State Farm defends criticism over handling of Katrina claims

Anita Lee, Sun Herald© (Biloxi, MS) via The Herald© (Monterey, CA)

BILOXI, Miss. - The "cacophony" is drowning out what State Farm Fire & Casualty Co. sees as a just, speedy and inexpensive way to resolve Hurricane Katrina claims.

"You kind of step back from it and look over the last month or so and you see, at least I see, examples that sort of strike me as convenient amnesia or schizophrenia, whether we're looking at the political environment, whether we're looking at the legal environment or whether we're looking at the editorial environment," said Michael A. Fernandez, vice president of corporate communications and external relations at State Farm headquarters in Bloomington, Ill.

"Potentially, I see it as destabilizing, to the point that it causes a lot of concern around, what are the business certainties and uncertainties as we go forward? We see all the noise, and we see all the clutter and cacophony of voices and we're kind of saying, `OK, where do we go from here?'"

Fernandez was joined in a meeting Friday with the Biloxi Sun Herald by State Farm agency field executive J.D. Sparks and legislative affairs attorney Steven C. Simkins. They are making the media rounds in advance of a Feb. 28 hearing U.S. District Court Judge L.T. Senter Jr. will hold on the proposed settlement.

State Farm representatives have been taken aback by criticism that accompanied what they consider a compromise with policyholders: An offer to review 35,000 Coast Katrina claims and pay a minimum of 50 percent on structure and contents to policyholders whose homes the hurricane swept away. Settlement details consume 41 pages, plus 10 exhibits.

To date, State Farm says, it has paid an average of $25,030 for structural damage to 794 policyholders left with slabs or pilings. State Farm had been unwilling to release the figure before Friday.

Where wind damage covered by State Farm and water damage covered by federal flood insurance could not be separated, the company denied claims, infuriating policyholders on the waterfront from state line to state line.

As Fernandez pointed out, Senter asked attorneys on both sides of the insurance debate to look for a just, speedy and inexpensive way to resolve 1,000 Katrina insurance cases clogging the federal court, filed by policyholders against the big three insurers - State Farm, Allstate and Nationwide - and other insurance companies.

But Senter has found much to question in the State Farm settlement agreement. His concerns, outlined in a six-page order, will be reviewed at the hearing. The settlement State Farm negotiated with the Scruggs Katrina Group of attorneys is not the only solution being batted about, but it is the one the company is willing to accept.

Fernandez said state officials in Alabama and Louisiana have asked if they, like Mississippi, should start beating up on the company to get results. He failed to mention any specific remedies State Farm might be considering to avoid future post-catastrophe problems, although the issues raised in Mississippi mirror those in a 1999 tornado case from Oklahoma, in which a jury found the company recklessly disregarded policyholders' rights.

He was asked if the company bore any responsibility for what has happened.

"I'm not here to say we're perfect," Fernandez responded. "I'm not here to say there weren't mistakes made."

Taylor taking on insurance. Bill seeks to create all peril policy

February 8, 2007, Anita Lee, Sun-Herald© (Biloxi, MS)

View Sen. Taylor’s Bill (http://www.sunherald.com/multimedia/sunherald/images/0207.taylor.multiperil.bill.pdf)

U.S. representatives from California, New York, Massachusetts, North Carolina and Louisiana have signed on to co-sponsor a bill U.S. Rep. Gene Taylor, D-Miss., plans to introduce in the House today creating a national insurance policy for wind and water damage.

"Multiple peril insurance would meet the increasing demand for disaster insurance in coastal regions," Taylor wrote in a memo to colleagues. "Insurance companies are withdrawing from coastal areas, doubling or tripling premiums and forcing states to take on more disaster risk."

To illustrate his point, Taylor included a list of headlines from newspapers along the coastlines about increasing premiums and shrinking coverage.

The insurance industry, however, is likely to lobby against the bill, which establishes the policy under the auspices of the National Flood Insurance Program as an alternative to a flood policy. Private insurance policies cover wind damage.

"With homeowners' policies and the flood program as it exists, you have those perils covered," said Joseph Annotti, spokesman for the Property Casualty Insurers of America. "We just question a mandate for expanded coverage for risk that is fairly limited geographically.

