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2006 Timeline: Risk management



Risk managers report mixed market conditions as 2006 begins. While rates for many liability lines drop, the hurricane-battered commercial property market hardens significantly as buyers face double-digit increases.

Top insurance and reinsurance executives at the Property/Casualty Insurance Joint Industry Forum call for new approaches to handling natural catastrophe risks. They disagree, however, on whether a national natural catastrophe fund is needed.


A federal grand jury indicts former General Re Corp. officials-- Chairman Ronald Ferguson, Chief Financial Officer Elizabeth Monrad, Assistant General Counsel Robert Graham--and Christian Milton, former vp-reinsurance at American International Group Inc., on a series of criminal counts associated with a finite reinsurance transaction.

AIG agrees to pay $1.64 billion to settle civil fraud charges leveled by New York Attorney General Eliot Spitzer and New York Insurance Superintendent Howard Mills. The agreement, which also requires AIG to change certain business practices, also resolves a Securities and Exchange Commission lawsuit that repeats many of the state allegations.

The Bush administration announces its support of the Fairness in Asbestos Injury Resolution Act, which would create a no-fault national trust fund to compensate victims of asbestos-related disease. The trust fund bill stalls on the Senate floor before month's end.


Silverstein Properties Inc. and several insurers renew a court fight over whether the Sept. 11, 2001, terrorist destruction of New York's World Trade Center should be treated as two occurrences.

In a move hailed by employers, the U.S. Senate confirms Edwin G. Foulke Jr. as assistant secretary of labor for occupational safety and health--the new head of the Occupational Safety and Health Administration.

The U.K. Financial Services Authority, citing progress in reforms within the market, suspends plans to develop rules to ensure that the insurance market gives buyers contract certainty at policy inception.

Zurich Financial Services Group Inc. agrees to pay $171.7 million to resolve allegations of bid rigging brought by nine state attorneys general. Later in the month, the insurer agrees to an additional $153 million settlement to resolve similar charges brought by three other states.


Sens. John Sununu, R-N.H., and Tim Johnson, D-S.D., introduce legislation that would allow property/casualty and life insurers--but not health insurers--the choice of being regulated by federal rather than state authorities.

The Tropical Meteorology Project at Colorado State University predicts another unusually active hurricane season for 2006, with 17 named storms forming in the Atlantic Basin. The prediction, fortunately, turns out to be wrong. By the Nov. 30 end of the hurricane season, only nine named storms had formed.

ACE Ltd. pays $80 million to settle bid-rigging charges brought by New York Attorney General Eliot Spitzer. Within days, Liberty Mutual Group Inc. says it will fight similar charges brought against it by New York and Connecticut authorities.


The House of Lords rules that U.K. employers' liability for compensation claims from employees who develop mesothelioma should be based on the length of time employers negligently exposed employees to asbestos. Previously, employers faced unlimited liability.

The U.S. Senate fails to proceed with a pair of medical malpractice liability reform bills, killing them for the year.

Berkshire Hathaway Inc. Chairman Warren Buffett tells shareholders that while the company could pay losses stemming from a catastrophic event four times as costly as Hurricane Katrina, such an event--causing $240 billion in insured losses--would severely impact much of the insurance industry.


The National Assn. of Insurance Commissioners considers easing reinsurance collateral rules in favor of a rating approach.

A bipartisan group of House members introduces legislation that would create a uniform system to regulate and tax surplus lines insurers. The measure would also make the domiciliary state of a reinsurer the sole regulator of the reinsurer's solvency. The House Financial Services Committee approves the bill in late July.

The U.S. Supreme Court expands an employee's ability to sue for on-the-job retaliation under Title VII of the Civil Rights Act of 1964. In its unanimous ruling in Sheila White vs. Burlington Northern & Santa Fe Railway Co., the court holds that reassigning an employee to a different job and temporarily suspending her pay amounted to retaliatory acts for her sexual harassment complaint.


Risk managers report continued favorable pricing for most liability coverages. The property market, however, continues to exhibit a split personality. Catastrophe-exposed accounts face hard times while accounts in areas such as the Midwest experience rate decreases.

Jardine Lloyd Thompson P.L.C. enters preliminary discussions about a possible takeover of rival brokerage Heath Lambert Group. Heath Lambert terminates the talks within days.

Randal K. Quarles, the U.S. Treasury's undersecretary for domestic policy, calls for insurance regulatory reform during an appearance before the Senate Banking, Housing and Urban Affairs Committee. He does not, however, endorse a specific plan.


St. Paul Travelers Cos. Inc. pays $77 million to settle allegations of bid rigging and other corporate misconduct brought by three states.

The Michigan Supreme Court bars bundling of asbestos-related personal injury claims. Advocates of asbestos liability reform hail the decision as one that will give priority to claimants who are truly sick rather than those who manifest no illness but fear they will become ill.

In the first major federal ruling on whether Hurricane Katrina's storm surge is covered under a homeowner's policy, a judge in Mississippi holds that an insurer does not have to cover water damage sustained by a policyholder who did not purchase separate flood insurance.


New York Attorney General Eliot Spitzer drops some civil fraud charges against former AIG Chairman and Chief Executive Officer Maurice R. Greenberg and former AIG Chief Financial Officer Howard Smith. In an amended complaint that drops a punitive damage demand, Mr. Spitzer continues to charge that the two misled investors with sham transactions that artificially boosted AIG's reserves.

U.S. Rep. Edward R. Royce, R-Calif., introduces an optional federal charter bill for property/casualty and life insurers.

A three-judge panel of the 6th U.S. Circuit Court of Appeals rules that morbidly obese employees do not have discrimination protection under the Americans with Disabilities Act unless their condition has an established physiological cause.


The Presidential Working Group on Financial Markets issues a long-awaited report in which it declines to endorse an extension of the federal terrorism insurance backstop slated to expire Dec. 31, 2007. The group, however, also declines to call for an end to the program.

John Tiner, chief of the U.K. Financial Services Authority, calls on risk managers to push their brokers for greater disclosure of commissions. He adds that the FSA is open to the idea of requiring such disclosure if the market doesn't improve the situation on its own.

Berkshire Hathaway Inc. proposes a multibillion-dollar deal to reinsure and run off the liabilities of Equitas Ltd. Also, a Berkshire unit buys the U.S. operations of Swiss reinsurer Converium Holding Ltd.


Democrats win control of the U.S. Congress. Their victory raises hope for swift action on extending the terrorism insurance backstop, but dashes hope for major tort reforms. In New York, voters elect Eliot Spitzer as governor by a landslide.

The United States and Russia reach agreement to give U.S. insurers greater access to the Russian market. The agreement, which also liberalizes trade for other industries, will allow Russia to join the World Trade Organization as early as 2007.

Standard & Poor's Corp. revises its capital model for global insurers and reinsurers. Observes say the new model could increase burdens on some property/casualty insurers and ease them for some life and health insurers.

A federal judge in New Orleans refuses to dismiss coverage suits stemming from damage caused by breached levees in New Orleans following Hurricane Katrina. Insurers appeal the decision.


The new chairmen of the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee pledge to move swiftly on extending the federal terrorism insurance backstop once the new Congress convenes in 2007. Meanwhile, the Risk & Insurance Management Society Inc. issues a white paper saying that without a long-term solution to the terrorism insurance question in place by the end of 2007, "the country faces a catastrophic exposure to the economy."

The Tropical Meteorology Project at Colorado State University predicts that despite 2006's mild hurricane season, 2007 will be an active season with 14 named storms forming in the Atlantic.