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YORBA LINDA, Calif.-Other property/casualty insurers should consider the measures that CIGNA Corp. took in restructuring its asbestos and environmental liabilities, an executive of the insurer says.
CIGNA's restructuring, which continues to be challenged by some policyholders and rival insurers, may not be a model for every insurer, but elements of it could be appropriate for some, said Gerald A. Isom, president of CIGNA Property & Casualty. He spoke earlier this month at the Third Annual Insuring the Children Insurance Industry Forum, a charity event in Yorba Linda, Calif.
Policyholders would be better protected and the insurance industry would be stronger if other insurers devised aggressive and comprehensive plans for meeting their long-tail liabilities, he contends. Decisive action would help put the industry's contentious liabilities behind it, he said.
The real risk comes from ignoring the problem and not properly funding for asbestos and environmental liabilities, according to Mr. Isom.
Mr. Isom said that the restructuring, which now has been in place for more than a year, helped CIGNA show positive financial results for 1996 and the first quarter of 1997.
"The runoff operation has been performing well within the ranges we expected," he said. The results show it's possible for a property/casualty company to actively manage its environmental exposure, he said.
"What we have done in the restructuring is show that there are actuarial techniques that now allow a company to make a reasonable estimate of what their exposure is," he said.
CIGNA's action has also shown that an insurer can conduct greater due diligence and work closely with regulators.
"Few, if any, insurers have undergone as extensive a review of their liabilities, including independent expert studies conducted for regulators," according to Mr. Isom.
Mr. Isom did not specifically address the opposition to CIGNA's restructuring.
A Pennsylvania appellate court in March vacated the state's regulatory approval of CIGNA's reorganization (BI, March 10). The court found the insurance commissioner did not hold proper hearings on the transaction before it was approved, and has ordered new trial-like hearings.
CIGNA is appealing the decision to the state Supreme Court (BI, April 21).