"It just seems to be a matter of principle. Expanding the government's role where the private market can and should be acting is a little dangerous."

The key to improving coastal markets, Annotti said, is stronger building codes and mitigation measures in flood-prone areas, allowing property-tax credits and reductions in insurance premiums for property owners who meet the standards.

Taylor's bill includes those controls, too. Property owners could take advantage of national multiple peril insurance only if their communities adopt the program and agree to meet building standards.

Unlike the flood program, premiums would be based on actual risk, meaning homeowners would payer higher rates for the multiple peril insurance.

The bill would limit coverage on residential structures to $500,000, with a $150,000 cap for contents and loss of use. Businesses and churches would be limited to $1 million for structure coverage, and $750,000 for contents and loss of use.

In his memo Taylor also pointed out: "The Multiple Peril Insurance Act would allow homeowners to buy insurance and know that all of their damage from wind and water will be covered. They would not have to hire lawyers, engineers and adjusters to determine what damage was caused by wind and what was caused by flooding."

Sen. Trent Lott, R-Miss., is reviewing Taylor's bill. A spokesman in his office said Wednesday that Lott has co-sponsored a bill in the Senate that would establish a committee to review the issue of disaster insurance.

Concluded Robert Hartwig of the industry-sponsored Insurance Information Institute:

"This is likely to be a divisive issue. I think many insurers will not be thrilled with the notion that, in areas where they have historically provided wind coverage, which by the way is the vast majority of the country, that the NFIP would be allowed to intrude."

Given the problems with flood rates, Hartwig said it's unlikely NFIP could achieve a financially sound multiple peril insurance program.

High yields are driving Wall Street into 'catastrophe' bonds

February 6, 2007, George Stein, Bloomberg© via International Herald Tribune©

NEW YORK – John Brynjolfsson at Pacific Investment Management Co. is one of the biggest buyers of catastrophe bonds, securities whose returns are linked to insurance claims from calamities like hurricanes, earthquakes and disease.

Brynjolfsson enjoys watching documentaries about cataclysmic events and violent storms on television, but the bonds are more than a personal interest. They pay as much as 10 percentage points more than benchmark interest rates, making them some of the highest- yielding investments in fixed income.

Fund managers like Brynjolfsson are increasingly turning insurance into the next frontier for securitization, the technique Wall Street perfected to package everything from credit card bills to mortgages and car loans into tradable bonds. They want high-yielding securities that are not tied to stock or bond markets, and the insurers themselves, still reeling from Hurricane Katrina and under pressure from regulators to conserve capital, are searching for ways to off-load risk.

Swiss Reinsurance, the world's largest reinsurer, estimates that the market for insurance-linked securities, which includes things like "bird flu bonds," will grow to $350 billion in a decade after more than quadrupling to $27 billion in the past five years. With as much as $2 billion in underwriting fees up for grabs, almost every investment bank, from Lehman Brothers Holdings to Deutsche Bank, is building teams to sell and trade insurance.

"You can't match these yields," Brynjolfsson, who holds $1 billion of catastrophe bonds at Pimco, said during an interview last week. "They fully compensate the investor for the risks that are being underwritten and provide an additional premium. I'm making a real strong push with issuers and Wall Street to bring out more of these securities for my investors."

Roger Ferguson, who became Swiss Re's head of financial services last year after quitting as vice chairman of the U.S. Federal Reserve, said in December that insurance-linked securities might offer the growth potential of mortgage bonds, a market that has grown to more than $6 trillion from almost nothing in the late 1970s. Fees in the capital market for insurance also are more lucrative.

Underwriting commissions on catastrophe bonds range from 1 percent to 1.5 percent, according to Dan Ozizmir, head trader of insurance-linked securities at Swiss Re. For "sidecars," vehicles that let investors bet on specific reinsurance risk, arrangers can make 2 percent. That compares with the 0.12 percent average fee bankers earn selling bonds for Fannie Mae or Freddie Mac, the biggest providers of funds for U.S. home loans.

Most insurance bonds function like reinsurance, except that instead of being underwritten by a single company, like Berkshire Hathaway, the risk is borne by multiple investors. Insurers sell catastrophe bonds to cover damage claims from disasters like Hurricane Katrina, which cost the industry more than $40 billion.

