NEW YORK -- A corporate policyholder has a right to know all details about its broker's compensation arrangements with each insurer the broker recommends as a source of coverage, according to a new policy statement from the Risk & Insurance Management Society Inc.

"All sources of broker compensation, direct and indirect, should be disclosed," regardless of whether that compensation is specific to the policyholder or contingent on factors such as business volume, profitability or individual primary and reinsurance placements, according to the one-and-a-half-page statement.

"RIMS supports the spirit of the New York Insurance Department's Circular Letter No. 22, which states: All such compensation arrangements should be disclosed to insureds prior to the purchase so as to enable insureds to understand the costs of the coverage and motivation of their broker in placing the business."

This RIMS policy statement represents a broad consensus of leaders' views, said Anne Allen, the organization's director of governmental affairs. However, individual members may have different thoughts about the amount of desired disclosure, she added.

The policy statement also addressed corporate consolidation in the insurance industry, noting that this trend among global brokers is being offset by "intense competition" among other types of firms seeking to provide risk management services, including consulting firms and large reinsurers.

"Risk managers should act as proactive consumers in this transitional period to ensure that the new market will meet their needs," RIMS recommends.

RIMS began looking at these issues after receiving questions about them from a variety of sources.

Active storm season predicted

FORT COLLINS, Colo. -- In 1999, the U.S. can expect another active hurricane season, comparable to this year's season, according to the hurricane forecast team at Colorado State University.

The team predicts 14 named storms, nine hurricanes and four intense hurricanes will form in the Atlantic Basin during the 1999 season, which lasts from June 1 through Nov. 30.

"We feel the 1999 season will be comparable to the one just past and not too much weaker than the 1995 and 1996 seasons, both of which were very busy," William Gray, the CSU professor of atmospheric science who leads the forecast team, said in a release. "Climatic evidence strongly suggests that we are embarking on a new era of enhanced major hurricane activity."

The number of intense Saffir-Simpson Category 3, 4 and 5 storms will increase in 1999, the team forecasts, because of a stronger Atlantic "conveyor belt."

"Our concern is that, because of the population buildup along the U.S. East Coast, property damage could be severe," Mr. Gray said in the release, adding that these storms cause more than 80% of all property damage.

Compared to long-term averages, the team predicts the U.S. Atlantic coast has about twice the chance of experiencing a storm with winds of 111 mph or greater in 1999. The Gulf coast also holds a 150% greater probability of a major hurricane making landfall, compared with long- term averages.

LTV Corp., PBGC reach deal

WASHINGTON -- A new agreement announced last week between the Pension Benefit Guaranty Corp. and LTV Corp. will allow the steelmaker to follow a standard schedule in making contributions to its underfunded pension plans, rather than using a complex schedule of fixed and variable payments.

The new agreement replaces a 1993 pact, which established the complex funding schedule. That earlier agreement resolved years of controversy going back to 1986, when LTV said it could no longer afford to contribute to the plans, which then had about $2.5 billion in unfunded benefits.

Several months later, the PBGC took over the plans and then, after LTV set up new, lower-cost pension plans, returned the underfunded plans to LTV. LTV then sued the PBGC to prevent the agency from returning the plans, which set off a lengthy legal battle that ended in 1990, when the Supreme Court ruled that the PBGC had the right to restore the plans to LTV.

Since the earlier agreement, LTV has contributed $2.8 billion to the plans, which, according to PBGC interest rate and other assumptions, have about $1.5 billion in unfunded benefits and about 78,000 participants, including 52,000 retirees.

Aside from making the funding schedule simpler to administer, the new agreement ties the pension contributions of LTV -- like other employers -- to how well the plans are funded, and not to the overall health of the company.

Study clears breast implants

MIDLAND, Mich. -- The Tort Claimants Committee is disputing the findings of a report released last week that there is no causal link between silicone breast implants and disease.

"Nowhere in the report does the Pointer panel say that silicone is safe in the body," Sybil Niden Goldrich, an implant recipient and spokeswoman for the committee, said of the study, conducted by a four-member panel appointed by U.S. District Judge Sam C. Pointer Jr., who is overseeing the multidistrict breast implant litigation.

Despite the Tort Claimants Committee's response, Victor Schwartz, a product liability expert and counsel to the American Tort Reform Assn. in Washington, said plaintiffs lawyers likely will think twice before recommending their clients opt out of the latest settlement offered by Dow Corning Corp. (BI, Nov. 16). The panel's report "could persuade some women to participate in the settlement," he said.

The report backs the Midland, Mich., company's unwavering position that the implants are safe.

Regardless, the report will have no effect on the settlement proposal, which is included in the company's bankruptcy reorganization plan, a Dow Corning spokesman said.

