AM Best to host webinar on state of E&S Market

A.M. Best Co. is working with NAPSLO to host a Webcast entitled, "State of the Excess and Surplus Market" on Friday, September 25, from 11 a.m. to Noon (Eastern). Registration is free and can be done online at Best's Conference Center.

Company leaders and experts in the specialty insurance market will discuss the findings of a soon to be published report from A.M. Best and the Derek Hughes/NAPSLO Educational Foundation on the issues shaping the excess and surplus market and how companies are faring within it.

Speakers scheduled include:

• Steve DeCarlo, CEO, AmWins
• Neil Abernathy, CEO & President, Swett & Crawford
• Peter Eastwood, CEO, Lexington Insurance Co.
• Joseph Roethel, Assistant Vice President, A.M. Best Co.
  

Topics will include:

• An analysis of the performance of the leading excess and surplus insurance coverage writers.
• An exploration of changes in the distribution environment and the roles of agents and brokers.

Attendees can submit questions or comments for the discussion by e-mailing news@ambest.com. Questions and comments will be discussed before and during the live event. Coverage of the Webcast will be featured in an upcoming issue of Best's Review.

Brady R. Kelley Named Executive Director

The NAPSLO Board of Directors announced that Brady R. Kelley has accepted the position of Executive Director of the Association and will join NAPSLO on September 12, replacing Richard M. Bouhan who will be retiring from the organization following 30 years of service.

Mr. Kelley most recently was Chief Financial and Business Strategy Officer for the National Association of Insurance Commissioners (NAIC), the U.S. standard-setting and regulatory support organization governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories.

“After an extensive search we are very pleased to announce that Mr. Kelley has accepted the position as Executive Director,” said NAPSLO President Letha Heaton. “We would also thank Mr. Bouhan for his many years of service to the Association and the surplus lines industry.”

Mr. Bouhan will remain with the Association through June of 2012 working on the transition and also legislative and legal issues for NAPSLO. Mr. Bouhan joined the Association in 1981 as Legislative Director and became Executive Director in 1988.

Mr. Kelley has served as Chief Financial and Business Strategy and previously served as Chief Financial Officer, Director of Financial Services, and Financial Services Manager since joining the NAIC in 1998. He also served as a senior accountant for Price Waterhouse after graduating with a bachelor’s degree in accounting from the University of Missouri. He has also received the CPA designation.

“We are sad to see him leave us, and excited for the opportunity this provides him and his family,” said NAIC Chief Executive Officer, Dr. Therese M. (Terri) Vaughan. “Having appreciated his talents for 13 years at the NAIC, we applaud the wisdom of NAPSLO’s choice and wish Brady the very best of luck.”

Concurrent Causation of Loss and the Named Storm Deductible in the Wake of Hurricane Isaac

As the remnants of Hurricane Isaac continue to rain down and potentially cause damage, Louisiana Insurance Regulatory Law has a timely article on two issues which many homeowners in affected regions may face: concurrent causation of loss and the named storm deductible.

Read the full article:

Concurrent Causation of Loss and the Named Storm Deductible in the Wake of Hurricane Isaac.

Downloading Data to Retail Agents in the E&S Market Subject of Sept. 9 Webinar

The Retail Agent E&S Joint Industry Initiative is sponsoring a webinar on Thursday, September 9 on Opportunities for Downloading Data to Retail Agents in the E&S Market.

You can reserve a spot on the Webinar seat now at: https://www1.gotomeeting.com/register/588464784. The webinar will highlight developments in downloading data from MGAs/Brokers/E&S Carriers to Retail Agents and will focus on the benefits of using Download technology, how Download can work for MGAs/Brokers/E&S Carriers, how to avoid pitfalls when implementing Download, and any other questions that arise.

Sponsored by the Retail Agent E&S Joint Industry Initiative (a collaboration of AAMGA, ACORD, ACT & NAPSLO), the session will feature presentations by Neal Quiros of IVANS, Doug Johnston of Applied Systems, and Nellie Massoni of Vertafore. After registering you will receive a confirmation email containing information about joining the Webinar.

NAPSLO Issues Notice of Annual Business Meeting & Nominating Committee Report

NAPSLO has issued its Notice of Annual Business Meeting & Nominating Committee Report  and the 2012 Annual Business Meeting will be held in the Atrium A Ballroom at the Marriott Marquis Hotel in Atlanta, Georgia on Wednesday, October 10, 2012, at 10:45 a.m. Eastern.

At the Annual Business Meeting NAPSLO membership will act on the slate of officers and directors presented by the Nominating Committee and any other business properly brought before the membership.

The Nominating Committee's slate of Wholesale Broker Nominees for three-year terms are:
• Gilbert C. Hine, Jr., CPCU, CFP, McClelland & Hine, Inc., San Antonio, Texas
• Davis D. Moore, Worldwide Facilities, Inc., Los Angeles, California
• Matthew D. Nichols, ASLI, All Risks, Ltd., Hunt Valley, Maryland

Company Director Nominees for three-year terms are:
• Scott A. Culler, Markel West, Woodland Hills, California
• Michael D. Miller, CPCU, CLU, ARe, Scottsdale Insurance Company, Scottsdale, Arizona

Officer Nominees for one-year terms in 2012 – 2013 are:
• President - Matthew D. Nichols, ASLI, All Risks, Ltd., Hunt Valley, Maryland
• Vice President -  Kevin T. Westrope, Westrope, Kansas City, Missouri
• Secretary - Hank H. Haldeman, The Sullivan Group, Los Angeles, California
• Treasurer - Gilbert C. Hine, Jr., CPCU, CFP, McClelland & Hine, Inc., San Antonio, Texas

The members of the 2012 Nominating Committee are: Letha E. Heaton (Chair & Immediate Past President), Admiral Insurance Co.; Jim Carey, Admiral Insurance Company; Hank H. Haldeman, The Sullivan Group; Jacqueline M. Schaendorf, Insurance House, Inc.; and John F. Wood, III, Specialty Risk Associates, Inc.

Wireless Access at Convention

NAPSLO will offer free wireless access in the Brokers' Lounge at the San Francisco Marriott at the upcoming convention, set for September 14-18.

The Brokers' Lounge will be open to registered attendees Wednesday, September 14 through Saturday, September 17 (see hours below) and attendees will be able to access the Internet.

Wednesday........10:00 a.m. - 5:00 p.m.
Thursday...............7:30 a.m. - 5:00 p.m.
Friday....................7:30 a.m. - 5:00 p.m.
Saturday...............8:00 a.m. - Noon

The wireless access replaces the Internet Kiosks available in past years.

Avoiding Insurance Mistakes: Five Tips

Here is a great video from the Insurance Information Institute about five mistakes to avoid with your personal insurance policies. Our Oxford and Cincinnati, OH insurance offices strongly agree with these items.

Insurance Journal issues review of surplus lines tax sharing

A recent Insurance Journal article discusses the continued differences between the few states that participate in tax sharing as part of the Non-Admitted Insurance Multi-State Agreement (NIMA) versus the majority of states that retain 100% of the surplus lines taxes collected as the home state. NAPSLO’s recent analysis illustrating the insignificant financial impact, especially when compared to the burden and increased costs incurred by brokers and consumers, was highlighted in the article. NAPSLO remains hopeful that additional data from NIMA states will be made available for further analysis, but remains confident additional data will support our initial findings. 

NAPSLO continues to believe that the only viable and uniform national solution for surplus lines premium taxation is the home state approach and that all states should tax 100% of the surplus lines premium on a policy at their home state rate and retain 100% of the taxes they collect. 

RAA offers program on Financial Reporting & Analysis

The Reinsurance Association of America's ReFinance program will be held in New York City, October 28-29, 2010, and as an Association Partner, NAPSLO members will receive an Association Partner registration rate of $1,250 for the two-day program.

The program ReFinance: the ABCs of Financial Reporting and Analysis for Property/Casualty Insurers and Reinsurers will take place on October 28-29, at the New York Helmsley Hotel in New York City.

ReFinance is designed for insurer and reinsurer financial professionals and also for non-financial professionals from underwriting, claims, compliance, law and marketing disciplines to learn the fundamentals of property/casualty insurance and reinsurance financial analysis and reporting.

