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NAIC NAMES PANEL TO REVIEW CIGNA-LIKE RESTRUCTURINGS
KANSAS CITY, Mo.-The National Assn. of Insurance Commissioners plans to study insurer restructurings that create "good company/bad company" units and report its conclusions to state regulators before its fall national meeting.
The topic is timely given concerns raised among regulators and insurers over CIGNA Corp.'s proposal to reorganize into an active operation and a runoff operation for its long-tail liabilities (BI, Jan. 22).
The 13-member committee that will re- CIGNA prompts NAIC study view the issue is chaired by Robert E. Wilcox of Utah and co-chaired by Terri Vaughan of Iowa. Also serving are commissioners from California, Illinois, Louisiana, Maine, New York, South Carolina, Tennessee, Texas, Virginia and Wisconsin. Pennsylvania Commissioner Linda Kaiser, who is considering CIGNA's plan, also will serve on the panel.
In other action, the NAIC will allocate $506,000 to fund through June 1996 its System for Electronic Rate and Form Filings and Producer Information Network projects. However, the NAIC delayed until March consideration of a budget amendment to earmark $400,000 for revision of the annual statement.
SPILL DAMAGES COVERED
PROVIDENCE, R.I.-The owner of a tank barge involved in a massive oil spill off the Rhode Island coast is insured for liabilities arising from the accident.
The barge, owned by Eklof Marine Corp. of Staten Island, N.Y., was driven aground off Moonstone Beach, R.I., after a fire broke out on its tug, also owned by Eklof, during a storm. About 828,000 gallons of the 4 million gallons of heating oil on board leaked into Block Island Sound. The cause of the fire still is unknown.
The spill, near a national wildlife refuge, killed lobsters and other marine life and closed about 254 square miles of Block Island Sound and Rhode Island Sound to fishing.
Eklof has $10 million in liability coverage through New York-based Water Quality Insurance Syndicate to meet the financial responsibility requirements the federal government imposes on shippers to ensure that damages relating to such incidents are covered. An additional $500 million in liability coverage is provided by West of England Shipowners Mutual Insurance Assn. (Luxembourg), a protection and indemnity club.
While most or all of the first $10 million in coverage is expected to be exhausted, no estimate of total damages was available last week.
Eklof set up a claims center in Rhode Island and agreed to buy thousands of pounds of possibly tainted live lobsters from local dealers, spokesmen for the company and the Rhode Island Department of Environmental Management said.
TRANSIT MAKES SECOND PAYMENT
LOS ANGELES-The receivers for Transit Casualty Co. this month made a second payment to creditors of the hugely insolvent insurer. Forty-five state guaranty funds and many corporate policyholders received about $65 million. Transit made its first payment of $55 million about a year ago.
To date, the receivers have collected $720.1 million of assets, said liquidator Burleigh Arnold. Of that, $450.5 million has been set aside for creditors, and about $70.6 million more is earmarked for long-tail creditors. The other $199 million has been spent on a computer software system to allocate losses to more than 900 reinsurers worldwide, on staff and on collecting records from 20 managing general agents in 256 locations nationwide, Mr. Arnold said.
Transit is insolvent by more than $4 billion.
DERIVATIVES DISPUTE SETTLES
NEW YORK-Bankers Trust Co. will pay $67 million to settle a derivatives-related dispute with Allentown, Pa.-based Air Products & Chemicals Inc.
The dispute-which was never filed as a lawsuit-stemmed from more than $107 million in losses Air Products reported in fiscal 1994 associated with leveraged interest-rate swap contracts that it had entered into in late 1993.
A Bankers Trust spokesman could not provide insurance information concerning the settlement.
In 1994, Bankers Trust entered into an enforcement agreement with the Federal Reserve Bank of New York that required Bankers Trust to take steps to ensure that its derivatives customers understood the instruments' risks (BI, Dec. 12, 1994).
Bankers Trust settled disputes with Cincinnati-based Gibson Greetings Inc. and Montvale, N.J.-based Federal Paper Board Co. for $14 million and $12 million, respectively, in 1994, while a dispute with the Swiss pharmaceuticals firm Sandoz A.G. was settled last year for an undisclosed amount. Still pending is litigation by Cincinnati-based Procter & Gamble Co. over its derivatives-related losses.
SEC AND ORANGE COUNTY SETTLE;USX SETTLES CLASS ACTION
LOS ANGELES-Current and former Orange County officials will face no financial penalties or other punishments under terms of a settlement reached last week with the Securities and Exchange Commission over charges stemming from the county's investment fund debacle.
