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Top Quotes of June

From movement on the TRIA front, to a battle between Endurance Specialty Holdings and Aspen Insurance Holdings over the former’s hostile bid for the latter, to a warning from Warren Buffett on the volatility of insuring against hurricanes, the month of June offered up some interesting quotes on key industry issues. 

The month also saw two major P&C insurers —AIG and The Hartford — announcing new CEOs. 

Below and on the following pages, see the top quotes of June.

The Hartford announced earlier this month that CEO Liam McGee will be stepping down after a medical procedure. CFO Christopher Swift will assume the CEO role tomorrow. 

In a comment run in Bloomberg, Swift says, “I want to thank Liam for his leadership. We will remain focused on executing our strategy to deliver greater shareholder value by profitably growing our property & casualty, group benefits and mutual funds businesses, reducing the size and risk of our legacy annuity block and becoming a more effective and efficient organization.”

The FIO received letters commenting on its look into auto-insurance affordability. The FIO initiative was partly driven by concerns that the data collected by the National Association of Insurance Commissioners may not be adequate and that "other data sources will likely be needed," according to a regulatory bulletin from an industry law firm.

But the comment letters themselves were not without some controversy. A remark in the letter from the National Association of Mutual Insurance Companies received an angry response from the Consumer Federation of America.

Robert Detlefsen, NAMIC's vice president of public policy: “If consumers can choose to spend more of their income on alcohol and tobacco, and also more on television sets and cable service, than on automobile insurance, it is hard to make the case that it is difficult for these consumers to afford automobile insurance.”

J. Robert Hunter, director of insurance, CFA: “NAMIC has slandered a large majority of low-income Americans by implying that they spent more on cigarettes and alcohol than on auto insurance when in fact they spent nothing at all on these two products. Many households spend nothing on these products and this abuse of statistics reveals the underlying disrespect that at many auto insurers have for low-income drivers.”  

Insurance Information Institute President Robert Hartwig writes in a story for PC360 about the dangers of post-disaster regulations that change the rules of the game for insurers who write and price risks based on their understanding of what the claims process will be after a loss event.

Hartwig: “After a natural disaster, ‘Monday morning quarterbacks’ both proliferate and pontificate. Some of this can be positive. In fact, staring down disaster and deciding not to be a victim twice often triggers community conversations that lead to infrastructure improvements to help prevent such a scenario from ever getting a replay. 

“However, not all hindsight is helpful, particularly when the rules going into the 'game of risk' are not the same rules in the immediate aftermath. Think about it this way: You’ve got a team that runs drills, budgets for expenses and asks players to follow a certain game plan in preparation for the big football game. But on game day, the team arrived on the field to discover it’s not football they are playing, but lacrosse.”

The House voted along party lines this month to approve language in an appropriations bill that would deny funding for proposed Federal Motor Carrier Safety Administration (FMCSA) rulemaking aimed at raising the minimum insurance required for interstate carriers. The minimum limits have not been raised since the 1980s. Discussions on the amendment led to a disagreement between sponsor Rep. Steve Daines, R-Mont. and Rep. Matt Cartwright, D-Pa., who last year introduced legislation that would increase the current minimum for motor carriers transporting property from $750,000 to $4.422 million.

Daines: “Current proposals regarding the insurance increase call for minimum levels to go up by more than 500%, and this would lead to a significant reduction in insurance availability for motor carriers, especially small businesses. The bottom line is this: the trial lawyers win, the small businesses lose.”

Cartwright called the Daines amendment “a threat to the safety of Americans on the roadway,” and “counter to the goal we all share to protecting and preserving Social Security and Medicare, two vital safety-net programs in this country. It destroys accountability in the safety rules in the trucking industry.”

Speaking at the 18th Annual America’s Claims Event at the Gaylord National Resort in National Harbor, Md., Paul Stachura, chief claims officer and head of global claims transformation for QBE North America addressed the problems the insurance industry experiences when trying to recruit young talent.

Stachura: “We’re having trouble attracting the younger generations to our profession. It isn’t ‘sexy,’ but we can improve the reputation of the industry. Tell them how much we give back to communities and tell them how much they can gain by joining this industry. We need to take their innovation and energy and combine it with our experience to create a dynamic partnership.”

The month began with the Senate advancing a seven-year TRIA extension that the industry largely supported, although there were some concerns. But the industry was more unsure of where the House would come down on the issue. Later in June, the House advanced a five-year TRIA extension out of the Financial Services Committee that was somewhat more favorable for the insurance industry than a three-year extension committee leaders were contemplating earlier. 

Still, the House bill essentially phases out the program over the five-year period for all attacks other than NBCR events. Representatives on both sides of the issue sounded off before and after the FSC vote:

Rep. Jeb Hensarling, R-Texas: “I assure you if I was a committee of one, this is not the bill we would be considering today. For those who think it goes too far too fast—I for one think it goes not very far and too slowly.”

