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CSU team predicts active 2007 hurricane season
[FORT COLLINS, Colorado]The follow-up to this year's relatively mild hurricane season will be an active 2007 season, with 14 named storms expected to form, the forecasting team from Colorado State University's Tropical Meteorology Project said earlier this month.
"We believe 2007 will be an active season in the Atlantic basin," the team, led by William Gray, professor emeritus of atmospheric science at CSU in Fort Collins, Colorado, said in a report.
The team predicted above-average probability of United States major hurricane landfall, with the likelihood of a major hurricane hitting the U.S. coastline set at 64%, compared with an average for the last century of 52%.
Of the 14 named storms, the team said it anticipates seven will strengthen into hurricanes, three of which could become "intense hurricanes"classified as category 3, 4 or 5 storms on the Saffir-Simpson scale.
The forecasters noted in their report that "we should not read too much into the two hurricane seasons of 2004-2005," which were unusually active and resulted in several major hurricanes causing billions of dollars in insured property damage. "The activity of these two years was unusual, but well within natural bounds of hurricane variation," they said.
Additionally, the team noted in the report that the large upswing of U.S. hurricane landfalls in 2004 and 2005 was not directly related to global warming, in their view, but rather that "changes in ocean salinity are believed to be the driving mechanism."
"We have no plausible physical reasons for believing that Atlantic hurricane frequency or intensity will change significantly if global ocean temperatures continue to rise," the researchers wrote.
Hurricane season runs from June 1 through November 30.
The team plans to issue the next update of their 2007 Atlantic basin hurricane forecasts in April 2007.
Earlier this month, London-based forecaster Tropical Storm Risk released its long-range forecast for 2007, also predicting an above-average number of hurricanes that will make landfall in the United States.
By Rupal Parekh
Advent to open retro reinsurer in Bermuda
[LONDON]Lloyd's of London insurer, Advent Capital Holdings P.L.C. has raised fresh capital and announced plans to open a Bermuda-based reinsurer, Advent Re.
London-based Advent said that it raised $37.5 million (€28.3 million) through equity and debt issues. The insurer plans to use the proceeds to establish a "class three" Bermudian reinsurance company.
The company has incorporated Advent Re Holdco as the holding company for Advent Re. The new reinsurer will write retrocession reinsurance, developing a more traditional treaty business in the next few years.
The Bermuda venture will be led by Advent's Chairman Brian Caudle, who is stepping down from his role as director of underwriting to focus on the startup. Mr. Caudle said: "The establishment of a Bermuda platform is an exciting development for Advent, allowing us to take full advantage of the favorable conditions being experienced in the retrocessional market in which Advent has historically specialized."
In a statement, Advent said that it was creating the Bermuda-based reinsurer to take advantage of the lack of retrocession capacity in the reinsurance market. Advent does not expect the new capital entering the retrocession market to be sufficient to put immediate downward pressure on rates, in particular, business written as of January 2007, the company said in a statement.
Advent follows rival Lloyd's insurers Hiscox P.L.C., Amlin P.L.C., Catlin Group Ltd. and Omega Underwriting Holdings P.L.C. in establishing insurance companies in Bermuda.
In its statement, Advent said that Bermuda offered "less onerous capital requirements" compared with the United Kingdom and quicker recognition of profit for capital purposes.
By Stuart Collins
Tennessee insurance head to resign
[NASHVILLE, Tennessee]Tennessee Insurance Commissioner Paula Flowers has announced that she plans to leave her job and return to the private sector.
Ms. Flowers, an attorney, has served as state insurance commissioner for nearly four years. She was appointed in January 2003 by Tennessee Governor Phil Bredesen, who was recently re-elected.
"After careful thought and much discussion with my husband and three sons, I have decided not to continue in my current position," Ms. Flowers said in a statement. Also, she said she is committed to ensuring a smooth transition and has not yet set a departure date.
Ms. Flowers is expected to leave sometime in January, a department spokeswoman said.
By Meg Fletcher
Brown & Brown settles Florida probe
[TALLAHASSEE, Florida]Brown & Brown Inc. has agreed to pay $5.8 million (€4.4 million) to resolve investigations by Florida officials over its acceptance of undisclosed contingent commissions, officials said.
Under terms of the settlement, reached with Florida Attorney General Charlie Crist, Florida Chief Financial Officer Tom Gallagher and Florida Insurance Commissioner Kevin McCarty, Brown & Brown agreed to reimburse approximately $4.8 million (€3.6 million) to up to 400 cities and counties in Florida.
The Daytona Beach, Florida-based brokerage also must pay $1 million (€754,657) to the agencies for investigative costs, and it agreed to adhere to stricter compensation disclosure requirements. The settlement does not require Brown & Brown to cease collecting contingent commissions.
"Brown & Brown has fully cooperated with our agencies to reimburse cities and counties of Florida for excess fees and commissions it collected and has agreed to fully disclose all fees and commissions in the future," Mr. Gallagher said in a release.
Brown & Brown denied wrongdoing, but agreed to reimburse its clients without any formal action taken by the three agencies, the statement said.
Calls into Brown & Brown for comment were not immediately returned.
