If ever there was a time for a business to buy employment practices liability (EPL) insurance itÃ¢â‚¬â„¢s now, according to latest data on workplace discrimination claims released by the U.S. Equal Employment Opportunity Commission (EEOC). The findings show that 93,277 workplace discrimination charges were filed with the EEOC during fiscal year 2009 Ã¢â‚¬“ the second highest level ever Ã¢â‚¬“ and monetary relief obtained for victims totaled over $376 million. As in previous years, race and retaliation were the most frequently cited types of employment discrimination in 2009, each accounting for more than one-third (36 percent) of charges filed with the EEOC, while sex-based discrimination charges were the third most frequently filed (30 percent). Bear in mind that multiple types of discrimination may be alleged in a single charge filing. A closer look at the numbers reveals some key takeaways. For example, the number of charges alleging discrimination based on disability rose by 10 percent to 21,451 Ã¢â‚¬“ the highest level ever. At 22,778, the number of charges alleging age-based discrimination also reached the second-highest level ever. Charges of discrimination based on national origin also rose by 5 percent to 11,134. A range of factors, including economic conditions, increased diversity and demographic shifts in the labor force and employeesÃ¢â‚¬â„¢ greater awareness of their rights under the law, contributed to the near-historic level of total discrimination charge filings, the EEOC said. Check out I.I.I. information onÃ‚ EPL insurance.
Yesterday New York Governor David Paterson spoke of plans to revive a global insurance exchange in New York. The New York Insurance Exchange (NYIE) would bring buyers and sellers of complex commercial insurance closer together, providing increased transparency and security for everyone in the process. Ã¢â‚¬Å“The exchange will reaffirm our status as the hub of international trade and finance and it will also curtail the unregulated transactions that devastated the global economy,Ã¢â‚¬ Governor Paterson said. This is not the first time that the idea has been raised. Former New York Insurance Superintendent Eric Dinallo sought input from the industry about reviving the exchange in early 2009 after first suggesting the move in 2008. The exchange would operate in a similar way to LloydÃ¢â‚¬â„¢s of London, Governor Paterson said, and would enhance New YorkÃ¢â‚¬â„¢s status as the worldÃ¢â‚¬â„¢s financial center stimulating the economy by increasing the flow of capital and insurance premiums to New York. Hard-to-insure risks and the economic benefits resulting from them generally find a home in offshore jurisdictions like Bermuda, Ireland, Switzerland and LloydÃ¢â‚¬â„¢s. In the process, New York loses jobs and tax revenue, he said. It is estimated that an additional $7 billion to $10 billion in premium dollars could be generated by an efficient, revitalized exchange. We like the timing of this announcement, compared to last year. Reviving the exchange could lead to greater coverage choices for buyers of insurance and increased competition in the market as well as stimulating economic growth in New York. At the same time, capital funding for such an exchange is likely to be easier to come by than it would have been two years ago or even last year. However, from the perspective of buyers and risk managers it remains to be seen what specific marketÃ‚ need the exchangeÃ‚ would address and how successful it would be compared to well-capitalized and established markets catering to complex risks. A New York Times article by Mary Williams Walsh notes that it would be easier for New York to create an insurance exchange than other states because it attempted to start one in the 1980s. That attempt failed, but apparently the enabling legislation is still on the books.
Hope was that the whiff of financial scandal was dying down after fallout from the subprime and credit crisis, Madoff and Stanford Ponzi schemes. Then along came Galleon. Last month billionaire Raj Rajaratnam, founder of the now-defunct hedge fund Galleon Management LP, was arrested by the FBI accused in an insider trading case that allegedly generated more than $25 million in illicit gains. Six others involved in the scheme were also charged including senior executives at major companies including IBM, Intel and McKinsey & Co. Yesterday the Galleon probe widened with the charging of 14 other individuals, including hedge fund traders and managers, lawyers and a former Galleon employee, for their part in the insider trading group. Reports suggest that further arrests can be expected in the coming weeks. The collapse of the Madoff and Stanford schemes fueled litigation on a number of fronts and it is likely that Galleon will do the same. Exactly what the impact will be on professional liability insurance lines such as directors and officers (D&O) and errors and omissions (E&O) remains to be seen. Typically, these types of claims take some time to emerge. In the mean time, Galleon is sure to be a hot topic among those attending the PLUS International Conference in Chicago next week. I.I.I. president Dr. Robert Hartwig will be speaking at the PLUS conference next Wednesday ahead of the opening keynote address by former President Bill Clinton. Be sure to check back on the I.I.I. Web site for a copy of Dr. HartwigÃ¢â‚¬â„¢s presentation. For more on Galleon, check out the D&O Diary.
