Courtesy: FEMA

Since that storm in 2005, the costliest and fifth deadliest in U.S. history, property-casualty insurers have been collecting increased premiums during four calm hurricane seasons.

The calm could be ending this year, as forecasters say this hurricane season, which runs from June 1 through Nov. 30, could be among the worst in recent years.

Three forecasters predict four intense hurricanes in the Atlantic Basin, well above the long-term average of two to three intense storms. Warmer sea surface temperatures and a transition to neutral El Niño conditions are expected to enhance hurricane activity.

The National Oceanic and Atmospheric Administration (NOAA) predicts in its Atlantic Hurricane Season Outlook an 85% chance of an above normal season for the North Atlantic Ocean, Caribbean Sea and Gulf of Mexico, where hurricane activity could hamper recovery efforts in the Deepwater Horizon oil rig disaster.

NOAA predicts a 70% probability of between 14 and 23 named storms and eight to 14 hurricanes, with three to seven of them being major.

Forecasters say the conditions expected this year have historically produced some very active Atlantic hurricane seasons.

Industry bracing for impact

After significant catastrophe losses in first quarter, U.S. property-casualty insurers and global reinsurers are hoping their balance sheets don’t face further financial risks, according to A.M. Best, an insurance industry ratings service.

The industry enters the season on the strength of underwriting and financial results that rebounded in 2009 after deteriorating in 2008, a year marked by catastrophe losses from hurricanes Ike and Gustav and poor investment returns associated with the global financial turmoil, the ratings service said.

It added that state wind and beach plans, and last-resort insurers saw in-force liabilities grow by double and even triple-digit percentages from 2005 to 2009 in states such as North Carolina, Florida and Texas.

Insurance companies have reacted in the wake of the destruction left by Hurricane Katrina, which caused 1,836 confirmed deaths and more than $81.2 billion in losses.

The ratings service’s data indicates insurers’ efforts to exit hurricane prone states accelerated from 2005 to 2009, compared with homeowners’ multi-peril business written earlier in the decade.

Major writers of homeowners’ multiperil, Citizens Property Insurance Corporation in Florida and Louisiana Citizens Property Insurance Corp., have shifted market share to other carriers through takeout programs, the service reported.

The top 10 A.M. Best rated writers’ market share fell more than eight percentage points from 2005 to 2009 in Louisiana; about three percentage points in Mississippi; and more than nine percentage points in Texas.

Forecasts for hurricane season rivaling 2005 put insurers on edge via IFAwebnews.

Julie Quinn

The House Insurance Committee rewrote SB 595, sponsored by Sen. Julie Quinn (R-Metairie), meaning if the measure passes the entire legislative body it returns to the Louisiana Senate, which approved the original version in April, according to the New Orleans Times-Picayune.

Louisiana is one of several states, including Florida and Virginia, dealing with the aftermath of drywall imported from China that has resulted in medical issues with residents and damage to wiring and pipes in homes.

According to the Times-Picayune, the insurance industry attempted several amendments to Quinn’s bill, including one stripping the requirement that insurers reinstate a dropped policyholder within 30 days at the same conditions existing before the termination.

In its current form, the bill prohibits an insurer from canceling or failing to renew a policy, “based solely on the presence of installed drywall” that came from China prior to Dec. 31, 2009.

Quinn’s bill originally included a penalty for non-compliant companies in the form of a fine matching half of the value of the insured property.

Under the current bill, terms of the legislation, if approved, would end July 1, 2013.

Chinese drywall insurance bill moves forward in Louisiana via IFAwebnews.

The ratings services upgraded the Watertown, N.Y.-based firm’s financial strength rating to “B++” (Good) from “B+” (Good) and its issuer credit rating to “bbb” from “bbb-” with a “stable” outlook on both ratings.

With roots dating to 1877, North Country offers products including homeowners, farmowners, inland marine and landlords coverage, according to the property-casualty firm’s website.

A.M. Best said the ratings and outlook also reflect North Country’s improved underwriting leverage and favorable operating performance. The company’s improved capital position has been derived from surplus advances in each of the past five years, which are attributable to management’s emphasis on improved operating margins and strengthened balance sheet, according to the ratings service.

Over the most recent five-year period, pre-tax earnings have been driven primarily by profitable underwriting results due to management’s re-underwriting efforts in prior years and strict adherence to underwriting and pricing discipline in recent years, A.M. Best noted. North Country’s conservative investment portfolio has also generated consistent net investment income.

Partially offsetting the positive ratings attributes, the ratings service said, are North Country’s business concentration and property predominant exposure in New York. As a result, North Country’s operating performance remains susceptible to weather-related events as well as changes in regulatory and competitive market conditions. Also, the company maintains an expense disadvantage, driven primarily by its elevated commission and loss adjustment expenses, according to A.M. Best.

The ratings service added that despite this, North Country’s underlying book of business has outperformed industry averages, as reflected by its extremely favorable five-year average pure loss ratio.

Improved capital, market presence boost New York insurer’s ratings via IFAwebnews.