Attendees will: learn to read and understand the statutory Annual Statement and its schedules; use the statutory Annual Statement as a tool for financial analysis; learn the differences in the various accounting systems; develop a working knowledge of key financial and accounting terms; analyze and interpret comparative financial statements; compute and interpret financial ratios.

The agenda, brochure and registration information is online. Attendees earn CLE, CPD, and CPE credits for attending ReFinance. Questions? Contact Ann-Marie Mwombela at 202.783-8385 or Mwombela@reinsurance.org.

NCCI Sees Continued Deterioration in Workers' Compensation Market

The National Council on Compensation Insurance, Inc. ("NCCI") has issued its annual "State of the Line" study which analyzes the entire workers' compensation market "from the implications of the overall economic environment, to current and expected industry conditions, to political considerations and more."[1]

Unfortunately, the report isn't good:

…our analysis this year shows that conditions in the workers’ comp industry continue to deteriorate. The line continues to experience an ever-lengthening list of challenges, including poor underwriting results, declining (albeit more slowly) premiums, an uptick in claim frequency, and an uncertain regulatory and inflationary climate.

The reserve position of private workers' compensation insurers continued to decline in 2010, sinking another $1 billion since 2009 to an estimated total deficiency of $10 billion, according to the NCCI.[2]

In what it calls a "singularly distressing development," the NCCI reports that, in 2010, the workers' compensation industry has seen an estimated 9% increase in lost-time claims frequency after 12 uninterrupted years of lost-time claim-frequency decreases in NCCI states nationwide.

In somewhat more encouraging news, the "precipitous declines" in net-written premium for workers' compensation experienced by private carriers in the last few years appear to have slowed in 2010. Net-written premium for workers' compensation declined only 1.3% for private carriers in 2010, compared to a 20% decline from 2007 to 2009.

While workers' compensation insurance rates continued to decline in many parts of the country, the NCCI suggests that this trend could be turning around based on filed increases in loss costs/rates for the 2010/2011 filing cycle.

The NCCI notes a number of external forces on the workers' compensation industry, including what unknown residual impact the Patient Protection and Affordable Care Act ("PPACA") may have, as well as other regulatory concerns, such as the following:

The federal government also continues to erect its Federal Insurance Office and the Financial Stability Oversight Council, both entities that may ultimately make recommendations that affect the way that insurance markets in the United States are regulated. With some elements of the government calling for an increase in federal oversight and regulation of insurance, all system participants will be keeping a close eye on developments in the months to come.[3]

Medical-cost containment could be crucial to the workers' compensation insurance industry as a growing percentage of workers' compensation payments are going to medical expenses instead of replacement wages. Some suggest that the industry could see as much as 70% of the comp-claims dollar going to pay medical expenses.[4]

With PPACA looming over the industry and the ballooning costs of workers' compensation medical expenses, some have even suggested that the continued revamping of the health insurance system could eventually absorb the health insurance elements of workers' compensation. If PPACA or its progeny expand to cover workers' compensation medical costs, the future of a replacement wage-only workers' compensation industry is questionable.

The workers' compensation market faces other threats as well, including the ever-present risk of terrorism and the specter of new occupational exposures from emerging technologies.[5]

Additionally, the current trend of an increasingly older-and-aging workforce presents significant problems of its own, including increased severity of claims and potentially higher administrative costs as Medicare Secondary Payor issues become more common.

Finally, the "epidemic proportions" of obesity in the workforce is likely to continue to increase claims frequency and medical expenses.[6]

1. Workers' Compensation Market Continues to Deteriorate, Stephen J. Klingel, National Underwriter P&C, August 22, 2011.
2.  Workers' Compensation Market…, Id.
3.  Workers' Compensation Market…, Id.
4. Workers’ Comp Faces Big Challenges, Changes In Its Second Century, Sam Friedman, National Underwriter P&C, August 22, 2011.
5. Workers’ Comp Faces…, Id.
6. Workers’ Comp Faces…, Id.

Minnesota to open stamping office; searching for Executive Director

The Surplus Lines Association of Minnesota was recently established to record all surplus lines insurance documents that licensees are required to file in the state and is currently looking to fill the position of Executive Director.

The Surplus Lines Association of MN will be responsible to educates its members in the areas of insurance tax responsibilities; rules and regulations; and the proper use of the surplus lines market.

In partnership with its Board, the Executive Director will provide leadership of Surplus Lines Association of MN, and be responsible for the overall administration and management of the Surplus Lines Association of MN, including day-to-day business operations; implementation of Association policies and plans toward the accomplishment of Association goals; develop and conduct an educational program to advance the professional/technical/managerial skills of the membership; represent the Association as its chief executive officer in all dealings with other organizations, individuals and the general public.

The Association is looking for someone with demonstrated accounting and management skills; Insurance industry knowledge; Bachelors or higher degree in business, accounting or math. 3 years relevant experience working in responsible positions.

Cover letter and resume should be submitted to colleen.hegstrom@state.mn.us.

2008 Summer Internship Opportunity

The National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO) is offering summer internships for qualified college juniors and seniors interested in a career in the surplus lines/specialty market. Many former interns who have participated in this program in the past five years are currently employed in the insurance industry, and nearly 71% enjoy a rewarding career in this unique market segment.

Selected interns will spend five weeks with a surplus lines/specialty insurance company followed by four weeks with a wholesale broker/general agent. NAPSLO provides transportation to and from the host locations, pays housing costs, as well as a stipend to cover incidental expenses. The host firms also provide a competitive salary.

The deadline to return applications is December 1, 2007. In addition to the application, students must submit a copy of their college transcript, two letters of recommendation, and their resume. Applications can be found online at

Nominating Committee Releases Report

The NAPSLO Nominating Committee has released their report with proposed slates of director and officer nominees for 2009-2010.

NAPSLO member firms will vote on the proposed slate of officers and directors during the Annual Business Meeting, scheduled for Friday, October 9 at the 2009 Annual Convention in Orlando.

Nominated for officer positions were:

President - Marshall P. Kath, Colemont Brokerage Group, Inc., Dallas, Texas
Vice President - Timothy P. Makowski, Specialty Lines Underwriters, Milwaukee, Wisconsin.
Secretary - Letha E. Heaton, Admiral Insurance Co., Cherry Hill, New Jersey
Treasurer - Robert T. Sargent, CPCU, RPLU, ARM, Mercator Risk Services, Inc., Hartford, Connecticut

Nominated for three-year terms on the Board were:

Gregory T. Crouse, Crouse & Associates Insurance Brokers, Inc., San Francisco, California
Gilbert C. Hine, Jr., McClelland & Hine, Inc., San Antonio, Texas
Matthew D. Nichols, ASLI, All Risks, Ltd., Hunt Valley, Maryland
Michael P. Fujii, Endurance American Specialty Insurance Company, New York, New York
Letha E. Heaton, Admiral Insurance Company, Cherry Hill, New Jersey

Directors are nominated for three-year terms on the Board. Officers are nominated for a one-year term. Mr. Fujii is new to the Board and Ms. Heaton recently changed NAPSLO member affiliations.

Parc 55 Reservation Information Requests

Attendees of the NAPSLO Annual Convention staying at the Renaissance Parc 55 in San Francisco who need to change their arrival or departure date on their reservation or check on the status of the reservation, need to phone the hotel directly.

Previously the hotel was taking requests via email but because they are sold out they have asked NAPSLO to inform attendees that guests should contact the hotel at 800) 697-3103 to inquire if changes can be made or to check on the status of a reservation.

The NAPSLO Annual Convention is scheduled for September 14-18 at the San Francisco Marriott.

“Wear and Tear” Vs. “Sudden and Accidental”

Two terms that are important to know when it comes to the reason behind an insurance claim. Those terms are “Wear and Tear” and “Sudden and Accidental”.

“Wear and tear” is defined by Wikipedia as “damage that naturally and inevitably occurs as a result of normal wear or aging.” An example on a home would be a house settling over time, a pipe that corrodes and leaks water over several months or years, or a roof that after 15 years starts to drop shingles. All these items would not be covered under an insurance policy as an insurance policy does not cover “Wear and Tear”. Insurance policies cover “Sudden and Accidental” events.

