March 30, 2023
Citizens Property Insurance Approves 2023 Rate Hike
With 1.2 million policyholders, Citizens Property Insurance, Florida's insurer of last resort, has seen a big influx in customers in the past two years. "It has become the primary insurer in a lot of places," said Josh Palmer, president of Palmer Insurance Agency. According to Palmer, this is because Florida's insurance market has been so volatile that the majority of consumers can not find private coverage. "We've lost a lot of carriers. The financial stability of some of the open market players has been at question," Palmer said. Homeowners who have Citizens Insurance will likely be paying more starting this fall. Wednesday, Citizens board members approved a recommended statewide average increase of 14.2% for all Personal Lines policies – homeowners, condominium unit owners, dwellings, renters and mobile homes. Individual premiums may increase by more than that because of higher replacement costs due to inflation in the construction market. "This will be a historic level rate increase. Only once in the history of Citizens have they had a double-digit rate increase, that was in 2009," said Mark Friedlander, Insurance Information Institute spokesperson. Homeowner multiperil (HO-3) rates, will have an average increase of 13.9%, while condo owners will see an average 14.6% increase. The increase must be approved by the Office of Insurance Regulation. If passed, the rates will go into effect Nov. 1. "You're not going to get a rate change in the middle of your policy period. It's at your renewal time," said Friedlander. The reason for the hike, Citizens said, is to keep up with the growing number of policies and make sure if there is another active hurricane season, they have the money to pay out to those with damage. “The fact is that Citizens rates remain actuarially unsound and artificially low. This inadequacy is unsustainable and heightens the risk of assessments on all Florida insurance consumers,” said Citizens President/CEO and Executive Director Tim Cerio said. ABC Action News wanted to know what this really means for you. It turns out if you have Citizens, you will still likely be paying less than if you had a private company. "Nobody likes to see their insurance rates go up. We do understand that. We try to be prudent in our request. The fact is private market carriers are raising rates 30-40%," said Michael Peltier with Citizens Property Insurance. Citizens is also now requiring policyholders to carry flood insurance. "As we've seen with Hurricane Ian, flood coverage in Florida is critical. It really allows people to build their homes back to the way they want them," Peltier said. Insurance experts said no immediate action needs to be taken by policyholders but if you are concerned about rising rates, it does not hurt to shop around. "It's always worth calling your insurance agent. Get several new quotes, shop the policy. Although it could be very challenging to find rates better than citizens," said Friedlander.Read More
March 30, 2023
M&A Buyers Defy Uncertainty with Bullish Optimism for 2023
Global dealmakers achieved a third consecutive quarter of market outperformance in the first three months of 2023, according to research on completed deals from WTW’s Quarterly Deal Performance Monitor (QDPM). Based on share price performance, companies making M&A deals outclassed the wider market2 by +1.0 percentage points for acquisitions valued over $100 million between January and March 2023. This follows a positive performance of +5.2 percentage points in the previous quarter. Run in partnership with the M&A Research Centre at The Bayes Business School, the data reveal that the marginally positive performance of Q1 2023 has been driven by Asia Pacific deal activity, where buyers outperformed their regional index by +13.8 percentage points. With 43 deals closed in Q1 2023, the region saw a 7% drop in volume compared with Q1 2022. M&A deal activity also slowed significantly around the world, recording its lowest first quarter figures since 2015, with 157 deals completed worldwide in Q1 2023 compared with the corresponding quarter of 2022 (220 deals) and the final three months of 2022 (202 deals). The slowdown in deal activity, however, has been far more pronounced in other regions. North American acquirers underperformed their index by –3.9 percentage points, with 79 deals closed between January and March, representing a sharp 32% decline in M&A activity compared with Q1 2022. Dealmakers from Europe, which continues to face more disruption and uncertainty, underperformed their index by –7.4 percentage points, with 30 deals completed in Q1 2023, down a substantial 39% in volume compared with Q1 2022. David Dean, managing director, M&A Consulting, WTW, said: “The sharp decline in M&A deals completing this quarter is the inevitable hangover effect following an astounding year in 2021, compounded by the macroeconomic and geopolitical headwinds that bruised the market last year. “At the same time, M&A markets are far from closed. The number of deals we’re seeing in the pipeline has not dropped at all, but many have made slower progress toward completion, or have paused, as buyers adopt a ‘wait and see’ approach. Dealmakers remain fairly bullish and believe M&A activity will increase in the second half of 2023 as markets stabilize and interest rates level.” The need to adopt new technologies and talent, reach new markets and reinvent supply chains to build resilience has seen cross-sector deals reach their highest level since the WTW M&A study began in 2008. The WTW data also show the median time to close deals in Q1 2023 has been the slowest since 2008, with 71% of all deals now taking at least 70 days to complete, compared with 53% less than 18 months ago. This trend is directly linked to the rise in cross-sector acquisitions, which typically require more time to evaluate and assess before closing, as well as the wider need for robust due diligence from both a performance and risk