"When you put all that together, you have an attractive market with legs," said Nelson Seo, who holds insurance- linked securities at Fermat Capital Management, a hedge fund in Westport, Connecticut.

Buyers of AAA-rated mortgage bonds get yields of 1 percent more than benchmark interest rates for assuming the risk that homeowners will default. The stakes — and potential payoff — on catastrophe bonds are higher.

A disaster like a typhoon or pandemic flu can trigger claims that consume a bond's principal. Four months after Swiss Re sold $190 million of "Kamp Re" bonds in July 2005, the company said investors probably would not get their money back because of Katrina's devastation.

Standard & Poor's lowered its credit rating on the bonds to "CC," two steps from a default, in October 2005. Pimco valued its $5 million of Kamp Re bonds at $3,000 in a filing two months ago, down from $2.47 million a year earlier. The bonds mature this year on Dec. 14.

On Lehman's New York trading floor, Brett Houghton watches screens displaying radar readings from the U.S. National Weather Service and seismic data from the U.S. Geological Survey. He trades in catastrophic risk.

"If someone asks us for a quote on a type of bond, we're going to look at hurricanes or earthquakes that happened in the area before we actually set a price," Houghton said.

Lehman has 20 bankers and traders specializing in insurance-linked securities. To bet on the likelihood of a global or regional pandemic, Houghton can buy and sell bird flu bonds. For earthquakes there are catastrophe bonds.

Niraj Patel, a money manager at Genworth Financial, an insurer based in Richmond, Virginia, uses the returns from catastrophe bonds to finance payments that Genworth makes on life insurance claims. "People never thought of insurance as a trading instrument, but that's changing," Patel said.

California building standards commission completes adoptions for new California building standards code

February 5, 2007, dBusiness News© (Sacramento, CA)

SACRAMENTO -- The California Building Standards Commission has completed adoptions of new building standards that will take advantage of the latest technology in construction.

“For the first time in nearly ten years, California will have a complete set of building codes based on the latest national and international model building codes, making use of the most current technologies and methods of construction. This will put California back in the forefront as a leader in the use of the latest technology for building safety, fire prevention, safe construction, and code enforcement,” said Rosario Marin, Secretary of the State and Consumer Services Agency and chair of the Commission.

The Commission’s Executive Director, David Walls, concurred, saying, “We anticipate that the 2007 California Building Standards Code will be published this summer.”

The improved standards will allow California to utilize the latest technological advances in the construction and remodeling of residences, state government buildings, schools, hospitals, and other occupancies regulated by the state.

The California Building Standards Code is comprised of twelve parts that incorporate public health and safety standards used in the design and construction of buildings in California. The codes also include standards for energy efficiency and access compliance for persons with disabilities.

The new regulations include the approval of Chlorinated Polyvinyl Chloride (CPVC) plastic pipe for use in residential water supply piping systems. CPVC has been a nationally accepted material since 1982, however, California has only permitted its use on a limited basis since 2001. The Department of Housing and Community Development prepared and certified an Environmental Impact Report resulting in a recommendation that the Commission adopt and approve the use of CPVC. The Commission’s vote was unanimous and CPVC will be placed in the 2007 California Plumbing Code.

Also, new seismic design standards provide the latest in earthquake safety for the construction of all buildings in California. These standards are especially important in California since this state experiences approximately 75 percent of the nation’s seismic activity. Wildland-urban interface fire protection standards were adopted to provide for better fire protection of structures located in areas prone to wildfires. In addition, changes to building standards for persons with disabilities were adopted to introduce federal Department of Justice (DOJ) certification requirements. California continues to strive for barrier-free design in buildings to ensure they are accessible to, and usable by, everyone.

The recently approved building standards were developed by the Department of Housing and Community Development, Office of the State Fire Marshal, Division of the State Architect, Office of Statewide Health Planning and Development, and the Commission. They will be published in the California Building Code, California Electrical Code, California Mechanical Code, California Plumbing Code, and California Existing Building Code — all parts of the California Building Standards Code.

An up-to-date California Building Standards Code and DOJ certification will help to reduce insurance rates at the local level, positively impacting the cost of housing and businesses in California.