So what is “Sudden and Accidental”? The best way to define it is by giving examples. If a pipe in your house just suddenly burst from pressure or because of freezing that is sudden and was done accidently. If wind blows through your neighborhood and suddenly blows off your roof or chunks of your roof that is sudden and accidental. If a tree falls and damages your home that event is sudden and accidental.

“Sudden and Accidental” events are things people can not totally prevent which is why insurance exists and covers them. On the other hand, “Wear and Tear” damage can be prevented by making sure your property is well maintained and updated. Insurance policies are not maintenance contracts.

So next time you have damage to your property ask yourself is this “Wear and Tear” or “Sudden and Accidental”? If it is “Sudden and Accidental” be sure to call your insurance agent or if you are not sure which it falls under call your insurance agent and let them help you figure that out.

Book Review: “Buckets of Money: How to Retire in Comfort and Safety”

“Buckets of Money: How to Retire in Comfort and Safety,” by Raymond J. Lucia, CFP (John Wiley & Sons, Inc., 2004)
by Richard F. O’Boyle, Jr., LUTCF, MBA
“The Insider’s Guide to Retirement and Insurance Planning”
http://www.retirementandinsurance.com


We’re taught to save throughout our working years to fund our retirement – diligently socking money into our 401(k)s and paying down our debt. But once we flip the switch and settle into a presumably worry-free retirement, how do we effectively and efficiently spend down our assets in those golden years? Ray Lucia, a Certified Financial Planner with a celebrity’s flair, helps us to answer this tough question with his “buckets of money” planning strategy.

The gist of “Buckets of Money” is that our nest eggs should be separated into three “buckets” of ultra-safe income streams, conservative medium-term assets and aggressive stock funds. Over seven-year cycles, the funds are depleted and shifted into the next immediate bucket to be used for current income. The buckets strategy leaps the key retirement planning hurdle by providing safety, growth, diversification, tax-efficiency and lifetime income. The book identifies which investments are appropriate for which buckets, along with guidelines for the proportions of each.

The book reads like a infomercial, but don’t let that turn you off. The general discussion of asset classes and products (stocks, bonds, annuities, etc.) is valuable for the novice and experienced investor alike. His comprehensive perspective honestly allows him to cover all potential investment classes. Mr. Lucia isn’t trying to sell you on anything other than his planning strategy (and he does that well).

Mr. Lucia’s website contains some notes on changes, but I’d like to see a fully updated edition of the book. For example, the buckets strategy recommends real estate holdings of as much as 20% of a portfolio in the form of real estate investment trusts. Given the 2008 mortgage meltdown, perhaps that should be reconsidered. Mr. Lucia only skims past the important backstop that life, disability and long-term care insurance provide as we switch our retirement portfolio from accumulation mode to distribution mode. Fortunately, the author takes into account the complexities of the tax code since intelligent tax planning can make or break a retirement plan. The book’s numerous statistical examples remain useful today.

The worksheets included in the book are quite easy to use. While the potential to “do it yourself” is there for the experienced investor who has a trusted advisor, I wouldn’t recommend that an individual adjust her portfolio without consulting a professional. I’m not sure if the buckets strategy is an “all or nothing” approach to investing. Any retirement plan can benefit from the non-controversial concepts presented here.

Book Review: “The Complete Guide to Reverse Mortgages,” by Tammy Kramer and Tyler Kraemer

“The Complete Guide to Reverse Mortgages,” by Tammy Kramer and Tyler Kraemer (Adams Media, 2007)
by Richard F. O'Boyle, Jr., LUTCF, MBA
"The Insider's Guide to Retirement and Insurance Planning"
http://www.retirementandinsurance.com


Tammy and Tyler Kraemer do professional advisors and consumers a valuable service by demystifying reverse mortgages. The sale of reverse mortgages has boomed in the past 20 years as house-rich/cash-poor retirees seek to tap into their home equity to fund their golden years. “The Complete Guide to Reverse Mortgages” details and explains the many benefits and pitfalls of these complex and poorly understood financial products. Every professional advisor should read this book, along with every consumer seriously considering one.

Over the last three or four years I have seen a surge in published articles (good and bad) on reverse mortgages. This is mainly because our retirement investments have failed to produce the expected pile of money to live off of. Up until 2008 (the year after this book was published) our home values had increased beyond rationally expected levels. The perfect storm of crashing investment accounts, crimped budgets and plummeting home equity values makes the consideration of a reverse mortgage even more pertinent.

“The Complete Guide to Reverse Mortgages” is a consumer-friendly volume with useful worksheets and illustrations. If you are a senior considering a reverse mortgage (or adult child of one), take 30 minutes to pencil through the worksheets. Better yet, sit down with a financial advisor or mortgage specialist and do them together. Don’t hesitate to float the idea past intelligent friends, your family attorney or a neighborhood insurance agent. The consumer is well-advised to carefully network to find a reputable reverse mortgage specialist. You may bring any financial advisor along with you to a consultation. By speaking with a variety of advisors, you will be sure to explore the fullest spectrum of options. This is a financial purchase you should be extremely cautious about because it’s a long-term commitment.

Many things have changed in the reverse mortgage market since the 2008 financial meltdown so on February 25, 2011, I spoke with Jim Calimopulos, Reverse Mortgage Sales Manager at Worldwide Capital Mortgage Corp. in Bay Shore, NY.

Mortgage rates and the costs of reverse mortgages in general have increased, and property values have decreased, which means that less money is ultimately put into a consumer’s pocket when they take out a reverse mortgage. The highly publicized failure of IndyMac bank (one of the largest reverse mortgage providers) has fortunately not made a great impact on the availability of these products to consumers since other companies such as Financial Freedom and MetLife continue to be strong players.

Since 2010, the Department of Housing and Urban Development’s Home Equity Conversion Mortgage program has sought to lower some costs and provide more options to consumers. As Mr. Calimopulos explained, if a couple is downsizing their home and moving into a new home, they can greatly benefit from the HECM program. For example, if they sell their home for $300,000 and then buy a $250,000 home in a 55+ community, they can still get a reverse mortgage for up to $190,000 on the new property. Ultimately, the couple will have about $110,000 in cash to put aside for use in the coming years.

A.M. Best Report: Surplus Lines Results Remain Strong

The annual A.M. Best Co. report on the surplus lines industry showed that while surplus lines insurers outperformed the property/casualty industry in underwriting and operating performance in 2007, the softening market and more aggressive competition portend deterioration in profitability as premium levels decline.

Absent a catastrophe that curtails the incursion of standard market insurers and the new offshore market, the surplus lines industry's market share is expected to continue decreasing over the near term, according to the report

The report, which will be released at the NAPSLO Annual Convention, is commissioned by the Derek Hughes/NAPSLO Educational Foundation. This year's report noted that:

• After-tax return on equity, which measures after-tax profitability from underwriting and investment activity, slipped slightly to a still solid 12.4% from 15.05% at year-end 2006.
• The impact of the softening market was evident in the 8.7% drop in net premiums written in 2007 for professional surplus lines insurers.
• Merger and acquisition activity has been high among surplus lines companies and distribution through midyear 2008, and is expected to continue over the near term.
• For the fourth consecutive year, in 2007, surplus lines recorded no financial impairments, compared with the four impairments for the admitted P/C industry
• The top three surplus lines groups were unchanged from 2006: American International Group, Lloyd's and Zurich Financial Service Group.
• An interstate compact designed to solve the surplus lines industry's multistate tax and compliance problems was finalized in 2008, as Congress considered the Nonadmitted and Reinsurance Reform Act (NRRA), also supported by the surplus lines industry.

More States Adopt NAPSLO’s View on Requiring Surplus Lines Brokers to Have P&C License

A recent survey by the NARAB Working Group has shown that a number of states have adopted NAPSLO’s position that under Gramm-Leach-Bliley Act of 1999 states can not require surplus lines brokers to have underlying P&C license if they are not handling the diligent search for a policy.

One of the goals of Gramm-Leach-Bliley was to allow easier access to surplus lines licenses to out of state residents. A number of states required that before a broker could acquire a surplus lines license they would need to acquire an underlying property and casualty license. NAPSLO argued that if the broker was not performing the diligent search of the state’s admitted market, under GLB they did not need an underlying P&C license.