Alfred W. Gross

In conjunction with National Hurricane Preparedness Week (May 23-29), the Virginia State Corporation Commission’s Bureau of Insurance (BOI) is urging consumers to consider their options before winds and rains arrive, noting “it will be difficult to find an insurance company willing to write related coverage until the storm threat passes,” in a statement.

Regulators also said that hurricanes and their resulting floods “can threaten lives and properties” in Virginia during hurricane season, marked from June 1 through Nov. 30.

“Take steps now to protect your family, home, and business in the event of a disaster. Prepare for the unexpected,” said Virginia Insurance Commissioner Alfred W. Gross in a statement. “Know what to do if a disaster strikes and make sure you have the insurance coverage you will need should one occur. If you do not already have flood insurance, determine your flood risk and act now to protect your home or business.”

The BOI advises residents to check with their insurance provider or agent to see if their homeowner’s policy contains a special deductible for wind or hurricane losses. Regulators said some companies automatically include a wind or hurricane deductible, while others offer it as an option, so consumers should check.

The agency also reminded residents that most of the damage from hurricanes comes from flooding, not high winds, and that even minor flooding can cause extensive damage to homes, businesses and belongings.

With homeowners’ policies in Virginia generally not including coverage for damage due to floods, surface water or storm surges, the BOI directed consumers to the NFIP, run by the Federal Emergency Management Agency. The program offers insurance for direct flood and flood-related damage to homeowners, renters and business owners in eligible communities.

The BOI also urged consumers to check with their insurer or agent regarding “write your own” policies for flood insurance, noting a 30-day waiting period before a new policy takes effect.

Va. insurance commissioner urges preparation for hurricane season via IFAwebnews.

The Flemington, N.J.-based company also had its financial strength rating of “B+” (Good) and issuer credit rating of “bbb-” affirmed by the ratings service.

Farmers’ sells include homeowners, businessowners, workers’ compensation and automobile insurance throughout New Jersey.

A.M. Best noted that the revised outlook for the company reflects the reduced exposure that its risk-adjusted capitalization has to equity market volatility going forward. It also acknowledged that over the past several years, Farmers reduced its significant holdings of common stock to comply with the New Jersey legislation passed two years ago, limiting equity investments, which was followed by revision of Farmers’ investment strategy and portfolio allocation that emphasizes fixed income investments.

The ratings also recognize Farmers’ adequate capitalization, generally favorable operating performance and local market expertise, which are offset by the company’s unfavorable loss reserve development trends and geographic concentration of risks in New Jersey, according to A.M. Best.

As a property-predominant writer in New Jersey, Farmers’ surplus remains exposed to adverse legislative actions, regulatory decisions and severe weather conditions, the ratings service also noted.

Compliance with N.J. law aids property-casualty insurer’s ratings jump via IFAwebnews.

Mike Bennett

In a letter to several media outlets in the state, Florida Sen. Mike Bennett (R-Bradenton) asked Gov. Charlie Crist to lead an effort to remove Kevin McCarty from office immediately. Bennett said he made the request last year, after Crist vetoed residential insurance legislation at McCarty’s recommendation and no action was taken.

Bennett alleges that McCarty “either lied” before Florida’s cabinet “or at least hid the truth” in testifying on the health of new companies in Florida by neglecting to tell state leaders that several of those companies had already gone out of business.

“He has a habit of saying whatever he thinks his boss wants to hear,” Bennet wrote. “Over the last year, it has become more and more evident that Commissioner McCarty is NOT serving the residents of Florida in any beneficial way and that the insurance markets in Florida have become weaker and more vulnerable under poor leadership and as a result of his unsound policymaking.”

The state senator also pointed to a recent inquiry by Florida Chief Financial Officer Alex Sink regarding some insurers close to bankruptcy to continue writing policies without warning consumers. Bennett accused McCarty of allowing companies to drop unwanted customers and ending requirements that companies be able to cover the worst hurricanes possible.

In her letter, Sink cites several indicators of a “fundamental shift in strategy with regard to the regulation of property insurance companies.” They include an order removing a requirement from Citizens Property Insurance Corp. to provide three years of continuous coverage for policies, a request for receivership of Northern Capital Insurance Co. and the monitoring of Magnolia Insurance Co. about to enter receivership.

In response, McCarty defended all the actions of his office as “intended to support and promote the insurance marketplace in Florida while protecting policyholders.”

Despite the defense, Bennett said McCarty’s “out-of-control tactics include dishonesty and evasion when information is demanded.”

Adding he is aware McCarty will not resign, he implores Crist, Florida Attorney General Bill McCollum or Sink “to provide the necessary leadership and accountability required in order to protect Florida residents.

“We are no longer able to trust McCarty’s word or his actions,” Bennet concluded. “Gov. Crist prides himself as ‘the people’s governor’ and he is now an ‘Independent’ politician. I am again calling on the governor to lead and urge the Florida Cabinet to discharge Kevin McCarty as insurance commissioner.”

Florida senator calls for firing of state insurance commissioner via IFAwebnews.

