Ironshore, Distinguished Program Group Form Acquisition Unit

October 14, 2010

Bermuda-based specialty insurer Ironshore Inc. and New York-based program administrator Distinguished Programs Group LLC have formed a joint venture acquisition vehicle targeting the managing general underwriter and program manager segments of the insurance distribution business.

The business plan for the new unit, IDP Holdings LLC, contemplates multiple acquisitions of small to mid-sized program managers as well as the development of start-up operations built around key underwriting teams, according to the firms.

IDP Holdings is targeting acquisitions of companies with $5 to $25 million in premium, experienced management and solid underwriting results. Distinguished will provide strategic and financial management and Ironshore will provide insurance capacity to acquired companies. Financial terms will vary from acquisition to acquisition.

Kevin Kelley, CEO of Ironshore, will serve as chairman of IDP Holdings. Kelley said the investment in IDP reflects Ironshore's "long-term commitment" to program business.

Jeremy R. Hitzig, CEO of Distinguished Programs, will have the CEO title at IDP Holdings.

"With Ironshore's capacity and broad underwriting capabilities, acquisition candidates in a number of industry segments and product lines will be considered although an emphasis will be placed on quality of management and demonstrated underwriting profitability," said Hitzig. "We believe that IDP Holdings is a great option for business owners seeking to exit the business over the short to medium term or those seeking a partial liquidity event but with a desire to have an ongoing stake in the business. Either way, we will look to leverage the full resources of Distinguished and Ironshore to support and build the business in the future."

Through its platform in Bermuda, including Iron-Starr Excess, Ironshore writes property and excess casualty insurance for global commercial risks.

Distinguished Programs offers tailored insurance programs for residential and commercial real estate owners and property managers including property, liability, directors & officers' liability, crime and high limits of umbrella insurance. Its products are distributed through a growing network of more than 2,000 independent agents and brokers. Distinguished's subsidiary companies include SES Insurance Brokerage Services, Inc., and China-based ReSource Pro, ta business process outsourcing company for insurance intermediaries.

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Hurricane Paula Spares Mexico's Coast, Heads for Cuba

October 13, 2010

Category 2 Hurricane Paula passed 60 miles east of the resort town of Cancun, Mexico this morning, packing maximum sustained winds of 100 mph, according to catastrophe modeling firm AIR Worldwide. With hurricane force winds extending only 15 miles outward from the center, Paula did not bring damaging winds to the hotel-lined Yucatan coast. In Cancun, maximum recorded winds were below tropical storm strength.

Ahead of the storm, authorities evacuated 1,500 residents off the Isla Holbox and 60 fishermen from Isla Contoy, and sea travel was suspended to and from Cozumel. Paula's passage near these islands earlier this morning was uneventful, and no damage has been reported thus far, AIR said.

"The rapid intensification that Paula went through yesterday has concluded, and there has been little change in strength in the storm overnight," said Dr. Tim Doggett, principal scientist at AIR Worldwide. "The upper levels winds have increased as expected, which will result in higher amounts of wind shear around Paula. This will gradually weaken the storm over the next couple of days."

According to the National Hurricane Center's (NHC) 10:00 AM CDT advisory, the storm was located approximately 70 miles east of Cancun and 65 miles west-southwest of Cuba. It is moving north near 5 mph, and an upper level flow is expected to turn Paula to the northeast and then east later today toward Cuba. On its projected path, Paula is not expected to threaten Mexico's main offshore oil-producing region.

NHC's current forecast takes Paula north of western Cuba around a persistent area of high pressure over the Caribbean. Tropical storm force winds could start affecting Cuba beginning this evening, and a hurricane warning is in effect for the province of Pinar del Rio, Cuba.

"If the storm tracks further eastward, interaction with mountainous terrain will further disrupt the storm," said Doggett. "Given the small size of this system, once the storm encounters these mountains, it should decay quickly."

Doggett said it is possible that Paula will track further north, remain over water, and approach the Florida Keys. "If this scenario is realized, Paula may be able to maintain its structure for a longer period of time and impact the western Keys over the weekend. However, given the existing environmental shear, it is unlikely the system will be at hurricane strength at that time," he said.