The NARAB survey showed that Idaho, Illinois, Kansas, Kentucky, Maine, Maryland, Mississippi, Montana, Nebraska, North Dakota, Oregon, Rhode Island, and Wyoming eliminated the underlying license requirement for those brokers that do not conduct diligent searches. In addition, a number of other states had previously passed legislation that adopted this view.

Cavalcade of Risk, No. 138 - From Global to Personal Risk

Nina Kallen is hosting the 138th edition of the Cavalcade of Risk at her blog, Insurance Coverage Law in Massachusetts.  Nina's blog is very informative and a good resource even for those outside of Massachusetts.

The Cavalcade of Risk is a biweekly rotating collection of articles and links (also known as a "blog carnival") from insurance and other-risk-related sources that provides some great information and insight about risk management.

Replay of Webinar on Surplus Lines Reforms Available

A replay of the NAPSLO sponsored a webinar - Surplus Lines Reforms: What You Need to Know About the New Federal Law - on the implementation of the surplus lines provisions of the Non-Admitted and Reinsurance Reform Act is now available to view and the PowerPoint presentations used in the webinar are available to download.

The August 19th webinar reviewed what agents, brokers, carriers and regulators need to know about regarding implementing the Non-Admitted & Reinsurance Reform Act, contained in the financial services reform bill approved in July 2010.

The surplus lines reform language mandates that beginning one year after the bill is signed into law the home state of the insured will be the only state with jurisdiction over the transaction and the only state to which a broker must pay taxes.

James Donelon, Louisiana Commissioner of Insurance to Speak at Annual Convention

More than 3,000 people have registered for the 2007 Annual Convention, scheduled for Oct. 3-6 in New Orleans. Programs begin Thursday morning at 10 a.m. with a welcome by James J. Donelon, Louisiana Commissioner of Insurance. His speech will be followed by the Forum entitled: Changing Markets, Changing Laws: What’s Ahead for the E & S Wholesaler? This will feature eight top executives from wholesale brokerage firms and surplus lines companies. Forum participants from NAPSLO member wholesale brokerage firms will be: Neal Abernathy, Swett & Crawford; Steve DeCarlo, AmWins Group, Inc.; Ron Gabor, Gabor Insurance Services, Inc.; and Marshall Kath, Colemont Brokerage Group.

Forum participants from NAPSLO member companies will be: Dennis Crosby, ACE Westchester Specialty; David Leonard, RSUI Group; Tom Mulligan, Western World Insurance Group; and Dale Pilkington, Colony Insurance Company.

Over the past five years the surplus lines industry has become an increasingly larger and more important part of the insurance industry. This is quite a change from the 1990s when flat markets, solvency concerns about some markets, and threatened government regulation raised an ominous specter about the future of the industry. Today the market represents nearly 15 percent of the P&C industry.
Specific topics to be discussed during the forum will be: the factors that have driven the recent growth of the surplus lines market, the impact this growth has had on the wholesale distribution system and risk taking community, regulatory compliance concerns and current federal legislative proposals including the Nonadmitted and Reinsurance Reform Act.

The inclusion of this Industry Forum on Thursday morning is a departure from the traditional annual convention format in which that morning has been left completely open. This year, convention attendees will be given the opportunity to hear important leaders of our industry discuss current issues and topics and to secure perspectives and knowledge about trends that may impact their business.

Derek Hughes/NAPSLO Educational Foundation Scholarships Announced

The Derek Hughes/NAPSLO Educational Foundation has selected 13 students to receive $4,000 scholarships for the 2007-08 school year. The program’s goal is to further the study of insurance and encourage, support and reward students who have an interest in insurance.

The four students selectedto receive a Rolland L. Wiegers Education Scholarship are:
•Brian Sassano, Warminster, Pennsylvania, Temple University
•Andrew Martin, Ostego, Michigan, Olivet College
•Kimberly Ambrecht, Doylestown, Pennsylvania, Temple University• Craig Jenkins, Hastings, Michigan, Olivet College

The Kevin A. McLaughlin Memorial Scholarship recipient is:
•Joshua Hart, Gaylord, Michigan, Olivet College

The three students selected to receive a Scott W. Polley Memorial Scholarship are:
•Sarah Leszczuk, Reading , Pennsylvania, Temple University
•Amanda Eikenberry, Des Moines, Iowa, Drake University
•Blake Kerr, Chickasha, Oklahoma, University of Central Oklahoma

The Herbert W. Kaufman Memorial Scholarship recipient is:
•Aelon Porat, Philadelphia, Pennsylvania, Temple University

The Derek Hughes/NAPSLOEducational Foundation Insurance Scholarship recipient is:
•Deyan Kozhuharov, Olivet, Michigan, Olivet College

The NAPSLO Insurance Scholarship recipient is:
•Jeremy Harlow, Monmouth Illinois, Illinois State University

The Richard Hull Educational Scholarship recipient is:
•Ryan Coburn, Wayland, Michigan, Olivet College

The Russell Bond Memorial Scholarship recipient is:
•Maria Gabriel, Philadelphia, Pennsylvania, Temple University

Illinois Becomes 49th State to Pass NRRA Compliance Legislation

Illinois became the 49th state to enact Nonadmitted and Reinsurance Reform Act enabling legislation with the signing of HB1577. The bill, signed by the Governor on August 14, authorizes the state to tax the gross premium on a surplus lines policy when Illinois is the home state of the insured but does not authorize tax sharing.

The bill includes most of the significant NRRA definitions and defines affiliate, affiliated group, exempt commercial purchaser, home state, qualified risk manager and state. This bill does not limit the scope of the law to policies where Illinois is the home state of the insured and taxes the gross premium when it is the home state of the insured.

The bill includes NRRA eligibility terms but goes beyond the NRRA in continuing to require that the broker use insurers that have standards of solvency and management that are adequate for the protection of policyholders or the broker is to provide a warning to the policyholder if the insurer does not meet such standards.

Illinois did not implement NRRA legislation in 2011 but issued a bulletin saying the state would tax 100% of the premium if Illinois were the home state in the policy. Comprehensive information on 2012 legislation in Illinois and other states is available on NAPSLO's website, in addition to a number of NRRA resources. To date the only Michigan and the District of Columbia have not passed NRRA compliance legislation.

Brace Yourself... Health Reform, Rising Insurance Costs and the PPACA-yderm in the Room

The New York Times breaks down the legal challenges facing PPACA, the Des Moines Register warns of looming rate increases, the Buffalo News thinks PPACA can still do a lot of good while the Washington Times says its doing more harm than good, and the Heritage Foundation suggests there's a PPACAyderm in the country's economic woes room.

As mentioned in a previous article, the Department of Health and Human Services and the Treasury Department continue issuing guidelines and handing out establishment grants for the Patient Protection and Affordable Care Act ("PPACA") health insurance exchanges even as the constitutionality of PPACA's individual mandate requiring U.S. residents to purchase health insurance seems to be on the fast track to the Supreme Court.

The "core fight is whether Congress... can require people to buy private health insurance."

A New York Times editorial breaks down the current legal challenges facing PPACA and its individual mandate, asking: Will Health Care Reform Survive the Courts?

The legal battle over the constitutionality of the health care reform law will determine how far government can go in helping to improve people’s lives. Ultimately, the Supreme Court will have to decide this question. Until then, the pileup of lower federal court rulings — responding to some of the more than two dozen lawsuits filed against the law — is confusing and sharply divided, especially on the requirement that individuals buy or obtain health insurance or pay a penalty.

* * *

The core fight is whether Congress, under its powers to regulate interstate commerce, can require people to buy private health insurance if they don’t want to. Although the law has many elements, the mandate is an important tool for reaching the goal of near-universal coverage — and needed to make health insurance reforms work.

The editorial ends by calling for judicial restraint, urging the Supreme Court to "let political leaders determine what health care reform should be."

Read the full editorial: Will Health Care Reform Survive the Courts?

Bad luck? Within two months of Congress passing PPACA, "the trend in job growth dropped sharply."

With respect to the country’s current economic woes, James Sherk of the Heritage Foundation points out what may be the elephant in the room – an elephant President Obama has named “Bad Luck” but Sherk calls PPACA – asserting that private-sector job creation stopped improving almost as soon as Congress passed the health reform legislation last year.

In May private sector job growth dropped sharply to less than 50,000 net jobs. Thereafter, monthly improvement in private job growth averaged just 6,500 jobs.