Plans reach deal on review

SACRAMENTO, Calif. -- The state's largest managed care plans -- representing about 20 million enrollees -- will implement voluntary external review processes for patients who are denied treatment, the California Assn. of Health Plans announced last week.

If reviewers determine the proposed treatment is medically necessary, the decision should be binding on the health plan, according to a CAHP board resolution. Sixteen plans are represented on the CAHP's board of directors, and they cover more than 90% of the 20 million enrollees insured by the association's 40 member plans.

Each plan will create its own program and determine if a panel or an individual health care professional will review appeal cases, a CAHP spokesman said.

The move makes California the first state to have all of its largest health plans adopt a voluntary appeal process, the CAHP said. CAHP member plans were urged to implement review programs by the end of 1999. Some CAHP members already have review processes in place.

Many CAHP members will wait until late 1999 rather than implement a program now and have to revise it should state or federal legislators mandate a review process.

INEX can securitize onshore

CHICAGO -- With approval from the Illinois Department of Insurance to conduct securitized transactions, the INEX Insurance Exchange now can offer an onshore forum for risk securitization deals, which to this point have been done through offshore special purpose vehicles.

"We at the exchange view the development as extremely significant," said James E. Tait, president and CEO of INEX, formerly the Illinois Insurance Exchange. "To my knowledge, this affords the first viable alternative for bringing insurance securitization transactions onshore."

The new regulation allows INEX, based in Chicago, to transfer risks to special purpose limited syndicates, which, in turn, would issue the securities transferring those risks to the capital markets.

Pharmacists to appeal suit

CHICAGO -- Pharmacists will appeal a federal judge's decision to void their lawsuit that charged drug manufacturers and wholesalers with conspiring to fix prices.

The class-action suit, with 30,000 plaintiff pharmacies, including Walgreen Co., was against four drug manufacturers and five wholesalers that refused to settle along with eight other defendants, which have paid $720 million to end litigation.

U.S. District Judge Charles Kocoras in Chicago last week threw out the case against the remaining defendants, saying the plaintiffs did not prove the companies conspired to fix prices. Pharmacists had charged in the suit that they have been denied discounts that the industry gives health maintenance organizations, mail-order drug programs, hospitals, nursing homes and other bulk buyers.

Some suggested before the trial began that drug prices could rise if the pharmacies won their case against the manufacturers, because, they said, drug makers might de-emphasize discounts for all segments of the marketplace (BI, April 6). Others say a win either way would have had little effect on prices.

The dismissal won't mean big changes in drug prices for employers, sources say.

David Melnick, plaintiffs attorney with Melnick & Melnick in Milwaukee, said an appeal will be filed after Judge Kocoras issues a written opinion. That opinion had not been released as of late last week.

The judge stopped the trial after nine weeks, issuing the directed verdict after the plaintiffs' case was presented but before the defendants' response. Mr. Melnick said that deprived plaintiffs of a part of their argument. "A lot of times, you bring out faults in cross-examination," he said.

EXEL buys Illinois insurer

HAMILTON, Bermuda -- EXEL Ltd. has agreed to buy Intercargo Corp., a specialty insurer licensed in 48 states.

EXEL will pay about $88 million to buy the organization, though the deal is subject to Intercargo shareholder and regulatory approvals. At the end of September, Intercargo had assets of $165 million.

The deal will allow EXEL to extend its U.S. business, said President and CEO Brian O'Hara. Earlier this year, EXEL concluded an agreement to buy Folksamerica General Insurance Co., licensed as an insurer in 20 states and as a reinsurer in 11, and renamed it X.L. Insurance Co. of America Inc.

Once the current deal is completed, Schaumburg, Ill.-based Intercargo will operate closely with Lloyd's of London managing agency The Brockbank Group P.L.C., another of EXEL's acquisitions this year through its purchase of Mid Ocean Reinsurance Co. Ltd. Also this year, EXEL bought 25% of San Francisco-based Tri-City Brokerage Inc. for $8 million to help extend Brockbank's midmarket U.S. business.

Intercargo's international trade and contract surety business is expected to be enhanced by satellite and marine business from Brockbank, as well as business from other EXEL subsidiaries.

In a statement, Mark Brockbank, CEO of Brockbank, said the arrangement with Intercargo will significantly grow Brockbank's North American business.

Briefly noted

Superfund reform will be taken up again, according to the chairman of the Senate Environment and Public Works Committee. Sen. John Chafee, R-R.I., told the annual fall meeting of the National Assn. of Manufacturers last week that he intends to revisit Superfund reform in the next Congress. . . .New Jersey state officials and medical groups last week agreed to a plan in which providers serving patients enrolled in financially troubled Health Insurance Plan of New Jersey would receive 30% of outstanding bills and 75% on new bills (BI, Nov. 2).