Road trip

February 29, 2008

Hats off to the Property Casualty Insurers Assn. of America and David A. Sampson, the group’s president and CEO, for aggressively engaging themselves this week in Florida’s property insurance debate.

It’s no secret that Floridians and their lawmakers are wrestling with the issue of affordable property insurance in the hurricane exposed state. And, with the state’s 2008 legislative session starting Monday, there will be no end to the political rhetoric over the issue in the weeks ahead, and with it accompanying newspaper headlines.

In fact, that all began earlier this year, with Florida Senate President Ken Pruitt appointing a Senate Select Committee on Property Insurance Accountability, charged with taking “testimony, under oath, from property and casualty insurance company executives about their pricing practices and their increased profits associated with escalating rates.”

So it was a good move by the PCI and Mr. Sampson to commission a poll of Florida likely voters about the property tax issue earlier this year, and to travel to Tallahassee this week to discuss the findings with Florida business leaders and news media.

Among the poll’s findings was that property insurance is the number two priority among those polled, ranking just behind property taxes and ahead of education, health care costs, crime and jobs.

The poll also revealed that 91% of Floridians agree that the state should help focus on reducing losses through risk mitigation such as controls over types of construction and building materials and where homes are built, while 75% feel long-term stabilization of insurance rates is more important than immediate rate relief.

There are public officials in Florida who are genuinely interested in finding a solution to this issue that would provide long-term stability from a vital private insurance market in the state. The PCI’s trip to Florida this week demonstrated an interest in working with them.


And the winners are. . .

February 11, 2008

It’s that time of year, and with a settlement of the Writers Guild strike appearing imminent, it looks like movie fans can take heart in the fact that it’s full-speed ahead for the this year’s Academy Awards Feb. 24.

At the risk of sounding like the Onion’s Jackie Harvey, who doesn’t have Oscar Fever this time of year? Turner Classic Movies has its 31 Days of Oscar, and now the Insurance Information Institute has caught the Oscar bug, weighing in with its own list of the Top Insurance Films.

The winners, ranked in order of the Institute’s personal preference are: Double Indemnity (1944), Memento (2000), The Fortune Cookie (1966), The Killers (1946), Save the Tiger (1973), The Rainmaker (1997), The Thomas Crown Affair (both the 1968 and 1999 versions), Sicko (2007), To Catch a Thief (1955) and Along Came Polly (2004).

It’s pretty hard to argue with the noir classic Double Indemnity at the top of the list, though I think I’m personally a bit fonder of The Fortune Cookie. And I’d have to rank the 1968 Thomas Crown Affair with Steve McQueen and Faye Dunaway a bit higher.

So what did the III leave off the list? The 1937 classic Lloyd’s of London, which, though it is only loosely based on history, is titled Lloyd’s of London? The great 1960 film The Apartment? The only connection to insurance may be that Jack Lemmon’s character is trying to climb the ladder at Consolidated Life Insurance, but it is a terrific film.


Analyzing the analysts

February 8, 2008

The rating agencies have been referred to by many in the insurance industry as  “the new regulators” for long enough now that it’s probably time to retire the “new” and change the reference to to “the real regulators” or “the regulators we really care about because of the impact a downgrade can have on our business.”

In light of the impact the rating agencies’ scrutiny can have on companies’ fortunes, it’s interesting to see the rating agencies themselves–those on the bond rating side–under the microscope, a spot they’ve found themselves in the past few months as government officials react to the sub-prime mortgage crisis and, more recently, to the related woes of bond insurers and their potential impact.

As a story in today’s New York Times noted, this isn’t the first time the rating process has been questioned. Events like the 2001 Enron collapse prompted considerable discussion of the quality of the rating agencies’ analysis and the objectivity of their rating process, given that the debt issuers are the ones paying for their ratings.

Both Standard & Poor’s Corp. and Moody’s Investors Service Inc. are clearly trying to address the concern, with both looking at actions they say are meant to strengthen their ratings operations.

Yesterday, S&P announced what it described as “a broad set of actions” it was in the process of implementing, focused on governance, analytics, information and education. Among other things, S&P said it was establishing an ombudsman office to address conflict of interest concerns, and that the company would periodically engage an outside firm to review its compliance and governance processes.

S&P also announced a number of steps aimed at strengthening its analytics, steps intended to increase information transparency and steps aimed at educating the public including the creation of a credit ratings user manual and investor guidelines and broader distribution of its analysis and opinions on the Web and through other media.

Moody’s, too, indicated it’s considering some changes. In the company’s fourth quarter and full-year 2007 earnings release that came out yesterday, Raymond McDaniel, Moody’s chairman and chief executive officer, said the company is responding to the current “credit market dislocations” by providing “more extensive research and credit evaluation tools.”

Mr. McDaniel also said Moody’s is “working closely with market participants on information transparency in order to restore confidence and to support more orderly credit market operations as quickly as possible.”

Of course, Mr. McDaniel also said he expects the current “credit market dislocations” to continue “well into 2008,” an opinion that seems to be widely held, so no matter what they do, the rating agencies might find themselves wearing the bull’s-eye jacket for a while yet.