonneau, ACE Tempest Re USA, Inc.; and Jonathan P. Ritz, United National Group.
Buysse noted: "Reinsurers will support high quality program business. Specialization by line or class is the key to survival."
Bonneau said: "In today's market there are only 40 reinsurers compared to 130 in 1982." Because of this, he added, "gambling on interest rates is a thing of the past." Reinsurers are looking for business that produces an underwriting profit. "With pressure from Wall Street and the impact of Sarbanes-Oxley, reinsurers are pushing documentation and keeping their ducks in a row. Reinsurers are looking for people who know their business and the numbers."
Ritz added: "In 2001 and prior years, underwriters focusing on production created a disaster in the reinsurance market. Today, the focus is on profits on all levels and a stable environment with primary carriers taking bigger risks."
At the session on Technology Decisions in Program Business, Greg Thompson, president of Thompson Insurance Enterprises, Inc. (THOMCO), told attendees that their technology purchase decisions should be based on due diligence and networking to know what's out there. He cautioned them to "beware of the demo" and watch out for promises predicated by "soon" or "almost." More effective than a demo is an on-site installation visit to determine how a vendor delivers on commitments and the frequency and quality of updates.
In the preparation and training phase, the buyer should "hold the vendor's feet to the fire, including withholding money as a last resort, in obtaining products and services."
At a roundtable session called "Making Money Beyond Commissions," opportunities discussed included establishing premium financing companies, loss control services, claims management services, filing service fees, forming agency captives, and forming risk retention groups for casualty business.
AIG introduces new excess program
AIG Excess Casualty, a division of American International Group, Inc. (AIG), recently introduced AIG ExcessPrimeSM, a $25 million commercial liability program that provides insureds with additional excess limits. AIG ExcessPrime is designed to sit in excess of $50 million lead commercial umbrella insurance. To qualify, an AIG member company must currently underwrite the existing lead commercial umbrella layer. The program offers occurrence and claims-made forms. When an insured submits an application for lead umbrella coverage, the AIG Excess Casualty underwriting team will automatically provide a quote for AIG ExcessPrime, eliminating the need to submit multiple applications for various coverages.
For more information, contact Melena Ortega at (212) 458-1928 or Melena.Ortega@aig.com.
Cat bond market grows 42%
The catastrophe bond market experienced substantial growth in 2003, as total bond issuance reached $1.73 billion, up 42% from the 2002 total of $1.22 billion, according to findings from a new joint study by Guy Carpenter & Company, Inc., and MMC Securities Corp. The study also indicated a trend toward larger bond transactions, with an average issue size of $217 million in 2003, up from $174 million in the previous year. The largest transaction to date, the three-tranche Zenkyoren Phoenix issue valued at $470 million, took place in 2003. The five-year transaction covers potential losses from second-event occurrences of major earthquakes and/or typhoons in Japan. The study notes that earthquakes rank the leading risk. California earthquake, followed closely by Japan earthquake, were identified as the perils and geographies most securitized in 2003, followed by East Coast hurricane and European winter storm.
"Catastrophe bonds represent a relatively new and important source of capital for insurance and reinsurance companies with large risk transfer needs," said Managing Director Christopher McGhee, head of Guy Carpenter's Investment Banking Practice and Managing Director of MMC Securities. "The expanding and increasingly sophisticated institutional investor base for these securities, combined with the decreasing costs of issuing them, may help drive growth in this market."
Copies of the study, Market Update: The Catastrophe Bond Market at Year-End 2003, are available for download at www.guycarp.com. For printed copies, contact Guy Carpenter at marketing@guycarp.com.
Chubb offers intellectual property handbook
Chubb is offering a new Intellectual Property, Privacy and Communications Risk Management Handbook, designed to assist companies of any size in evaluating and managing their risk, focusing on copyrighted content, trademarks, trade secrets, patents, privacy and defamation. The handbook uses a checklist format that lets management determine areas of strengths and weaknesses, and provides practical recommendations to help reduce or eliminate the exposures identified. A glossary of terms defines the words and phrases commonly used in the world of intellectual property. Chubb-appointed agents may order the handbook as they do other materials from Chubb.
