Cyber Insurance Market Expected to Grow

As high-profile cyber threats to data security and privacy grow, many businesses are turning to cyber insurance for protection.

Although cyber insurance has been in existence for more than a decade, the market for cyber coverage has recently begun to expand as the cost of data breaches and other cyber threats continues to grow, according to an article by Nicole Perlroth.

The average cost of a data breach hit $7.2 million last year and cost companies $214 per compromised data record, according to the Ponemon Institute. And that's just for a data breach. If a company's intellectual property is stolen, it could decimate an organization.[1]

In the past, businesses have generally been reluctant to discuss cyber and data threats publicly, and some companies have been unwilling to commit significant resources to protecting against these threats.

Despite high-profile cyber attacks at Sony, Google, Epsilon, RSA and others this year, only a third of companies surveyed by Advisen, a research group, say they have purchased a cyber insurance policy.[2]

The business risks of cyber threats have become so prominent, in fact, that the U.S. Security and Exchange Commission recently issued guidance requiring companies to disclose "material" cyber attacks and related cost to shareholders, as well as any "relevant insurance coverage."[3]

Cyber insurance protects against the "twin risks" of data privacy and security.

A comprehensive cyber insurance policy should protect against the "twin risks" of data privacy and security, according to Emily Freeman, a cyber insurance broker. Cyber insurance should provide coverage for intellectual property theft, "the cost of lost business, notification costs, credit-monitoring services, public relations and legal and investigation expenses" as well as "class-action lawsuits, regulatory investigations, civil fines and even extortion demands."[4]

Despite past reluctance by some in the business world to address cyber and data threats with insurance coverage, Perlroth's article suggests that the cyber insurance market is on the verge of considerable growth.

There are no statistics on the size of the cyber insurance industry, but Peter Foster, a senior vice president at Willis North America, an insurance broker, estimates there may be $750 million worth of premiums placed. With the recent S.E.C. measure and the frequency and severity of cyber attacks growing, Mr. Foster predicts that figure could grow by 50 percent over the next 12 to 18 months.[5]

Julie Campbell at Live Insurance News agrees, indicating that 2012 will begin a massive expansion in cyber attack insurance.[6]

This year, the world watched as many corporations – even those that are reputed to have the strongest security systems in place – experienced massive data breaches that were so extensive that their final damage total has yet to be calculated.[7]

Earlier this year, one massive cyber attack showed that small-time hackers and identity thieves are not the only significant threat to information privacy and security.[8]

Approximately 48 chemical and defense companies in the U.S. were the targets of a large cyber attack earlier this year.

Symantec Corp., a leading data security firm, announced that "approximately 48 chemical and defense companies in the U.S. were the targets of a large cyber attack" in October. The attack was traced back to China and it "has been linked to industrial espionage, as the compromised information detailed chemicals, formulas and manufacturing processes used in military and industrial ventures."[9]

1. Insurance Against Cyber Attacks Expected to Boom, Nicole Perlroth, December 23, 2011.
2. Insurance Against Cyber Attacks..., Id.
3. Insurance Against Cyber Attacks..., Id.
4. Insurance Against Cyber Attacks..., Id.
5. Insurance Against Cyber Attacks..., Id.
6. 2012 Will Begin a Massive Expansion in Cyber Attack Insurance, Julie Campbell, LiveInsuranceNews.com, December 26, 2011.
7. 2012 Will Begin a Massive Expansion..., Id.
8. The Need for Cyber Insurance Grows in Light of Recent Attack on 48 Chemical and Defense Companies in the U.S., Stephen Vagus, LiveInsuranceNews.com, November 2, 2011.
9. The Need for Cyber Insurance Grows..., Id.

Insurance Industry Supports Legislation Designed to Restrict Federal Insurance Office's Regulatory Authority

The proposed Insurance Data Protection Act would require the FIO and other federal regulators to obtain information about insurance companies from state regulators rather than directly.

A panel of the House Financial Services Committee approved the Insurance Data Protection Act[1], legislation designed to restrict the ability of federal regulators to get financial information from insurance companies.[2]

As currently configured, the Insurance Data Protection Act is intended to clearly delineate the FIO's role as an "information-gathering entity" and restrict its ability to act as a regulator.

The bill would revoke the authority of the FIO and the Office of Financial Research (OFR), two new entities created by the Dodd-Frank Act, to subpoena data from insurance companies.

The bill also would require the FIO, the OFR, the Financial Stability Oversight Council, and any other federal entity that seeks data about insurance companies to obtain that data through the insurance company's state regulator, another federal agency, or a public source.[3]

Further, the Act would require both federal entities and state regulators to preserve the confidentiality of private information collected from other state and federal agencies.[4]

The Property Casualty Insurers Association of America (PCI), an insurance industry trade association composed of more than 1,000 member companies nationwide, issued a press release last week applauding the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity for passing the Insurance Data Protection Act.

