Employer health plan growth

reduces ranks of uninsured

WASHINGTON-Aided by a booming economy, the number of individuals without health insurance fell sharply last year, the first decrease since the 1980s, the U.S. Census Bureau reported last week.

In 1999, the number of people without health insurance declined to 42.6 million from 44.3 million, a decline of 3.8%. Correspondingly, the proportion of the nation's residents without health insurance coverage declined to 15.5% from 16.3% in 1998.

Ranks of uninsured decline

The decline in the number of uninsured was due exclusively to an increase in the number of people with employment-based health insurance coverage. In 1999, 62.8% of the population had employment-based coverage, up from 62% in 1998.

These increases, benefit experts note, are the result of a tighter job market that has forced more employers, especially smaller companies, to offer health insurance plans to attract and retain workers. In addition, the low unemployment rate has meant that more individuals are likely to be covered under group plans.

Rhode Island led the nation last year with the lowest proportion-6.9%-of its residents without health insurance coverage, while New Mexico, at 25.8%, had the highest proportion.

GAO calls for benefits disclosure

WASHINGTON-Congress should consider passing legislation to require employers to disclose more information to employees about the impact on benefits of converting traditional defined benefit plans to cash balance plans, the General Accounting Office said last week.

In a draft report, the GAO said one of the changes Congress should impose would be to require employers to provide employees with timely information in plain language about when conversions will significantly reduce benefits.

In addition, the GAO said, Congress should consider making changes in pension law to prevent what is often called wear-away, situations in which employees, after a cash balance plan conversion, do not earn benefits under the new plan for a limited period of time. Legislation awaiting Senate action would, as the GAO advises, curb wear-away.

The GAO also recommended that the Internal Revenue Service develop comprehensive regulations that would recognize that cash balance and other so-called hybrid plans are distinctly different from other types of plans, a recommendation that employers endorse.

"The report recognizes that these are legitimate plans and the agencies should address problems in the law that are causing uncertainty," said Mark Ugoretz, president of the ERISA Industry Committee in Washington.

The GAO also suggested the Labor Department modify disclosure requirements for summary plan descriptions, which employers provide employees, to include a clear statement that employees do not own the cash balance accounts and to explain how the accounts differ from those that are part of defined contribution plans that employers may also provide.

Frontier managers face pay cuts

ROCK HILL, N.Y.-Frontier Insurance Group Inc. will cut the salaries of its top managers and further reduce staff as part of the ongoing effort to turn around the fortunes of the troubled insurance holding company.

The announcement of the salary reductions came last week, as the Rock Hill, N.Y.-based company announced it had exercised its option to purchase $800 million in aggregate stop-loss reinsurance from National Indemnity Co., a unit of Berkshire Hathaway Inc. The stop-loss reinsurance covers about $514 million in loss and loss adjustment expense reserves held on June 30 for accident years 1999 and before. The agreement with National Indemnity also includes up to $286 million in adverse-development coverage for loss and loss adjustment expense above the held reserves.

The salary cuts, which affect Henry Rhulen-Frontier's president and chief executive officer-and the six other members of the company's executive management group, took effect immediately. Other members of the company's senior management will also take pay cuts, according to a statement released by the insurer.

In addition, Frontier intends to further cut its staff over the rest of the year. Since the beginning of the year, the insurer's total number of employees has dropped to 680 from 1,600.

Signet Star Re reorganizing

GREENWICH, Conn.-W.R. Berkley Corp. is reorganizing the reinsurance operations of its Signet Star Reinsurance Co. unit to focus on business that W.R. Berkley believes can increase profitability.

Signet Star will be renamed Berkley Insurance Co., and its reinsurance operations will be organized into three existing underwriting management units.

Berkley Insurance Co. will take the place of the Berkley Regional Insurance Co., whose stock W.R. Berkley will transfer to the new entity. The contribution will give Berkley Insurance Co. a statutory policyholder surplus of around $600 million, compared with Signet Star's $300 million.

The three W.R. Berkley underwriting management units that will take over Signet Star's reinsurance operations are Signet Star Treaty Reinsurance Managers, Facultative Resources Inc. and Fidelity & Surety Reinsurance Managers. Signet Star Treaty Reinsurance Managers will continue its focus on excess-of-loss business, with an emphasis on specialty business. The unit also will continue to handle alternative-market reinsurance business placed by traditional reinsurance intermediaries.

Edward Norris, Signet Star Re president, will become senior vp of W.R. Berkley, with responsibility for all reinsurance operations. In addition, he will establish an affiliate that will form strategic relationships with managing general underwriters that focus on specialty coverages.

"This reorganization will reinforce our commitment to the reinsurance sector and will focus our resources on segments of the reinsurance business that provide the highest return," said William R. Berkley, chairman and president of W.R. Berkley, in a statement announcing the changes.

AAU purchase complete

LONDON-British Aviation Insurance Group Ltd. last week completed its $140 million acquisition of Short Hills, N.J.-based aviation and satellite insurer Associated Aviation Underwriters Inc.

