To follow up on my post about Marsh hoping for new revenue from contingent commissions (here), Willis CEO Joe Plumeri spoke out in a story (story here) saying that it's unfair that only certain brokers are prohibited from taking these commissions while other brokers and agents are free to do so.
Mr. Plumeri believes that transparency is a competitive advantage for Willis and would like to see these fees abolished for all brokers.
In the UK, risk management association AIRMIC took one of its strongest positions on the subject (story here) calling for automatic disclosure. Currently if asked brokers must disclose, but AIRMIC is calling for disclosure even when not asked by clients.
The issue has been addressed by the FSA, the regulator for financial services including the insurance industry, but the latest position seems to indicate that the market should decide. The association of brokers (BIBA) has unsurprisingly agreed that regulation is not required.
If AIRMIC didn't stand up to take this position and raise awareness to the FSA, nobody would.
Showing posts with label AIRMIC. Show all posts
Showing posts with label AIRMIC. Show all posts
Tuesday, 15 July 2008
Thursday, 10 July 2008
Marsh settlements - closure?
Two stories in the news about Marsh this week caught my eye.
First was Advisen Senior Legal Analyst Anne Wallace's summary of an update to one of the nearly 9,000 cases in Advisen's large loss database of litigation which talks of the closure or final settlements stemming from the Spitzer investigation:
Second was the story by Liam Pleven of the Wall Street Journal (story here) which talks about how authorities in NY are reconsidering the settlements and opening the door to potential reinstatement of contingent commissions in some form. Liam's articles states how Marsh has a lot riding on this.
So is it closure? With European brokers reinstating these fees at 2.5% of premium and the EU to review this and potentially New York reconsidering, could we see these come back? I know our friends at AIRMIC and RIMS will have a lot to say about this, or should.
To subscribe to our alerts on this and similar litigation e-mail me or call +1.212.897.4820.
First was Advisen Senior Legal Analyst Anne Wallace's summary of an update to one of the nearly 9,000 cases in Advisen's large loss database of litigation which talks of the closure or final settlements stemming from the Spitzer investigation:
On July 3, 2008, attorneys for Marsh filed a Settlement Agreement and Brief in support of settlement of the Multidistrict Litigation entitled “In Re Insurance Brokerage Antitrust Litigation” filed in 2004.
This action alleged that insurance companies and insurance brokerage firms worked with one another to allocate customers and markets resulting in charging and collecting inflated premiums from policyholders.
The district court dismissed plaintiffs’ federal antitrust and RICO claims in the commercial case. Plaintiffs’ third attempted appeal has been withdrawn in favor of this settlement.
This Settlement is funded by the undistributed remainder of the earlier NYAG settlement, which totals about $69 million. $62 million will form the Litigation Settlement Fund; $5 million of this fund will be to resolve state claims. The remaining $7 million will be available to Marsh to settle the remaining “tag along” cases.
All parties have agreed with this settlement and set a final fairness hearing date of August 8, 2008.
When settlement is approved, this will bring to a close a large chapter in this 4 year saga for the insurance industry.
The class for this settlement does not include any valid “opt-out” plaintiffs or any party that has benefited from any prior “actual or threatened or other proceeding…concerning their purchase of Insurance, including but not limited to any Participating Policyholders in the NYAG Settlement Agreement”.
The class plaintiffs have previously settled with both the Zurich and Gallagher Defendants for $121.8 and $28 million respectively.
Second was the story by Liam Pleven of the Wall Street Journal (story here) which talks about how authorities in NY are reconsidering the settlements and opening the door to potential reinstatement of contingent commissions in some form. Liam's articles states how Marsh has a lot riding on this.
So is it closure? With European brokers reinstating these fees at 2.5% of premium and the EU to review this and potentially New York reconsidering, could we see these come back? I know our friends at AIRMIC and RIMS will have a lot to say about this, or should.
To subscribe to our alerts on this and similar litigation e-mail me or call +1.212.897.4820.
Tuesday, 24 June 2008
Report from AIRMIC: The Global Pain of Tax on Premiums
Cargill is the second-largest private company in the US and operates in 66 countries. David Ketley, Cargill’s UK risk manager, explained how even the best of best efforts result in less-than-perfect compliance.
Every country has rules about what tax on premium is due, who has to pay it, what filings are required and when they are due. These taxes vary by coverage type and business class, so it’s a matrix on top of a matrix. Frequently it’s the underwriters who pay on behalf of the client but sometimes it’s the duty of the broker and in some cases the client who has to pay.
Advisen carries data from a third party service provider on the rules and regulations in 165 of the world’s 195 countries, including how taxes on premiums are to be paid. David Ketley said it’s hard to keep up and cited how Advisen Front Page News alerted him to a change in Australia’s rules. But this panel discussion highlighted that while the tracking of these rules is tough, it is far from the whole of the challenge.