What else happened in the spring of 2010? Despite obstacles that many believed would kill the bill, Congress passed the Affordable Care Act. Within two months, the trend in job growth dropped sharply. Monthly job creation had been on pace to top out in the hundreds of thousands. Post-Affordable Care Act, it has barely kept pace with population growth.

Correlations do not - of course - prove causation. The fact that job growth slowed after Congress passed the Affordable Care Act does not prove that the legislation is at fault. There are, however, good reasons to believe that the law applied the brakes to hiring.

Read the full editorial: Did Health Law Bring Economic Doldrums?

LTC insurers request premium rate increases of up to 30% in Iowa.

On a related note, the Des Moines Register’s editorial warns Iowans to brace themselves for rate increases, stating that insurance companies have asked the State of Iowa for permission to increase premium rates as much as 30% this year, primarily with respect to long-term care insurance. While the editorial notes that long-term care policies are relatively new, it blames insurance companies for failing to accurately predict future costs and expenses.

Now that people are living longer and filing claims for care, insurance companies are increasing premiums on others to pay those expenses.

The editorial asks why insurers are seeking rate increases for as much as twice what Iowa state regulators have determined are necessary. Apparently without any research or analysis to try to answer that question, the editorial concludes that insurers “cannot justify raising rates as much as they want” based on a quote from an Iowa state regulator.

Ominously, the editorial concludes:

In Iowa, state regulators are the only thing standing between Iowans and huge rate increases. Yet the increases the state approved can still add up to a lot of money for Iowans. If premiums become unaffordable, they may have to drop their coverage and walk away from a large investment in premiums.

Watch out for that elephant, too, Iowans.

Read the full editorial: Brace Yourself for Rate Increases.

Despite its drawbacks, PPACA "has done and can do a lot of good."

In his column for the Buffalo News, Douglas Turner suggests that PPACA can still do a lot of good.

While so-called Obamacare is a disappointment, the administration and many states like New York are working to squeeze what good they can out of it as the nation waits to see how the U. S. Supreme Court will rule on the sweeping law.

Turner suggests that the Supreme Court will, more likely than not, disallow PPACA’s health insurance individual mandate, but the rest of the law will survive. He goes on to explain his opinion that PPACA will help consumers even without the mandate.

Despite its drawbacks, the Affordable Care Act has done and can do a lot of good. Medicare clients can get wellness exams without co-pays. Americans now have freedom from worry about lifetime limits on coverage. The law has funded state programs to keep customers from being ripped off. No child can be denied coverage because of a pre-existing condition, a provision that will be extended to all in 2014.

Read the full editorial: Affordable Care Act Can Do a Lot of Good.

A "rationally devised formula developed and administered by government bureaucrats will not reduce costs and improve efficiency."

Tracy Miller at the Washington Times disagrees, positing that policy pressures and government subsidies will result in a pricey government-run program that is Doing More Harm than Good.

Insurance could become affordable for most of the uninsured via the subsidies included in the PPACA, but the amount spent on subsidies likely would far exceed the government’s cost projections, adding considerably to government deficits. Many healthy people will choose not to buy health insurance.

* * *

Thus, those who buy insurance will be sicker than average, and many will wait until they get sick to purchase insurance. Premiums will rise to reflect the higher health care costs of those who purchase insurance, making insurance too costly for young, healthy people who do not qualify for government subsidies.

The problem with the PPACA is that a rationally devised formula developed and administered by government bureaucrats will not reduce costs and improve efficiency. Rather, demand and the costs of meeting health care needs would be controlled more effectively with decentralized decision-making in a market economy.

Read the full editorial: Obamacare: Doing More Harm than Good.

Privacy Insurance and Financial Losses from Data Breach

Toby Merrill's article in the Advisen Cyber Liability Journal gives an overview of privacy insurance, also known as network security or cyber insurance, to "cover the financial losses arising from a data breach" that can also include "access to expert advice and services."

Privacy insurance has become more prominent as increases in the scope of federal and state privacy laws "continue to fuel a rise in publicly reported corporate data breach incidents."

Merrill, an Assistant Vice President in the Professional Risk division of ACE USA, warns that not all privacy insurance products are created equal:

While most policies and endorsements address both first-party and third-party exposures, there are often wide differences in coverage terms, conditions, exclusions and financial limits.

Many policies, for instance, may highlight large limits of insurance coverage for statutory notification to the affected parties of a breach and the monitoring of their credit, but fail to provide adequate financial limits or choice among the vendors providing assistance in the aftermath of a data breach.

Thanks to Nina Kallen at Insurance Coverage Law in Massachusetts for the find.

Technology Program Added to Convention

A program to review recent actions by U.S. carriers and the London market concerning technology issues has been added to the schedule of the 2012 NAPSLO Annual Convention in Atlanta.

The session, Current Technology Issues: Bringing Carriers into the Mix, will take place on Tuesday, October 9 from 8:30 a.m. to 9:30 a.m. and will include Adam Stafford, Head of Electronic Distribution for Lloyd's; Tammie Miller, Risk Placement Services Director of Automation and Chair of the E&S Joint Working Group London Subgroup; and Greg Ricker, Strickland Insurance Group CIO and Co-Chair of the Joint Working Groups Carrier Subgroup.

The program will review proof-of-concepts demonstrating the goal of transferring data from retailers to managing general agents/brokers and to carriers. Panelists will also review the information requested by London brokers and syndicates on binding business and the efforts by the London subgroup to work with U.S. MGAs and brokers to supply the requested information. In addition, recent actions on technology issues in the London market will be discussed.

The panel will also review actions by the E&S Joint Working Group. The Working Group's carrier subgroup has been working with ACORD and the vendor community to create a common messaging solution.

The London subgroup has focused on communications and standards between MGAs and the London market and is making great strides in workflow efficiency and reporting. Current activities include understanding risk modeling and the data required for analysis, rolling out the newly developed XML bordereaux standard, working towards a claim standard that has been submitted and seeking approval, and helping develop standards around reporting risk data.

New Jersey Enacts Law to Collect 100% of the Tax and Allows State to Join A Compact

The New Jersey Governor has signed into law Nonadmitted and Reinsurance Reform Act (NRRA) compliance  legislation that would authorize the state to collect 100% of the tax on U.S. premiums and allows the state to join a compact or tax sharing agreement.

New Jersey is among the latest states to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation and offered comments.

The NRRA mandates that beginning July 21, 2011 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are bringing their laws into compliance.

New Jersey SB 2390 authorizes New Jersey to collect 100% of the tax on U.S. premiums for a surplus lines or independently procured insurance policy when New Jersey is the home state of the insured. It  also authorizes the Commissioner to enter into, modify and terminate one or more tax sharing agreements or compacts.

The bill provides that in determining whether to enter into a compact or tax sharing agreement, the Insurance Commissioner must consider: efficiencies to be achieved; the amount of revenue to be generated through participation; and any other material factor. In addition, a decision by the Commissioner to enter into a tax sharing arrangement is subject to nullification by the Joint Budget Oversight Committee

The bill defines home state per the NRRA, however limits the imposition of nonadmitted insurance premium tax to U.S. premium. The bill does not incorporate the NRRA's exempt commercial purchaser (ECP) exemption or insurer eligibility requirements.

NAPSLO contests Montana assuming collection of stamping fees

NAPSLO is submitting a letter and will take part in hearings on August 21 to contest the decision by the state of Montana to take over collection of stamping fees from the Montana Surplus Lines Agents Association (MSLAA).

Effective July 1, 2009 the Montana Commissioner of Securities and Insurance announced it would review and process surplus lines insurance submissions, determine applicable stamping fees owed, and send surplus lines agents tax and fee statements.

NAPSLO is questioning the basis for the state to take over the MSLAA’s duties in collecting the stamping fee. Under Montana state law “if a surplus lines advisory organization is not operating as set forth in this section, the stamping fee may be collected by the commissioner and placed in a state special revenue account for the expenses of regulating surplus lines” however the MSLAA was in operation at the time of the take over.

“NAPSLO’s view is that the state can step in only if there isn’t a surplus lines advisory organization collecting the fees, and there was an organization in place collecting the fees,” said NAPSLO Director of Government Relations Steve Stephan. “We believe under state law Montana must allow the MSLLAA to resume its role in collecting the stamping fees and processing submissions.”

