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ACE, X.L, Risk Capital Re to write political risk coverage
HAMILTON, Bermuda-ACE Insurance Co., X.L. Insurance Co. and Risk Capital Reinsurance Co. are forming a managing general agency to write political risk insurance.
Sovereign Risk Insurance Ltd., based in Bermuda, offers limits up to $50 million per project and $100 million per country. Its per country limit is expected to grow to $500 million within five years.
Most policies will have a seven-year, non-cancelable term, but some will be for up to 10 years.
The three founding companies will jointly underwrite the policies, with ACE and X.L. each underwriting 45% of a risk and Risk Capital Re underwriting 10%.
Price Lowenstein, formerly a vp with San Francisco-based Guy Carpenter & Co. Inc.'s international specialty group and director of Guy Carpenter & Co. Asia Ltd., has been named president and CEO. Two other underwriters will join him. Sovereign will begin operations May 1.
"We felt that with foreign investment growing at a rapid pace, a new private entrant into the field was warranted," Mr. Lowenstein said.
"It is a natural area for both of us," said Brian Duperreault, chairman and CEO of ACE. "It's a product demanded by our existing client base and it's a way to expand our relationship with them."
Another political risk underwriter, American International Group Inc., has increased the limits to $120 million per risk from $85 million for its AIG Global Trade & Political Risk Insurance Co., while increasing the policy term to 10 years from seven years. In 1996, the term was raised to seven years from three years.
The extended term is the critical improvement, said AIG Global President John Salinger.
"There are a lot of developments where the underlying need is significantly more than three years," he said. "Banks have been asked to provide lines of finance for five, seven, 10 years or longer."
Appeals court to hear RRG case
NEW ORLEANS-The 5th U.S. Circuit Court of Appeals will hear oral arguments April 28 on a 1996 federal court ruling that struck down a Louisiana law on risk retention groups.
U.S. District Court Judge John Parker ruled last year that the federal Risk Retention Act pre-empted the 1995 Louisiana law that required RRGs licensed in other states to maintain at least $5 million in capital and surplus, post a $100,000 bond or cash deposit and pay a $1,000 fee before they could operate in Louisiana (BI, June 10, 1996). In his ruling, Judge Parker wrote that the Risk Retention Act "expressly pre-empted regulation of risk retention groups by any state other than the one which chartered the group."
Risk retention group advocates hailed Judge Parker's ruling. They warned if the Louisiana law had been allowed to stand, other states would have taken a similar step, destroying the centerpiece of the Risk Retention Act: allowing RRGs to operate nationwide after meeting the licensing requirements of one state.
But the Louisiana Department of Insurance, which is appealing Judge Parker's ruling, earlier said if the ruling is allowed to stand it would mean that other states would be "unduly dependent" on the regulation of the RRG's chartering state.
Syndicates leave 1994 open
LONDON-At least 10 Lloyd's of London syndicates are expected to be left open for the 1994 year of account, even though most of the long-tail liabilities and uncertain losses prior to 1993 have been closed into runoff reinsurer Equitas Ltd.
Most of these syndicates are considered "orphan" in that members agents have decided to no longer support them, and there is no successor syndicate for them to close into under Lloyd's three-year accounting, underwriting agents say.
However, at least one non-marine syndicate will not be closing because of unquantifiable underwriting losses. That is non-marine syndicate 657, underwritten by David Lowe and managed by Archer Group Holdings P.L.C. Capital providers have known since Mr. Lowe left late last year that the syndicate would be left open. Last week, it was revealed that the syndicate has underwriting losses mainly from U.K. employers liability coverages of at least 21 million pounds ($33.9 million). The syndicate is trying to buy a runoff reinsurance contract to halve the bottom-line losses, Lloyd's sources agreed.
Underwriters are leaving syndicates open because "people are being cautious about what they can and cannot do," said an Archer spokeswoman.
The concern, underwriters say, is that members will have grounds for lawsuits similar to those filed in the past. Members litigation prompted Lloyd's to come up with a reconstruction and renewal plan.
David Gittings, director of Lloyd's regulatory division, would not comment on whether the Archer agency would be disciplined. However, he said, "we have met frequently with Archer and have kept abreast of everything that's been going on."
Ceridian to settle age suits
MINNEAPOLIS-Ceridian Corp. will pay up to $24 million to settle age discrimination lawsuits that 313 former employees brought against the company.
The lawsuits stemmed from the downsizing of Ceridian's predecessor, Control Data Corp., in the late 1980s.
Arden Hills, Mich.-based Control Data Systems Inc. will pay an additional $4.5 million. Control Data Systems once was part of Control Data Corp. but separated from Minneapolis-based Ceridian when the former parent was restructured.