AAU's previous owners, The Chubb Corp. and CNA Financial Corp., each of which had a 50% stake in the joint venture, split the sale proceeds evenly. Those proceeds consist of a $110 million base purchase price, a $20 million non-compete payment and a $10 million pre-closing dividend.

The sale will not end Chubb's and CNA's participation in the new pool of aviation insurers that AAU will manage, but the insurers' role in the new pool will be reduced greatly. Beginning Jan.1, 2001, Chubb and CNA each will take a 5% participation share for two years. That represents a more than fivefold drop from their current 27.5% shares. The insurers agreed to two-year agreements to provide BAIG continuity during the transition period from the old pool to the new one.

Besides Chubb and CNA, the new underwriting pool will consist of CGNU P.L.C., Zurich Financial Services Group Inc., Mitsui Marine & Fire Insurance Co., Munich Reinsurance Co., Royal & SunAlliance Insurance Group P.L.C., and Tokio Marine & Fire Insurance Co. Ltd.

AAU's current insuring pool will remain intact until year-end 2000. Besides Chubb and CNA, that pool consists of subsidiaries of Atlantic Mutual Insurance Co., Employers Reinsurance Corp., Kemper Insurance Cos., NAC Re Corp., and Underwriters Reinsurance Co.

Partner benefit trend growing

This year, more employers-including more Fortune 500 companies-are offering domestic partner health insurance benefits to employees than in 1999, according to a report by the Human Rights Campaign Foundation in Washington.

As of August, 3,572 companies, colleges and universities and state and local governments announced that they currently offer, or will soon offer, health care coverage to the domestic partners of their employees. This is a 25% increase from one year ago, according to the study, which is titled "The State of the Workplace for Lesbian, Gay, Bisexual and Transgendered Americans."

Over the same year, the number of Fortune 500 companies that offer domestic partner benefits jumped 46% to 102 from 70.

"Employers have discovered that these benefits help attract and keep the best workers, a critical consideration in the current tight job market," said Kim I. Mills, education director of the Human Rights Campaign.

Trenwick, LaSalle Re merge

HAMILTON, Bermuda-Trenwick Group Inc. and LaSalle Re Holdings Ltd. completed their merger last week.

The reorganized group now has one Bermuda-based holding company, Trenwick Group Ltd., with five main operating units:

*Trenwick America Re, based in Stamford, Conn., which provides property and casualty reinsurance to U.S. ceding companies.

* Trenwick International, based in London, which provides property and casualty reinsurance and specialty insurance internationally.

* LaSalle Re, based in Bermuda, which specializes in property catastrophe reinsurance.

* Canterbury Financial Group, based in Stamford, which provides specialty insurance programs through managing general agents.

* Chartwell Managing Agents, based in London, which manages the group's three Lloyd's syndicates.

Briefly noted

XL Capital Ltd. has named Nicholas J. Metcalf chief executive officer of its Lloyd's of London unit, The Brockbank Group P.L.C., and CEO of managing agency Brockbank Syndicate Management Ltd. He was previously active underwriter of syndicate 588. He takes over from Mark Brockbank, 48, who announced he was taking early retirement in July. Also, XL announced that Martin Reith, managing director of Brockbank Syndicate Management has resigned "to pursue other opportunities."...Chubb Corp. has invested $2.5 million in eREINSURE.com Ltd., an e-commerce technology company in Salt Lake City. eREINSURE is developing an Internet-based reinsurance negotiation and trading platform....A Chicago suburb has filed a proposed class action lawsuit charging broker Arthur J. Gallagher & Co. with violating state anti-fraud statutes by taking undisclosed contingent commissions from insurers. The Village of Orland Park, Ill., which used Gallagher to place public officials' fidelity bonds from 1994 to 1997, filed suit last month against the broker in the Chancery Division of Cook County Circuit Court. Gallagher officials were not immediately available for comment...A new model regulation to protect the privacy of consumers' non-public personal financial and health information was formally approved by the full membership of the National Assn. of Insurance Commissioners during a conference call earlier this week. The likelihood of individual states adopting the measure remains uncertain, however, because insurance industry trade associations are split over supporting it. Several trade groups voiced their support at a recent hearing in Chicago on a different model proposed by the National Conference of Insurance Legislators....Medical malpractice insurer Medical Liability Mutual Insurance Co., has completed its acquisition of The Princeton Insurance Cos. Combined, the companies have a medical malpractice liability premium volume of more than $475 million and insure more than 40,000 physicians, dentists and health care professionals in 11 states as well as 175 hospitals and related health care facilities in Delaware, New Jersey, New York and Pennsylvania....Kansas City, Mo.-based Interstate Brands Corp. has asked a San Francisco judge to grant a new trial and to toss out the $121 million in punitive damages IBC was ordered to pay to a group of African-American employees who alleged discrimination. Among other issues, IBC argued in court filings that jurors were drinking alcohol during trial breaks and deliberations. Judge Stuart Pollock of the San Francisco Superior Court was scheduled to hear the motion last Friday.