In addition, Mr. Stephan noted in the letter to the department that it can only take over the stamping fee collection duties from an existing organization if there is a finding that the organization is not operating pursuant to Montana law. To date Mr. Stephan said there has been no examination by the commissioner finding a violation of law and no hearing has been provided to the MSLAA and as a result there is no basis to conclude that the advisory organization was not operating as required.

According to statistics from the Surplus Lines Stamping Office of Texas, $54.2 million in surplus lines premiums were written in Montana in 2008, and approximately $1.5 million would have been collected in surplus lines taxes and $542,000 in stamping fees.

Second Agent to Broker/MGA Data Transfer Demo Set

The General Agent Interface Subgroup will be hosting the second in the series of Proof of Concept demonstrations showing the importation of data from retail agent systems to MGA/Broker Systems on Wednesday, Sept. 2 from 11:00 a.m. to Noon (Eastern).

This webinar will feature technology provided by Appulate and the presenter will be Dimitri Nikouline, assisted by Subgroup Chair Mike Roy of CRC Insurance Services, Scott Montney of Cochrane & Company and Retail Agent E&S Working Group Co-Chair Angelyn Treutel.

Please reserve your Webinar seat in advance by clicking the registration link. After registering you will receive a confirmation email containing information about joining the Webinar. There is no charge to attend the Webinar.

A replay of the first webinar demonstration with ADTS is available online.

Delaware Enacts NRRA Bill Requiring 100% of Premium to be Taxed; Establishes Procedure to Enter Compact

The Delaware Governor has signed into law Nonadmitted and Reinsurance Reform Act (NRRA) compliance related legislation that would authorize the state to collect 100% of the tax on the U.S. premium and allows the state to join a compact or tax sharing agreement.

Delaware is among the latest states to enact NRRA related implementation legislation. During the session NAPSLO provided draft legislation and offered comments.

The NRRA mandates that beginning July 21, 2011 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are bringing their laws into compliance.

Delaware's SB109 provides authorization for participation in an interstate cooperative compact or agreement, however it requires the insurance commissioner to establish a NRRA Implementation Revenue Study committee to study the fiscal impact of entering into a compact.

The law provides that 100% of the premium for all policies written on home state insureds, whether single-state or multi-state, is considered Delaware premium for tax purposes; provides for the payment of premium tax on independently procured nonadmitted insurance; and provide for penalties for noncompliance with tax filing requirements.

SB 109 further adds definitions for "home state," "affiliated group" and "control," adopts the NRRA exempt commercial purchaser exemption, and amends insurer eligibility requirements.

NAPSLO Applauds Regulators' Approval of Kentucky Allocation Proposal

NAPSLO applauded insurance regulators' decision to approve a proposal by the Kentucky Department of Insurance on how to allocate surplus lines premium taxes. In a non-binding straw vote on Thursday, the SLIMPACT (Surplus Lines Multistate Compliance Compact) Commission voted to approve the allocation method proposed by Kentucky.

“NAPSLO, and the industry, were pleased to see regulators vote to approve Kentucky’s allocation proposal,” said NAPSLO Legislative Co-Chair David Leonard. “The Kentucky proposal presents a workable methodology that would be a vast improvement over other tax methodologies under discussion and we hope that other state groups will also adopt the proposal.”

The commissioners, representing the nine states that adopted SLIMPACT legislation, were meeting to discuss issues regarding the compact following the Nonadmitted and Reinsurance Reform Act (NRRA), a part of the 2010 Dodd-Frank Act, becoming effective on July 21, 2011. The Commission must adopt a tax allocation formula and Kentucky, one of the nine states, proposed a tax allocation formula that would allocate surplus lines taxes based on exposures, however, most casualty would not be allocated, an approach similar to what is in use today. The Kentucky formula could be used in any tax-allocation agreement as necessary between different states.

“Adoption of Kentucky’s proposal would basically continue the current allocation system rather than require brokers to implement a new system,” said NAPSLO Legislative Co-Chair Hank Haldeman. “It is significant step toward implementing uniformity and simplicity in filing multistate taxes, which is sorely needed.”

NAPSLO joined eight other industry trade groups in writing SLIMPACT Commissioners to recommend that they adopt the allocation methodology proposed by Kentucky. The industry groups supporting the Kentucky proposal were the American Association of Managing General Agents, the American Bankers Insurance Association, the American Insurance Association, the California Insurance Wholesalers Association, the Council of Insurance Agents & Brokers, the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies, and the Risk Management Society.

The SLIMPACT commission is presently composed of Alabama, Kansas, Kentucky, Indiana, New Mexico, North Dakota, Rhode Island, Tennessee, and Vermont

Patient advocacy groups allege discrimination by health insurers against those with chronic diseases

Several patient advocacy groups focused on AIDs, leukemia, epilepsy and other diseases have alleged that health insurers are violating the Affordable Care Act by discriminating against those with chronic diseases, and the groups are pressing the Department of Health and Human Services to respond, according to an article from The Hill.

Groups such as the National Health Law Program and the AIDS Institute have filed complaints with the administration claiming insurers are in violation of the Affordable Care Act’s provisions that prevent them from discriminating against people with pre-existing conditions and chronic diseases.

They argue certain drugs are put on higher tiers, requiring patients with chronic diseases to pay bigger out-of-pocket costs. In some cases, they say, the co-pay for such drugs can be 30 percent or higher.[1]

The pharmaceutical industry is apparently siding with the patient advocacy groups, as lobbying groups like the Pharmaceutical Research and Manufacturers of America have also questioned insurers' co-pay practices.[2]

One of the largest health insurance lobbying groups, America's Health Plans, has responded "by arguing that patients have the option to select a range of health plans that may suit their budgets better," according to The Hill.

Read the full article:

HHS pressed on insurance discrimination claims
Ferdous Al-Faruque | The Hill August 18, 2014

1. HHS pressed on insurance discrimination claims, Ferdous Al-Faruque; The Hill; August 18, 2014.
2. HHS pressed on insurance discrimination claims; Ferdous Al-Faruque; The Hill; August 18, 2014.

Convention update

Thursday, August 18 is the last day to request refunds for convention registrations and receive a partial refund. Starting on August 19 no refunds will be processed. Also, after August 23 all registration must take place on-site at the convention at the San Francisco Marriott.

More than 3,100 people have registered for the convention, set for September 14-18 at the Marriott. The Opening Reception takes place on Wednesday, September 14 and programs start on Friday with columnist George Will presenting the Derek Hughes/NAPSLO Educational Workshop Lecture.

There will be a special Legislative Breakfast on Saturday, September 15, to cover current state and federal legislatives issues, with a presentation by Maria Berthoud of B&D Sagamore, NAPSLO's new lobbying firm.

Insurance and Your College Kids

Out in front of our Oxford, OH insurance office, it is a busy place. Today 16,000+ Miami University students return to begin a new school year. This annual pilgrimage brings up potential insurance issues pertaining to what parent's personal insurance policies cover or don't cover. Three areas that parents should be aware of:

(1) If your son or daughter is going away to school over 100 miles from home without a car, most companies will rate your Personal Auto Policy for them being married which is a nice discount. Let us know if this discount might apply to your family and your Personal Auto Policy.

(2) Most insurance companies will extend personal property (contents) coverage and personal liability for your son or daughter while they are in college and living in a dormitory. Some, but not all, will also extend coverage if they are living in off campus facilities such as an apartment or other student housing. Please check with us to see if your insurance company provides this extended protection. If not, we should be able to write a Tenant/Homeowner for your student to cover both their personal property and personal liability while they are an undergraduate. If they are in graduate school, they should definitely have their own Tenant/Homeowner Policy.

(3) If you or your children are using a rental truck to take their things back to college, U-Haul, Penske, Hertz and other will offer you coverage on the vehicle (collision damage waiver) and extended liability. While these may be covered by your Personal Auto Policy, not all companies extend the protection, so check with us before renting the vehicle. Whether or not they are covered will depend on the length and Gross Vehicle Weight of the vehicle and several other factors. We may be suggesting you buy the extra protection from the rental company before your trip.

Committee Volunteer Deadline is August 21

NAPSLO members interested in volunteering for a committee need to contact the NAPSLO office by August 21. Interested people should e-mail your request, or fax the NAPSLO office at (816) 741-5409 to volunteer for a committee assignment.