management perspective. Dean said: “There are tremendous opportunities to explore for acquiring companies, especially corporates and PE [private equity] funds with high levels of capital. Some sectors that have been resilient or benefitted from the pandemic, such as technology or healthcare, may continue to see strong demand. The banking industry is also expected to see significant consolidation, while the technology, media and telecom sector has never been hotter. “For buyers pursuing deals in the current uncertain economic climate, it will be more important than ever to conduct disciplined due diligence and dive deeper into potential weaknesses in a target. Retaining and integrating new employees after a deal closes will also be critical for the acquisition to deliver value, especially if the objective is to boost talent by acqui-hiring. This means well-crafted retention incentives must be a top priority, especially in today’s tight labor market.” WTW QDPM methodology All analysis is conducted from the perspective of the acquirer. Share-price performance within the quarterly study is measured as a percentage change in share price from six months prior to the announcement date to the end of the quarter. All deals where the acquirer owned less than 50% of the shares of the target after the acquisition were removed; hence, no minority purchases have been considered. All deals where the acquirer held more than 50% of target shares prior to the acquisition have been removed; hence, no remaining purchases have been considered. Only completed M&A deals with a value of at least $100 million that meet the study criteria are included in this research. Deal data are sourced from Refinitiv. About WTW M&A WTW’s M&A practice combines our expertise in risk and human capital to offer a full range of M&A services and solutions covering all stages of the M&A process. We have particular expertise in the areas of planning, due diligence, risk transfer and post-transaction integration, areas that define the success of any transaction.Read More
March 30, 2023
AI Leaders Urge Labs to Halt Training Models More Powerful Than ChatGPT-4
Artificial intelligence experts and industry leaders, including Elon Musk, University of California Berkeley computer science professor Stuart Russell and Apple Inc. co-founder Steve Wozniak, are calling on developers to hit the pause button on training powerful AI models. More than 1,100 people in the industry signed a petition calling for a six-month break from training artificial intelligence systems more powerful than the latest iteration behind OpenAI’s ChatGPT, in order to allow for the development of shared safety protocols. “Recent months have seen AI labs locked in an out-of-control race to develop and deploy ever more powerful digital minds that no one – not even their creators – can understand, predict, or reliably control,” said an open letter published on the Future of Life Institute website. “Powerful AI systems should be developed only once we are confident that their effects will be positive and their risks will be manageable.” The call comes after the launch of a series of AI projects in the last several months that convincingly perform human tasks such as writing emails and creating art. Microsoft Corp.-backed OpenAI released its GPT-4 this month, a major upgrade of its AI-powered chatbot, capable of telling jokes and passing tests like the bar exam. It also highlights ongoing tensions between Musk and OpenAI. The nonprofit research lab was founded in 2015 with Musk as co-chair along with Sam Altman, who is also OpenAI’s chief executive officer. At the time, OpenAI’s goal was to “advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.” Musk, who runs multiple companies including Tesla Inc., left OpenAI’s board in 2018. He has criticized the organization, which created a for-profit arm in 2019, saying it has become a “closed source, maximum-profit company effectively controlled by Microsoft,” and that it has “strayed very far from the path of virtue.” Musk has also been looking into creating a rival research lab, according to The Information. Meanwhile, in a recent podcast with tech journalist Kara Swisher, Altman said Musk is a “jerk” while noting he believes Musk is “feeling very stressed about what the future’s going to look like for humanity.” Altman — whose name appeared on the list of signatories Tuesday night — didn’t sign the petition, said OpenAI spokesperson Hannah Wong. “Also I think it’s important to point out that we spent more than six months — after GPT-4 finished training — on the safety and alignment of the model,” Wong said. Alphabet Inc.’s Google and Microsoft are among the companies using artificial intelligence to enhance their search engines, while Morgan Stanley has been using GPT-4 to create a chatbot for its wealth advisers. Developers should work with policymakers to create new AI governance systems and oversight bodies, according to the letter. It called on governments to intervene in the development of AI systems if major players don’t imminently agree to a public, verifiable pause. “AI research and development should be refocused on making today’s powerful, state-of-the-art systems more accurate, safe, interpretable, transparent, robust, aligned, trustworthy and loyal,” it said. Yoshua Bengio, the founder and scientific director of Canadian AI research institute Mila, signed the petition, according to a statement from the institute. Emad Mostaque, founder and CEO of Stability AI, also said he signed it. “We have seen the amazing capabilities of GPT-4 and other massive models. Those making these have themselves said they could be an existential threat to society and even humanity, with no plan to totally mitigate these risks,” Mostaque said. “It is time to put commercial priorities to the side and take a pause for the good of everyone to assess rather than race to an uncertain future.” The Future of Life Institute is a nonprofit that seeks to mitigate risks associated with powerful technologies and counts the Musk Foundation as its biggest contributor. “All of the top signatories on the list have been independently verified,” said Anthony Aguirre, a spokesperson for the institute. “Doing so for the whole list exceeds our capacity.” A spokesperson for the Center for Humane Technology, whose executive director, Tristan Harris, signed the letter, said steps are being taken to prevent fake signatures. New signatories are now requiring human review before going up on the site, and all high-profile signatories listed have been vetted by direct communication, the spokesperson said in an email.Read More
