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.
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.
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.
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.”
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:
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.
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.”
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.”