In the correspondence, potential volunteers need to provide background information on yourself (including name and address information), areas of interest and any current or past involvement with other industry associations.

In addition, you should indicate your availability to attend Committee Day, which is scheduled for Nov. 16-17 at the Grand Hyatt DFW at the Dallas-Fort Worth Airport.

NAPSLO committees are as follows: Budget, Finance, Audit & Investment; Career Awareness; Communications & Technology; Convention; Education; International; Internship; Legislative; Membership & Ethics; Mid-Year Educational Workshop, and PAC. Please see the NAPSLO website for additional information on the committees

In Memory of Orville D. Jones, NAPSLO Past President

On Thursday, August 15 the NAPSLO family lost one of its past presidents, Orville D. Jones, who served as NAPSLO President from 1998 to 1999 and was on the NAPSLO Board of Directors from 1992 to 2000.

After serving in the industry for many years he currently worked for CRC Insurance Services, Inc., serving on the Senior Management Group, Board of Directors and as Assistant to the Co-Chairman & CEO.

Orville started his career in insurance in January 1961 as a salesman for Employers Insurance of Texas. He joined the surplus lines industry in 1977 and was named Chairman, President and CEO of Crump Insurance Services in October 1986. When he retired from Crump in October of 1999 he was Chairman and CEO.

Orville was elected President of NAPSLO in September of 1998 and prior to that served for a number of years on the Board of Directors and committees. He was on the original NAPSLO Education Committee which developed and presented their plan to the Board of Directors for the first NAPSLO E&S School, which took place in 1990 at the University of Vermont. He was also chairman of the NAPSLO Education Committee that developed the NAPSLO Advanced School and served as a faculty member in the NAIC/NAPSLO Surplus Lines School for Regulators.

In addition to serving on the NAPSLO Board, Orville served on the Board of Directors of the Surplus Lines Stamping Office of Texas and was Chairman in 1995. He received his BBA in Business Administration from Stephen F. Austin University and served as an officer in the United States Marine Corps prior to entering the insurance industry.

He is survived by his wife Joan, one son, two daughters, and five grandchildren. Funeral services are set for Monday at 2:00 p.m. at the Park Cities Baptist Church in Dallas and graveside services will be Tuesday in Tyler, Texas at Cathedral in the Pines Cemetery. Funeral arrangements are being handled by the Stewart Funeral Home in Tyler.

At the family’s request, donations in Orville's name can be made to the Marine Corps Scholarship Foundation; 909 N. Washington Street, Suite 400; Alexandria, VA 22314 or the Mary Crowley Cancer Research Center - Attn: Accounts Receivable; 1700 Pacific Avenue, Suite 1100; Dallas, TX 75201.

In the passing of Orville Jones, NAPSLO and the wholesale industry has lost a great leader, an innovator and a tireless worker; but most of all we have all lost a friend, mentor and wonderful human being. Orville helped lead three industry organizations to great success and he did it with grace, humor and compassion. Although he is gone, Orville's indomitable spirit and many accomplishments live on. He will be missed.

2015-07 Slate of Officers, Directors announced

The NAPSLO Nominating Committee recently issued its proposed slate of officers and directors for 2006-07. Member firms will vote on the proposed slate during the Annual Business Meeting, scheduled for Friday, September 15, at the Annual Convention in Chicago.

Nominated for officer positions were:
President - William H. Newton, Lemac & Associates, Los Angeles, Calif.
Vice President - Mary Ellen Rozzell, Continental/Marmorstein & Malone, Paramus, NJ.
Secretary - John F. Wood, III, CIC, CIW, Specialty Risk Associates, Inc., Shreveport, La.
Treasurer - Dale H. Pilkington, Colony Insurance Company, Richmond, Va.

Nominated for new three-year terms on the Board were Gregory T. Crouse, Crouse & Associates Insurance Brokers, Inc., San Francisco; and Gilbert C. Hine, Jr., CPCU, McClelland & Hine, Inc., San Antonio, Texas. Letha Heaton, Evanston Insurance Company, Deerfield, Ill.; Matthew D. Nichols, All Risks, Ltd., Hunt Valley, Md.; and Mr. Pilkington, were renominated for new three-year terms.

Directors are nominated for three-year terms on the Board. Officers are nominated for a one-year term.

HHS and Treasury Issue PPACA Rules and Grants as the Constitutionality of the Health Reform Individual Mandate Ripens for the Supreme Court

HHS and Treasury continue issuing guidelines and handing out establishment grants for PPACA health insurance exchanges even as the constitutionality of PPACA's individual mandate requiring U.S. residents to purchase health insurance seems to be on the fast track to the Supreme Court.

The Department of Health and Human Services (“HHS”) and the Treasury Department are pushing forward the establishment of the health insurance exchanges mandated by the Patient Protection and Affordable Care Act (“PPACA”), despite the recent challenges to the constitutionality of parts of PPACA, according to an article from Reuters. In recently released guidelines, the HHS and the Treasury Department said that "states need to provide a 'one-stop shop' system" that will provide consumers with information regarding the insurance programs and tax credits for which they are eligible, including Medicaid. [1]

HHS awarded $185 million in grants to 13 states and the District of Columbia to establish exchanges.

Additionally, the HHS awarded $185 million in grants to 13 states and the District of Columbia to help establish the exchanges. HHS already awarded $35 million in these "establishment grants" to three other states in May. Additionally, more than $50 million in planning grants went to most states last year, and another $241 million in grants were paid to help seven states establish exchanges that others could use as a model.[2]

PPACA requires the individual state governments to establish health insurance exchanges, or open marketplaces where competing insurance companies can offer health insurance plans with certain minimum requirements to consumers. If the states haven’t submitted detailed plans of their health insurance exchanges by January 1, 2013, the HHS will move in and begin establishing the exchanges to ensure they are established by 2014.[3]

Meanwhile, a U.S Court of Appeals has ruled PPACA's health insurance mandate unconstitutional.

Meanwhile, the United States Court of Appeals for the 11th Circuit ruled on Friday that PPACA’s mandate requiring U.S. residents to purchase and maintain health insurance was unconstitutional. The decision contradicts the ruling of the 6th Circuit Court of Appeals in June, setting the stage for the U.S. Supreme Court to settle the matter in 2012.[4]

The 11th Circuit decision stated that, while Congress has broad power under the Commerce Clause of the U.S. Constitution to regulate interstate commerce, Congress cannot "mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die."[5]

Additionally, the 11th Circuit "raised federalism concerns, saying the mandate intruded on health-insurance matters traditionally a concern for the states."[6]

The Politico has pointed out two strong reasons to believe that the Supreme Court will weigh in on the constitutionality of the PPACA mandate:

First, there are two circuit courts that have ruled in opposite directions on the constitutionality of the law's individual mandate. And second, because the Obama administration lost in the latest ruling, it is going to be the one filing the appeal. The Supreme Court rarely turns down such requests from the federal government, especially on an issue with the scope of the health reform law. [7]

Thus, the issue of the constitutionality of the PPACA mandate appears to be on the fast track to the Supreme Court, and it may be before the Court in the 2012 term.

1. Government lays out health insurance exchange details, Alina Selyukh and Anna Yukhananov, Reuters, August 12, 2011.
2. Government lays out… , Id.
3. Government lays out… , Id.
4. Health Overhaul is Dealt Setback, Brent Kendall, Wall Street Journal, August 13, 2011.
5. Health Overhaul…, Id.
6. Health Overhaul…, Id.
7. Lawsuits hit faster track to Supreme Court, Jennifer Haberkorn, Politico, August 15, 2011.

NAIC to Tout State Regulation to U.S. and Foreign Policymakers

As reported by Insurance Journal, the National Association of Insurance Commissioners (NAIC) is "Protecting the Future" with its new educational initiative in U.S. capital, the European Union capital, and the seat of the Financial Stability Board (FSB) for the G-20. The NAIC initiative will extol "the virtues of the 150-year old state-based insurance regulatory system" in Washington, D.C.; Brussels; and Basel, Switzerland.[1]

“The U.S.’s state-based insurance regulation system has an unmatched track record and can best adapt to meet our future economic and financial challenges,” said Ben Nelson, NAIC chief executive officer. “By ensuring soundness, solvency, stability and competition, state-based insurance regulation does more than make insurance markets work — it protects the future for American consumers, employers and the economy as a whole.[2]

The pro-state insurance regulation is motivated in part by the NAIC's view that "some federal officials and global regulators are seeking unprecedented authority over American insurance markets, including the imposition of bank-centric regulation on insurance companies." [3]

The NAIC, Nelson and its other leaders have been critical of recommendations for an expanded role for the federal government in U.S. insurance regulation, attempts to apply capital requirements suitable for banks to insurance companies, and moves to introduce global capital requirements on insurers.