For example, while the tax liability is ultimately paid by the risk manager, as AIG said – it’s part of their expense ratio, getting an invoice or receipt is next to impossible and ensuring that the amount has actually been paid is also difficult – this is quite unpopular with corporate compliance officers.
Allocation by risk managers of these taxes is also difficult – the consensus among the audience was that it was more important to regulators to see a consistent approach over many years than to get every allocation correct down to the last penny.
Cargill was joined on the panel discussion by Mike Stalley, Founder & CEO of Fiscal Reps which effectively administers the tax calculations and filings and payment on behalf of insurers in EU countries, another in a never-ending series of cottage industries in the global commercial insurance market.
When the panellists ended the session by saying that tax on broker fees was another massive challenge, we left the session informed, but perhaps depressed.
Every country has rules about what tax on premium is due, who has to pay it, what filings are required and when they are due. These taxes vary by coverage type and business class, so it’s a matrix on top of a matrix. Frequently it’s the underwriters who pay on behalf of the client but sometimes it’s the duty of the broker and in some cases the client who has to pay.
Advisen carries data from a third party service provider on the rules and regulations in 165 of the world’s 195 countries, including how taxes on premiums are to be paid. David Ketley said it’s hard to keep up and cited how Advisen Front Page News alerted him to a change in Australia’s rules. But this panel discussion highlighted that while the tracking of these rules is tough, it is far from the whole of the challenge.
For example, while the tax liability is ultimately paid by the risk manager, as AIG said – it’s part of their expense ratio, getting an invoice or receipt is next to impossible and ensuring that the amount has actually been paid is also difficult – this is quite unpopular with corporate compliance officers.
Allocation by risk managers of these taxes is also difficult – the consensus among the audience was that it was more important to regulators to see a consistent approach over many years than to get every allocation correct down to the last penny.
Cargill was joined on the panel discussion by Mike Stalley, Founder & CEO of Fiscal Reps which effectively administers the tax calculations and filings and payment on behalf of insurers in EU countries, another in a never-ending series of cottage industries in the global commercial insurance market.
When the panellists ended the session by saying that tax on broker fees was another massive challenge, we left the session informed, but perhaps depressed.
Monday, 23 June 2008
Report from AIRMIC: Today’s D&O Cover (Part II of II)
With recent D&O cases focusing on fraud exclusions, extradition and a focus on financial mismanagement, you could easily forget some of the other core exposures for companies and their Directors & Officers.
Law firm K&L Gates reminded us of the need for protection against cases where Directors & Officers are sued for “putting profits in front of safety” in cases where employees suffer fatal accidents on the job – where Derivative Actions can be brought on the back of suits against the company.
Further exposures include where Directors & Officers are held liable for pollution by the company, or where cartel activity occurs (see the 2 British Airways executives resigned after the fuel surcharge price-fixing investigations).
Jane Harte-Lovelace and Sarah Tulpin of K&L Gates’ Insurance Coverage Practice (they defend companies and their Directors and Officers, and don’t act on behalf of insurers) gave a series of tips – specific policy form wordings that can cause the D&O product not to work as expected. I will ask them if we can republish their whitepaper in Advisen Front Page News but here are a few highlights:
- The definition of “wrongful act” needs to include any “breach of duty” as the recent Companies Act of 2006 in the UK codified the duty of Directors & Officers to include the broad definition “duty to promote the success of the company”.
- Ensure that the allocation provisions are in place should the company and the Directors & Officers share defense legal teams and costs.
- Pay particular attention to the definition of “investigation” as it relates to cartel activity
Advisen has a repository of over 2,000 standard policy forms including 400+ D&O policy wordings. Each can be compared on a topic-by-topic basis and with keyword searching, it’s very easy for clients or their brokers to check these terms of coverage. Drop me an e-mail for more information.
Report from AIRMIC: Today’s D&O Cover (Part I of II)
In a detailed presentation to close the workshops at last week's AIRMIC Conference in Edinburgh, broker HSBC and law firm K&L Gates gave a serious lesson about how the devil is in the details for companies and their Ds & Os looking for the right form of coverage.
Adrian Jenner, who heads HSBC’s Mergers & Acquisitions and Management Liability practices out of London, talked about the evolving D&O structure saying that most companies are pulling back on excess entity coverage for the company’s securities and instead focusing premium spends on coverage for the Directors and Officers themselves as well as for the company.
Adrian further noted that HSBC has just placed D&O policies for 3 clients where there was specific DIC D&O coverage for individual directors, and that all of these clients had taken audit committee Side A coverage as well.