According to Ben McKay, senior vice president of federal government relations at PCI:

This commonsense bill will help reduce costly, duplicative information requests on insurers... The Insurance Data Protection Act reinforces the Dodd-Frank Act that specifically required the Federal Insurance Office to seek data from state regulators first before imposing burdensome data demands on insurance companies.[5]

R.J. Lehmann, deputy director of the Heartland Institute's Center on Finance, Insurance and Real Estate, suggests that the bill increases the protection afforded insurer information from the restrictions on sharing "confidential" information to a higher level because the bill includes limits on the sharing of "non-publicly available data" by or among state and federal regulators. While Lehmann has his own theories about the who and why behind this provision, he makes an important point:

The bill’s language refers not to “confidential” information, but to non-public information. That’s a key distinction. The statutory financial reports that insurers file with their state regulators and the NAIC are not confidential... That data is not confidential. It just isn’t made available to the public.[6]

1. H.R. 3559
2. New Legislation Tries to Pose Serious Threat to Federal Insurance Powers, Elizabeth D. Festa and Arthur D. Postal, LifeHealthPro, December 9, 2011.
3. New Legislation..., Id.
4. New Legislation..., Id.
5. PCI Supports Insurance Data Protection Act, December 8, 2011. 6. The Insurance Data Protection Act’s hidden sop to the NAIC, R.J. Lehmann, Out of the Storm News, December 9, 2011.

Louisiana Insurance Commissioner Donelon Elected President of the National Association Insurance Commissioner for 2013

James J. Donelon, Louisiana Commissioner of Insurance, has been elected to serve as President of the National Association of Insurance Commissioners for 2013.

The National Association of Insurance Commissioners (NAIC), the national insurance regulatory advisory organization made up of the chief state insurance regulators, has elected its slate of officers for 2013, including James J. "Jim" Donelon as President.

In addition to President of the NAIC, Donelon also serves on the NAIC Executive Committee and as chairman of the NAIC Surplus Lines Task Force.

A former member of the Louisiana House of Representatives, Donelon joined the staff of the Louisiana Department of Insurance in 2001, serving as Chief Deputy Commissioner and Executive Counsel. Donelon was appointed as Louisiana Commissioner of Insurance in 2006 to fulfill the unexpired term of the previous Commissioner. He was then re-elected as the Commissioner of Insurance in 2007 and again in 2011. In addition to his new position as President of the NAIC, Donelon also serves on the NAIC Executive Committee and as chairman of the NAIC Surplus Lines Task Force.[1]

Donelon and the other new NAIC officers assume their new duties on January 1, 2013.

Other NAIC officers elected for 2013 include North Dakota Insurance Commissioner Adam Hamm as President-Elect, Montana State Auditor and Commissioner of Securities and Insurance Monica J. Lindeen as Vice-President, and Pennsylvania Insurance Commissioner Michael F. Consedine as Secretary-Treasurer. Donelon and the other new NAIC officers assume their new duties on January 1, 2013.

One of Donelon's first duties as NAIC President will be heading up the search for the organization's next CEO because the current NAIC CEO, Terri Vaughan is preparing to depart.

Donelon indicated that finding the right person to serve as CEO of the NAIC is "vitally important" to preserving the state insurance regulation system, citing the increasing encroachment of the federal government into the traditionally state-based insurance regulatory scheme. Although Donelon supports federal insurance regulation with respect to international commerce, domestic insurance regulation is a different matter:

We support it as necessary on the international level but we don’t feel it is appropriate for the federal government to take over or even further encroach on the success of state regulation going back over 100 years now.[2]

Donelon is interested in international insurance matters from a state-based perspective, as well. He recently attended a conference of Latin American insurance supervisors to discuss emerging issues in the insurance world such as Europe's Solvency II initiative. Additionally, international reinsurance regulation is important to Donelon because Louisiana is a coastal state with property and casualty reinsurance issues fundamentally tied to the foreign-dominated reinsurance market.[3]

1. James J. Donelon, Louisiana Commissioner of Insurance, Louisiana Department of Insurance, December 10, 2012.
2. NAIC president: CEO to be selected to take NAIC to "next level", LifeHealthPro, Elizabeth D. Festa, November 19, 2012.
3. NAIC president: CEO to be selected…, id.

Standard Operating Procedure in the Life Insurance Industry Brings Bad Press and May Spur Regulatory Action

A recent push by insurance regulators across the country on life insurance companies has already resulted in millions of dollars of previously unpaid benefits going out to thousands of beneficiaries, but some suggest that settlement fees, fines, penalties and escheat payments are the real impetus behind state enforcement actions.

The typical life insurance policy requires beneficiaries to notify the insurance company of the death of an insured before policy benefits are paid out. However, as recent press reports have emphasized, this standard operating procedure has left potentially hundreds of millions of dollars in unpaid life insurance claims, and tens of thousands of beneficiaries without the benefits they are due.

The Wall Street Journal suggests that regulators are placing the blame on the insurance companies:

Regulators say most life insurers fail to take steps to determine whether policyholders have died, leaving it to beneficiaries to file claims. But some families don't know their loved ones hold policies. It is a widespread problem, state officials say, and one that hits lower-income families the hardest. [1]

Recently, New York's state Department of Financial Services announced that almost 8,000 people received more than $52 million in unpaid life insurance benefits after it began pushing life insurers to look for unpaid claims internally. The Department of Financial Services urged life insurers to use resources like the U.S. Social Security Administration database to identify deceased insureds under life insurance policies, annuity accounts and retained asset accounts.[2]

Some life insurers have already been performing cross-checks with the Death Master File for years.

While some companies, such as Massachusetts Mutual Life Insurance and Prudential Insurance Company of America have been performing regular cross-checks with resources like the Social Security Administration's Death Master File for years, the Department of Financial Services was pushing life insurers to go back more than twenty-five (25) years in their searches for unpaid life insurance benefits, according to Thomas Workman, president of the Life Insurance Council of New York.[3]

New York is not the only state interested:

Meanwhile, a task force of regulators from Florida, California and eight other states is aiming to reach up to three settlements with major insurers as soon as next month, Florida officials said.[4]

Florida officials have already reached a settlement with John Hancock Life Insurance Company that resulted in payments to beneficiaries, or turned over to states as unclaimed property, of more than $88 million.[5]

Regulators and attorneys general are probing whether regulatory or enforcement action is appropriate.