CNA, Aon announce P-C agency E&O program
CNA insurance companies and Affinity Insurance Services, a subsidiary of Aon Corporation, jointly introduced Agency AdvantageSM, a professional liability insurance program for property and casualty agencies that write up to $20 million in gross written premium annually. Optional coverage is available by endorsement for the sale of life and health insurance and other financial products. Liability limits start at $100,000 and range up to $5 million aggregate. Retentions are available from $1,000 to $50,000. The policy is a claims-made and reported form.
The policy covers the amount of damages an agency is legally obligated to pay as a result of a wrongful act in the performance of professional services. In some circumstances it provides defense coverage for fraud and claims arising out of an insured's placement of coverage with an admitted carrier that later declares insolvency. Insureds include independent contractors as well as current and past employees. Program availability is subject to state insurance department approval.
For more information, call (866) 461-1228 or visit the policy Web site (www.agency-advantage.com).
AIG offers school bus umbrella
The AIG Companies introduced BusPlusSM, an umbrella liability package that provides excess auto liability, sexual misconduct liability, and terrorism coverage for schools, municipalities, and private bus companies responsible for the transportation of children. Limits are available up to $25 million.
For more information, contact Ben Beauvais at (617) 330- 8412, or e-mail BusPlus@aig.com.
HSB offers farmers equipmentbreakdown package to other insurers
The Hartford Steam Boiler Inspection and Insurance Company (HSB) introduced an equipment breakdown package that other insurers can incorporate into their farmowners policies. Insurers also can use HSB's specialized services. Traditionally HSB has provided individual equipment breakdown policies to farms and ranches through independent agents and brokers.
Equipment breakdown insurance covers risks not addressed in standard farm policies, including damage caused by mechanical breakdown, electrical arcing and short circuits. It can also pay for spoilage, lost farm income, and extra expenses that result from equipment breakdown. Covered equipment includes electronic systems, deep well pumps, motors, electrical equipment, refrigeration, environmental controls, compressors, and other types of equipment. The coverage does not apply to combines, tractors, and other vehicles or risks commonly protected by property insurance.
For more information, visit the insurer's Web site (www.hsb.com).
Arch has new D&O products
Arch Insurance Group introduced three Side-A policy forms that provide specialized directors and officers coverage. The policy forms have separate limits of liability to cover an individual board member's personal assets if an organization's primary D&O coverage runs out.
For more information, visit the insurer's Web site (www.archinsurance.com).
AIG launches venue liability coverage
The AIG Companies has introduced Venue Liability ProtectorSM, which is designed to address the casualty risks of public venues and the accident risks of patrons at performance and hospitality events. The product's general liability coverage includes accidental death and dismemberment for patrons of venues such as nightclubs, sports stadiums, museums, and dinner theaters. Risk management services are offered to help insureds reduce liability exposures and create a safer environment for the public.
General casualty limits up to $1 million are available in primary coverage and excess limits up to $25 million. Up to $10 million in aggregate AD&D insurance is also provided.
For more information, contact Deborah Coleman at (214) 932-2163 or e-mail VenueLiability@aig.com.
The Hartford opens street cleaners program to all of its agents
The Hartford Financial Services Group, Inc., opened its street cleaners insurance program to all independent agents who do business with the company. The Clean Streets Insurance (CSI) Program, introduced in 2002, is designed for contractors whose businesses involve street sweeping operations, construction sweeping, cleaning of parking lots, and catch basin cleaning services.
The policy includes a per-project aggregate that provides a separate limit of liability for each project and an auto lay-up credit that provides an up-front credit for companies located in the snow belt states that refrain from using their sweeping equipment during the winter months. The program includes workers compensation with the insurer's return-to-work services and its Property Choice endorsement to cover buildings and business personal property. Umbrella coverage is also available. All coverages are individually underwritten and may not be available in all states.
For more information, Hartford agents may call (800) 301-6173 or e-mail Jim.Doherty@thehartford.com. Non-Hartford agents may call Scott Cerosky at (877) 887-9337 or visit the CSI Web site (www.insuresweepers.com) *