Bermuda Brokers Unsure Of Probe Impact

By Mark E. Ruquet

NU Online News Service, Nov. 5, 11:20 a.m. EST, NewYork?A panel of Bermuda insurance executives said theywere unsure what the fallout will be from the contingency fee probein the U.S., but one ventured that hard work will be required tokeep accounts at renewal time.[@@]

The executive's observations were part of an educational panelon the Bermuda markets held during the annual ProfessionalInsurance Wholesalers Association of New York State, Inc.'s annualconference held yesterday in Brooklyn, N.Y.

During a question and answer period, Shannon Totten, vicepresident at Endurance Specialty, said that there could be somefallout from the contingency fee investigation, but what form thatwould take remains unclear.

Endurance, whose major brokerage business comes from Marsh andAon, could see some problems on renewal business, but even more ofa concern will be new business that could go elsewhere if clientsmove business to other brokers.

"We plan to hit the pavement hard," Ms. Totten said, as renewalscome around.

Marsh's parent company, Marsh & McLennan, was sued by NewYork's Attorney General Eliot Spitzer over charges of bid-riggingand steering insurance contracts to insurers with high payingcontingency fee arrangements. Aon is under investigation by Mr.Spitzer.

Matthew Meyer, vice president/general casualty manager withAllied World Assurance Company, said that questions could alwaysarise over the steering of business toward profitable commissions.He said he did not have an answer on how to prevent that fromhappening.

Lars Bergquist, executive vice president at Risk SpecialistsCo., Ltd., said his firm does not pay contingency fees and did notknow what affect the probe would have.

Both Risk Specialists and Allied World Assurance are Bermudainsurers created after the Sept. 11 terrorist attack in response tocapacity issues the industry feared could envelop it as theindustry dealt with the volume of claims, the executives said. Thecreation of these carriers involved substantial investments fromMarsh and Aon, they added.

Ms. Totten said that if brokers were unable to make investmentsin new companies after another catastrophic event, she wasconfident there would be enough investors available to create newcapacity.

Both Ms. Totten and Mr. Meyer said that Bermuda would continueto offer terrorism coverage, as it has in the past, should the U.S.not renew the Terrorism Risk Insurance Act for 2005.

On the question of premium pricing, Ms. Totten said pricingremains flat with some increases depending on the specific line ofbusiness.