The regulatory task force, as well as some state attorneys general, are probing whether regulatory or enforcement action is appropriate, although life insurers maintain their procedures are lawful and in accordance with the policy terms.[6]

These probes generally are focused around concerns that many big insurers for years have routinely used a Social Security death database when doing so has been beneficial to their business, such as to cut off retirement-income checks. But they haven't used the same database to ensure payouts to life-insurance policyholders' beneficiaries, the authorities say.[7]

Life insurers are still reviewing up to 950,000 other policies and almost 28,000 old claims for additional unpaid benefits.

The average payment to beneficiaries resulting from the New York push was almost $7,000, which the largest overdue payment was more than $670,000, plus interest. Meanwhile, life insurers are still reviewing up to 950,000 other policies and almost 28,000 old claims that could result in millions more in unpaid benefits to beneficiaries.[8]

The amount of the unpaid benefits and the number of affected beneficiaries in states like New York and Florida have gotten the attention of regulators from across the country:

New York is just one of 35 states that are investigating the Death Master File issue. Regulators have estimated that as a result of those allegedly improper payment practices, the combined damages across the affected states may exceed $1 billion.[9]

While the push by regulators for life insurers to track down unpaid claims is certainly good for beneficiaries, it may also be good for state government treasuries. Settlement agreements, fines and penalties mean money in "depleted state coffers," noted Bruce Ferguson with the American Council of Life Insurers, as reported by the Wall Street Journal.[10]

State escheat laws may require that some abandoned claims be paid out to the state treasury.

Another possible boon for ailing state government pocket books: unclaimed or abandoned property generally escheats to the applicable state treasury. That means if life insurers find that they owe unpaid benefits to beneficiaries on old policies, but they can't track down those beneficiaries, state escheat laws may require that money to be turned over to the state government.

1. Bring Out Your Dead: Push Pays Off for Policyholders, Leslie Scism, Wall Street Journal, December 6, 2011.
2.  Life Insurers Pay Out $52.6 Million after NY Push, Karen Freifeld, Reuters, December 5, 2011.
3.  Life Insurers Pay Out..., Id.
4. Bring Out Your Dead..., Id.
5. Bring Out Your Dead..., Id.
6. Bring Out Your Dead..., Id.
7. Bring Out Your Dead..., Id.
8. Insurance bigs sat on $52M cash owed grieving New Yorkers, Douglas Feiden, New York Daily News, December 6, 2011.
9. Life Insurers Pay N.Y. $52.6M Post Investigation, Jeff Jeffrey, A. M. Best Company, Inc., Insurance NewsNet.com, December 5, 2011,
10. Bring Out Your Dead..., Id.

Election Impact on the Insurance Industry: More of the Same – A LOT MORE

Recent articles and opinions suggest that the recent election means a lot more of the same for the insurance industry – including a new flood of regulations.

A number of insurance industry observers and pundits have recently discussed the potential impact of the recent election upon the insurance industry and insurance regulation.

FIO is likely to play expanding role in insurance regulation

An article from Insurance Networking News, for example, suggests that the Federal Insurance Office (FIO) will likely play an expanding role in insurance regulation, particularly on the international front. The article quotes industry observers who agree, including the following comments from Peter Kochenburger, executive director of the Insurance Law Center at the University of Connecticut:

The federal government absolutely has the right to regulate insurance. That has been decided since 1944, but it has consistently declined the opportunity to do so. * * * It’s a long overdue office, but it has not exercised its jurisdictional authority in any kind of way that assumes it’s going to override the states.[1]

Kathy Burger, Editorial Director of Insurance & Technology, predicts that "for the insurance industry the results appear to be... more of the same."

With Barack Obama reelected, continuation of a Republican House and Democratic Senate, and the so-called "fiscal cliff" looming, it looks as if insurers will be facing pretty much the same kinds of challenges as before the elections. The Affordable Care Act will stay in place, meaning health insurers must navigate the transformation of their industry. Dodd-Frank isn't going away, which means stepped up efforts around reporting, risk management and navigation of "too big to fail" definitions. The world hasn't gotten any less risky, as evidenced by the devastation caused by Superstorm Sandy and this week's Nor'easter. And the competitive landscape in financial services continues to be unsettled, with new kinds of competitors and consumer-driven channels creating new opportunities for education, interaction and service.[2]

Healthwatch, the Hill's Healthcare Blog, seems to agree but also seems to emphasize more.

The new waiting game in healthcare isn’t about the political future of the Affordable Care Act, but rather the huge amount of work that still has to be done to implement it. As expected, the Health and Human Services Department is moving ahead quickly on several key regulations that had been held until after the election.

Since Election Day, HHS has submitted regulations to the Office of Management and Budget on essential health benefits, insurance regulations, wellness programs and quality initiatives.