March 30, 2023
California’s Winter Storms Bring Billions in Damages
Severe storms that battered California this winter are set to continue into spring. Atmospheric rivers and cold fronts have brought near-record rain and snow to areas that have been battling drought-like conditions for many years. More storms are predicted to make landfall in coming weeks. The storms have led to flooding, road closures, power outages and fatalities. They have caused billions of dollars in damages. Gov. Gavin Newsom last week eased some drought restrictions after the three driest years on record. He didn’t declare the drought to be over because water shortages remain in parts of densely populated Southern California. Approaching warmer temperatures are expected to increase the risk of floods and mudslides as snowpack starts to melt in the mountains, threatening foothill communities. “This is not a normal year,” said Michael Wehner, a scientist in the computational research division at Lawrence Berkeley National Laboratory, in Berkeley, Calif. One of the factors that has led to near-record rainfall is the weather phenomenon La Niña. The powerful pattern, which has now ended, has a pronounced effect on weather in the U.S. as it shifts the jet stream north. California experienced at least four “Pineapple Expresses,” strong atmospheric storms in which moisture builds up in the Pacific around Hawaii and pelts the West Coast with heavy rainfall and snow, according to Alex Tardy, a meteorologist with the National Weather Service. A Pineapple Express can bring as much as 5 inches of rain in one day, according to the National Oceanic and Atmospheric Administration. A succession of moderate storms, meanwhile, has saturated the soil. Cold fronts and snow storms dumped record amounts of snow in some places, reaching levels last seen in the 1980s. Lakes and reservoirs that store water are nearing capacity in some areas. California’s 54-person congressional delegation wrote to President Biden Wednesday saying they support the state’s request for a “major disaster declaration,” and asked for more federal support. Here are key figures from the storms so far: Atmospheric Rivers California has experienced about 25 atmospheric rivers since the winter storms began late last year, with Southern California experiencing at least 12 of those storms, according to Mr. Tardy, the meteorologist. Snow Statewide snowpack is nearing record levels at 60.5 inches. That is higher than any other reading since the snow sensor network, a measuring device used when it rains or snows, was established in the mid-1980s, according to Sean de Guzman of the California Department of Water Resources. “This year will certainly be in the top three or four snowpack years since the 1950s,” said Mr. de Guzman. Snow in the Sierra Nevada is a little more than double the historical 30-year average, according to Mr. Tardy. The Mammoth and Tahoe regions have received the most snow on the West Coast, he said. “Our snowpack has never been this deep,” Mr. Tardy said. Snowpack is the amount of snow on the ground that persists until the arrival of warmer weather. When it turns to snowmelt, the runoff can affect water supply. Snowfall, which measures how much snow has fallen in a certain period, is also close to record highs. The University of California, Berkeley’s Central Sierra Snow Lab in Soda Springs, Calif., said this year’s snowfall was the largest since the early 1980s. The lab has recorded 713.8 inches, or 59.5 feet, of snowfall since October, compared with a normal full-season total of around 360 inches, or 30 feet, according to the U.S. Drought Monitor. With another 20.7 inches of snow added this week, it is now the second-snowiest winter since the lab began tracking measurements in 1946. More snow is expected next week. Water levels Lakes and reservoirs in some parts of the state are nearing capacity, according to Mr. Tardy. Lake Oroville and Shasta Lake have tripled their capacity, and were at 81% and 82% capacity, respectively, as of March 28. Since December, Lake Oroville, the state’s largest water storage facility, has increased approximately 200 feet in depth and gained just under 2 million acre-feet of water, according to California’s Department of Water Resources. Economic damage Severe weather and flooding in California since Dec. 26, 2022, has led to $5 billion to $7 billion in damages, according to a Moody’s report from late January. The estimate reflects inland flood impact and includes damage to infrastructure caused by atmospheric river storms, according to the report. It is based on event reconstruction and reflects property damage and interruption to businesses “across residential, commercial, industrial, automobile and infrastructure assets,” according to Moody’s. California has spent more than $60 million in response and recovery work, according to the governor’s office. Deaths Dozens of people have died after fierce storms lashed California. Only some of those deaths will be classified as weather-related, because authorities tend to investigate only fatalities of people who weren’t under medical care or in a hospice, or if it wasn’t known if they were under a doctor’s care. It can take time to determine a storm-related death. The California Governor’s Office of Emergency Services said this week it has confirmed nine storm-related deaths, including two in San Francisco County, and one each in Lassen, Mariposa, Placer, San Bernardino, San Mateo, Santa Clara, and Ventura counties.Read More