For more information about the California Building Standards Commission and building code issues, please visit us online

Judge cuts State Farm punitive award by $1.5 million

February 2, 2007, Daniel Hays, National Underwriter©

A federal judge who ruled that a jury could impose punitive damages on State Farm for its mishandling of a Hurricane Katrina claim, has decided that the $2.5 million award should be reduced to $1 million.

U.S. District Court Judge L.T. Senter Jr. in Gulfport, Miss., said that even though the company’s conduct was “reprehensible,” a lesser award was more appropriate.

State Farm said it would appeal the case in any event.

At issue was a claim brought by Norman Broussard and Genevieve Broussard, whose Biloxi, Miss., home was torn off its foundation slab.

The company, according to the judge, fought the claim on the basis of policy language excluding flood damage, and ignored the probability “that some damage occurred from a cause other than flood.”

Judge Senter, after hearing evidence at trial, had awarded the couple $211,222 in contractual/compensatory damages before sending the case to the jury to set punitive damages.

He said that in his opinion, the damages the panel assessed were almost 12-times the amount of compensatory damages, and a more appropriate assessment was a sum between four- and five-times the compensatory damages.

“The judge's order will not change our intention to appeal the ruling and the jury's punitive damage award,” State Farm said in a statement. “There remain critical legal issues that need to be addressed in the Broussard trial. Those include the location of the trial, which party should have the burden of proof, and the fact that the

jury was not permitted to deliberate the facts of the case.”

Judge Senter, in his latest ruling, said the company had “attempted impermissibly to place the burden of proof on the plaintiffs to establish that their losses were caused by wind…”

A few days after the Broussard verdict, State Farm announced it had reached a proposed class-action settlement to reimburse homeowners in three Mississippi counties with pending or potential claims.

However, Judge Senter has rejected the proposed language as unfair, sending the negotiators back to the drawing board, with representatives for both sides expressing confidence a deal satisfactory to the judge will be worked out.

Insurance execs courted

February 1, 2007, Mark Ballard, The Advocate© (Baton Rouge, LA)

Blanco: La. might take over coverage if no new policies written

Gov. Kathleen Blanco said she told top insurance executives Wednesday that unless they start selling hurricane protection policies in Louisiana, state government may take over property insurance.

“I also mentioned that the ingredients for state takeover are very plain and perhaps were being driven by their actions,” Blanco said in an interview from an airplane waiting to take off from the Palm Springs, Calif., airport for her flight home.

“If they’re abandoning us, we don’t have any choices,” Blanco said.

Blanco gave a speech in nearby La Quinta to the nation’s largest insurance trade group. It was her latest attempt to make homeowners’ property insurance more available and more affordable in post-hurricane Louisiana.

She and Commissioner of Insurance Jim Donelon spent four days this week in California trying to persuade more insurers to write policies in Louisiana.

Blanco said most of her speech reminded the insurance executives of the efforts Louisiana has made to lower the risk of damage from hurricanes.

For instance, Blanco said, she told members of the Property Casualty Insurers Association of America that new flood-protection projects and tougher building codes have made coastal Louisiana better able to withstand hurricanes.

Insurance companies, by and large, have stopped selling policies that pay to repair hurricane damage to homes and buildings in the southern part of the state.

“I told them we want them to come in and fill the voids, or else state government is going to do something like what Florida has done,” Blanco said.

The Florida Legislature last week approved changes to the way property insurance is bought and sold in that state. The new laws lowered premiums for property insurance by, for instance, letting that state’s insurer of last resort compete against private insurance companies.

The insurance industry has loudly criticized the Florida changes.

Blanco said the insurance executives told her that they fear other states might follow Florida’s lead. She responded to them that she prefers state government not get involved in selling insurance, she said.

“The private market is best,” Blanco said.

But property owners are not in the mood for the industry’s proposals that would make it easier for them to sell insurance in Louisiana and other Gulf Coast states, she said.

“If you underpay a claimant who has been paying their premiums for all these many years — if you then, upon renewal, either double or triple their rates or you tell them you’re not going to cover them anymore, then you’ve set up a vacuum,” Blanco said.

“It does not create a friendly environment for the marketplace,” she said.

Commissioner Jim Donelon, on the same returning plane as Blanco, said he and the governor asked insurance executives for a dozen of the companies to come to the state and sell hurricane protection policies.

