Hub: Reg. Insurers Risk Higher Insolvency
By Michael Ha
NU Online News Service, Dec. 15, 11:55 a.m. EST?Despite improving underwriting results for the overall property-casualty industry, the marketplace should still expect a wave of reserve surprises and insolvencies?especially for smaller regional carriers?in the coming year, a major brokerage firm forecast.[@@]
"We expect further downgrades and another wave of insolvencies. Insureds must carefully evaluate their insurance carrier," said Damian Testa, president for Kaye Insurance Associates, part of Chicago-based Hub International Limited.
Mr. Testa told National Underwriter that regional carriers could face a higher risk of insolvencies in 2004. "It could now be regional carriers that have to add to their reserves. The other issue is reinsurance receivables; if reinsurers don't pay it, smaller carriers are more at risk," Mr. Testa said.
He observed that there are now more problems arising between carriers and reinsurers, with reinsurers not paying claims as rapidly as they used to. "So that could be a real problem for smaller guys next year," he forecast.
Another concern for the p-c industry in 2004 is the soaring jury awards, Mr. Testa said. (A recent study by New York-based consultants Tillinghast-Towers Perrin found that tort-related costs in the civil litigation system reached $233 billion in 2002, their largest dollar increase in U.S. history. See NU Online News Service, Dec. 10, 2003.)
"Jury awards certainly seem to be outpacing inflation?when you get one jury award, that could also lead to hundreds of other high-cost settlements. Plaintiffs' lawyers are doing a very good job in increasing awards and settlements," he noted.
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