Under the agreement, the SEC will charge but not fine the county, its supervisors and two former finance officials-former Treasurer Robert Citron, who ran the failed investment pool, and Matthew Raabe, who was Mr. Citron's deputy-with defrauding investors in offering documents for $2.1 billion in county bonds by failing to disclose the financial condition of the investment pool. The pool, whose proceeds were invested in highly leveraged derivative instruments, ultimately collapsed in December 1994, losing nearly $1.7 billion (BI, Dec. 12, 1994).
While none of those named admitted wrongdoing, all agreed not to violate securities laws in the future. Messrs. Citron and Raabe also agreed to cooperate with the SEC's ongoing investigation.
SCIENTOLOGY CHURCH WINS SUIT
PITTSBURGH-USX Corp. will pay $8.5 million to settle a class-action lawsuit alleging that it violated federal securities laws in a 1993 offering of USX-U.S. Steel Group common stock.
The Pittsburgh-based company denied liability in the case-which focused on allegations that the company made false statements in the offering's prospectus and registration statement-but said it was settling "to dispose of burdensome, protracted and expensive litigation."
A company spokesman said the settlement, which is subject to approval by the federal district court in Pittsburgh, would resolve the suit's claims against both the company and company officers named in the complaint. USX said it would retain the cost of the settlement.
N.J. PREMIUM FINANCE LAW
ARLINGTON, Va.-A federal district court judge in Arlington, Va., has ruled that Arnaldo Lema, who had posted unpublished writings by Church of Scientology founder L. Ron Hubbard over the Internet, was guilty of copyright infringement.
Judge Leonie M. Brinkema issued an order from the bench in granting a summary judgment motion made by the Scientology Church-affiliated Religious Technology Center and said a more detailed written order would be issued later, according to a church spokeswoman.
In November, Judge Brinkema had granted summary judgment in favor of the Washington Post and two of its reporters and dismissed them from the same case, ruling there was no evidence they had copied the church documents for reasons other than news gathering, news reporting and responding to litigation (BI, Dec. 11, 1995).
TRENTON, N.J.-Buyers of commercial property/casualty insurance will face higher penalties for late installment payments to premium finance companies under new law in New Jersey.
The law, sponsored by Assemblywoman Clare M. Farragher, R-Monmouth County, allows charges of 5% on the portion of the delinquent installment that is $5,000 or less, 3% on the portion that is more than $5,000 but does not exceed $15,000 and 2% on the portion that exceeds $15,000. Policyholders have a 10-day grace period before being considered delinquent in their payment.
Before New Jersey Gov. Christine Whitman signed A. 1074, the maximum delinquency charge allowed was $5, a penalty that had been unchanged since 1968.
"If a commercial insurance installment is $10,000 to $15,000 and all that has to be paid is $5 to make the payment 20 to 30 days late, then there is an obvious disincentive to paying on time," said Assemblywoman Farragher.
A jury in Jacksonville, Fla., on Friday ruled in favor of Bristol-Myers Squibb Co. and its subsidiary, Medical Engineering Corp., in a lawsuit filed by plaintiff Karen Love seeking damages for medical problems she suffered as a result of allegedly faulty silicone breast implants....The U.K. Serious Fraud Office will pursue new fraud charges against Kevin Maxwell and three former directors of the Maxwell media empire. Earlier this month, a court acquitted Kevin Maxwell, his brother Ian and former Maxwell adviser Larry Trachtenberg of pension fraud charges (BI, Jan. 22). The SFO charges, which are subject to a pretrial hearing, include conspiracy to defraud three banks....A panel of Massachusetts state Democratic legislators this month unveiled a proposal to require employers to pay half the cost of a basic health insurance policy for their employees. Republican Gov. William Weld strongly opposes an employer health care mandate....Standard & Poor's Corp. has lowered Lincoln National Corp.'s long-term ratings outlook to negative from stable following the announcement by the insurer's Lincoln National Life Insurance Co. affiliate that it plans to acquire the group tax-sheltered annuity business of UNUM Life Insurance Co. of America and First UNUM Life Insurance Co. of New York in a transaction valued at about $70 million. S&P said that increased competition within the annuity business, as well as the business' characteristics in general, pose challenges to the insurer's ability to maintain strong spreads in the future....Oklahoma Sen. Bruce Price, D-Hinton, has asked the State Board on Property & Casualty Insurance to approve a 14% workers comp rate cut, citing an actuarial report the board commissioned and several workers comp reforms in recent years. The National Council on Compensation Insurance seeks a 1.2% rate hike effective April 1.