* * *

With the healthcare law’s political future now assured, the focus over the next few months will be on the states and the rule-making process, and all signs indicate that a new flood of regulations is about to begin.[3]

Unfortunately, according to the Hill and Moody's, more of the same is not good news for insurers:

President Obama’s reelection is... bad news for insurance companies, according to the latest analysis from Moody’s. The Affordable Care Act “will have negative credit implications for insurers based mainly on the additional regulations and restrictions it imposes on insurers,” Moody’s wrote. [4]

PropertyCasualty360 also sees the status quo continuing, and that means that the Affordable Care Act (ACA) is here to stay. However, some insurance industry analysts suggest the health insurance exchanges required under the ACA may be delayed:

Beth Mantz-Steindecker, a health regulatory analyst at Washington Analysis, is suggesting that implementation of the exchanges may be pushed back because so few states are prepared to implement the program.[5]

Other implications of the 2012 elections on the insurance industry, according to the PropertyCasualty360 article, potentially include the following:

Designation of certain insurers as systematically significant by the FSOC could happen soon.

• The release of the FIO's report on proposals to modernize the regulation of insurance regulation is likely imminent;
• The Financial Stability Oversight Council will likely begin designating certain non-banks such as insurers as systemically significant, and potential insurer candidates include American International Group, MetLife and Prudential Insurance;
• Implementation of consolidated regulation of insurance companies which operate thrift holding companies will move forward, although it could be delayed due to insurer objections; and
• The Terrorism Risk Insurance Act may not survive, at least in its current form.[6]

1. Election Brings New Faces and an Expanding Role of the FIO, Chris McMahon, Insurance Networking News, November 8, 2012.
2. Impact of 2012 Election on Insurance: More of the Same?, Kathy Burger, Insurance & Technology, November 9, 2012.
3. Overnight Health: HHS Moving Quickly on Key Regulations, Sam Baker and Elise Viebeck, The Hill, November 12, 2012.
4. Overnight Health..., id.
5. The Election's Impact on Insurance Issues, Arthur D. Postal, PropertyCasualty360.com, November 7, 2012.
6. The Election's Impact..., id.

Heath Insurance Reform Lobbying Intensifies

The health care and insurance industries lobby the Obama administration to shape the rules and regulations that will govern the creation and operation of the forthcoming health insurance exchanges.

The federal Department of Health and Human Services has received thousands of comments on the preliminary rules it issued earlier this year on the new insurance markets and exchanges established under the Patient Protection and Affordable Care Act, also known as Obamacare. As the 2014 deadline for institution of the state-based exchanges looms, just about any industry involved in the nation's health care system is trying to get its voice heard on how the new reforms should ultimately be implemented.[1]

The exchanges will be "online hubs for individuals and businesses to compare and purchase health insurance plans.

The health insurance exchanges are intended to be state-run "online hubs for individuals and businesses to compare and purchase health insurance plans."[2] However, if an individual state does not establish an exchange compliant with the Affordable Care Act by 2014, the federal government will create and operate that state's exchange instead.

While the Affordable Care Act provided some basic guidelines for the exchanges, much remains unknown, including some of the fundamentals such as the minimum health insurance coverage and benefits that exchange health plans will be required to provide.

America’s Health Insurance Plans, which lobbies for the insurance industry, has pushed the Obama administration to leave much of the regulation to the states, which have traditionally overseen insurance market functions.[3]

But it is not just hospitals and insurance companies that are lobbying to have their voices heard. Many industries could potentially be impacted by the new health system, including the pharmacy industry.

[Pharmacy chain CVS Caremark] has petitioned the Obama administration for rules that would allow its employees, such as pharmacists and nurse practitioners, [to] help consumers navigate the exchange and purchase health insurance.[4]

State insurance commissioners will play a significant part in the creation and operation of the exchanges.

The National Association of Insurance Commissioners is paying close attention to regulatory developments associated with the Affordable Care Act, as well. State insurance commissioners will play a significant part in the creation and operation of the exchanges, and thus, they have a vested interest in the federal rules and regulations coming out of the Obama administration.[5]

1. A scramble to shape the new health insurance exchanges, Sarah Kliff, Washington Post, November 2, 2011.
2. A scramble to shape…, Id.
3. A scramble to shape…, Id.
4. A scramble to shape…, Id.
5. A scramble to shape…, Id.

Hurricane Sandy Insurance Information and Resources

This edition of Insurance Regulatory Law includes links to information and resources for people affected by Superstorm Sandy last week.

How to Protect Your Hurricane Sandy Insurance Claims

For some homeowners, the aftermath of Hurricane Sandy could bring a whole second round of troubles. After the storm passes, they may have to negotiate with their insurers to get the cash they need to repair wind and water damage.

Homeowners' insurance companies have gotten tougher as weather has become more cataclysmic. They've raised rates, carved out some coverage and tucked in new wind and hurricane exclusions and deductibles.

Homeowners need to play the game right if they want to get claims paid quickly and thoroughly. You can start early - here's what to do now and later.

Read the full article: How to Protect Your Hurricane Sandy Insurance Claims.

Cuomo: No Hurricane Deductibles for NY Homeowners

New York homeowners will not have to pay potentially debilitating hurricane deductibles on insurance claims stemming from damage caused by Sandy, Gov. Cuomo said Thursday.

The New York State Department of Financial Services has informed the insurance industry that hurricane deductibles should not be triggered for the Superstorm, which will prevent coastal homeowners from having to pay deductibles in their insurance policies, Cuomo said.

Read the full article: Cuomo: No Hurricane Deductibles for NY Homeowners.

How to Make the Most of a Sandy-Related Claim

Is there a way to get your Sandy-related insurance claim fast-tracked for approval?

* * *

Insurance-industry experts say a degree of waiting is inevitable after a storm of Sandy's size and scope, which resulted in damage that has been estimated at anywhere from $7 billion to $50 billion. In Sandy's case, the claims could be especially time-consuming to process because it won't always be clear if the storm damage is wind or flood-related...

