Now I Know What That Means

As a new year’s gift to readers, note our redesign – not radical, but quite clean and easy to read. Compliments to Gina Balog for executing this. Our web presence has become greatly enhanced as well, for which we thank Claudia Palmira and her team. We have had a good run and will be adding more to the formula this year, including new staff members and more pages of content regarding the laws and the trends that affect you. … Like the ones that have been identified for 2016 by Deloitte’s U.S. Insurance Leader, Gary Shaw. In the words of a Deloitte missive here is what they see as having serious influence this year: Blockchain Technology: “This technology is slowly being applied to certain sectors within financial services and could soon be coming to disrupt the insurance industry. Blockchain technology, being complete and verifiable, could be used to verify identity, auto insurance coverage, health status, or to settle claims expeditiously. The potential for this to cause a significant transformation of the insurance space over the medium to long term is already obvious.” Whew, now I know what that means. Insurance in New Sectors: “Innovation in other industries may also lead to new opportunities. The potential for the cyber insurance market to take off is huge, while insurance for new technologies—such as drones, where the potential for crashes and invasion of privacy lawsuits abounds—will require that insurers be nimble and proactive in helping companies navigate accompanying legislation that could put them at risk. Regulation: This is a disruptor that will not go away any time soon, but which has the greatest potential to disrupt the industry in the short-term. Collectively, regulatory activity in 2015—including the Department of Labor’s (DOL) new proposed fiduciary role, which has the potential to severely disrupt the life insurance and annuities model—may represent the cresting of a new wave of regulatory changes to which insurers must adapt this year.” Deloitte does a lot to hold its own as a thought leader. …. Slim Pickens is the actor who played Taggart in Blazing Saddles and who rode the A bomb in Dr. Strangelove. No relation, Don Pickens is now playing a starring role as chief underwriting officer for Zurich Insurance-Zurich Global Corporate in North America. He succeeds Patrick Daley, who will assume a new role as head of property for the East Region within Global Corporate in North America. Pickens most recently served as senior vice president and chief risk officer of American International Group Inc.’s Global Commercial business. We trust his fate will be better than the characters Slim played, especially given Don Pickens’ evident talent and experience. … These are the Committees of the New York State Senate. Makes you think. Aging, Agriculture, Alcoholism and Drug Abuse, Banks, Children and Families, Cities, Civil Service and Pensions, Codes, Commerce, Economic Development and Small Business, Consumer Protection, Corporations, Authorities and Commissions, Crime Victims, Crime and Corrections, Cultural Affairs and Tourism, Education, Elections, Energy, Environmental Conservation, Ethics, Finance, Health, Higher Education, Housing, Infrastructure and Capital Investment, Insurance, Investigations and Government Operations, Judiciary, Labor, Local Government, Mental Health, Racing, Gaming and Wagering, Rules, Social Services, Transportation, Veterans, Homeland Security and Military Affairs, Libraries Select Committee, State-Native American Relations Select Committee, Science, Technology, Incubation and Entrepreneurship Select Committee, Administrative Regulation Review Commission, Rural Resources. We pay a lot for this set of structures. I wonder if it will be worth it in 2016. …

Arent Fox LLP recently represented Clear Blue Financial Holdings LLC in its launch of two fully licensed fronting carriers. Clear Blue is a newly-formed commercial insurance fronting provider that offers fronting and related services to the US insurance marketplace. Elliott M. Kroll, lead Arent Fox partner on the transaction, told us “More hedge funds and private equity groups are entering the insurance and reinsurance market today because there is less correlated economic risk. Many of the insurance and reinsurance vehicles formed by hedge funds and private equity firms are offshore and need a vehicle to assume risk in the United States. Clear Blue has capacity and an excellent rating to service that slice of the market.” The combined carrier group has received an A.M. Best rating of A- (Excellent). The Companies are backed by Pine Brook, a private equity firm with deep financial services and insurance sector expertise. “More hedge funds and private equity groups are entering the insurance and reinsurance market today because there is less correlated economic risk,” said Elliott M. Kroll, lead Arent Fox partner on the transaction. “Many of the insurance and reinsurance vehicles formed by hedge funds and private equity firms are offshore and need a vehicle to assume risk in the United States. Clear Blue has capacity and an excellent rating to service that slice of the market.” TAG Financial Institutions Group raised capital to finance the business, identified and advised on the acquisition of the two insurance subsidiaries, and advised on aspects of the rating and regulatory processes. Clear Blue President and CEO Jerome Breslin built Bank of America’s commercial insurance division. He is joined by Chief Risk Officer Jim Mann and Chief Operating Officer Peter Klope, both of whom worked with Breslin at Bank of America. The management team is rounded out with Jeff Downey, former TAG Financial Principal, Manuel Lebron and Scott Palladino, all of whom bring significant experience in the P&C industry to the Clear Blue team. Steven Nigro, Managing Partner of TAG Financial has been named to the Board of Directors of Clear Blue. Clear? … Insurers continue to fight for market share and, as a result, US P&C composite rate was down four percent in December. Richard Kerr, CEO of MarketScout, outlined the current pricing environment: “While it may seem the insurance industry has already been in a prolonged soft market cycle, we are only four months in. The market certainly feels like it has been soft for much longer, because rates bumped along at flat or plus 1 to 1½ percent from July 2014 to September 2015. The technical trigger of a soft market occurs when the composite rate drops below par for three consecutive months.” MarketScout has been tracking the US property and casualty market since July 2001. Kerr profiled the cycles by pointing out, “It seems the length and veracity of the market cycles has become less volatile in the last five or six years. Thus, the impact of a hard or soft market in today’s environment may be 5 or 6 percent up or down. Can you imagine how we would react today in a market such as that of July 2002 when the composite rate was up 32 percent? Or in December 2007 when the composite rate was down 16 percent? Underwriters today have better tools to price their products and forecast losses. Further, the chances of a rogue underwriter or company are greatly reduced by the industries’ checks and balances. There may be less excitement but there are probably far fewer CEO heart attacks.” MarketScout’s historical barometer reflects a mean average rate increase of 30 percent in calendar year 2002. For calendar year 2007, the mean average decrease was 13 percent. The current environment is relatively benign in relation to these volatile years. … Now I understand that. … Building on successes realized for agents and brokers in 2015—including the enactment of the landmark certificates of insurance law; the increased timeframe of photo inspection requirements from five to 14 days; and the passage of a bill that would standardize the triggers for homeowners’ hurricane deductibles, the Professional Insurance Agents of New York State, has announced its focus for the 2016 session, as identified both by its member agents through a formal survey and input obtained by directors and Advisory Council members. PIANY will seek a number of reforms including, it reports: “ensuring proper coverage is in place for ride hailing/ride sharing; the elimination of the State Insurance Fund’s 30-day rule; enacting workers’ compensation policyholder protections; hurricane deductible trigger standardization; and scaffold law/tort reform.” “PIANY is committed to working with lawmakers to identify and advance legislation that will benefit the professional, independent insurance agent and their policyholders,” said PIANY president Gene Sandy, CIC. Let’s hope that PIANY and the other insurance lobbies in Albany have a banner year. The industry has fared fairly well as a result of the several teams of association professionals who attack the problems that beset insuring in the state and that drive prices up. … Let’s hope that our legislators will now understand that…and act.