Officials with five companies have spoken to him about coming to Louisiana to write hurricane insurance.

“No assurances yet, but (there are) positive indications,” said Donelon, who next week travels to London to lobby the sellers of surplus lines that insurance companies buy to protect them from having to pay out too much.

The 1,000 members of the Property Casualty Insurers Association of America are companies that, combined, write about 41 percent of the country’s homeowners’ insurance policies.

Blanco met Monday and Tuesday with executives of the companies that create “modeling” software used by insurance companies to figure out how risky it is to write policies along Louisiana’s coastline.

State Farm "minimized damage"

Scott Miller, Pantagraph©(Bloomington, IL)

BLOOMINGTON — State Farm Insurance Cos. “minimized the damage” by settling a class-action lawsuit Tuesday with Mississippi Attorney General Jim Hood, an industry analyst said.

The Associated Press reported that State Farm agreed Tuesday to pay about $80 million to 639 policyholders involved in a class-action lawsuit filed by Mississippi Attorney General Jim Hood.

In turn, Hood dropped his criminal investigation of State Farm’s claims handling in Mississippi following Hurricane Katrina.

The Bloomington-based insurer also agreed to reopen the claims of an estimated 35,000 Mississippi policyholders who didn’t sue the company but may want more money.

State Farm spokesman Phil Supple would not discuss the company’s analysis of what the reopening might cost.

“It’s hard to tell what the final expenditure of this will be,” he said.

James Valverde, vice president of risk management for the Insurance Information Institute in New York, said State Farm’s decision will have a far-reaching impact on the entire industry, particularly with State Farm and other insurers still involved in hundreds of Katrina-related lawsuits.

Insurance could become costly and hard to find in the Gulf Coast, he said. But the added costs shouldn’t trickle into Central Illinois and other parts of the country, he said.

State Farm also could face more lawsuits if other homeowners see the settlement as a chance to cash in.

“Clearly, this kind of outcome creates a lot of uncertainty in an industry that’s already volatile and fragile,” Valverde said. “These cases give people the false impression that they can use the courts for their best interests. … In the litigious society we live in, (the settlement) could give rise to new lawsuits, but it’s too early to tell. We’re only seeing the beginning of this.”

Given a Mississippi jury’s recent decision to make State Farm pay a Mississippi couple $2.5 million in punitive damages, Valverde said the insurer “minimized the damage” by settling, rather than allowing other juries to follow suit.

Jim Jones, director of the Katie School of Insurance and Financial Services at Illinois State University, noted that State Farm also avoided future litigation expenses by settling this case.

“The industry as a whole settles a lot of cases. Most cases don’t go to trial,” he said. “Part of it is a recognition of the cost of litigation. Another part of it is uncertainly, and (State Farm is) probably feeling pretty uncertain about how a judge or jury is going to rule. … You have to make a business decision.”

State Farm tallied a $3.2 billion profit in 2005, the year Katrina struck. That was after paying $6.3 billion in hurricane damages in the Gulf Coast. The company paid more than $1 billion in Mississippi alone.

Last year looked like a much more profitable year for State Farm, however, though year-end figures haven’t been reported. While Katrina cost the insurer billions in 2005, the largest catastrophe in 2006 was a Midwestern hailstorm in March that cost State Farm nearly $300 million, spokesman Jeff McCollum said.

According to third-quarter financial statements filed with the Illinois Division of Insurance, State Farm’s net worth jumped 14 percent from $50.2 billion to $57 billion at the end of September.

Discount on quake insurance from California Earthquake Authority

On January 12, 2007 an article and televised broadcast was released from CBS 5 in San Francisco, CA. It stated the California Earthquake Authority (CEA) was not informing its policyholders they were entitled to refunds. This broadcast also had a customer that said they received a refund. This report was not entirely true. It failed to disclose the details of how the policyholder obtained a refund. A policyholder does have the right to the changed rate the day the request the change, however, this will require the policy to be canceled and re-written. This may have negative ramifications on their homeowners policy. Some carriers require a homeowners policy be canceled and re-written at the same time, and this day and age of carriers reducing risk, they may refuse to re-write a new policy, or have such a drastic increase in their homeowners policy that it absorbed some if not all of the saving on the Earthquake policy.