March 30, 2023
Fed Official Tells Congress Many to Blame for Silicon Valley Bank Failure
The scope of blame for Silicon Valley Bank's failure stretches across bank executives, Federal Reserve supervisors and other regulators, the banking system's top cop on Wednesday told U.S. lawmakers demanding answers for the lender's swift collapse. "I think that any time you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed," Michael Barr, Fed Vice Chair for Supervision, told Congress. "So we're looking at all of that." The failures of SVB, and days later, Signature Bank, set off a broader loss of investor confidence in the banking sector that pummeled stocks and stoked fears of a full-blown financial crisis. Depositors tried to pull more than $42 billion in a single day at SVB in early March, surprising regulators and kicking off deposit flight across other regional banks. "That's just an extraordinary scale and speed of a run that I had not ever seen," Barr said. "I think all of us were caught incredibly off-guard by the massive bank run that occurred when it did." Representatives from both political parties pressed Barr, Martin Gruenberg, head of the Federal Deposit Insurance Corp, and Treasury undersecretary for domestic finance Nellie Liang on why regulators did not act more forcefully, given Fed supervisors had been raising issues with the bank for months. "There is still much we need to understand of what you knew when and how you responded," said Republican Patrick McHenry, chair of the committee. "The bottom line for you as the panel, there's bipartisan frustration with many of your answers. There's a question of accountability and appearance of lack of accountability." Barr on Tuesday criticized SVB for going months without a chief risk officer and for how it modeled interest rate risk, but lawmakers said the response wasn't aggressive enough, with Democrat Juan Vargas saying, "it seems like they blew you guys off and you didn’t do anything." REPORTS DUE MAY 1 Both the Fed and FDIC are is expected to produce reports on the failure of Silicon Valley Bank by May 1. The Fed's report will concentrate on supervision and regulation while the FDIC report will center around deposit insurance. Several lawmakers asked Barr to make available the Fed's confidential communications around supervision. Barr told the House Financial Services Committee that he first became aware of stress at Silicon Valley Bank on the afternoon of March 9, but that the bank reported to supervisors that morning that deposits were stable. Gruenberg of the FDIC told lawmakers he also became aware of SVB's stress that Thursday evening. All three testifying said that regulators had sufficient tools to deal with the crisis once it happened, but Barr said the Fed could have done better on supervision. SVB and Signature became the second- and third-largest bank failures in U.S. history. Investors fled to safe havens like bonds while depositors moved funds to bigger institutions and money market funds. Markets have calmed since Swiss regulators engineered the sale of troubled Swiss giant Credit Suisse to rival UBS, and after SVB's assets were sold to First Citizens Bancshares. However, investors remain wary of more troubles lurking in the financial system. The Fed was in discussions with Silicon Valley Bank the day before its collapse to move pledgable collateral to the discount window, a key facility long associated with providing emergency loans to banks, Barr said on Wednesday. "(Fed) staff were working with Silicon Valley Bank basically all afternoon and evening and through the morning the next day to pledge as much collateral as humanly possible to the discount (window) on Friday," Barr said. Some Democrats have also argued a 2018 bank deregulation law is to blame. That law, mostly backed by Republicans but also some moderate Democrats, relaxed the strictest oversight for firms holding between $100 billion and $250 billion in assets, which included SVB and Signature. The White House is readying plans for legislation that would reinstate those regulations on midsize banks, the Washington Post reported on Wednesday, citing two sources familiar with the matter.Read More
March 30, 2023
Florida Citizens Targets Extra $4.2B of Risk Transfer for 2023
Florida’s Citizens Property Insurance Corporation, the property insurer of last resort for the Florida market, has disclosed details of its proposed risk transfer program for the coming year, which includes a budget of $725 million to fund an additional $4.2 billion of protection. For its Coastal Account, Citizens is set to target coverage of approximately $2.890 billion, comprised of $835 million of existing private risk transfer and $2.055 billion of new private risk transfer, with budgeted premiums of $325 million. And for its Personal Lines Account, the proposed level of coverage is $2.919 billion, comprising $795 million of existing private risk transfer and $2.124 billion of new private risk transfer, with budgeted premiums of $400 million. Across both accounts, then, the amount of new risk transfer sought by Citizens comes to just short of $4.2 billion, with total budgeted premiums of $725 million. If approved, this plan would represent a major increase in Citizens’ reinsurance program and a shift in its risk transfer strategy, particularly given the difficulties it faced last year in securing a lower level of coverage, due to challenging market conditions. As previously reported, part of the increased scope of this year’s risk transfer program will be provided by the $500 million Lightning Re catastrophe bond that Citizens issued earlier this month. Plans show that $210 million of the bond will be apportioned to the Coastal Account and $270 million to the Personal Lines Account. But the Lightning Re issuance was also accompanied by plans to merge Citizens’ three risk transfer accounts into a single account for future years, which could make reinsurance