Hannover Re's top executive cites economic conditions and higher cost of capital for stricter terms, price hikes for its move out of U.S. property-catastrophe.

By CYRIL TUOHY, managing editor of Risk & Insurance®

Warning to reinsurance buyers: Hannover Re will not participate in June 1 and July 1 renewals if all you're looking to do is reinsure the U.S. property-catastrophe slice of your portfolio with the German-based reinsurance giant.


That was the message of Hannover Re Executive Board Chairman Wilhelm Zeller last week, during a conference call with reporters on the property-catastrophe reinsurance market.

"We will not reinsure buyers looking for property-catastrophe only," said Zeller. "We will reward buyers who reinsure the entire portfolio with us."

Hannover Re has 525 clients in the United States.

Though just "a handful" of Hannover's 525 U.S. clients look for property-catastrophe coverage only, these clients typically require the lion's share of the reinsurer's capacity, Zeller said, and that capacity will be allocated to those cedants that reinsure big chunks of their coverage portfolios with Hannover Re, not just their property-catastrophe exposures.

The reason for the blunt message was simple: The cost to Hannover Re to reinsure its risks in the retrocessional market has gone up, said Zeller. In addition, reinsuring U.S. property-catastrophe risk only, without the hedge offered by a diversified risk portfolio, has always been a money-losing proposition.

Reinsuring property-catastrophe risk in Europe and the rest of the world outside of the United States remains profitable, said Zeller.

SIMILAR TO 2006

He added that Hannover Re would impose rate increases on June and July renewals similar to levels buyers saw in 2006. In addition, Hannover Re will look to reinsure risks in regional and superregional coverage programs rather than risks in national programs.

If the reinsurer can't get what it believes to be a fair price to reinsure a client's property-catastrophe risk, Zeller said, then Hannover Re will consider investing in alternative reinsurance strategies such as catastrophe bonds and insurance-linked securities.

"If we can't get the rate in the traditional market, which we think we need then we will diversify capacity to insurance-linked securities," he said.

The company, which has set aside $200 million to invest in these types of securities, won't hesitate to increase its ILS budget, he said.

After five or six months of dormancy in the second half of 2008, the market for catastrophe bonds, a type of insurance-linked security, is showing signs of life, said Thomas Holzheu, senior economist for Swiss Re Economic Research & Consulting.

"The fact that we've seen three bond issues in the past two or three weeks shows some confidence is coming back," he said. "Some of the technical issues have been resolved, and the potential is there. Demand is there from sponsors to place some of the bonds, and there's dedicated capital that wants to invest in this space."




March 23, 2009

Copyright 2009© LRP Publications

Risk and Insurance

Report says insurers are tops in the financial sector with their lobbying totals. What is the industry getting for its money?
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

Insurers dropped about $1.1 billion to lobby on Capitol Hill in the last decade. That's the most out of any sector in financial services, the other sectors being commercial banks, securities firms and accounting firms, according to data in a March report from an organization called Wall Street Watch.


The industry dispatched 1,219 individual lobbyists in 2007 alone, nearly one-third out of the total 2,996 guns hired by financial services interests. It also contributed more than $220 million to federal campaigns, out of the total $1.738 billion given by financial services as a whole.

These figures do not surprise some familiar with how Washington works.

"They're pouring tons of money into the political process," said Mike Ferguson about insurers. "They are clearly active, and they are clearly connected and participate fully in the political process."

Ferguson is chief operating officer of the Self-Insurance Institute of America Inc., an organization that represents employers and vendors in the alternative risk transfer industry. Incidentally, when speaking with Risk & Insurance®, Ferguson was attending a SIIA meeting in Washington, D.C., where members held more than 300 congressional appointments.

"We're hot on the scene," he said, though he added that the ART industry needed to catch up with the traditional insurance market's lobbying effort. On certain issues--such as healthcare or risk retention groups--carriers "certainly are not going to be looking out for employers," he said, either out of different interests or simply indifference.

"Regarding our property and casualty insurance lobbying activities, we work hard to advance public policy positions that promote competitive insurance marketplaces," said Jeffrey Brewer, spokesman for the Property Casualty Insurers Association of America.

P/C SUCCESSES

Some property/casualty insurers might chafe at the notion that they're putting a full-court press on Congress. Bob Detlefsen, vice president of public policy at the National Association of Mutual Insurance Companies, made it clear that, if one were to parse those numbers, it probably would turn out that health insurers paid for most of that lobbying, not the P/C side--by factors of "some magnitude."

(The Wall Street Watch report did not break out separate numbers for the P/C, life and health sides of the industry.)

Yet, P/C carriers did have reason to lobby and be involved in lawmaking in the last decade.

