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The words may have changed, but the tune pretty much stays the same.

That sums up several of this year's Top 10 risk management stories. The top stories of 1997 include the risk management equivalents of remixed golden oldies, longtime hits that refuse to drop from the charts and the occasional totally new tune. Variations on the theme of industry consolidation, diversification and restructuring continue to appear prominently on the list, as evidenced by 1997's top story (see story, page 14).

In fact, atop this year's chart is a follow-up version of last year's No. 5 story, the acquisition of Alexander & Alexander by Aon Group.

This year's version of the continuing story of brokerage consolidation, however, was performed by the Marsh & McLennan Cos. Inc.

The story began early in the year, when M&M acquired French broker CECAR and confirmed it was in negotiations to acquire Minet Group from The St. Paul Cos. Inc. The moves came after a wave of acquisitions made by rival Aon, which had become the world's largest retail brokerage with its earlier acquisition of A&A.

On the heels of its purchase of CECAR, M&M announced it had purchased Johnson & Higgins for $1.8 billion. The deal catapulted M&M back into the No. 1 spot and proved to be a windfall for the directors of J&H, many of whom became multimillionaires.

Aon struck back a month later with its announcement that it would buy Minet Group from The St. Paul Cos. The surprise deal took away a target of M&M, which had been in talks to acquire Minet since January.

The story didn't end there, either. Nine months after M&M acquired J&H, a group of retired J&H directors sued the former J&H directors who had approved the sale to M&M (BI, Dec. 8). The retirees claimed they had been fraudulently deprived of their fair share of the windfall profits from the sale.

The year's No. 2 story was also a variation on a theme first performed by cigarette manufacturer Liggett Group Inc., which broke ranks with the rest of the tobacco industry in 1996 by offering to settle claims for smoking-related illnesses made against it by a group of state attorneys general. Liggett announced it had reached a deal in March, admitting cigarettes are harmful and addictive and that it has marketed to teenagers.

Within weeks, representatives of the major tobacco companies began talks with state attorneys general on a proposed global settlement of tobacco litigation. Ultimately, the tobacco industry agreed in June to a $368.5 billion settlement with the states that would, among other things, protect the companies from future class-action litigation (see story, page 16).

But the settlement remains unrealized, because Congress must approve it. House and Senate committees met throughout the summer, hearing witnesses and attempting to sketch the parameters of legislation to implement the deal. By the time Congress recessed for the year in November, several bills to implement the deal had been drafted, but none seemed likely to win quick passage.

The year's No. 3 story also involved class-action suits -- the area of mass tort settlements in general and courts' increasing skepticism of them -- with implications for any tobacco deal. In one of its last decisions of the 1996-97 term, the Supreme Court dealt a sharp blow to a key litigation strategy for businesses by rejecting a $1.3 billion class-action settlement of asbestos claims.

The 6-2 majority in Amchem Products Inc. vs. Windsor et al. held that the members formed for the class were too diverse and that many potential class members would not even be aware of their eligibility though they would be barred by the pact from suing. Citing the decision, a federal judge in August rejected a proposed class action settlement of tobacco litigation against Liggett Group (see story, page 16).

Meanwhile, the Dow Corning Corp. breast implant litigation saga continued through the summer, with Dow Corning issuing a new settlement offer to silicone breast implant claimants that would pay them $2.4 billion, or $400 million more than its offer before entering bankruptcy protection.

But in a separate case in December, a Louisiana judge decertified the class in the country's first silicone breast implant case scheduled for trial, following the precedent set by the Amchem ruling. Members will have to pursue their cases individually or participate in the bankruptcy reorganization process.

The No. 4 story underscored the improved financial condition of Lloyd's of London, which announced in late spring record profits for the 1994 underwriting year (see story, page 16). The profits were driven significantly by the absence of huge additions to reserves, which characterized the market for several years prior to the creation of the market's runoff reinsurer Equitas Ltd. In October, Lloyd's won its first marketwide ratings from Standard & Poor's Corp. and A.M. Best Co. Lloyd's sought the ratings to provide a clearer basis for comparison with other global insurers.

The No. 5 story represents something new -- the creation by United Services Automobile Assn. of a special-purpose reinsurer to issue $477 million in East Coast hurricane catastrophe bonds, which will provide USAA with $400 million in excess cover in the event of a cat loss. The cat bond deal, a watershed event in capital market forays into risk financing, is oversubscribed by investors. Subsequently, Swiss Re and Tokio Fire & Marine issued cat bonds for quake risks (see story, page 18).

The year's No. 6 story echoes the No. 1 story, although in a manner off-key to some risk managers. An October J&H Marsh & McLennan memo outlined a new strategy to place certain insurance business through six regional offices rather than local offices nationwide. That memo sparked concern among risk managers who viewed the move as evidence of the world's largest broker throwing its clout around at their expense.

Something also was ominous about the No. 7 story of 1997. The Year 2000 computer problem became more urgent for risk managers and insurers as time runs out for companies to begin conversion projects. Several insurers unveiled products aimed at covering losses from the Year 2000 exposure of companies or their suppliers. Congress also appeared likely to step further into the matter when Sen. Bob Bennett, R-Utah, introduced a bill in November that would require companies to reveal their Year 2000 exposures and their strategies -- including insurance -- for coping with them.

