Exhaustion Trigger Language

I can't think of any other context than insurance policy wording where the two words "exhaustion" and "trigger" would come together.

Thanks to a tip from John McCarrick of Edward Angell Palmer & Dodge (a founding father of PLUS and a good friend to Advisen), Kevin LaCroix explained the significance of the ruling by California's intermediate appellate court on March 25th which found that Qualcomm could not collect on its excess Directors & Officers (D&O) policy where it had settled with the primary carrier for less than the full limit.

See the D&O Diary post here.

Without blaming any party or any type of industry player in general, Kevin noted that the product needs improvement in order to prevent an insured getting "stuck" and noted how "many excess D&O carriers now offer exhaustion trigger language that reduces the restrictions on the kinds of payments that could trigger the excess carrier's payment obligation."

Advisen's database of over 400 D&O policy forms enables a full comparison of which policies offer this trigger language and we will be conducting a study on the topic for our subscribers. For information about this, contact me on mpower@advisen.com.

The Devil is in the Details

When incorporating a business, setting up the bylaws seems less important than getting revenue operations going.

But an interesting article in today's Advisen Front Page News Europe notes how a bit of forethought early on could pay off in terms of D&O coverage:

Not honoring the laws of the business type they've chosen is the "main mistake"
entrepreneurs make, she said. Common mistakes include ignoring bylaws, not
having a corporate board and using business assets for personal objectives.

The "she" is Nancy Rapoport, the Gordon & Silver Ltd. Professor of Law at the Boyd School of Law at the University of Nevada, Las Vegas.

To subscribe to Advisen Front Page News Europe click here.

Chase Them Down

Hits to this blog show one of the most widely-read posts discussed complaints about the small decrease in capacity of Lloyd's - see the post here.

In today's Advisen Front Page News we ran a story on the topic about Lloyd's managing agent Ascot Underwriting who announced they were decreasing their "premium income capacity by 28% to GBP450m". See the story here.

In citing how the weak U.S. dollar and the soft market of decreasing prices for commercial lines insurance coverage combined for a "double whammy", Ascot's business development manager Michael Bullock provided a noteworthy comment:

You might well find you lose out on good accounts because you can't chase them
down quite to the extent the market might do.

We haven't seen new capacity in the past month or so, we're seeing existing providers announcing cuts like Ascot - it's just a matter of time before some claims come in and change the supply & demand equation and they are likely to happen in a big way in the area of management and professional lines coverage for financial institutions (D&O, E&O/PI).

Where that ripples in terms of increased pricing remains to be seen. Overall, supply is still disproportionately high as related to demand.

To follow this and other stories subscribe to Front Page News here.

The Cinderella Story

With the title of this post I refer not to the beginning of the college basketball tournament in the U.S. which begins today and is known for the "Cinderella stories" of overachieving college teams, but rather to a story in today's Advisen Front Page News quoting Lord Levene, Chairman of Lloyd's.



Levene hits on two of my favorite themes about Lloyd's - the need for paperless processing (see my posts on the subject here) and the tension among old and new capacity providers at Lloyd's in today's soft market (see my recent post here).



In discussing how progress has been made in ending the van runs from Lime Street, Levene notes that there is a long way to go before paperless processing is a reality and hints at the fact that the insurance industry could be at a competitive disadvantage to other capital providers such as the investment banks pouring money into the industry and securitizing policies. I love this quote from Lord Levene:

'If we are to end our status as a Cinderella industry we have to improve
the quality of our systems.'

Advisen has invested in Web Connectivity which enables paperless processing through its award-winning ACORD messaging gateway EnabledB2B.



And answering the complaints (of Mr. Hiscox and Mr. Catlin) about allowing new money into Lloyd's, in affirming how Lloyd's has agreed to manage the cycle through the Franchise Directorate, Levene said:

'I think there is an extreme lack of candor in this industry.'

The story can be found here.