purchases more complex this year. The reinsurance spend budgeted by Citizens also needs to account for the hardening pricing environment heading into renewals this year, as the insurer says it expects to see rate increases of around 30% to 50% for most Florida carriers when it comes to secure its program in May. However, in a recent market update, Citizens maintained that it sees “some positive momentum” in the risk transfer space with capital inflows due to the attractive nature of risk transfer pricing and uncorrelated risk relative to other asset classes in the current market environment. But, while there is a significant amount of demand for risk transfer capacity from cedants, from Florida carriers in particular, it further notes that investor demand has been stable, resulting in a significantly higher spread levels than in prior years. Likewise, Citizens points out that capital markets transactions have been able to upsize and price at levels marginally below the initial price guidance, but overall spread levels are above what has been seen in prior years due to the increased scrutiny on credit and risk, increasing cost of capital, macro‐level stress in the financial markets, and alternative investment opportunities. In combination, these factors could mean that Citizens is faced with a repeat of 2022 at renewals this year, if it is unable to secure risk transfer protection in line with its ambition targets. Moving forward, Citizens says its staff will work with traditional and capital markets teams, as well as its financial advisor, to evaluate available options, relating to the structure, terms, pricing, and other relevant matters with regards to structuring the 2023 risk transfer program. Staff will then present recommendations to the Board in May for final approval of the risk transfer program.Read More
March 29, 2023
P/C Insurers Facing Hardest Market in a Generation: APCIA
As property & casualty insurers grapple with ongoing severe inflation, escalating claims costs coupled with record natural disaster losses and skyrocketing capital costs, a new white paper, Hard Market Cycle Arrives: Inflation, Natural Disasters, and More Straining Property Insurance Markets by the American Property Casualty Insurance Association (APCIA) and University of South Carolina Associate Professor Robert Hartwig, PhD, CPCU, examines the top inflation trends, natural disaster losses and financial impacts resulting in significant pressure for property insurers, reinsurers, and consumers. “The U.S. property casualty insurance industry is facing significant pressure from rising economic inflation, legal system abuse, supply chain constraints, increasing catastrophic weather driving up losses, and historic cost increases for reinsurance and other forms of capital,” said Karen Collins, APCIA vice president, property and environmental. “The combined effects are resulting in the hardest market cycle in a generation. Commercial and personal property lines customers, particularly those in high-risk regions, may feel the effects of recent, elevated cost trends.” Inflation and Financial Results: The price of single-family residential home construction materials have climbed 33.9 percent since the start of the pandemic, while trade services are up 27 percent. 2022 was the eighth year in a row the U.S. suffered at least 10 catastrophes causing over a billion dollars in losses. 2022 combined ratio for U.S. homeowners line is estimated to reach 107.9 precent, as insurers paid out more money to cover losses and expenses than they collected in premiums. A.M. Best noted personal lines (auto and homeowners) incurred an estimated underwriting loss of $34.9 billion in 2022, nearly tripling the prior-year level and driving an industry five-year high underwriting loss. The U.S. property casualty insurance industry’s policyholder surplus fell 9.4 percent in 2022, according to A.M. Best, and is likely to be the largest drop since early 2009, according to S&P. Reinsurance broker Guy Carpenter estimates that property-catastrophe reinsurance prices rose 30.1 percent in 2023, following a 14.8 percent increase in 2022. “This unusual combination of challenges has created a perfect storm resulting in a significant deterioration in personal lines loss results in 2022, according to Fitch and S&P Global Market Intelligence,” said Collins. “The growth of population, housing, and businesses in hazard-prone areas are exacerbating the effects of climate change, leading to more frequent and severe catastrophe losses. The higher costs of capital and reduced reinsurance capacity are further exerting upward pressure on insurance rates and may result in stricter underwriting in catastrophe-exposed markets.” “We must work together to mitigate homes and properties to bend down the loss curve,” said Collins. “The insurance industry is encouraging homeowners, renters, and businesses to mitigate potential losses by hardening homes, communities, and businesses. Mitigation is the key to easing the pressure on costs for everyone.” Mitigation & Financial Preparation Tips:Read More
- Harden homes and businesses by upgrading disaster resilient building materials.
- In wildfire-prone regions, create an ember-resistant zone by keeping the roof and five feet around the structure free of combustible materials, such as bark, debris, plants, or wood.
- Install home safety devices that leverage smart technology to help predict and prevent damage or claims from occurring.
- Ensure coverage limits reflect current costs to rebuild and update insurance policy to reflect any increase in square footage or remodeling improvements recently made.
- Consider adding three key coverages: automatic inflation guard coverage, ordinance and law coverage, and extended replacement cost coverage, for increased financial protection.
- Increase additional living expense coverage to cover extended reconstruction timeframes and higher rental costs.
- Understand your policy – do you have replacement cost coverage or actual cost value coverage.