* * *

But there are certain steps policyholders can take now to ensure they aren't at the end of the claim line, experts say.

For starters, they need to hurry up and get their claims in.

* * *

Making the call is one thing; providing the right information is another. The latter is key to speeding up a claim, experts say. If a homeowner can provide details of the damage, both to their property and possessions, he will essentially be making the adjuster's job easier.

Before-and-after photographs, purchase records and contractor estimates for repairs are especially valuable. It isn't that the adjuster will take everything at face value, but it gives him a reasonable starting point.

Read the full article: How to Make the Most of a Sandy-Related Claim.

Preparing a Hurricane Sandy Insurance Claim? Here are Some Important Pointers

There are some important tips for policyholders when dealing with an insurance claim. First and foremost, the insured should promptly give notice to the insurance company of the loss. Many insurance policies require notice, and the policies usually use language saying the notice should be quick.

* * *

Save all receipts incurred with the loss. First-party property insurance many times requires the policyholder to "[t]ake all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property..."

* * *

Be prepared for the insurance company to send a representative to inspect the property. This person may be an employee of the insurer or an outsourced representative.

* * *

It is critical to thoroughly review your insurance policy. Yes, it will read like Greek to many people. But certain critical conditions required in the event of a loss are usually much easier to understand. Furthermore, many insurance policies contain deadlines that must be followed.

* * *

The first offer to pay your claim by the insurance company does not have to be the last. Many times the insurance adjuster is low on the claim valuation.

* * *

You should consider obtaining your own estimates and if they are higher than the insurer’s, then negotiate with the adjuster.

* * *

In short, ensuring you protect your insurance claim will take extra time. While trying to deal with the actual loss, many people put the insurance aspect on the back burner, but that can be highly detrimental. Attention has to be paid to the insurance claim from day one, and that starts with reviewing and understanding your insurance policy.

Read the full article: Preparing a Hurricane Sandy Insurance Claim? Here are Some...

Some Sandy Victims Wait as Insurance Adjusters Wait for Access, Prioritize Claims

Insurers up and down the east coast have already logged tens of thousands of claims. The Consumer Federation of America has estimated that there will be hundreds of thousands of claims filed before all of the basements are pumped and the roofs are replaced.

Even though thousands of extra adjusters have been out fielding those claims in the most distressed states since the storm hit, it’s going to take a long time before every homeowner and renter sees an insurance adjuster up close and in person.

* * *

Some customers may be forced to wait because insurance companies are slammed. In some cases, they can’t get into the most affected neighborhoods. In others, they are simply doing triage, and sending their adjusters to the most dramatically damaged homes.

"We prioritize by severity of damage to properties on a case-by-case basis," said Nicole Alley, a spokesperson for USAA. She said her company had roughly 500 adjusters working on claims that had reached 25,000 by mid-day on Thursday. By late afternoon on Friday, that number had risen to 31,000, with 2,000 claims filed in two hours.

A State Farm spokesperson said her firm had logged more than 50,000 claims by mid-afternoon on Thursday.

USAA landed its mobile catastrophe van in a Breezy Point parking lot on Friday – right next to a trailer from MetLife and a van from Liberty Mutual.

Their top priority: homes that are uninhabitable, so that the owners can get emergency funds deposited to their bank accounts the same day (or the day after) for food and shelter.

Matthew Stewart, a total loss expert for USAA, which primarily serves members of the military, predicted that the insurer will be in the area with claims adjusters through November, and possibly into December.

* * *

Read the article: Some Sandy Victims Wait as Insurance Adjusters Wait for Access...

After Sandy: Tips on Filing Home Insurance Claims

Insurers will be dealing with a crush of claims in the aftermath of Superstorm Sandy which inflicted billions of dollars in damages. Once homeowners can assess the extent of their personal losses, many will have to brace for another ordeal: navigating the insurance claims process.

Preparation and planning well before a storm arrives can help homeowners avoid potential pitfalls. But how they handle the details when it comes time to file can help ensure receiving an adequate payout.

Here are six tips to weather the claims process...

Read the full article: After Sandy: Tips on Filing Home Insurance Claims.

Sandy to Test Revamped Federal Flood Insurance Program

It is unclear if claims from Sandy, which delivered a wallop to the Northeastern United States earlier this week, will exceed the $3.7 billion the National Flood Insurance Program can spend before Congress needs to authorize more funds.

The largest private provider of policies for the flood program said on Thursday it expects Sandy will be the second-worst insured flood loss in U.S. history, behind only Hurricane Katrina in 2005.

That disaster, with $17.7 billion in claims, plunged the program into debt that the government has acknowledged may never be fully repaid from premiums.

* * *

Critics of the program complain that it subsidizes people who live and build in dangerous and environmentally sensitive flood zones from the coasts to the Midwest.

So far budget-focused lawmakers have been careful to not openly attack the program. But once Sandy's flood damage is tallied, there could be renewed calls for subsidy cuts if the Federal Emergency Management Agency has to ask for permission to borrow more money to run the program, which would add to its already hefty debt of close to $18 billion.

* * *

Standard homeowners' insurance does not cover flooding. The government set up the NFIP in 1968 to provide affordable insurance, impose flood management policies on vulnerable communities and reduce federal disaster aid costs.

The NFIP provides coverage through roughly 80 companies that sell policies and collect premiums on the government's behalf for a fee. The premiums go to FEMA.