This talk of evolving D&O program structures reminds me that in the PLUS Bermuda D&O Symposium that Dan Bailey suggested separate sublimits for defense claims and expect Advisen to issue a report shortly on rising defense costs and why the end of the Lerach and Weiss era is not as warmly received among underwriters as you might expect.
Adrian Jenner, who heads HSBC’s Mergers & Acquisitions and Management Liability practices out of London, talked about the evolving D&O structure saying that most companies are pulling back on excess entity coverage for the company’s securities and instead focusing premium spends on coverage for the Directors and Officers themselves as well as for the company.
Adrian further noted that HSBC has just placed D&O policies for 3 clients where there was specific DIC D&O coverage for individual directors, and that all of these clients had taken audit committee Side A coverage as well.
This talk of evolving D&O program structures reminds me that in the PLUS Bermuda D&O Symposium that Dan Bailey suggested separate sublimits for defense claims and expect Advisen to issue a report shortly on rising defense costs and why the end of the Lerach and Weiss era is not as warmly received among underwriters as you might expect.
Tuesday, 17 June 2008
Report from the AIRMIC Conference in Edinburgh, Scotland
Good showing at the Conference - the biggest turnout for a non-London event in AIRMIC's history. Some of the developing themes in discussions here:
Two issues highlight the delicate balance AIRMIC straddles between the demands of the membership of risk managers and the leverage of the insurers whose products are so necessary to those risk managers.
First, risk managers last year announced that they would band together to produce a benchmark of claims paying by underwriters. In the last 12 months there has been a high level of serious discussion with the insurers but no product. Perhaps this discussion is the baseline goal for AIRMIC, but they are looking to produce some results of this survey by the end of the year.
Second, risk managers are upset about insurers' overuse of Reservation of Rights in the claims negotiation. The expected response from underwriters of an agreed protocol for this was well-received.
Separately, Directors & Officers Insurance (D&O insurance) is at the forefront of many panel discussions and with the hardening market for financial institution buyers of D&O and the expected impact on the general corporate market for D&O, it's not surprising.
Marsh sent a press release out about its online benchmarking database which highlights just how much larger Advisen's is.
And finally, John Hurrell, CEO of AIRMIC is a great public speaker and not just because of his impassioned plug for the Advisen / AIRMIC Benchmark Survey, but because he's already connected to the AIRMIC membership in this, his first Annual Conference.
Wednesday, 14 May 2008
The Price of Apples
Amazing how many good D&O stories I missed on vacation last week from the Siemens claim to Aspen hiring away quality D&O underwriters from Lloyd's Managing Agent Novae, to D&O legend James Weatherstone taking the helm for Arch Europe.
Catching up with a Lloyd's broker yesterday who brings in US risk to London, D&O price volatility is up. In the Financial Institution market for D&O and E&O, the underwriting markets are shrinking their lines, and in one case flat-out non-renewing a policy. In general corporate D&O the impact is less profound but the tide will turn.
I'm also happy to report that the AIRMIC Benchmark Survey is well underway with the majority of respondents coming from Financial Institutions who want to get a good sense of where the D&O market is.
Catching up with a Lloyd's broker yesterday who brings in US risk to London, D&O price volatility is up. In the Financial Institution market for D&O and E&O, the underwriting markets are shrinking their lines, and in one case flat-out non-renewing a policy. In general corporate D&O the impact is less profound but the tide will turn.
I'm also happy to report that the AIRMIC Benchmark Survey is well underway with the majority of respondents coming from Financial Institutions who want to get a good sense of where the D&O market is.
Thursday, 1 May 2008
Benchmarking comes to the UK
Yesterday Advisen and AIRMIC announced the launch of a Benchmark Survey similar to the one Advisen has produced for RIMS for 6 years.
Picking up on my theme of how empirical data is superior to anecdotal data (see post here) AIRMIC Benchmark Survey is the only one of its kind in the UK where data is collected directly from risk managers, thereby providing the most accurate tracking of buying trends for all major coverage lines across a wide array of commercial insurance buyers.
For more information on participating or getting results, please e-mail airmic@advisen.com.
The survey results will provide AIRMIC members and other subscribers with benchmarking charts using relevant peer group comparisons. The data will make risk managers and other industry professionals more informed in considering the structure and expected cost of their insurance programmes. The service will answer questions such as “How much coverage do my peers buy?” or “Am I paying too much for my insurance?”
Risk managers who are not currently AIRMIC members are welcome to participate and/or to use the results of the survey in making more informed decisions about their insurance programs.
AIRMIC chief executive John Hurrell said,
Picking up on my theme of how empirical data is superior to anecdotal data (see post here) AIRMIC Benchmark Survey is the only one of its kind in the UK where data is collected directly from risk managers, thereby providing the most accurate tracking of buying trends for all major coverage lines across a wide array of commercial insurance buyers.