Brown & Brown is the latest in a string of brokers to settle charges over its compensation practices with state authorities since New York Attorney General launched his lawsuit against Marsh & McLennan Cos. Inc. in 2004.
By Sally Roberts
Agent business to be liberalized in China
[BEIJING, China]Chinese insurance agent business will be liberalized at the end of this year, according to a China Insurance Regulatory Commission official.
Foreign investors will be allowed to set up their own insurance agent companies, including insurance brokerages from the end of 2006, said Meng Zhaoyi, head of the CIRC international department.
Foreign investors will not, however, be allowed to solely fund a life insurance company in China, said Mr. Meng.
The current 50% limit on foreign stakes in a life insurance company will not be changed.
According to the CIRC, since China joined the World Trade Organization five years ago, 47 foreign insurance companies have set up 121 branches in China, with 135 more establishing 200 representative offices.
Revenues of foreign insurance companies in the country reached 34.1 billion yuan ($3.3 billion) in 2005, some nine times more than in 2001, said CIRC.
Foreign insurance companies held a 7% market share in China at the end of 2005, up from 5.3% in 2001, added the regulator.
In the more international cities they have a higher share, with 19% of the market in Beijing in 2005 and 17% in Shanghai.
By Adrian Ladbury
Hannover Re sets up retakaful unit
[MANAMA, Bahrain]Hannover Re Group has launched a wholly-owned subsidiary to underwrite so-called retakaful business, reinsurance that conforms with Islamic law.
Hannover ReTakaful B.S.C. (c) is based in Manama, Bahrain. In the reinsurance industry, Takaful takes the form of a mutual insurance company.
There are currently about 80 takaful insurers active in 20 countries, according to the Hanover-based reinsurance group.
These insurers are obliged to obtain reinsurance from a Sharia (Islamic law)compliant retakaful company and may only resort to traditional reinsurance if sufficient retakaful capacity is lacking, explained Hannover Re.
By Adrian Ladbury
AIG, Starr settle MGA disputes
[NEW YORK]Feuding insurers American International Group Inc. and C.V. Starr & Co. announced earlier this month that they had reached a settlement of certain disputes stemming from the termination of managing general agency relationships between the companies' subsidiaries.
Terms of the settlement were not disclosed. Under the agreement, AIG will cease conducting business under "Starr" and related names, while C.V. Starr will refrain from conducting business under "American International" and related names, according to a joint statement from the companies.
New York-based AIG and its subsidiaries were linked for many years to the Starr companies. However, AIG and Starr have had a contentious relationship since early 2005, when Maurice Greenberg was ousted as AIG's chairman and chief executive. Mr. Greenberg is now chairman of Starr.
A spokesman for AIG declined to comment on the settlement.
Representatives for C.V. Starr did not return phone calls.
By Rupal Parekh
Maritime law covers riverboat workers
[DES MOINES, Iowa]The Iowa Supreme Court has ruled that riverboat casino workers injured on the job are subject to benefits provided under the federal Jones Act and not those awarded by the Iowa Division of Workers' Compensation.
The decision Friday involved the consolidated claims of a slot machine attendant, a "banker" and a floor host, records show. The ruling resolved whether riverboat casino workers are "seamen," which lower Iowa courts had split on and courts in other states have struggled with.
The state's workers compensation commissioner originally ruled that the commission had jurisdiction to award benefits because the boats were not "vessels in navigation." They only cruised incidentally to meet the legal requirements of maintaining a gambling license, the commissioner found. Therefore, the workers were not seamen and not subject to the Jones Act. A district court affirmed that finding, and the casinos appealed.
An appeals court reversed the ruling and the Supreme Court agreed, finding that under the Jones Act a seaman contributes to the function of a vessel or its mission.
"It is undisputed that the mission of these riverboats was to provide gambling for its patrons and that these claimants contributed to that function," the high court wrote in its opinion. The Supreme Court remanded the case to dismiss the workers comp claims.
By Roberto Ceniceros
Prudential settles Spitzer probe
[NEWARK, New Jersey]A unit of Prudential Financial Inc. has agreed to pay $19 million (€14 million) and stop paying contingent commissions on certain lines to settle allegations of fraud and anti-competitive practices leveled by New York Attorney General Eliot Spitzer.
Under the settlement, group life insurer Prudential Insurance Co. of America will cease paying contingent commissions to brokers on group insurance products, including disability, life and long-term care.
Prudential also agreed to provide full disclosure of broker compensation to employers and said it would pay restitution of $16.5 million (€12.5 million) to policyholders and pay civil penalties totaling $2.5 million (€1.8 million).
The settlement ends regulatory probes into Prudential's broker compensation practices launched by Mr. Spitzer in 2004.
The investigations found that between 1999 and 2005, the company paid almost $60 million (€45 million) in overrides to brokers on nearly $18 billion (€13 billion) in insurance premiums, Mr. Spitzer's office said.
Additionally, Prudential at times paid some brokers specific commissionsso-called "single case overrides"to close a deal or promote future business. "On certain occasions Prudential built the cost of these single case overrides into the premiums," Mr. Spitzer's office said in a statement.
By Rupal Parekh