In recent years, with severe hurricanes in 2004 and 2005, premiums have not met claims costs, forcing FEMA to borrow money.

It is too early to tell whether Sandy's flood damages will exceed the program's resources. Wright Flood, the largest private provider of policies for the program, is getting about 3,000 claims a day so far, said Patty Templeton-Jones, the company's chief operating officer. That will only rise as people start actually getting back to their houses.

In total, she said FEMA is expecting claims on at least 80,000 policies after Sandy, about a quarter of which Wright will handle.

Read the full article: Sandy to Test Revamped Federal Flood Insurance Program.

HUD "Disparate Impact" Rule and the Insurance Industry

The "disparate impact" doctrine is a tenet of employment law that prohibits a facially neutral employment practice which is deemed to have an unjustified or disproportionate adverse impact on members of a minority group or a class protected by Title VII of the Civil Rights Act. Recently, however, the disparate impact doctrine has been the basis of a new encroachment of federal authority into the realm of state-based insurance regulation.

The U.S. Supreme Court championed the disparate or adverse impact doctrine in the landmark employment rights case of Griggs v. Duke Power Co., 401 U.S. 424 (1971). In Griggs, the Supreme Court held that the "absence of discriminatory intent" was not enough to redeem employment procedures if those procedures nevertheless acted as impediments to employment that disproportionately affected minorities or protected classes. Thus, Griggs signaled that not only was intentional discrimination unlawful under the Civil Rights Act, but unintentional discrimination was prohibited as well. If a certain rule or procedure can be shown to have an adverse or disparate impact on a protected class, whether it was intended as discriminatory or not is irrelevant.

The HUD Rule imposes liability for discrimination regardless of intent.

In early 2013, the Department of Housing and Urban Development (HUD) enacted a final rule (the "Rule") implementing the discriminatory effects standard of the Fair Housing Act. As stated in the Rule, the Fair Housing Act prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status, or national origin. HUD, statutorily charged with enforcing the Fair Housing Act, has interpreted it to prohibit practices with an unjustified discriminatory effect, regardless of whether there was an intent to discriminate.[1]

The Rule provides that liability may be established under the Fair Housing Act based on a practice's discriminatory effect, even if the practice was not motivated by a discriminatory intent. Further, the Rule includes a three-part burden-shifting test for determining when a practice with a discriminatory effect violates the Fair Housing Act.[2]

The Rule could expose virtually any factor used by insurers to assess risk or price coverage to challenge on the "disparate impact" basis.

The Rule specifically notes that HUD has long interpreted the Fair Housing Act to prohibit discriminatory practices in connection with homeowners insurance. This means that the "unintentional discrimination" prohibition could reach insurance practices, and insurance companies could face "disparate impact" challenges to virtually any factor used to assess risk or price insurance coverage if such factors have a disproportionate adverse affect on protected classes.

Insurance industry insiders objected to the Rule before it was even finalized, asserting that it was a violation of the McCarran-Ferguson Act's prohibition against federal law interference with state insurance regulation. HUD dismissed these assertions in the final Rule publication, stating that McCarran-Ferguson does not preclude it from issuing regulations that may apply to insurance policies.

The American Insurance Association and the National Association of Mutual Insurance Companies recently filed suit against HUD, asserting that the Rule is a violation of the McCarran-Ferguson Act and challenging the "unintentional discrimination" liability imposed by the Rule.

Additionally, the United States Supreme Court has agreed to hear another case involving a challenge to the Rule. The Supreme Court granted certiorari in Mount Holly v. Mount Holly Gardens Citizens in Action, Inc., in June of 2013, putting the issue of disparate impact claims under the Fair Housing Act squarely before the Court.

1. 24 CFR Part 100 – Discriminatory Conduct under the Fair Housing Act.
2. 24 CFR Part 100 – Discriminatory Conduct under the Fair Housing Act.

Insurance Implications of California Home Builder Air Pollution Mitigation Law

The Supreme Court has declined to hear an appeal challenging a local/regional home developer mitigation law which could have ramifications in the construction insurance market.

The appeal of a lawsuit by the National Association of Home Builders (NAHB) challenging a California law requiring home developers to mitigate carbon emissions from building projects was recently declined by the United States Supreme Court. Many emission-related risks and mitigation-related risks may not be covered by the standard insurance policies typically used in the construction industry today.

Home developers must mitigate the carbon emissions generated by their projects under the law.

Adopted by the San Joaquin Valley Unified Air Pollution Control District, the law at issue forces those involved in housing development projects to mitigate the carbon emissions generated by their efforts. Mitigation can be either by specific green initiatives, or through payments to the District to fund general pollution mitigation projects.

The NAHB originally filed suit to invalidate the law in 2006, asserting that the District did not have the jurisdiction to regulate the environmental requirements of home developers. Both the federal district court and the United States Court of Appeals for the Ninth Circuit disagreed, indicating that local and regional air pollution controls are permitted by the U.S. Clean Air Act.

The standard construction program typically provides contractors liability insurance, builders risk insurance and workers compensation.

A standard construction insurance program typically provides contractors liability insurance, builders risk insurance and workers compensation. Generally, this program would provide protection from third-party claims for damages, damages to the project during construction, and medical/disability payments for injured employees.

Pollution liability insurance is typically a specialized coverage that is not always included in standard construction insurance programs. Additionally, standard pollution liability insurance endorsements may not cover risks related to emission mitigation efforts, risks and/or litigation.

New endorsements specifically designed to cover these mitigation risks could emerge.

