A View from the Press Box

One of the industry’s most glaring weaknesses is the lack of a high-profile defender to make the case for insurers in good times and bad, but that will no longer be a problem come New Year’s Day, when Robert P. Hartwig takes over as president of the Insurance Information Institute, replacing the retiring Gordon Stewart.

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Recognizing that assessment of risk and capital adequacy is becoming more complex, insurance company rating agencies moved forward this year with development of updated models, standards and approaches–at times drawing fire from carrier executives for going too far. Indeed, there was so much abuse heaped on rating agencies at last month’s Annual Executive Conference for the Property-Casualty Industry in New York that one beleaguered representative from Fitch jokingly identified himself as “one of the official punching bags” of the meeting.

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The $7 billion reinsurance deal between Berkshire Hathaway’s National Indemnity Company and Equitas was the best news for the Lloyd’s market in quite some time. For while Lloyd’s has taken giant steps to restructure its capital base, upgrade its internal management structure and streamline its operations, there’s always been a black cloud looming on the horizon.

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For nearly six years, so-called “alien” reinsurers have been battling to convince regulators to lower their collateral requirements and create a more level playing field with their U.S. competitors. Regulators shocked the industry last June by taking the argument one step further, with a proposal to demand collateral from all carriers—foreign and domestic—according to the financial risk they pose. The big question is, will it pass, as planned, by September?

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While it is rare for the property-casualty insurance industry to mount a united front on almost any controversy, conflict within the business was particularly harsh this year on a number of major public policy debates.Let’s start with the split over a long-term response to catastrophe threats.

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They say politics makes strange bedfellows, but now that Democrats are poised to take control of Congress next week, insurance industry lobbyists might actually find a more receptive crowd on at least one key industry objective on Capitol Hill–TRIA extension.

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Like a shot to the gut, insurers had the wind knocked out of them last month by a potentially monumental decision that many insurer flood exclusions did not, in fact, preclude payment of claims resulting from the failure of levees to protect New Orleans during Hurricane Katrina.

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The controversy over contingency fees grew ugly this year, with some big brokerages calling for an end to the bonus commissions that got them into trouble with regulators in the first place, and independent agents literally telling their bigger brothers to “shut up and take their medicine” without penalizing honest producers.

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I interrupt my presentation of NU’s Top 10 Stories of 2006 to bring you this important news bulletin! Independent agent Thomas J. Crowley contacted NU to warn us that Santa Claus is facing an insurance crisis that could shut down his operation, which is rife with hard-to-place risks–from commercial auto on his sled, to workers’ comp for his elves, to property coverage for his isolated North Pole workshop. Click below to read the full story, and feel free to weigh in on how Santa could get out of this mess in time for Christmas!

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How long will carriers be able to hold out as prices begin sliding down the softening market’s slippery slope? That’s the question on the minds of every underwriter and producer as a perfect storm gathers–with skyrocketing profits and a surprising lack of catastrophes threatening to start another race to the bottom.

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