March 29, 2023
Underwriting Losses Soar, Net Income Shrinks for P&C Insurers in 2022
Key financial results for private U.S. property/casualty insurers significantly worsened in 2022 from a year earlier, according to preliminary results from Verisk, a leading global data analytics provider, and the American Property Casualty Insurance Association (APCIA). The industry experienced a $26.9 billion net underwriting loss in 2022, more than six times the $3.8 billion underwriting loss in 2021. The underwriting loss was the largest the industry has seen since 2011. Net income fell to $41.2 billion in 2022, compared to $62.1 billion a year earlier – a 33.6% decline. In 2022, incurred losses and loss adjustment expenses grew 14.1% while earned premiums grew 8.3%. The combined ratio – a key measure of profitability for insurers – deteriorated as well, to 102.7% in 2022, from 99.6% in 2021. The preliminary results, presented in the table below, are consolidated estimates based on annual statements filed by insurers with insurance regulators. The results are based on about 94% of all business written by U.S. property/casualty insurers. “The insurance industry is being hammered by increasing input costs, natural catastrophes, legal system abuse, and resistance in some states to adequate rates,” said Robert Gordon, senior vice president, policy, research & international for APCIA. “Insurers suffered a 14.1 percent increase in incurred losses and loss adjustment expenses (16.6 percent in Q4), contributing to a more than $76 billion contraction in insurers’ surplus at a time when loss exposures are rapidly growing. In 2023, insurers are faced with a significant challenge to close the rate gap in order to meet their growing cost of capital.” “Hurricane Ian and the effects of inflation resulted in major losses for property insurers last year, while accident severity continued to plague personal and commercial auto lines,” said Neil Spector, president of underwriting solutions at Verisk. “To remain profitable in these challenging times, many insurers are looking for new ways to reduce expenses, increase efficiencies, and enhance the customer experience. And they’re finding help from an ecosystem of advanced technology and analytics that is growing every day.” Policyholders’ surplus recovered somewhat from Q3 2022’s $911.7 billion to $952.4 billion, but still remains below that of year-end 2021 driven primarily by the large amount of unrealized capital losses accrued during 2022. Insurers’ rate of return on average policyholders’ surplus, a measure of overall profitability, declined to 4.2% in 2022 from 6.4% in 2021. Fourth Quarter Sees Continued Growth in Net Written Premiums The industry’s net income fell to $10.3 billion in fourth-quarter 2022 from $19.8 billion in fourth-quarter 2021, and the annualized rate of return on average surplus fell to 4.4% from 7.9% a year prior. Net written premiums rose $13.8 billion in fourth-quarter 2022, or 8.2%, compared to a year earlier. Net underwriting losses declined to $5.5 billion in fourth-quarter 2022 from $1.8 billion in gains a year earlier, and the combined ratio deteriorated to 104.0% from 100.0% a year prior.Read More
March 29, 2023
Alera Group Bolsters Transportation Insurance Offerings with Acquisition of Capstone
Alera Group, a top independent national insurance and wealth services firm, today announced the acquisition of Capstone Insurance Services, LLC, an independent insurance agency that offers personalized programs to simplify insurance solutions for the transportation industry. “Insurance and financial matters demand a level of responsiveness that is both swift and decisive, which is exactly what you’ll find here at Capstone Insurance Services,” said John Vowteras, Capstone’s CEO. “As an experienced team of licensed professionals, we strive to provide exceptional customer service and consideration for our clients’ businesses and personal insurances. We take pride in our unwavering commitment to upholding the highest level of ethics, service, diligence and confidentiality.” Headquartered in New Jersey, Capstone Insurance Services provides a full range of essential business and personal insurance products and services, including specialty services for the transportation industry, with programs specifically designed for Amazon delivery service providers, FedEx ground contractors and line haul contractors. Other business and personal lines of insurance coverage include Auto, General Liability, Property, Cyber Liability, Workers’ Compensation Home, Health and Life. “We are proud to welcome Capstone Insurance Services to Alera Group, and we look forward to a successful collaboration in the future,” said Alan Levitz, CEO of Alera Group. “The Capstone team has continually delivered exceptional service products and solutions to their clients. We are confident that they will enhance our transportation services and bring their perspectives, experiences and entrepreneurial mindset to our fast-growing presence in New Jersey and beyond.” The Capstone Insurance Services, LLC team will continue serving clients in their existing roles. Terms of the transaction were not announced. About Alera Group Alera Group is an independent, national insurance and wealth services firm with more than $1.2 billion in annual revenue, offering comprehensive employee benefits, property and casualty insurance, retirement plan services and wealth services solutions to clients nationwide. By working collaboratively across specialties and geographies, Alera Group’s team of more than 4,200 professionals in more than 180 offices provides creative, competitive services that help ensure a client’s business and personal success. For more information, visit https://aleragroup.com/ or follow us on LinkedIn.Read More
March 29, 2023
Boy Scouts’ $2.4B Bankruptcy Plan Upheld by Judge