As for the refund the person received, well if he canceled his previous policy the refund would have been for the pro-rated policy from the time it was canceled to when it would renew. This change only affects policyholders of CEA policies and not all earthquake policies since the CEA is not the only provider of earthquake insurance in the State of California.

Watch the televised broadcast by clicking the following link: http://cbs5.com/video/?id=19921@kpix.dayport.com

Partisan politics influenced Katrina response, says former FEMA Chief

January 23, 2007,Nahal Toosi, The Associated Press© via Insurance Journal©

Full Article Here

Political storm clouds gathered again over the federal government's response to Hurricane Katrina as former Federal Emergency Management Agency Director Michael Brown said party politics played a role in decisions on whether to take federal control of Louisiana and other areas affected by the hurricane.

Louisiana Gov. Kathleen Blanco said the partisanship Brown described was "disgusting,'' while a White House spokeswoman said Brown was making "false statements.''

Brown told a group of graduate students Friday that some in the White House had suggested the federal government should take charge in Louisiana because Blanco was a Democrat, while leaving Mississippi Gov. Haley Barbour, a Republican, in control in his state.

Brown said he had recommended to President Bush that all 90,000 square miles along the Gulf Coast affected by the devastating hurricane be federalized a term Brown explained as placing the federal government in charge of all agencies responding to the disaster.

"Unbeknownst to me, certain people in the White House were thinking, 'We had to federalize Louisiana because she's a white, female Democratic governor, and we have a chance to rub her nose in it,''' he said, without naming names. "'We can't do it to Haley (Barbour) because Haley's a white male Republican governor. And we can't do a thing to him. So we're just gonna federalize Louisiana.'''

Brown declined to say who in the White House had argued for federalizing the response only in Louisiana. He said that he'd later learned of the machinations through Blanco's office and from federal officials.

Blanco reacted sharply to Brown's remarks.

"This is exactly what we were living but could not bring ourselves to believe. Karl Rove was playing politics while our people were dying,'' Blanco said through a spokeswoman, referring to Bush's top political strategist. "The federal effort was delayed, and now the public knows why. It's disgusting.''

Eryn Witcher, a White House spokeswoman, denied Brown's claims.

"It is unfortunate that Mike Brown is still hurling false statements about the events surrounding Hurricane Katrina,'' she said. "The only consideration made by the administration at the time of this tragedy and since are those in the best interests of the citizens of the Gulf region.''

Brown defended his statements.

"All I have done since I have left the government is tell the truth about what was going on,'' he said.

Hawaii commissioner talks with Japanese, Chinese governments

January 23, 2007, Insurance Journal©

Hawaii State Insurance Commissioner J.P. Schmidt will be among the U.S. officials working with the governments of China and Japan to improve regulation in the financial services industries.

According to the Hawaii Department of Commerce and Consumer Affairs, Schmidt has been asked by the National Association of Insurance Commissioners (NAIC) to represent U.S. regulators in Financial Sector Working Group Dialogues in Tokyo, Japan, and Beijing, China. Schmidt will be joining representatives from the U.S. Treasury Department, Federal Reserve Board, Federal Deposit Insurance Corp., Securities Exchange Commission, Office of Comptroller of the Currency and the Commodity Futures Trading Commission.

The meetings are scheduled for next week. Among the issues scheduled to be discussed are the Interstate Compact for Life Insurance Products, the Reinsurance Evaluation office and other new initiatives at NAIC. There will be discussion on the progress of the privatization of Kampo (the insurance arm of the Japan postal service), regulation of Kyosai (small insurance associations) and bank insurance.

The agenda in China will also include new product approval, investment performance of insurers and asset allocation. The Hawaii Insurance Division hosted four officials of the China Insurance Regulatory Commission (CIRC) as part of the NAIC internship program over the past three years.

"The business of insurance has become a global industry, which requires adherence to best principles in regulation for the benefit of companies and citizens," stated Commissioner Schmidt. He believes the improvement of regulations in each country will make it easier for companies in Hawaii and the U.S. to do business in Japan and China. Companies in China and Japan may also find it easier to do business in Hawaii and the United States.