To the extent that local and regional governmental authorities continue to impose environmental mitigation requirements on home developers under the Clean Air Act, insurers serving the construction industry will likely be forced to adapt. New endorsements specifically designed to cover these mitigation risks could emerge. If the mitigation requirements become more pervasive, standard construction insurance programs could evolve to incorporate mitigation risk coverages as a standard feature.

Read the full article:

Supreme Court declines home builders' appeal of California air pollution law
Matt Dunning | Business Insurance
October 6, 2011

Insurance Industry M&A on the Rise

A steady rise in mergers and acquisitions in the insurance industry in the first part of this year is part of a trend that should continue into the future, according to reports.

After at least two years of steady decline, the first half of 2011 has brought a significant increase in mergers and acquisitions in the global insurance industry, according to an analysis by Clyde & Co cited in a report by the Financial Times.

The report indicates that global insurance industry transactions are expected to continue at an increased rate moving forward, and suggests that the reinsurance sector and the Bermudan industry are likely to be particularly active in M&A.

The Financial Times quotes Andrew Holderness, a partner at Clyde & Co, as follows:

“It is evident that mergers and acquisitions are back on the agenda of underwriting businesses,” he said. “Regulators and customers are looking for strength and stability...we expect to see continued activity across all types of transactions.”

Read the full article:

Sharp rise in insurance M&A
Paul J. Davies | Financial Times
September 11, 2011

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.

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.

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.

Mergers and Acquisitions in the Insurance Industry Expected to Rise

A recently released survey of insurance executives predicts a rise in M&A, and identifies the impact of new regulations and legislation as the biggest threat to insurance industry.

According to the 2014 Insurance Industry Outlook Survey from KPMG, the insurance industry may see a rise in strategic acquisitions moving forward, as the majority of insurers are "investing in customer programs, talent, and technology to grow their businesses and gain a competitive advantage" according to a KPMG press release accompanying the survey.

The survey's key findings include that a majority of the insurance industry executives surveyed (54%) indicated that their company was likely to be involved in M&A as a buyer over the next 12 months. That result is up from one-third (34%) last year.

The survey also listed the top three "drivers of transformation" over the next three to five years as customer demand, coping with change in technology and domestic competition.

Significantly, more than one-third (34%) of the insurance executives surveyed identified the biggest threat to their business models as the impact of new regulations and legislation. The second largest threat identified in the survey was losing share to lower-cost producers.

Read the full survey:

2014 Insurance Industry Outlook Survey

Actuary: Impact of Government Default on the Property & Casualty Insurance Industry Would Have Been Minimal

Financial analysis and actuarial firm says that the property and casualty insurance industry was unlikely to have been significantly effected if the U.S. Government had delayed payment of principal or interest on its obligations over the next twelve (12) months.

According to financial analysis and actuarial consulting firm Demotech, Inc., the property and casualty insurance industry may be uniquely poised to handle the fallout in the unlikely event that the United States government had postponed the payment of interest or principal on its near-term obligations – a looming but possibly "manufactured" crisis that was apparently staved off by a recent debt deal in the U.S. Congress.

With $150 billion invested in government debt, the P&C industry seemed vulnerable.

However, with about $150 billion in government debt-investments, the property and casualty insurance industry seemed vulnerable to a potential default by the U.S. Government, although a recent news release by Demotech says that less than $50 billion of those debt-investments mature in the next year.

Additionally, the amount of principal and interest due to the P&C industry in the next twelve (12) months represents only about three percent (3%) of the P&C industry's aproximately $1.3 trillion in aggregate cash and invested assets. Therefore, according to Demotech, the P&C industry was unlikely to have been adversely affected in any significant way if there had been a disruption in those cash flows.

A disruption in payments on government debt is only one potential aftereffect of a default.

However, a "disruption" in cash flows from the U.S. Government on its debt obligations is only one of the potential aftereffects of a U.S. Government default. For example, such a default could have caused a ripple effect through the investment markets and financial industries, the ultimate outcome of which is extraordinarily diffult to predict.

Read the full article:

P&C Industry Uniquely Poised to Hold its Own
Demotech, Inc. | PR Newswire
July 29, 2011

Top 10 Regulatory States for P&C Insurers

Vermont and Ohio had the best property and casualty insurance regulatory environments in the U.S. in 2010, followed by Illinois, Maine, and Wisconsin, according to a report recently released by the Heartland Institute.

The Heartland Institute, a national nonprofit research and education organization, has issued its 2011 Property and Casualty Insurance Report Card (available in PDF), a state-by-state analysis of insurance regulatory burden.

The report ‘asks fundamental questions about the nation’s property and casualty insurance regulatory environment’ such as the following:

• ‘How free are consumers to choose the property and casualty insurance products they want?’ and


• ‘How free are insurers to provide the property and casualty insurance products consumers say they want?’[1][2]

Vermont and Ohio had the best property and casualty insurance regulatory environments in the U.S. in 2010, followed by Illinois, Maine, and Wisconsin, according to the report.

The report notes that federal regulatory reforms of the financial services industry and health care did not have any major effects on property and casualty insurance, despite the fact that both the Patient Protection and Affordable Care Act (PPACA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act included provisions affecting property and casualty insurance.

Reviewing the data on insurance in 2011, we see once again a modest, uneven, but nonetheless real trend towards more freedom for consumers and businesses in the homeowners’ and automobile insurance realms. Although state-level insurance bureaucracies make it difficult, sometimes impossible, for insurers to offer consumers the products they need, want, and deserve, burdensome regulation shows signs of easing.[3]

State insurance regulation is graded in the report based on a number of factors, including politicization, regulatory clarity, residual insurance markets, market concentration and rate regulation.