An MIA bulletin (08-17) explained a new state law, which took effect Oct. 1, 2008, requiring insurers to notify policyholders in new and renewal homeowners policies that insurers in the state must cover loss caused by or resulting from water that backs up through sewers and drains not caused by the policyholder’s negligence. Specific language to be included in policies was included in the bulletin.

Among those fined in November 2009 were: Electric Insurance Co., based in Beverly, Mass., which offered the required coverage, but did not include necessary language in policies issued between October 2008 and May 2009.

Metropolitan Group Property & Casualty Insurance Co., Metropolitan Property & Casualty Insurance Co. and Economy Premier Assurance Co., all based in Warwick, R.I., failed to include language about the coverage in policies issued between Oct. 1 and Dec. 9, 2008.

Everett Cash Mutual Insurance Co. did not offer the coverage on new and renewal policies issued between Oct. 1, 2008, and July 30, 2009.

This story originally appeared in the May 2010 print edition of Insurance & Financial Advisor.

Homeowners drain policy disclosure omission costs insurers in Md. via IFAwebnews.

Broadus W. Marshall Jr., 57, who runs Marshall Insurance Co., was indicted May 11 on seven counts of insurance fraud, according to the Macon Telegraph. The charges stem from allegations that the agent sold one residential and five business policies, but rather than securing policies, pocketed the money for himself, according to the report.

Earlier this year, Philadelphia Indemnity sued Marshall and his son, Matthew P. Marshall, 26, seeking repayment of $135,904 that was to be forwarded to the company for auto and business liability policies for Goodwill Industries.

Charges against Matthew Marshall were dismissed when it was determined that he was not the agent for any of the policies, according to the report.

The indictment includes the Goodwill allegations, the report said, but also charges Marshall with taking $15,500 from Destiny Driven Deliverance Church, A Little Extra Inc. and River Edge Behavioral Health Center and an additional $1,000 from Pierce and Parker Inc.

The charges also state that Marshall took $1,000 paid by a local couple for policies.

Marshall’s lawyer told the Telegraph that the Goodwill charges are a result of accounting mistakes and misunderstandings, and that he had not reviewed the new allegations, but expects to prove his client is not guilty.

Ga. agent indicted for pocketing money from Goodwill, other clients via IFAwebnews.

Neil D. Breslin

The New York State Legislature will hold the meeting, convened by Assembly Insurance Committee Chairman Joseph D. Morelle (D-132nd District) and Senate Insurance Committee Chairman Neil Breslin (D-46th District), in Albany, where members of insurance companies and insurance trade groups are expected to testify.

The hearing will look at the reluctance of some insurance companies to write homeowners insurance in coastal areas, fearing the effects if a hurricane strikes the area. Companies have expressed concern about the potential for catastrophic levels of property insurance claims and the high cost of obtaining reinsurance for the risk.

Last month, another session involving Morelle and Breslin, legislators from the affected areas, insurance trade groups and several insurance agents from Long Island focused on the problems in the market and ideas for solutions.

The Independent Insurance Agents & Brokers of New York, a trade group representing nearly 1,800 agencies in the state, said it expects the meeting to explore the possibly creating one standard definition of an event that would cause large windstorm deductibles to apply to homeowners insurance claims. The group will also discuss how insurance companies are using the broader New York Property Insurance Underwriting Association policy, reform enacted in 2008, to make coverage more available. That reform authorized a coastal market assistance program, enabled NYPIUA to offer broadened coverage, and launched other initiatives to increase insurance availability.

New York legislators to explore coastal insurance problem via IFAwebnews.

Phil Bredesen

Tennessee Gov. Phil Bredesen announced that the federal government has authorized a major disaster declaration for 21 counties, making assistance available through the Federal Emergency Management Agency (FEMA). The agency is urging residents with damage to register online or call them to start the process immediately.

“We can see President Obama and other federal officials continue to move quickly to process our requests and announce declarations for more counties,” Bredesen said in a statement. “I expect us to continue to see additional counties authorized for federal assistance as the damage assessments continue, which will be tremendously helpful to Tennesseans who suffered losses as they work to rebuild.”

While that aid is forthcoming, so is a potential lawsuit against insurance agents who never told residents about flood insurance, according to WTVF in Nashville, Tenn.

The station reports that attorney David Raybin of Hollins, Raybin & Weissman is considering a suit against several insurance agents following the flood.

According to a statement on the firm’s site, a large number of people are contacting their insurers, only to learn they are not covered for water damage caused by the recent storm.

“A great many homeowners wrongly thought they were protected, only to find their insurance agent neglected to sell them the proper and necessary insurance,” the statement says.

Raybin told WTVF that agents “want to sell as quickly as they can and not have a lot of claims.

“They say ‘okay just sign here and you’re insured,’” he told the station, adding that insurance agents have an obligation to inform clients about the National Flood Insurance Program run through FEMA. Failure to do otherwise, he stated, is malpractice.

“There have been a lot of lawsuits around the country for agents not telling people about this,” said Raybin.

Anger against Tenn. insurance agents rises as flood waters subside via IFAwebnews.