WeÃ¢â‚¬â„¢ve blogged before about how mounting job cuts amid the economic downturn are resulting in an increase in employee lawsuits. At a public hearingÃ‚ yesterday the Equal Employment Opportunity Commission (EEOC) focused on recent developments in age discrimination complaints. According to the EEOC, while overall job discrimination complaints were up by 15 percent in 2008, the number of allegations of age discrimination increased by nearly 30 percent, compared with 2007. The EEOC is now considering new regulations to protect older workers from job discrimination in the wake of recent adverse court decisions that have made it harder for older workers to successfully challenge age discrimination under the Age Discrimination in Employment Act (ADEA). For example, just last month in a 5-4 ruling the U.S. Supreme Court ruled that employees bringing federal age-discrimination claims bear the burden of proving their age was a key factor in their reassignment by an employer (Gross v. FBL Financial Services). Ã‚ Previously, workers had to show that age was just one factor in the employment decision and then the burden of proving there was a permissible reason for the action shifted to the employer. For more on the EEOC hearing, check out todayÃ¢â‚¬â„¢s Washington Post online article by Steve Vogel. Check out I.I.I. information on specialty lines such as employment practices liability (EPL) insurance.
YesterdayÃ¢â‚¬â„¢s sentencing of Bernard Madoff to the maximum 150 years in prison in connection with a massive investor fraud has everybody talking. The Wall Street Journal Law Blog notes that while the 150-year sentence was the statutory maximum for the 11 counts Madoff pleaded guilty to in March, it is not the longest handed down in a white collar crime case. Meanwhile, the Associated Press quotes a source that authorities are likely to charge 10 others in connection with the multi-billion dollar fraud. The New York Times DealBook blog today outlines yet another Madoff-related lawsuit this one filed against a Texas hedge fund by New MexicoÃ¢â‚¬â„¢s teacherÃ¢â‚¬â„¢s union. Over at the D&O Diary Kevin LaCroix recently commented that as diverse and dispersed as the consequences of the Madoff scandal have been, so too is the wave of litigation to follow in the wake of the schemeÃ¢â‚¬â„¢s collapse. So it would seem. Check out the D&O DiaryÃ¢â‚¬â„¢s running list of Madoff-related lawsuits.
ItÃ¢â‚¬â„¢s a rather sad but inevitable part of working in the insurance business that any headline news, whether a hurricane, or train crash, or a celebrity death immediately gets you thinking about the insurance coverage involved and the potential claims that will arise. And so it is with the death yesterday of pop legend Michael Jackson. From providing appearance/event cancellation coverage, to insuring celebrity body parts, to providing death and disgrace policies, specialist insurers play a major role in providing protection to the stars and the companies that promote and sponsor them. For example, over the years Lloyd’s has insured a long line of celebrities, including Rolling Stones guitarist Keith Richards’ fingers and Marlene Dietrich’s legs, and in 2007 Lloyd’s insured the smile of America Ferrera, star of the hit television show Ugly Betty, for $10 million. Whether a musician, a sports star, or a top chef, each celebrity risk profile is different and will vary according to the individualÃ¢â‚¬â„¢s occupation, health, lifestyle and associated risks. An online article today at Reinsurance magazine concerns the question of insurance coverage for event cancellation given that Michael Jackson was on the cusp of a 50 concert tour.
Is Gulf of Mexico windstorm risk still an insoluble risk management problem? This is the question posed in the latest annual Energy Market Review from Willis. The report notes that fallout from a major Gulf of Mexico windstorm is once again casting a shadow over the energy insurance market in the wake of Hurricane Ike. A full consensus has yet to emerge as to the best way to offer the product, and in the meantime the market for Gulf of Mexico windstorm risk is more confused, volatile and expensive than ever before. Meanwhile, the energy industry is faced with a changing world, Willis says. The financial market meltdown and global economic recession have led to rapidly cooling commodity prices and left the energy industry now facing a very different challenge of maintaining profitability in the face of plummeting demand. As a result energy insurers must find new ways of making up for income shortfalls and sharp decreases in investment incomes in 2008. An increased focus on underwriting profitability is the inevitable result. However, any drive towards a harder market is being tempered by the fact that with little or no withdrawals from the market in January 2009, capacity levels for energy risks have actually increased by about 5 percent from last year, according to Willis. A big question mark therefore hangs over 2009: will competitive pressures take their toll on market discipline as the year progresses? Check out I.I.I. facts & stats on the 2007 and 2008 AtlanticÃ‚ hurricane seasons.