The suits, filed in U.S. District Court in Minneapolis, originally were filed in 1989. Company officials denied any wrongdoing but said they decided to settle to avoid the uncertainty of a trial's outcome and the defense costs associated with a lengthy trial.
Ceridian said the settlement will be paid out of earnings and is expected to reduce its first-quarter earnings by about 15 cents per share.
Control Data said that because it had already reserved against a potential settlement, its earnings would not be affected.
Viacom stands by report
NEW YORK-Charges by environmental groups that Viacom Inc. might have failed to fully disclose its potential liability for environmental cleanup in its annual report are inaccurate, the company said.
In a recent letter to Nancy M. Smith, director of Security and Exchange Commission's office of investor relations, the three groups-Citizen Action, Friends of the Earth and the Sierra Club-charged that Viacom had understated its potential Superfund liability by saying the liabilities will not have a seriously negative impact on its finances.
The groups estimated Viacom faces at least $270 million in cleanup costs at six sites alone. Much of this alleged liability stems from Viacom's merger with Paramount Communications three years ago. Paramount was a successor corporation to Gulf + Western, which contributed to numerous Superfund sites.
Viacom calls the alleged liabilities "grossly overstated," adding that in the past decade it and its predecessors have spent "tens of millions of dollars on cleanup, principally related to the operations of Gulf + Western."
New York-based Viacom added in a statement that the "$270 million costs that they attribute to six sites bears no relationship to reality.*.*.Our overall environmental liability has been appropriately reserved for on our balance sheet and is an extremely small fraction of Viacom's capitalization."
Viacom declined to give an estimate of its environmental liabilities but said they would not have a significant negative effect on the company's results.
Execs fired over harassment
CHICAGO-Two male senior executives of CNA Life have resigned following two female employees' charges that one of the men made "offensive comments" to the women.
A spokesman for CNA Life, a unit of Chicago-based CNA Financial Corp., said no legal charges have been brought against the company or filed with the U.S. Equal Employment Opportunity Commission.
The two executives, former CNA Life President Jack Kettler and former Chief Administrative Officer Robert Teske, resigned from the company effective March 1.
The company "has provided support for the affected employees and has thanked them for coming forward to report this behavior," according to a statement.
The spokesman said the employees received time off with pay during the company's inquiry. They have not asked for a monetary settlement.
Mr. Kettler allegedly made offensive comments, and Mr. Teske allegedly tried to prevent the employees' efforts to remedy the situation, according to a statement.
CNA has not filled the two vacant positions yet.
Aetna Inc. last week named Joseph T. Sebastianelli its new president. Previously co-president of Aetna-U.S. Healthcare and Aetna executive vp, Mr. Sebastianelli is credited with successfully implementing the marriage of U.S. Healthcare and Aetna that began in July 1996. . . .The New York Senate and Assembly passed bills last week that will allow women at least 24 hours of hospital care after undergoing a mastectomy and ensure that insurers pay for reconstructive surgery. . . .The Senate Commerce Committee held its first hearing of the year on product liability reform last week even though a final product liability reform bill has not been drafted. . . .The Washington-based College Construction Loan Insurance Assn., better known as Connie Lee, completed its privatization last week. Connie Lee, which had been owned in part by the federal government, had been restricted to insuring obligations of education and health-care related issues. Now the financial guarantee insurer plans to launch a program to insure bonds in all municipal market sectors. . . .Reliance Insurance Co., MTS Insurance Services and Lowndes Lambert US Holdings Inc., a unit of London-based Lambert Fenchurch Group P.L.C., have formed a U.S. insurance broker and managing general agent. New Century, which will be headquartered in Dallas and capitalized initially at $9.5 million, will offer property and casualty products nationwide. New York-based Reliance and LFG each will have a 40% stake in the venture, and Chatsworth, Ca.-based MTS will own 20% . . .A U.S. District Court jury in Columbia, S.C., on Friday found Arlington, Va.-based USAir negligent in a July 1994 plane crash near Charlotte, N.C. that killed 37 people (BI, July 11, 1994). A separate proceeding to determine damages against USAir, now US Airways Inc., will begin this week. . . .Woodland Hills, Calif.-based WellPoint Health Networks Inc. has completed its acquisition of the group health and related life businesses of John Hancock Mutual Life Insurance Co. for about $86.7 million. The deal was completed after WellPoint permitted Hancock to continue to service a contract with Troy, Mich.-based SelectCare Inc., which had sued to keep the deal from proceeding, said Candy Waldie, Wellpoint vp and assistant general counsel.