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Lloyd's wins agreement for reinsurance of Lioncover

LONDON -- Lloyd's is reinsuring Lioncover Insurance Co. Ltd. into Equitas Ltd.

In an 11th-hour agreement reached late last week with the blessing of the U.K. Department of Trade and Industry, Equitas, the runoff reinsurer of Lloyd's 1992 and prior liabilities, will take over Lioncover for a 601 million pounds ($1 billion) premium.

The deal was pushed through by Lloyd's as Lioncover's sole shareholder, because the Lioncover board could not reach unanimous agreement. Lloyd's set up Lioncover in 1987 to reinsure syndicates managed by PCW Underwriting Agencies Ltd., WMD Underwriting Agencies Ltd., and Richard Beckett Underwriting Agencies Ltd. and syndicates 2 and 49.

Almost 3,000 names were members of the syndicates, which collapsed in 1982. An internal Lloyd's investigation found evidence of fraud, but no one was prosecuted.

When Equitas opened last year, Lioncover could not be included because of disputes with reinsurers. These have now been settled, said Ian Barrett, managing director of Syndicate Underwriting Management Ltd., the organization managing Lioncover.

The agreement between Lloyd's and Equitas is "a satisfactory outcome for all concerned," said a statement issued by the Assn. of Lloyd's Members. ALM chairman Sir David Berriman said he thought it was the "right bargain," noting Lloyd's still retains responsibility to pay any additional liabilities.

The premium Lloyd's paid, comprising Lioncover reserves and an "additional premium" to Equitas, is 100 million pounds ($166.6 million) less than estimated by Equitas' reserving project as at the end of 1995 due to claims settlements and reinsurance recoveries. In fact, Lloyd's paid 25 million pounds ($41.5 million) more in the "additional premium" than it estimated in its reconstruction and renewal offer.

In total, Lloyd's has put 591 million pounds ($984.7 million) into Lioncover.

Equitas' surplus will be boosted by 70 million pounds ($116.6 million) as a result of the deal.

Tort reform law overturned

SPRINGFIELD, Ill. -- The Illinois Supreme Court has rejected the state's 1995 tort reform law, saying the law's $500,000 limit on non-economic compensatory damage awards in personal injury lawsuits "specifically discriminates against the most seriously injured plaintiffs" and usurps the judiciary's power.

While the court's opinion suggested that some aspects of the law might comply with Illinois' constitution, it held that many do not, leading it to overturn the law in its entirety.

Among other aspects with which the court took issue was the law's provision allowing businesses being sued access to all medical records of the plaintiff, even if they are not directly related to the lawsuit or the injury in question.

The tort reform law was passed in the spring of 1995 as "fast track" legislation after Republicans took control of both chambers of the Illinois General Assembly. They since have lost their majority in the Assembly's House of Representatives.

Surplus to exceed $300 billion

NEW YORK -- The property/casualty insurance industry's surplus will exceed $300 billion at year-end, according to estimates by the Insurance Information Institute and Standard & Poor's Insurance Rating Services.

The industry's surplus will be $307.3 billion at year-end, up 20.3% from 1996.

And the industry is expected to report a 102% combined ratio, which would be the lowest since 1979. That compares with a 105.8% ratio in 1996.

Sean Mooney, senior vp and economist with the III, estimates earned premiums will increase 3.3% in 1997, to $272 billion, and losses and loss expenses will fall by 3.1% to $200 billion.

After expenses and dividends, the 1997 underwriting loss is estimated at $7.2 billion. After investment income and other items, the industry will report after-tax net income of $34.7 billion, up 42.2% from 1996.

Among the factors improving 1997 results were estimated 1997 insured catastrophe losses of $3.5 billion, down 52.7% from 1996 and the lowest since 1990's $2.8 billion, Mr. Mooney noted.

In 1998, the industry's combined ratio is expected to increase to 105% according to Standard & Poor's. The industry's after-tax income is projected to fall to $26 billion in 1998.

Court clarifies timeline for suits

WASHINGTON -- The six-year deadline for underfunded multiemployer pension plans to sue to recover withdrawal liability payments from an employer that has left the plan does not begin to run until an employer fails to make payments on a schedule set by plan trustees, the Supreme Court ruled last week.

At issue in last week's decision is when the clock starts on a statute of limitations provision in the Multiemployer Pension Plan Amendments Act, the 1980 law that requires employers leaving underfunded plans to pay a share of a plan's promised but unfunded benefits.

In a unanimous decision in a case involving a San Francisco laundry that withdrew from the Bay Area Laundry & Dry Cleaning Pension Trust, the justices said the six-year statute of limitations doesn't begin until a multiple-step process is complete.

First, the trustees must calculate the debt, set a schedule of installment payments and then demand payment. Second, the employer must default on an installment that is due and payable under the trustees' schedule.