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Employers Should Consider 'Increased Risk Test' When Evaluating Workers' Comp Benefits

October 14, 2010

The Nevada Supreme Court has ruled that although employers are not "absolutely liable" when employees are injured "on the job," companies should apply the "increased risk test" to determine whether they are entitled to workers' compensation benefits.

The justices explained the increased risk test in Rio All Suite Hotel & Casino v. Phillips. According to court documents, Kathryn Phillips was a poker and blackjack dealer at the Rio All Suite Hotel & Casino in Las Vegas. While taking her mandatory 20-minute break during her usual eight-hour shift, she walked down the stairs to the employee break room, slipped, and fractured her ankle.

Her treating physician determined her injury was work related, and Phillips had surgery to repair her ankle. But Rio's third-party administrator, Sedgwick CMS, denied her claim saying Phillips did not prove the injury arose out of her employment.

"The types of risks that an employee may encounter during employment are categorized as "those that are solely employment related, those that are purely personal, and those that are neutral," the high court said.

In Phillips' case, the risk appeared to be neutral -- "neither distinctly employment nor distinctly personal character." However, the court said it was appropriate to apply the increased risk test, which "examines whether the employment exposed the claimant to a risk greater than that to which the general public was exposed."

After evaluating the case, the state Supreme Court said, "that substantial evidence in the record supports the conclusion that under the increased-risk test, Phillips' injury arose out of the course of her employment."

Phillips was required to take six periodic breaks, and there was no evidence to suggest that employees had any other means of reaching the employee break room without the stairs.

"Because the employees' periodic breaks were mandatory, Phillips was required to use the staircase six times during each shift. In fact, in its opening brief, Rio calculated that during the course of Phillips' 17-year employment, she traversed the stairs approximately 25,000 times,' the court said. Thus, the court concluded that the frequency with which Phillips was required to use the stairs subjected her to a significantly greater risk of injury than the risk faced by the general public. Consequently, Phillips should be awarded benefits, the high court wrote.

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ACE Makes Marine Appointments

October 14, 2010

ACE Global Markets (AGM) announced key appointments as part of a restructuring of its Marine team in London, as follows:

Mike Reynolds has been promoted to Class Underwriter for the Marine Hull and Marine Liability Account. Mike was formerly Deputy Hull and Yacht Underwriter for AGM and the Marine Manager for the UK & Ireland. He will be responsible for the performance of the Marine Liability, Hull, Yacht and War classes and report to Andrew Williamson, AGM Product Line Head.

James May joins AGM as Deputy Marine Hull and Liability Underwriter. James was previously with Hiscox Underwriting for seven years where he held roles within their Marine Hull, Cargo, Liability and Reinsurance departments. Prior to Hiscox, James worked for Price Waterhouse Coopers.

Peter Jerman joins as Yacht Underwriter in the Marine Hull team. Peter was previously with RFIB, the international Lloyd's insurance and reinsurance broker, where he was a Marine Hull and War placement broker before specializing in Yacht business. Prior to RFIB he worked for Besso in their Marine department.

David Kirk has been promoted to the position of Deputy Cargo Underwriter and will also continue to assist on the AGM Specie account. David joined ACE five years ago and has worked within the marine department initially as Specie Underwriting Assistant and then on the Specie and Cargo product lines.

Michael Southgate has joined AGM to assist Jason Roe, Fine Art and Specie Underwriter, in underwriting the specie account. Mike was previously with Heath Lambert Limited where he was an Account Executive dealing with a worldwide book of Jewelers' Block, Cash in Transit and general Specie accounts. He also placed a number of large Fine Art risks.

Williamson commented: "These appointments demonstrate our ongoing commitment to the marine market. The team provides a range of skills and expertise that will further enhance our service and the delivery of first class underwriting to our clients."

Source: ACE Global Markets

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Soft Market Persists; Fierce Competition to Continue into 2011: Marsh

October 14, 2010

Soft commercial insurance market conditions persisted through the third quarter of 2010, with lower rates on average across major coverage lines, according to a new report from broker Marsh.

Intense competition and overabundance of capacity continue to define the commercial insurance market, which is likely to remain stable into 2011 barring an unforeseen market-changing event, Marsh said in its report, U.S. Insurance Market Report 2010, Third Quarter Update: Insureds Net Benefits as Downward Rate Pressures Persist.