The year's eighth-place story sounds a familiar refrain -- the continued restructuring of insurers. CIGNA Corp. once again found its controversial reorganization plan -- which numbered among the top 10 stories of 1995 and 1996 -- in trouble when a Pennsylvania appellate court ruling vacated the state insurance commissioner's approval of its reorganization. The court also ordered new, trial-like hearings to be held in the case.

Another controversial reorganization, that of The Home Insurance Co., also made news in March when New Hampshire regulators placed The Home under formal state supervision after the insurer fell nearly $552 million short of its risk-based capital requirements. In late fall, Trygg-Hansa SPP Group transferred its shares in troubled Home Holdings Inc. to a bank trust as the first step in a plan to restructure Home Holdings and its debt.

Meanwhile, in a far less-contentious move that will nonetheless reshape the insurance landscape to some degree, SAFECO Corp. bid $2.8 billion in June to acquire American States Financial Corp. from Lincoln National Corp. The steep price buys SAFECO small and midsized commercial accounts and inroads into the Midwest.

A month later, Munich Reinsurance Co. restructured its primary insurance holdings to give it a larger presence in that market, which makes it Germany's second-largest primary insurer in addition to being the world's largest reinsurer. The strategy runs counter to the 1994 strategy of No. 2 Swiss Re to divest its primary insurance operations.

The Swiss continued to follow their own strategies in August when -- in a major combination of insurance and financial services -- Winterthur Insurance Co. and Credit Suisse Group agreed to a merger designed to provide each other's clients with one-stop shopping. And in mid-October, Zurich Insurance Co. proposed a merger with the financial services unit of B.A.T Industries P.L.C., which would create one of the world's largest insurance and asset management companies. The deal is not expected to be completed before late 1998, however, because of the regulatory approval required in the United States and elsewhere.

Elsewhere in Europe, two insurers in October became involved in a complex bid for control of Assurances Generales de France. Italian insurer Assicurazioni Generali S.p.A. made an unsolicited bid to acquire insurer AGF. The French insurer's managers, however, rejected the bid. Meanwhile, Allianz A.G. Holding entered with a friendly takeover offer that AGF embraced. Generali's board subsequently approved raising additional funds and was expected to counteroffer. Ultimately, however, Allianz and Generali in December worked out an arrangement under which Allianz would gain control of AGF, while Generali would obtain shares in two insurers held by Allianz and AGF (see story, page 2).

Weighing in at ninth place is the latest development in the now nearly 20-year long effort to enact federal product liability reform legislation. In early October, a discussion draft of proposed product liability reforms worked out between the White House and Sen. John D. Rockefeller IV, D-W.Va., won the backing of President Clinton, who had vetoed a 1996 bipartisan bill approved by the previous Congress.

The measure, however, was considerably watered down from other reform bills. For example, it capped punitive damages for only the smallest of defendants and placed no limits on joint liability for non-economic damages in product liability cases. Reform advocates, though welcoming the president's change in position, did not rush to support to the proposal. As of year's end, the chief Senate reform advocates -- Sens. Rockefeller and Slade Gorton, R-Wash. -- had failed to draft a bill that would satisfy the president or each other.

Rounding out the Top 10 risk management stories of the year is the continued diversification of Bermuda insurers. In late winter, the Bermuda Commodities Exchange won authorization to begin trading contracts based on catastrophe insurance risks. The facility, with initial members American International Group Inc., Guy Carpenter & Co. and Chase Manhattan Bank, planned to trade contracts based on a new catastrophe index created by Carpenter. Ultimately, however, a series of delays postponed the exchange's opening until November, by which time some 20 members had joined the exchange.

Diversification continued throughout the year. Catastrophe reinsurer Partner Re Ltd., with its $950 million acquisition of French reinsurer SAFR, changed its long-held view that cat companies should remain monoline companies. The deal, centered around the minority shares Swiss Reinsurance Co. holds in both companies, greatly expanded Partner Re's geographic reach while diversifying its portfolio.

Bermuda's excess liability insurers continued to aggressively diversify with EXEL Ltd.'s $637 million acquisition of property catastrophe reinsurer GCR Holdings Ltd., the holding company for Global Capital Reinsurance Ltd. The move followed ACE Ltd.'s 1996 purchase of cat reinsurer Tempest Re. The trend continued with ACE taking a more direct stake in the U.S. market via its acquisition of Westchester Specialty Group Inc. Later in the year, EXEL acquired Folksamerica General Insurance Co., giving EXEL direct access to the U.S. market for the first time.

Bubbling under the Top 10 was a mix of old standards, such as proposed reform of Superfund and of the Occupational Safety and Health Administration, continued squabbles over the EMLICO controversy and yet another rebuff to the state of Louisiana in its efforts to regulate risk retention groups despite the fact that the federal Risk Retention Act pre-empts such moves.

But there were some significant new developments as well, including the naming of Linda Lamel as executive director of the Risk & Insurance Management Society Inc., and an unusually mild Atlantic hurricane season, courtesy of El Nino.