A $2.4 billion bankruptcy plan for the Boy Scouts of America has been upheld by a federal judge, clearing an important hurdle in the legal challenge by certain insurance companies and dissenting sex abuse survivors. The plan would let the Texas-based organization keep operating while it compensates tens of thousands of men who say they were sexually abused as children while involved in Scouting. The ruling released Tuesday in U.S. District Court in Delaware rejected arguments that the bankruptcy plan wasn’t proposed in good faith and improperly strips insurers and survivors of their rights. More than 80,000 men have filed claims saying they were abused as children by troop leaders around the country. Plan opponents say the staggering number of claims, when combined with other factors, suggest the bankruptcy process was manipulated. Judge Richard Andrews said he found no fault with the plan’s initial approval by a federal bankruptcy judge in September, although he agreed with the previous judge that it was “an extraordinary case by any measure.” “The appellants have failed to put forth evidence that would demonstrate clear error in the bankruptcy court’s careful findings of facts,” the judge wrote. A spokesperson for lawyers representing several non-settling insurance companies had no immediate comment, but attorneys have previously suggested the case could eventually reach the U.S. Supreme Court. The Boy Scouts issued a statement describing the ruling as “a pivotal milestone” that “solidifies a path forward for both survivors and Scouting.” “We look forward to the organization’s exit from bankruptcy in the near future and firmly believe that the mission of Scouting will be preserved for future generations,” the statement said. Under the plan — which the Boy Scouts describe as a “carefully calibrated compromise” — the organization itself would contribute less than 10% of the proposed settlement fund. The local Boy Scout councils, which run day-to-day operations for troops, offered to contribute at least $515 million in cash and property, conditioned on certain protections for local troop sponsoring organizations, including religious entities, civic associations and community groups. The bulk of the compensation fund would come from the Boy Scouts’ two largest insurers, Century Indemnity and The Hartford, which reached settlements calling for them to contribute $800 million and $787 million, respectively. Other insurers agreed to contribute about $69 million. The Boy Scouts’ largest insurers negotiated settlements for a fraction of the billions of dollars in potential liability exposure they faced. Other insurers, many of which provided excess coverage above the liability limits of the underlying primary policies, refused to settle. They argued that the procedures for distributing funds from a proposed compensation trust would violate their contractual rights to contest claims, set a dangerous precedent for mass tort litigation, and result in grossly inflated payments. They also noted that a plaintiffs’ attorney had acknowledged that some 58,000 claims probably couldn’t be pursued in civil lawsuits because of the passage of tim When it sought bankruptcy protection in February 2020, the Boy Scouts had been named in about 275 lawsuits and told insurers it was aware of another 1,400 claims. According to plan opponents, the huge number of claims filed in the bankruptcy was the result of a nationwide marketing effort by personal injury lawyers working with for-profit claims aggregators to drum up clients. Insurers opposing the plan contend that Boy Scouts of America is contractually obligated to assist them in investigating, defending and settling claims, as it did before the bankruptcy. They say the organization, desperate to escape bankruptcy, colluded with claimants’ lawyers to inflate both the volume and value of claims in order to pressure insurers for large settlements, then transferred its insurance rights to the settlement trust. The insurers argue that if the Boy Scouts transfers its rights under insurance policies to the settlement trustee, it must also transfer its obligations under those policies. Under the Boy Scouts’ plan, insurance companies, local Scout councils and troop sponsoring organizations would receive broad liability releases protecting them from future sex abuse lawsuits in exchange for contributing to the victims’ compensation fund – or even for just not objecting to the plan. Some abuse survivors argued that releasing their claims against non-debtor third parties without their consent would violate their due process rights. The U.S. bankruptcy trustee, the government’s “watchdog” in Chapter 11 bankruptcies, argued that such releases are not allowed under the bankruptcy code, and that the scope of the proposed releases in the Boy Scout plan was unprecedented because it potentially extends to tens of thousands of entities.Read More
March 29, 2023
Before Reform Limits Take Effect, New Florida Law Spawns Tidal Wave of Insurance Lawsuits
Tens of thousands of lawsuits – an almost 700% increase – flooded the offices of court clerks across Florida days before Gov. Ron DeSantis signed sweeping new business-backed legal restrictions which help shield insurance companies, property owners and others accused of wrongdoing. The law went into effect with DeSantis' signature on Friday. But the lawsuit logjam will take months for clerks and later judges to sort out, officials say. Critics said that there's no shortage of irony in that the push by the state's biggest business associations to limit lawsuits first spawned a tidal wave of litigation. The crush was prompted by attorneys seeking to have cases heard under less-restrictive laws that were in place before Friday. The host of legal changes would apply only to lawsuits filed after that day, "There are many cases that would've been turned down or would've been settled pre-suit. But given the deadline, you have to file a suit to protect your client," said Todd Michaels, a Coral Gables lawyer and secretary of the Florida Justice Association. Who's to blame? "They brought this upon themselves," Michaels said of insurance companies, seen as a key driver of the legislation. "They were just in such a rush to take people's rights away so completely and as soon as possible." But the Senate sponsor of what many call the biggest civil justice overhaul in Florida history, said the cascade of lawsuits merely shows that the changes are needed. "I think it proves to us that the system is kind of broken and we need to reform it," said Sen. Travis Hutson, R-St. Augustine. "You're seeing all these lawsuits being filed now and it's going to shock the system for a little bit, but eventually it will work itself out and we'll be able to