INSURANCE MARKET UPDATE
Based on the results reported for the first nine months of 2003, 2004 should be "a brief period of time when everything is just right," predicts Robert P. Hartwig, Ph.D., CPCU, senior vice president and chief economist with the Insurance Information Institute. "Pricing will be neither too high nor too low and business and consumer demand for insurance will generally be met with relatively few areas of acute shortage," he continues. "Interest rates will rise but not too quickly. ... For the icing on the cake, the expanding economy ensures that exposure growth will accelerate--meaning that insurers will at least have some opportunity to compete for new business rather than resort to destructive price wars with each other for the same old business. All in all, market conditions could be just right in 2004."
The industry reported its best profit performance in five years in the first nine months of 2003, with net income after taxes reaching $21.1 billion, a dramatic 320.6% increase from the $5 billion through the same period of 2002, according to data compiled by ISO and NAII. Surplus rose 12.1% to $319.9 billion from $285.4 billion at year-end 2002. Improvements in both underwriting and investments spearheaded the recovery. However, Hartwig goes on to warn that the industry is not yet out of the woods.
"[T]he industry's voyage toward recovery has proved to be exceptionally slow, difficult and dangerous, despite pricing and underwriting discipline," Hartwig says. He points out that, in spite of the improvement in the combined ratio to 100.3, that still only resulted in the property/casualty industry providing a return on equity of less than 10%. That compares with 13% to 14% for the Fortune 500. Hartwig says that "more improvement is needed in 2004 and 2005. ... Insurers today need to push their combined ratios down to the low 90s (and keep them there) before they can expect to generate Fortune 500 type rates of return."
In short, what all this means is that 2004 will be a critical year to watch the performance of the property/casualty industry. If underwriting discipline is maintained, then we can anticipate some continuing success in future years. However, if pricing softens ...
Hartford Steam Boiler has property reinsurance program
Hartford Steam Boiler Inspection and Insurance Company introduced a "plug-in" property underwriting program for insurers and alternative risk transfer (ART) organizations. The program provides property reinsurance capacity for all-risk property and equipment breakdown with a turnkey set of underwriting and risk management services. The company offers treaty and facultative, pro rata, quota share, and program business support.
New risk retention group for long term care facilities
A risk retention group, Lewis & Clark LTC RRG, Inc. (L&C), has been formed by 29 long term care facilities to provide liability insurance to long term care facilities in 13 western states. Domiciled and licensed in Nevada, the RRG will write professional and general liability insurance for skilled nursing, assisted living, and independent living facilities on a claim-made form. Defense costs will be included within policy limits. Prior acts coverage will be available to 2000 at additional cost and subject to review of individual applications. The coverage will be offered initially in Idaho, Iowa, Montana, Nevada, Oregon, Utah, Washington, and Wyoming; operations will be launched later in Colorado, Kansas, Nebraska, North Dakota, and South Dakota.
Uni-Ter Underwriting Management Corporation (UUMC) of Atlanta will provide management services, including underwriting, marketing, risk management, claims handling, billing, collection, accounting/financial, regulatory compliance, information technology, and general administration.
Chubb offers personal D&O
The Chubb Group introduced a policy that covers the personal assets of directors and officers when their employer is unable, unwilling, or legally prohibited from funding indemnification. Called D&O EliteSM, the policy offers a dedicated limit of liability that is not shared with the corporate entity. The policy is noncancellable as long as the premium is paid. Coverage is fully severable, so that knowledge possessed by one board member cannot be imputed to another. The policy has no exclusions for pollution, errors and omissions, failure to maintain insurance, or libel/slander or defamation. Insured individuals are allowed to choose their defense counsel. Coverage applies to executives, their spouses or domestic partners, and heirs or estates if they are named as codefendants.
Schinnerer expands college policy to include GL
Victor O. Schinnerer & Company, Inc., has added general liability coverage to EdChoice, its program for small to mid-sized public and private colleges and universities with enrollments of up to 5,000. The GL coverage is available for exposures such as corporal punishment, athletics or sports activities, abuse and molestation, host liquor liability, and limited pollution liability.
The policy's named insured definition includes school nurses, speech therapists, athletic trainers, and physical therapists. Coverage applies to non-owned watercraft up to 50 feet in length, fellow employees, bodily injury, personal and advertising injury for course-related chat rooms and bulletin boards, and specified foreign education activities.
The GL policy is written on an admitted basis and is available in Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Missouri, New Hampshire, North Carolina, Ohio, Pennsylvania, Tennessee, Vermont, and Virginia.
AIG Private Client Group offers collector car coverage
AIG Private Client Group introduced a program for the owners of collector cars. Currently available in California and New York, the program allows collector and regular-use vehicles to be covered under one policy. Developed for high net worth individuals who own vintage automobiles, motorcycles, and other specialty vehicles, the program contains an agreed value provision and allows the insured to choose a repair facility.
Chubb offers new professional E&O policy
The Chubb Group has introduced Chubb PROE&OSM, a new errors and omissions liability policy that will be tailored to meet the individual needs of various professionals. Among the classes to be insured are: advertising firms; Web page designers; auction houses; consultants; financial planners; human resources consultants; management consultants; printers; and public relations firms. Each account will be individually underwritten.
Coverage includes a broad definition of a claim and includes defense for written demands for monetary or non-monetary relief as well as arbitration proceedings. Other features include:
--Spousal liability coverage which helps protect executives' and employees' spouses who are named as co-defendants;
--Severability of exclusions which allows for exclusions to be determined separately for each insured person, and no knowledge is imputed to other insured persons to determine the applicability of exclusions;
--Punitive or exemplary damages are provided under the law that is most favorable to the insurability of these damages in any jurisdiction that has a substantial relationship to the insured, Chubb, the policy, or the claim;
--Subsidiary coverage is automatically included; and
--Electronic services can be included.
GE Commercial increases E&S capacity
GE Commercial Insurance, a division of ERC, has increased its capacity to write umbrella and follow form excess coverage underwritten by its Specialty Excess & Surplus Lines Individual Risk unit. The unit underwrites business through select wholesale brokers. The unit now has capacity for limits of $5 million for both lead and excess umbrella layers.
Classes written in the Specialty E&S Individual Risk Underwriting unit include: agricultural; alarm dealers, installation and service companies; amusement parks; athletic equipment manufacturing; commercial artisan contractors; commercial real estate; component parts manufacturing; consumer products; food processing; habitational; hotels/motels; industrial products manufacturing; restaurants and bars, including liquor; and wholesale distributors.
Chubb establishes new marine operation
Chubb has established Chubb Marine Underwriters within its commercial insurance operations to provide marine products and services to the global insurance market.
Headquartered in New York City, the new unit will provide inland marine and ocean cargo products. It also will provide marine liability insurance in the United States through AXIOM Insurance Management, Ltd., a marine specialty underwriting facility with offices in Atlanta and Seattle. The Marine Services Unit also has been established to work in conjunction with Chubb Marine Underwriters. It combines marine loss control with claim and recovery specialists.
Rich Soja, CPCU, AMIM, ARe, senior vice president, Chubb & Son, is global manager of Chubb Marine Underwriters. Soja points out that Chubb has been providing marine insurance since 1882. "The formation of Chubb Marine Underwriters advances our marine underwriting and service capabilities, while allowing us to remain focused on local agents as well as specialized marine brokers." Agents and brokers will continue to access Chubb's marine products through its branch network in the United States and in nearly 30 other countries. *