The depressed economy has good and bad news for workers'compensation insurers, said the chief executive officer of theNational Council on Compensation Insurance at the group's annualseminar. The good news is there will be fewer and less costlyinjuries, but the bad news is there will be fewer premiums written,said Steve Klingel, NCCI president and CEO.

Klingel, basing his remarks on data from previous recessions,said insurers' premiums will be affected by smaller payrolls withfewer workers to insure. The greatest impact will be felt byinsurers whose business comes from the more affected sectors of theeconomy.

The hardest-hit sectors, he said, will be the manufacturing andconstruction sectors. Klingel said as construction slows, compinsurers will see fewer hurt workers from an industry thatgenerally tallies more severe and costly injuries.

There also will be a drop in injury frequency caused by the factthat fewer inexperienced workers will be arriving on the job, saidKlingel.

Severe weather over the Mother's Day weekend spurned a number ofkiller tornadoes that could qualify for the Insurance ServicesOffice catastrophe designation, the firm reported.

Gary Kerney, assistant vice president for Property ClaimService, a subsidiary of ISO, said the company is examining thestorms in all the affected states. “We likely will be assigning aserial number to the recent tornadoes but are currently gatheringinformation from other states such as Kansas, Oklahoma, Missouri,Texas, and Georgia in order to assess clearly all of the severeweather situations.”

PCS rates an event as a catastrophe when it impacts asignificant number of insureds and inflicts $25 million in damage.The storm front over the Midwest destroyed homes, knocked outpower, and reportedly killed as many as 21 people throughout theregion.

In terms of fatalities, the worst hit was Missouri, where thestate's emergency management agency reported at least 14 peopledied in the southwestern portion of the state.

Barry County appeared to be the hardest hit with up to 175buildings affected by tornadoes and a dozen destroyed. Most of thedeaths occurred in Newton County, where 12 died.

A modeling firm weighed in with estimates of earthquake damagein China, which it said created property losses of between $10billion and $15 billion, while an insurance executive said it couldmean heavy losses for reinsurers.

Risk Management Solutions, based in Newark, Calif., said itspreliminary estimates included infrastructure damage andinterruption to economic activity. The firm held off any estimateof insured losses.

Earlier, AIR Worldwide in Boston said the insured loss possiblycould hit $1 billion and other losses would be around $19 bil-lion,and EQECAT in Oakland, Calif., which has not yet figured insuredloss, said economic damage from the quake probably will not exceed$75 billion.

During a media briefing in New York, William R. Berkley, chairand chief executive officer of W.R. Berkley Corp., speculated someof the world's largest reinsurers will see significant losses fromthe China earthquake. “My guess is [they] will have losses wellinto the hundreds of millions because of this earthquake–more thanthey have made in all the time they've been in China,” he said.

The Hartford Financial Services Group Inc. reportedfirst-quarter net income fell 83 percent, resulting primarily from$648 million in net realized capital losses, but underwritingdelivered results above expectations. Included in the capital loss,the insurer said, is a $220 million charge related to theimplementation of new accounting standards.

Quarterly net income dropped by $731 million to $145 million,off $2.25 a share to 46 cents a share. Property/casualty operationswritten premiums were down one percent to $2.6 billion comparedwith the first quarter of 2007, producing operations net income of$326 mil-lion, off $135 million from the same period in 2007. The2008 results include $99 million of net realized losses. Despitethe losses, the combined ratio improved one point to 87.8.

In other operating segments, personal lines written premiumswere $936 mil-lion, flat compared with last year's numbers, with acombined ratio of 89.4. Small commercial grew $3 million to $743million with a combined ratio of 82.7. Middle market dropped $9million in written premiums to $743 million. Specialty commercialinsurance was down eight percent to $357 million and a combinedratio of 88.

Progressive Corp. warned its stockholders a “mini-tender offer”by Toronto-based TRC Capital Corp. for five million of its sharesis more than $2 below the stock's closing price.

The insurer indicated the Securities Exchange Commission (SEC)issued an investor alert regarding such offers, noting “somebidders make 'mini-tender' offers at below-market prices, hopingthey will catch investors off guard if the investors do not comparethe offer price with the current market price.”

TRC was offering $16.60 per share, which Progressive said wasmore than four percent below the per share closing price of $17.37on April 15, the day before the mini-tender offer was commenced,and approximately 11 percent below the preceding Friday's $18.64per share closing price.

Progressive reported it had 677.5 million shares of common stockoutstanding, meaning the TRC offer would be less than one percentof the company.