Based on data compiled from Marsh accounts renewing in the third quarter, the report found that:

Property rates declined an average of 6.1 percent;General liability rates declined an average of 6.7 percent;Workers' compensation rates declined an average of 5.3 percent;Auto liability rates declined an average of 0.1 percent; andDirectors & officers liability (D&O) rates declined an average of 8.7 percent.

"Commercial insureds continue to experience favorable market conditions as competition among insurers remains high and capacity plentiful," said Joe McSweeny, president, United States and Canada Division, Marsh. "A surplus of capacity, continued profits for insurers, and a stable litigation environment should lead to continued stability in the fourth quarter of 2010 and into 2011."

Marsh's report found that despite an estimated $18 billion in worldwide insured catastrophe (CAT) losses in the first two quarters of 2010, property rates for domestic and global businesses purchasing insurance in the U.S. typically declined five to 10 percent in the third quarter.

Barring some unforeseen event, the property market's abundance of capacity will likely impel insurers to further decrease rates into 2011 in order to maintain market share, according to the broker's report.

Similarly, primary casualty—comprised of workers' compensation, general liability, and automobile liability—remains largely a "buyer's market," with rates trending downward on average across all lines of business through the third quarter. Collateral continues to be an important negotiation point with primary liability carriers and often overshadows rate discussions during renewals. Insureds with a concentration of collateral with one carrier, or with specific collateral issues or needs, may have difficulty finding alternative solutions, Marsh said.

Rate trends for lead umbrella generally were similar to those experienced in the primary market, while excess liability rates showed moderate decreases on average, based on the class of business and competition levels.

The primary and excess D&O market remains extremely competitive, with premium reductions continuing to be realized in the first three quarters of 2010 for companies with favorable risk profiles. Rate changes for individual companies varied significantly depending on several factors, including market capitalization, industry, liquidity and loss experience.

One area of interest to D&O underwriters is the potential impact of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. While the full impact of the legislation will not be known for some time, Section 922 of the Act provides new incentives to whistleblowers, including substantial "bounties" in proceedings where the Securities and Exchange Commission (SEC) collects more than $1 million in fines or penalties. These new provisions could lead to a wave of employee whistle blowing that could result in significant regulatory activity and follow-on civil litigation.

Marsh's third quarter update is based on data from Marsh's Global Benchmarking Portal and reflects transactions brokered by Marsh through the end of the third quarter.

Source: Marsh

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Auto Insurance Quotes Comparison: Two Killed as Combine Strikes Power Lines on New Jersey Farm

Auto Insurance Quotes Comparison: Two Killed as Combine Strikes Power Lines on New Jersey Farm

Stanford Denied Use of Lloyd's Insurance to Pay Fraud Defense

October 14, 2010

Accused swindler Allen Stanford may not use $100 million in a Lloyd's of London directors and officers insurance policy to pay the lawyers defending him on charges of running a $7 billion fraud, a U.S. judge in Texas ruled Wednesday.

Stanford's criminal trial is scheduled for January on charges that he and other top executives of Houston-based Stanford Financial Group swindled investors who bought certificates of deposit issued by Stanford International Bank in Antigua.

A ruling by U.S. District Judge Nancy Atlas said that lawyers for Lloyd's had proven at a trial in August that it was likely that Stanford had committed money laundering. Stanford and his co-defendants deny any wrongdoing.

The court "concludes as to each plaintiff that the policy's money laundering exclusion applies to justify underwriters' denial of insurance coverage at this time,'' Atlas's written ruling in Houston federal court said.

She said that the findings "are neither final findings of fact nor conclusions of law'' for use in the criminal case or the civil case by the U.S. Securities and Exchange Commission against Stanford and three other executives.

The executives had argued that they could not afford to pay their lawyers because their assets were frozen when the SEC charged them in February 2009.

The Lloyd's underwriters of the directors and officers policy denied coverage after one defendant, former Stanford Chief Financial Officer James Davis, pleaded guilty to some of the charges last year.

The cases are Laura Pendergest-Holt et al v Certain Underwriters at Lloyd's of London, U.S. District Court for the Southern District of Texas, No. 09-3712 and U.S. v Stanford 09-342 and SEC v Stanford International Bank 09-298.

(Reporting by Grant McCool, editing by Gerald E. McCormick)

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