move forward under the new provisions." The legislation was signed by DeSantis within hours of receiving the bill. What the overhaul means It revamps attorney fees, the time frame for filing negligence lawsuits, "bad faith" cases against insurers, premises liability and comparison of fault, an issue which brought a parade of motorcyclists to the Capitol during earlier committee hearings concerned it limits their ability to sue when injured in accidents. In mostly party line votes in the Republican-controlled Legislature, the measure (HB 837) was approved 23-15 in the Senate after sailing 80-31 through the House last week. "Instead of improving the lives of the average person, it will absolve bad actors of their duties and responsibilities," Sen. Darryl Rouson, D-St. Petersburg, warned in debate Thursday, saying the measure further empowers insurance companies over consumers. After the legislation passed, Associated Industries of Florida President and CEO Brewster Bevis said the restrictions will save Floridians by "putting an end to the tort tax that was forced on Florida businesses and consumers by billboard lawyers." Court crush But for now, the courts are straining. Carolyn Timman, the Martin County clerk and president of Florida Court Clerks & Comptrollers, said about 82,000 lawsuits have been filed statewide in March, almost seven times the average 12,000 cases. The largest share of the lawsuits landed in the last week. "Our concern, of course, is our resources to be able to handle these cases," Timman said. "That's a big volume for us. We'll be working closely with the judiciary, as well, because I'm sure they have a lot of the same concerns. It's a lot of cases, certainly in a really compact time period." The ability of staff to process the volume of cases is compounded by the need to issue notices, and summonses, and later schedule pre-trial motions and handle evidence and jury selection as the lawsuits move toward trial, Timman said. Martin County, alone, has had 524 lawsuits filed this month. Normally, a monthly total is about 90, she said. Michaels, the lawyer with the Florida Justice Association, which represents trial attorneys, said his organization urged Republican sponsors of the civil justice restrictions to adopt a more phased-in approach to enacting the legal changes. But he said supporters insisted on having the law take effect as soon as the governor's signing, even though many Florida laws have a July or October effective date. "Once this bill became effective, rights that people had will be gone," Michaels said. "So it put lawyers in a position where you had to file before the governor signs it. The legal system now completely changes." More time needed, defenders say The Florida Defense Lawyers Association, which sides with insurers and other leading industries promoting the lawsuit restrictions, wrote Florida Supreme Court Chief Justice Carlos Muniz on Thursday, requesting an administrative order granting more time for defense clients to respond when sued – because of the backlog. The association fears companies could default in claims made against them by not timely responding to a suit. "This drastic increase in lawsuits will create a statewide issue that will impact the rights of defendants," the association wrote Muniz. "This will cause defense firms and attorneys undue burden and stress. There are not enough hours in the day to answer all of these complaints."Read More
March 29, 2023
Former Aetna CEO to Take Helm of Health Insurer Oscar
Mark Bertolini, former chief executive of health insurance giant Aetna Inc. and hedge fund Bridgewater Associates, will take the helm of Oscar Health Inc. as it seeks to turn a profit and carve out a role as a technology supplier in the healthcare industry. Mr. Bertolini, 66 years old, will take the post effective next Monday, the company said. He will succeed Mario Schlosser, 44, who co-founded Oscar in 2012 with Joshua Kushner and will take the new title of president of technology, reporting to Mr. Bertolini. Mr. Schlosser will also remain on Oscar’s board, which Mr. Bertolini will join, the company said. Mr. Bertolini said he would initially focus on ensuring Oscar meets its goal of having a profitable insurance business this year and full-company profitability in 2024. Beyond that, he said, he thinks the company can supply technology tools to help doctors and health systems interact with patients and manage their care, a different approach than some large insurers that have been more focused on buying up doctor groups, clinics and other assets. “The digital platform has an opportunity to really change healthcare,” he said. “What we’re thinking about is, how can we use it to enable the provider system instead of owning them.” Still, that would pit Oscar against many of the largest companies in the industry, including UnitedHealth Group Inc.’s Optum arm, Elevance Health Inc. and Cigna Group. Mr. Bertolini was a longtime health-insurance official who became chief executive of Aetna in 2010. He sold Aetna, one of the country’s biggest health insurers, to CVS Health Inc. in 2018 for nearly $70 billion. He left the CVS board in 2020. In early 2022, he became co-CEO of Bridgewater, stepping down earlier this month. Mr. Bertolini said his stint as chief executive there was always intended to be limited. He has been advising Oscar for the past 18 months, Mr. Schlosser said. “I don’t have too many more of these opportunities to change the system that I’ve known since the beginning of my career back in 1983,” Mr. Bertolini said. Oscar, of New York, has said it is using technology to make the experience of its roughly 1.15 million members simpler and more frictionless. Most of its members are enrolled in individual and small-employer plans, including a product it offers with Cigna. The company, which has never posted a profitable year, reported an accumulated deficit of $2.6 billion at the end of 2022. It had about $4 billion in revenue last year and posted a loss of about $610 million. Last year, Oscar said it would pull insurance operations out of Arkansas and Colorado. It said last August that a Florida health plan to which it was supplying administrative and technology services had terminated their deal.Read More
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