State regulation advocates are also concerned that the international Financial Stability Board in Basel, Switzerland, could be gaining too much influence in the U.S. when it comes to financial regulation.[4]

Adam Hamm, current NAIC President who is also North Dakota insurance commissioner, explains that "[s]tate insurance regulation works because it's specific to the industry's unique risks and able to reflect state-specific considerations."[5]

Read the full article:

NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers
InsuranceJournal.com

1. NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers
2. NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers
3. NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers
4. NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers
5. NAIC Roadshow to Tout State Regulation to U.S., Foreign Policymakers

Insurance and Your College Kids

Out in front of our Oxford, OH insurance office, it is a busy place. Today 16,000+ Miami University students return to begin a new school year. This annual pilgrimage brings up potential insurance issues pertaining to what parent's personal insurance policies cover or don't cover. Three areas that parents should be aware of:

(1) If your son or daughter is going away to school over 100 miles from home without a car, most companies will rate your Personal Auto Policy for them being married which is a nice discount. Let us know if this discount might apply to your family and your Personal Auto Policy.
(2) Most insurance companies will extend personal property (contents) coverage and personal liability for your son or daughter while they are in college and living in a dormitory. Some, but not all, will also extend coverage if they are living in off campus facilities such as an apartment or other student housing. Please check with us to see if your insurance company provides this extended protection. If not, we should be able to write a Tenant/Homeowner for your student to cover both their personal property and personal liability while they are an undergraduate. If they are in graduate school, they should definitely have their own Tenant/Homeowner Policy.
(3) If you or your children are using a rental truck to take their things back to college, U-Haul, Penske, Hertz and other will offer you coverage on the vehicle (collision damage waiver) and extended liability. While these may be covered by your Personal Auto Policy, not all companies extend the protection, so check with us before renting the vehicle. Whether or not they are covered will depend on the length and Gross Vehicle Weight of the vehicle and several other factors. We may be suggesting you buy the extra protection from the rental company before your trip.

Advanced School set for Nov. 4-7, in Dallas

Registration materials for the Advanced School, set for November 4-7 in the Dallas area, have been mailed to NAPSLO members in August. Materials are also available on the web site.

The Advanced School will include sessions on claims, finance, recognizing scams, reinsurance & alternative risk, and brokering. A new session on understanding exposures, emerging trends and specialty marketplace responses to E-business has been added this year.

The cost for the three-day school is $1,250, which includes room and board and course materials. The registration deadline is October 5. People with more than five years experience in the surplus lines industry are encouraged to apply.

The school offers a comprehensive look at surplus lines, and provides the opportunity to meet with others in the industry. Completion of the NAPSLO E&S School is not a prerequisite.

Surplus Lines Premium Growing According to Stamping Offices

 The Surplus Lines Stamping Office of Texas issued a report showing the 14 states with stamping offices saw growth in surplus lines premium during the first six months of 2013 relative to the same period in 2012. While the report indicates growth of 21.2% in total, it is heavily influenced by a large amount of prior years’ return premium transactions processed by New York in 2012. When excluding New York for this anomaly, the remaining stamping offices reported a 15.1% increase in 2013 premium compared to prior year. This report is now available by clicking here.  

 The report of calendar year 2012 to 2011 comparisons is also available illustrating a 0.9% increase in 2012 premium volume. When excluding New York and its 2012 return premium transaction anomaly, the remaining stamping offices reported an 11.8% increase in premium. To view the report of 2011 to 2012 data, click here. 

Top NAIC Officials to Scrutinize Lender-Placed Insurance

Insurance regulators focus attention on lender-placed / force-placed insurance amid allegations of monopoly and excessive premiumrates.

Both the current President of the National Association of Insurance Commissioners ("NAIC"), Kevin M. McCarty, and the NAIC President-Elect, James J. Donelon, have turned the insurance regulatory spotlight onto insurance that protects mortgage lenders and lien holders from certain property risks when homeowners allow their property insurance coverage to lapse – known as lender-placed or force-placed insurance.

McCarty intends to examine lender-placed insurance premiums and business practices.

McCarty, who is also Commissioner of the Florida Office of Insurance Regulation, intends to examine lender-placed insurance premium rates and the business practices of insurance carriers who write lender-placed insurance amid allegations of excessive rates. Two companies, Assurant, Inc. and QBE Insurance Group, Ltd., control as much as 90% of the force-placed market, according to McCarty.[1]

Donelon, also Commissioner of the Louisiana Department of Insurance, said the force-placed insurance industry is a "monopoly… that is perpetuating itself" at a recent NAIC hearing, according to an article from Bloomberg. The situation is "extremely profitable for two remaining companies in the market," according to Donelon, "Nobody is minding the store."[2]

Force-placed premiums more than tripled to $5.5 billion in 2010 from $1.5 billion six years earlier, according to New York Department of Financial Services Superintendent Benjamin Lawsky. The insurers often pay out less than 25 cents for every dollar in premiums they collect, he said, compared with about 63 cents on a typical homeowner’s policy.[3]

According to the executive director of the Center for Economic Justice, Birny Birnbaum, premium rates currently charged by force-placed insurers "are not justified when examining the companies' performance and profits over the years."[4]

Others suggest the rate increases are justified by the recent rise in foreclosures, as well as other market forces.

But John Frobose, president of American Security Insurance, suggests the increase in lender-placed insurance is justified by the recent rise in foreclosures, as well as other market forces. Because insurance carriers that write force-placed insurance have been subject to greater hazards, the associated premiums have also risen.[5]

Robert Hartwig, president of the Insurance Information Institute, suggests that the rise in lender-placed premiums has peaked. Hartwig predicted that the market for lender-placed insurance should "contract as foreclosures drop and the U.S. economy improves."[6]

Hartwig, along with the executive director of the American Bankers Insurance Association, Kevin McKechnie, defended lender-placed insurance premium rates, explaining that "carriers do not underwrite individual risks, but rather provide a portfolio of coverage to lenders where insurers are taking on risks… with virtually no information about them."[7]

Insurers also defended the higher rates they charge, saying that because the risks are primarily in catastrophe zones, higher premiums are needed to prepare for what they say is the inevitability of major losses.[8]

Nevertheless, Commissioners McCarty and Donelon, as well as other insurance regulators like Kentucky Insurance Commissioner Sharon Clark, intend to take a critical look at force-placed insurance premium rates and business practices, as well as the costs associated with the administration of lender-placed insurance placement, including the compensation paid to agents and lending institutions.[9]

The lender-placed insurance industry also faces proposed new regulations from the Consumer Financial Protection Bureau.

In addition to increased scrutiny by state-based insurance regulators, the lender-placed insurance industry also faces proposed new rules from the Consumer Financial Protection Bureau, created under the Dodd-Frank Act. The proposed new rules require servicers "to give advance notice and pricing information before charging consumers for the coverage" and "to terminate the insurance within 15 days" upon receipt of evidence that the homeowner has the necessary insurance.[10]

1. U.S. Regulators to Examine Forced-Place Insurance, Zachary Tracer and David Beasley, Bloomberg, August 10, 2012.
2. Insurance for Lapsed Borrowers Lacks Oversight: Regulator, Zachary Tracer and David Beasley, Bloomberg, August 9, 2012.
3.  U.S. Regulators..., id.
4. NAIC Promises Greater Focus on Force-Placed Insurance as CFPB Proposes Rules, By Mark E. Ruquet, PropertyCasualty360.com, August 10, 2012.
5.  U.S. Regulators..., id.
6.  U.S. Regulators..., id.
7. NAIC Promises..., id.
8. NAIC Promises..., id.
9.  U.S. Regulators..., id., NAIC Promises..., id.
10. NAIC Promises..., id.