A California court denied a request by Allstate to stay aregulator's order the firm cut its auto insurance rates by 15.9percent. Insurance Commissioner Steve Poizner reacted by issuing astatement calling the ruling by Superior Court Judge Peter Busch inSan Francisco “a $250 million victory for consumers in Californiaand for Allstate customers.”

Allstate said while disappointing, the ruling “has no impact onthe merits of Allstate's appeal, and we believe we ultimately willwin the appeal.”

Poizner said the court, by denying a stay, had rejected aneffort to delay immediate savings to consumers pending the courtaction Allstate brought challenging his department's determinationthat Allstate's existing passenger automobile rates are 15.9percent in excess of what the law permits.

The Financial Industry Regulatory Authority is advisingconsumers to look to see whether their mutual funds or other fundshave invested in bonds linked to pandemics and othercatastrophes.

“Event-linked securities currently offer higher interest ratesthan similarly rated corporate bonds,” officials at FINRA,Washington, wrote in an investor alert. “But if a triggeringcatastrophic event occurs, holders can lose most or all of theirprincipal and unpaid interest payments. This is precisely whathappened to funds that owned bonds linked to U.S. hurricane riskwhen Hurricane Katrina struck.”

Catastrophe bonds pay higher interest rates than similarly ratedtraditional corporate bonds, and some argue investors areovercompensated for the risk they assume by buying CAT bonds, FINRAofficials wrote. In addition, CAT bonds perform differently thantypical stocks and bonds perform in a bear market.

Supreme Court justices are not sure what to tell lower courtsabout how to review potential conflicts of interest that mightaffect disability benefits decisions. The justices heard oralarguments in Metropolitan Life Insurance Company et al. vs. WandaGlenn, a case involving questions about a benefits determinationmade by a company that served both as the insurer of anemployer-sponsored group disability plan and as theadministrator.

The plan was governed by the Employee Retirement Income SecurityAct. Justices told the lawyers for the parties they are uncertainabout what the lawyers want them to write in their opinion.

Chief Justice John Roberts noted the Supreme Court repeatedlyhas emphasized the importance of employer-sponsored benefit plans.“We want to encourage people to set up ERISA plans,” JusticeRoberts said.

The Glenn case deals solely with how the courts should review abenefits determination and not with the merits of the underlyingdisability claim.

Federal regulation of the U.S. insurance industry probably iscoming, but it may not bring quick benefits to insurers or toconsumers. Analysts with Fitch Ratings made that argument in ananalysis of federal insurance regulation proposals.

“Fitch believes increased federal regulation of the insuranceindustry is inevitable in the long term,” the analysts wrote.

The Treasury Department's recent declaration of support forgiving insurers the option of choosing between state and federalregulation makes passage more likely “than at any point in recenthistory,” according to Fitch.

Rate reductions are expected to continue for U.S. reinsuranceaccounts with midyear renewals unless catastrophe losses increasein the near term, reinsurance brokerage Guy Carpenter reported. Thebrokerage issued a report on the reinsurance market titled “TheMarket's Mixed Signals: Reinsurance Renewals at April 1, 2008,”which covers the reinsurance market for the United States, Japan,Republic of Korea, and India.

For the United States, the report said rates continued theirdecline at April 1 renewals, sustaining what was seen for Jan.1.

The report said looking ahead to midyear renewals, the currenttrends indicate the declines will persist, assuming losses remainlow. However, the report cautioned if predictions of anabove-average hurricane season come true, “the industry's two-yearstring of good fortune may come to a close.”

Liberty Mutual Group announced it has reached an agreement toacquire Seattle-based insurer Safeco Corp. in a transaction valuedat $6.2 billion. Liberty Mutual said it will pay $68.25 per sharein cash to become the fifth-largest U.S. property/casualty insurer.As of 2007, the combined 2007 direct written premium of the firmswas $26.1 billion.

The proposed transaction, approved by the boards of bothcompanies, is subject to approval by Safeco's shareholders as wellas regulators.

The transaction is expected to be closed by the end of the thirdquarter and is not subject to financing contingencies.

Liberty Mutual Group currently is the sixth-largest U.S. P&Cinsurer, based on the company's 2007 direct written premium of$20.2 billion, while Safeco had 2007 direct written premium of $5.9billion.

When the transaction is completed, Liberty said Safeco willbecome part of the group's Agency Markets business unit, which hadrevenues of $5.6 billion in 2007. Combined, the organization willbe represented by about 15,000 independent agencies.