Rep. Randy Neugebauer, R-Texas, speaking to PC360 in the weeks before the vote: “TRIA was meant to be a temporary program. We are transitioning the program in order to transfer risk where it belongs—to the private sector; to the professionals in the insurance industry.” 

“We are trying to respond to what the insurance industry is already telling us, that there is capacity in the private sector to take on more risk.”

Rep. Carolyn B. Maloney, D-N.Y.: “I can’t support a bill that would, I believe, undermine the whole point of TRIA — to make sure that terrorism insurance is readily available, and affordable, to all American businesses.”

Rep. Maxine Waters, D-Calif.: “I believe that this bill will jeopardize a program that has created jobs, spurred economic growth, and protects our nation’s economy from the costs of a terrorist attack." 

“This proposal arbitrarily bifurcates types of terrorist attacks–forcing insurers to pay significantly more should an attack be of ‘conventional’ means, rather than one that is Nuclear, Chemical, Biological or Radiological.” 

Endurance’s hostile bid for Aspen led to heated rhetoric as both sides sent letters to Aspen shareholders asking them to either support or reject proposals from Endurance that would pave the way for its takeover bid.

Endurance chairman and CEO John R. Charman: “We know from our extensive engagement with Aspen shareholders that many have been frustrated by the dismissive and entrenched response of Aspen’s board and management to the significant opportunity for value creation that Endurance has proposed.

“Despite the heated rhetoric Aspen has directed at Endurance, Aspen’s board and management have presented no credible plan to deliver value that can compete with what we are offering. What Aspen’s board and management have failed to achieve for 10 years, we are prepared to deliver today.

“We urge Aspen shareholders to speak forcefully by supporting our two shareholder proposals” of expanding the board and a court-sanctioned scheme of arrangement.

Glyn Jones, chairman of Aspen’s board: “The Aspen board of directors is unanimous in its belief that the Endurance offer significantly undervalues Aspen and fails to reflect the value of our business and strong future prospects. We are highly confident that Aspen can achieve more value for its shareholders—and without the significant risks that are inherent in a merger with Endurance—by continuing to execute its strategic business plan.”

“Beyond the [Endurance] offer’s significant undervaluation of our company, we believe that there is a fundamental strategic mismatch between Aspen and Endurance and that a combination would create significant dis-synergies. 

“Additionally, the 60% stock component of Endurance’s offer is highly unappealing given Endurance’s unattractive business mix, with an over-reliance on the volatile, low-margin and challenged crop-insurance business and a dependency on reserve releases to fuel earnings.

“We urge shareholders not to tender their shares into Endurance’s offer.”

Luis A. Aguilar, an SEC commissioner since 2008, said June 10 at the New York Stock Exchange that many corporate boards are not taking the proper steps to address cyber-security issues.

Aguilar: “Given the significant cyber attacks that are occurring with disturbing frequency, and the mounting evidence that companies of all shapes and sizes are increasingly under a constant threat of potentially disastrous cyber attacks, ensuring the adequacy of a company’s cyber-security measures needs to be a critical part of a board of director’s risk-oversight responsibilities.”

But he says “evidence suggests that there may be a gap that exists between the magnitude of the exposure presented by cyber risks and the steps, or lack thereof, that many corporate boards have taken to address these risks.”

Bond buyers appear undeterred by warnings from Warren Buffett about the volatility of the weather. A Bloomberg story says demand for notes linked to insurance against hurricanes and other natural disasters is prompting investors to accept the lowest relative yields in almost a decade for this time of the year. Buffett, though, said June 9 at the Edison Electric Institute’s annual convention in Las Vegas that Berkshire Hathaway Inc. is avoiding writing hurricane insurance in Florida because premiums have been pushed too low.

Buffett: “The hurricane does not know the rate that was charged for the hurricane policy, so it’s not going to respond to how much you charge. And if you charge an inadequate premium, you will get creamed over time.”

Earlier this month, AIG announced Peter D. Hancock, currently CEO of AIG Property Casualty, will assume the role of AIG CEO in September. He succeeds Robert Benmosche, who was named CEO in 2009 as the insurance giant sought to repay the federal government for its 2008 bailout. AIG repaid its debt in 2012. 

Hancock: “I am deeply honored to take on this responsibility as our entire organization unites around a commitment to excellence in every aspect of our work. Under [Benmosche’s] leadership, AIG has re-emerged from crisis as a pre-eminent leader in the global insurance industry. In just under five years, Bob transformed AIG’s culture into one that fosters empowerment and tenacity, reinvigorating our employees around the world and enabling them to achieve the impossible.”

Jim Auden, managing director at Fitch, speaking to what Hancock will bring to the table as CEO: “He’s made a lot of steps with the P&C operations,” Auden says. “They’ve done a lot to really adjust the portfolio and bring in more technology and infrastructure and more sophisticated pricing and underwriting methods that should help them get to a better underwriting footing in the future.”

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