"The thing that's probably been most important to us in the last five years was the terrorism insurance issue," he said, noting how insurers worked to get the Terrorism Risk Insurance Act passed following Sept. 11, 2001, and worked to get it extended in 2005 and 2007.

Another successful goal: the U.S. Class Action Fairness Act of 2005, which gave federal courts more jurisdiction over class-action lawsuits.

"Insurers were very much involved in that," Detlefsen said.

And let's not forget the teeny tiny issue of the optional federal charter, which if passed would theoretically allow carriers to choose a federal regulator instead of being governed by today's state-based regulatory system.

The federal charter has been a big target of dollars and has divided the industry's lobbying efforts. NAMIC opposes it, said Detlefsen, while other industry groups like the American Insurance Association support it. (The AIA declined to participate in this article.)

MONEY'S WORTH?

While some might wonder whether the insurance industry has gotten its $1.1 billion's worth, more spending could be needed in the near future. The main thrust of the Wall Street Watch report is to suggest that financial services firms lobbied for regulatory and legal changes that made their lives easier in the 1990s and 2000s ... but led to the financial collapse. (The title of the report is "Sold Out: How Wall Street and Washington Betrayed America.")

One such regulatory/legal change was the 1999 repeal of the Glass-Steagall Act, an action which, according to the report, large diversified insurers argued for along with the rest of the financial sector.

But now that the sky has fallen, the entire sector will face the backlash of increased regulation. More lobbying dollars might be needed to keep the screws from being tightened too much.




March 17, 2009

Copyright 2009© LRP Publications

Risk and Insurance

INFORMATION

AMAXX RISK SOLUTIONS released two new workers' comp guide books for employers. The first is titled "How to Manage Your Workers' Compensation Program and Reduce Your Costs 20% to 50%" and covers how to develop a cost-containment program. The second publication is titled "Facilitator's Guide: How to Implement a Workers' Compensation Management Program" and also discusses cost-containment programs. They can be ordered online.

SURESCRIPTS, formerly known as SureScripts RxHub, the national electronic prescribing network, launched an e-prescribing Web site called the E-Prescribing Resource Center. It's designed for payers, providers and policymakers, among others.



LIBERTY MUTUAL published a report and Web site for benefits and HR managers about best practices for managing employee absences, based on findings from meetings sponsored jointly with the Disability Management Employer Coalition.

TRAVELERS launched an enhanced Risk Control Web site for customers and agents, providing easier access to industry-dedicated risk management tools. These include TravSources, collections of safety and risk management resources in the Risk Control Customer Portal.

COVERAGES

THE HARTFORD introduced first-party data privacy expense coverage and cyber extortion expense coverage to its FailSafe suite of technology liability coverages. The data privacy expense coverage pays for actual expenses incurred as a result of a policyholder's negligent acts, errors or omissions that result in the improper dissemination of nonpublic personal information, or a breach or violation of data privacy laws. The cyber extortion expense coverage addresses expenses incurred by a policyholder in the event of an extortion threat to cause an actual interruption, suspension or failure of the company's computer system.

HEALTHMARKETS INC. now offers CoverFirst: A Scheduled Benefit Plan and the ProtectionPlus PPO Plan to consumers. The North Richland, Texas-based health insurer intends the plans to provide personalized health insurance to individuals, families and the self-insured, who are under increasing pressure due to increased unemployment levels and the erosion of the employer-based healthcare system.

DARWIN PROFESSIONAL UNDERWRITERS, a member company of the Bermuda-based Allied World Assurance Co. Holdings Ltd., rolled out its new U.S. admitted, standard market Lawyers Professional Liability coverage, which is designed for small to midsize firms with one to 25 attorneys, annual revenues of $50,000 and above, and all practice areas.

SOLUTIONS

Nashville-based NTELAGENT INC. released a Web-based insurance verification tool, as an added feature to its Self-Pay Management System. The new tool provides real-time insurance and benefits information at the point of service, allowing healthcare registrars and financial counselors to know what to do and what to say to each patient.

THE HARTFORD made nurses on call a standard claims service for all new short-term disability clients with 50 or more workers. This service will also be rolled out to existing clients over time. Nurses will handle the intake of claims, and automatic triggers in the insurer's claims system also will prompt clinical reviews during workers' recovery.

AON CORP. and CROWE PARADIS SERVICES CORP. teamed up to deliver a one-stop compliance solution for Medicare Secondary Payor. The solution includes access to Crowe Paradis' MSP Navigator Product, as well as legal, medical and IT expertise.

CDS BUSINESS MAPPING LLC added foreclosure monitoring to its RiskMeter Online service. With the submission of an Excel file, clients can then see flagged all property policies that are in the foreclosure process.


March 17, 2009

Copyright 2009© LRP Publications

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