For the fourth year in a row, Florida was ranked last on the list with an ‘F’ letter grade.

For the fourth year in a row, Florida was ranked last on the list with a letter grade of ‘F’ and a numerical score of -35. The report is very critical of the Florida regulatory environment, but notes that Florida’s legislature, with bipartisan majorities, did attempt ‘to reduce the size and scope of the state’s extensive insurance market interventions.'

The report also indicates that Florida ‘experienced a wave of insurer insolvencies mostly from over-regulation of the market’ including many insolvencies that ‘the Florida Office of Insurance Regulation kept secret from consumers in the early months of the year [that] ended up sending consumers and regulators scampering to other companies and the state’s residual market, the Florida Citizens Property Insurance Corporation.'

1. 2011 Property and Casualty Insurance Report Card, The Heartland Institute, May 2011.
2. See also the Heartland Institute's article regarding the report, written by Eli Lehrer, Vice President of Heartland.
3. 2011 Property and Casualty Insurance Report Card, The Heartland Institute, May 2011.

The Two-Headed Beast: Should California Stop Having Two Health Insurance Regulators?

Representatives from both the healthcare and the insurance industry met with California insurance regulators last week to discuss the future of the overlapping bureaucracies that regulate health insurance in the state.

Currently, California's health insurance industry is regulated by both the California Department of Insurance ('CDOI'), headed by an elected insurance commissioner, and the Department of Managed Health Care ('MHC'), a separate agency under the Governor's office. While the CDOI is charged with regulating traditional health insurance carriers, the MHC regulates HMOs and other managed care programs.

Some suggest that a single agency would be better equipped to serve the public and tackle a maze of new healthcare rules from the federal government.

According to an article in the Los Angeles Times, the 'two regulators enforce different sets of laws and require insurers to provide varying levels of health benefits for consumers. They also are seen as widely different in their dealings with insurers and in their enforcement powers.'

Healthcare lobbyists, insurance industry representatives and regulators met last week in Sacramento to discuss the possibility of combining the two regulatory agencies. From the Los Angeles Times article:

Some suggest that a single agency would be better equipped to serve the public and tackle a maze of new healthcare rules from the federal government. Others say such a move would distract from more pressing issues facing lawmakers and regulators.

California's Deputy Insurance Commissioner Janice Rocco said the event was only the first step in a public conversation about who whill regulate insurers and HMOS in the state, according to the article.

Read the full article:

Should California stop having two health insurance regulators?
Duke Helfand | Los Angeles Times
June 23, 2011.

D&O and Cyberinsurance Executive Summary: What You Need to Know Before You Walk into the Boardroom

Scott N. Godes of the Corporate Insurance Blog will be part of a free webinar on July 19, 2011, at 2:00 pm Eastern, about D&O and cyberinsurance: What You Need to Know Before You Walk into the Boardroom, part of the Executive Summary webinar series presented by Woodruff-Sawyer & Company.

More information is available here.

ING: Insurance Regulatory and Financial Issues May Prove Difficult in Divesting Insurance Business

ING warns that regulatory and financial issues could hamper plans to divest its insurance business via public offerings next year.

ING Groep NV, the global financial institution based in the Netherlands, has sold its U.S. online bank for $9 billion dollars after being forced by the European Commission to reduce its balance sheet by 45% as a condition for €10 billion that it received in financial crisis aid. Now, ING is preparing to spin off its insurance arm, but market volatility and stricter capital rules for insurance could unsettle its IPO plans.[1]

Regulatory concerns, market volatility and stricter capital rules for insurance could unsettle ING's IPO plans.

According to Dow Jones Newswires, ING Chief Executive Jan Hommen warned that the sale of its online bank, ING Direct USA, to Capital One Financial Corp. was complicated by regulatory and financial issues. Hommen is concerned that the process of divesting the insurance business could be just as difficult.

Analysts indicate that, in preparing for the proposed IPOs, ING will face a series of obstacles and that such divestments carry a 'material execution risk.'[2]

ING intends to separate its insurance and asset management businesses into newly created units, and restructure its capital base for the U.S. and European businesses.

Reports suggest that the divestments will ultimately cut ING's €1.3 trillion balance sheet in half, and reduce it from a global financial giant into a European-focused bank deriving the bulk of its business from Belgium, the Netherlands and Luxembourg.

Read the full article:

ING Says Insurance IPOs May Be As Complex As Selling...

Maarten van Tartwijk | Dow Jones Newswires
June 17, 2011

1. ING Says Insurance IPOs May Be As Complex As Selling Web Bank, Maarten van Tartwijk, Dow Jones Newswires.
2. Willaim Elderkin, Soceite Generale, according to Dow Jones Newswires.

New Global Accounting Standard Could Cost U.S. Life Insurers More Than $1 Billion

The U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board are working towards a new unified standard which could cost U.S. life insurers more than $1 billion in implantation costs and related expenses according to the American Council of Life Insurers.

As reported by Business Wire and detailed in the June edition of Best’s Review by A.M. Best, the proposed merger of the two accounting standards has U.S. insurers very concerned.

The potential implementation expenses “include the costs of reconfiguring the chart of accounts, the closing process, retraining staff and purchasing new accounting systems” according to the Business Wire article.

The June Best’s Review also discusses how changing regulations are impacting insurers in the U.S. and abroad.