Swiss Re backs independent European agency to assess Nat CAT risks

January 23, 2007, Insurance Journal©

Swiss Re has issued a "focused report," which assess the growth of the catastrophe bond market and calls for the establishment of an independent agency to "aggregate European claims data and provide the insurance industry with an efficient market loss index for natural catastrophe risks. This industry-wide effort will facilitate the further expansion of the insurance-linked securities (ILS) market in Europe and improve the transparency of natural catastrophe claims data."

According to the world's largest reinsurer, "current industry trends indicate that the European insurance industry will benefit from greater access to capital market solutions to cover natural catastrophe risks."

Swiss Re noted the significant growth in the market for "insurance-linked securities, with 2006 being a "record year with the issuance of catastrophe bonds increasing by 130 percent, bringing the total outstanding catastrophe bonds to $8.1 billion."

The growth in the market has been accompanied by "the widespread use of market loss indexes as bond loss triggers for US risks," the report continued. "In addition, the market for industry loss warranties (ILW) has grown significantly for US natural catastrophe exposures and currently totals in excess of $4 billion."

Swiss Re said, however, that the growth in the ILS and ILW markets "remains constrained due to the lack of an independent agency to collect industry-wide data and establish a reliable and effective market loss index."

"Industry loss indexes are key to unlocking additional capital market capacity for European insurers. With industry-wide support, this initiative can expand the traditional reinsurance and capital market solutions available to European insurers," noted Philip Lotz CEO of Capital Management and Advisory at Swiss Re.

"In addition to the advantages of more robust European ILS and ILW markets, reliable market loss data will benefit the industry by improving benchmarking, underwriting and exposure management," said the report.

The publication aims to "engage a dialogue within the European insurance industry and help bring about a practical and independent solution for establishing an European market loss index. In addition to the advantages of more robust European ILS and ILW markets, reliable market loss data will benefit the industry by improving benchmarking, underwriting and exposure management.

"With its new publication, Swiss Re aims to engage a dialogue within the European insurance industry and help bring about a practical and independent solution for establishing an European market loss index."

Many Will File Insurance Claims

Fox23

Watch This Video

(TULSA, Okla.) January 22 - Natural disasters create a large volume of insurance claims for damage to homes, businesses, cars and other property.

In the event of a disaster, claim representatives usually visit the most severely damaged homes first.

But, there are specific steps to take in reporting your damage that could help your claim move along more quickly.

1. Inspect your car, boat and home for damage - inside and out.
2. Look at every room in your house, and list any damage that you find.
3. When you report your claim, your insurance company will need to know if your house is damaged so severely that you can't live in it. They'll also need to know if a damaged car is safe to drive.
4. Help your insurance company handle your claim as quickly as possible by making a complete room-by-room inventory of your damaged property.

Remember, when you're making a list of what was damaged you should include specific details. An item's brand name, model number and purchase price are always helpful.

State Farm says for your future protection, it's a good idea to make a detailed inventory of all of your personal belongings.

Taking pictures of your property is also recommended.

State Farm settles a Miss. Katrina lawsuit before trial

January 22, 2007, Insurance Journal

State Farm Fire & Casualty Co. settled out of court last Friday with a Mississippi policyholder whose lawsuit over Hurricane Katrina damage was scheduled to be tried next week in federal court.

State Farm settled with Richard Tejedor of Long Beach only eight days after jurors awarded $2.5 million in punitive damages to a different policyholder a couple who sued the Bloomington, Ill.-based insurer for denying their claim after the Aug. 29, 2005, storm.

Terms of the settlement in the Tejedor case will not be disclosed, said State Farm spokesman Fraser Engerman. "We are pleased that we were able to resolve this issue before it went to (trial),'' Engerman said.

Jack Denton, one of Tejedor's attorneys, confirmed that the case has been settled but declined further comment.

Tejedor was one of hundreds of homeowners on Mississippi's Gulf Coast who sued their insurers for refusing to cover billions of dollars in damage from Katrina's storm surge.

Katrina destroyed his home, leaving nothing but a slab. A federal flood insurance policy paid him the maximum $200,000 for the home and $80,000 for its contents. Tejedor, however, said State Farm refused to pay for an additional $263,190 in damage to his home and its contents.

State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water...Read More