The court also said the six-year statute applies separately to each scheduled payment. As a result, if a plan was too late in filing suit to demand the first due withdrawal liability payment, it still could sue to recover succeeding liability payments.

Workplace injuries down in '96

WASHINGTON -- The incidence of workplace injuries and illnesses is continuing to drop, according to the U.S. Department of Labor.

The department's Bureau of Labor Statistics released its annual workplace survey last week, covering 1996. The rate of reportable non-fatal injuries and illnesses in private industry workplaces dropped to 7.4 cases per 100 full-time employees last year, down from 8.1 a year earlier and from 8.9 in 1992, the survey found.

The rate was higher for what the bureau terms "goods-producing industries," such as manufacturing and construction, than it was for "service-producing industries" such as transportation. Manufacturing had the highest incidence of workplace illnesses and injuries, at 10.6 cases per 100 employees in 1996; finance, insurance and real estate had the lowest, at 2.4 cases per 100 employees.

The survey does not state reasons for increases or decreases in injury and illness rates. The survey released last week is one of three workplace safety surveys by the bureau. Its survey on 1996 fatalities -- which showed a five-year low for the number of workers killed on the job -- was released in August (BI, Sept. 1). A more detailed survey on seriously injured and ill workers and the circumstances of their illness and injury is slated for release in April 1998.

Kaiser to pay family

DALLAS -- Kaiser Permanente is paying $5.35 million to the family of a man who collapsed and died in one of Kaiser's Texas clinics in 1995.

In a process used to encourage out-of-court settlements, a non- binding jury trial was held in state court in Dallas to hear allegations that the health maintenance organization's North Texas operations failed to diagnose heart problems that led to the collapse and death of 56-year-old Ronald Henderson.

Kaiser confirmed the settlement amount but did not return calls seeking more information regarding the case.

Jurors are unaware in such trials that their decision is non-binding. In this case, the jury reportedly returned a verdict that would have called for Oakland, Calif.-based Kaiser to pay a much higher award.

Airline settles with EEOC

MILWAUKEE -- Midwest Express Airlines Inc. has agreed to pay $115,000 and to fund new workforce diversity and training programs as part of a settlement agreement reached last week.

Six airline maintenance workers filed suit in U.S. District Court in Milwaukee last May, alleging the airline's hiring and promotion practices discriminated against African-American employees.

In addition to paying $115,000, which will be divided among the six individuals, and establishing new training diversity programs, Milwaukee-based Midwest Express, in its settlement with the Equal Employment Opportunity Commission, also agreed to: form a two- year partnership with the Milwaukee Urban League to help identify, recruit, interest and orient potential minority employees to positions such as aircraft groomer, technician and other career opportunities; and make available at least seven scholarships covering tuition, fees and books to Wisconsin technical colleges that offer aircraft maintenance certification programs. As part of the settlement, the company would not divulge the total cost of the programs.

Midwest Express agreed to settle all of the EEOC's claims to avoid litigation costs. It denies any racial discrimination.

Standard to demutualize

PORTLAND, Ore. -- Standard Insurance Co. is developing a plan to demutualize and become a publicly traded stock company.

If the plan is approved by Portland, Ore.-based Standard's board, its policyholders and regulators, the demutualization process will occur over an 18- to 24-month period. Upon completion of the demutualization, more than $500 million in stock could be distributed to the Standard policyholders, depending on the valuation of the company.

Company officials say conversion to a stock company will allow Standard, principally a group life and long-term disability insurer, to become more competitive because it will have greater access to capital.

Briefly noted

Insurance swindler Martin Bramson has pleaded guilty in the U.S. District Court in Baltimore to conspiracy, money laundering and mail fraud charges related to his operation of a string of bogus offshore insurers (BI, Nov. 10). He is scheduled for sentencing Feb. 11 and faces a statutory maximum of 30 years in jail, though his term under federal sentencing guidelines will likely be less. . . .Aetna U.S. Healthcare said James H. Dickerson Jr., its chief financial officer, is leaving the company, and it expects to name a replacement shortly. Parent Aetna Inc. reported lower-than-expected third-quarter earnings, which has been attributed to its U.S. Healthcare Inc. acquisition and the problems inherent in digesting a major acquisition (BI, Nov. 17). . . .Larry Lombardo and Fiona Luck have been promoted to executive vps from senior vps at ACE Insurance Co. Ltd. Mr. Lombardo will have overall responsibility for ACE's underwriting operations and Ms. Luck, who already heads the financial lines operations, will also be responsible for joint ventures. . . .ESG Re Ltd., a new specialty reinsurer, will be capitalized at $243 million after its initial public offering was oversubscribed. Originally, the reinsurer was to be capitalized at $210 million, but just before the IPO the number of shares for sale was increased. . . .Nearly 80% of insurers selling tax-favored medical savings accounts said sales have been below expectations. Reasons for subpar sales include lack of agent and consumer understanding of the product, according to a General Accounting Office report expected to be released this week.