For more information on participating or getting results, please e-mail airmic@advisen.com.
The survey results will provide AIRMIC members and other subscribers with benchmarking charts using relevant peer group comparisons. The data will make risk managers and other industry professionals more informed in considering the structure and expected cost of their insurance programmes. The service will answer questions such as “How much coverage do my peers buy?” or “Am I paying too much for my insurance?”
Risk managers who are not currently AIRMIC members are welcome to participate and/or to use the results of the survey in making more informed decisions about their insurance programs.
AIRMIC chief executive John Hurrell said,
“We have long admired the RIMS Benchmark Survey and are delighted to work
with Advisen on producing something similar.”
Friday, 15 February 2008
Insurance Industry Events
More than any industry I've worked in, insurance is relationship-driven.
Lloyd's in particular thrives on the trust between brokers and underwriters and buyers of insurance feel comfortable that their assets are covered based on a handshake.
This is both good for the customer and bad for those trying to document the policies involved. It's no wonder insurance litigation is so prevalent around claims. In fact, I've just hired a terrific new Sales Director (Colin Fennelly). In past positions Colin sold outsourced services to insurance companies to reduce the defense costs associated with this litigation, getting paid out of any savings found. It's an amazing economic ecosystem.
London has achieved a higher degree of "Contract Certainty" through recent reforms (see here for more), and the challenge of online processing of commercial insurance is still formidable. For example, how do you trade handshakes online?
Advisen invested in Web Connectivity which is the market leader in ACORD messaging software which is a key reason why Lloyd's and London market brokers and underwriters are moving accounting and claims processing online. Web Connectivity's growing client list and increased online volumes are highly correlated.
While the Lloyd's and London markets congregate in the square mile of postcode EC3 and meet socially all the time, and Bermuda is a close reinsurance community, the rest of the global insurance industry frequents industry events to meet with customers and trading partners. I was floored at the number of events Advisen is tracking. See list here.
I'm planning to attend the ACORD Conference in Las Vegas in May and the AIRMIC conference in Edinburgh in June and Advisen has a big presence at the year's biggest event - the RIMS Conference in April.
Lloyd's in particular thrives on the trust between brokers and underwriters and buyers of insurance feel comfortable that their assets are covered based on a handshake.
This is both good for the customer and bad for those trying to document the policies involved. It's no wonder insurance litigation is so prevalent around claims. In fact, I've just hired a terrific new Sales Director (Colin Fennelly). In past positions Colin sold outsourced services to insurance companies to reduce the defense costs associated with this litigation, getting paid out of any savings found. It's an amazing economic ecosystem.
London has achieved a higher degree of "Contract Certainty" through recent reforms (see here for more), and the challenge of online processing of commercial insurance is still formidable. For example, how do you trade handshakes online?
Advisen invested in Web Connectivity which is the market leader in ACORD messaging software which is a key reason why Lloyd's and London market brokers and underwriters are moving accounting and claims processing online. Web Connectivity's growing client list and increased online volumes are highly correlated.
While the Lloyd's and London markets congregate in the square mile of postcode EC3 and meet socially all the time, and Bermuda is a close reinsurance community, the rest of the global insurance industry frequents industry events to meet with customers and trading partners. I was floored at the number of events Advisen is tracking. See list here.
I'm planning to attend the ACORD Conference in Las Vegas in May and the AIRMIC conference in Edinburgh in June and Advisen has a big presence at the year's biggest event - the RIMS Conference in April.
Thursday, 7 February 2008
Part-time Risk Management
Large companies have dedicated Risk Managers with the largest companies having a team of 10 or so to manage risk at a corporate level and ensure best practices within each division.
What if you're a medium-sized business or small company? You're not likely to have a full-time risk manager and your staff that handles risk management as part of their role is likely to not have formal training in the art nor the science of risk management.
David Gamble, formerly the Executive Director of the Association of Insurance and Risk Managers (AIRMIC), has launched an online training course to help spread the gospel of effective risk management to these part-timers.
Advisen is delighted to announce a partnership with PRORIM, the name of the course (their banner is to the left) and we have begun promoting the course on our newsletter Front Page News.
What if you're a medium-sized business or small company? You're not likely to have a full-time risk manager and your staff that handles risk management as part of their role is likely to not have formal training in the art nor the science of risk management.
David Gamble, formerly the Executive Director of the Association of Insurance and Risk Managers (AIRMIC), has launched an online training course to help spread the gospel of effective risk management to these part-timers.
Advisen is delighted to announce a partnership with PRORIM, the name of the course (their banner is to the left) and we have begun promoting the course on our newsletter Front Page News.
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