DirectorsÃ¢â‚¬â„¢ and OfficersÃ¢â‚¬â„¢ (D&O) liability insurance costs for financial institutions increased 50 percent in the fourth quarter of 2008 compared to that of 2007, according to the Quarterly D&O Pricing Index from Aon CorpÃ¢â‚¬â„¢s Financial Services Group. This is the first time year-over-year price increases were found in over five years. Aon said a number of unprecedented events contributed to the significant price increases, including: reports of more than 1 million job losses in Q4 2008; Bernard Madoff’s alleged Ponzi scheme; a substantial decline in major stock indices; and federal securities class action lawsuits activity in 2008. AonÃ¢â‚¬â„¢s D&O Index also shows that the average price for $1 million in coverage limits increased 3.15 percent from Q4 2008, compared to Q4 2007. This is the first time since 2003 that price increases in the financial sector have been significant enough to move the entire index. So will there be more? Ã¢â‚¬Å“In the short term, we expect to see D&O pricing for the financial sector continue to rise,Ã¢â‚¬ said Mike Rice, managing director of AonÃ¢â‚¬â„¢s Financial Services Group and author of the Index in a press release. Ã¢â‚¬Å“It is possible, however, that a tough underwriting environment could emerge for all public companies as the economy continues to negatively impact both financial results and stock prices.Ã¢â‚¬ Ã‚
ItÃ¢â‚¬â„¢s time to make your Oscar picks and as you select a Best Picture among this yearÃ¢â‚¬â„¢s crop of nominated films another question you might want to consider is what is the riskiest movie of 2008? According to FiremanÃ¢â‚¬â„¢s Fund Insurance Co, honors in this category go to Ã¢â‚¬Å“The WrestlerÃ¢â‚¬ a drama about Randy Ã¢â‚¬Å“The RamÃ¢â‚¬ Robinson, a once popular pro wrestling star, now aging and down on his luck. As an insurance risk, the film wins Ã¢â‚¬Å“most risky productionÃ¢â‚¬ primarily because lead actor Mickey Rourke did much of his own stunt work in the film. The physicality and quantity of the stunts Ã¢â‚¬“ in one scene Rourke has a brutal wrestling match accompanied by glass shards, staples and barbed wire Ã¢â‚¬“ made the film a major risk. Luckily adequate precautions were in place to mitigate the risk, including insurance. Among insurance coverages for films, cast insurance covers a range of possible scenarios that could happen to an actor where production would be affected, such as illness, injury or even death. Of the total of 79 Oscar nominees this year FiremanÃ¢â‚¬â„¢s Fund insured 46. Insured nominees include Ã¢â‚¬Å“Milk,Ã¢â‚¬ Ã¢â‚¬Å“Frost/Nixon,Ã¢â‚¬ Ã¢â‚¬Å“The Reader,Ã¢â‚¬ Ã¢â‚¬Å“The Dark Knight,Ã¢â‚¬ Ã¢â‚¬Å“Changeling,Ã¢â‚¬ Ã¢â‚¬Å“Iron Man,Ã¢â‚¬ Ã¢â‚¬Å“Defiance,Ã¢â‚¬ Ã¢â‚¬Å“In Bruges,Ã¢â‚¬ Ã¢â‚¬Å“The Visitor,Ã¢â‚¬ Ã¢â‚¬Å“Frozen River,Ã¢â‚¬ Ã¢â‚¬Å“Wanted,Ã¢â‚¬ and Ã¢â‚¬Å“Hellboy IIÃ¢â‚¬ as well as Ã¢â‚¬Å“The Wrestler.Ã¢â‚¬
And on a completely different topic hereÃ¢â‚¬â„¢s a note for your calendar: FiremanÃ¢â‚¬â„¢s Fund and the I.I.I. invite you to participate in a webinar next Wednesday February 25 at 1pm ET/10am PT that will provide an overview of the impact of the economic stimulus plan on the property/casualty insurance industry. To register for the webinar, please contact: Susan Murdy, FiremanÃ¢â‚¬â„¢s Fund (email@example.com) or Loretta Worters, I.I.I. (firstname.lastname@example.org).Ã‚
Another day, another fraud. The Securities and Exchange Commission (SEC) has charged Robert Allen Stanford and three of his companies for orchestrating an alleged fraudulent, multi-billion dollar investment scheme centering on an $8 billion certificate of deposit (CD) program. ThisÃ‚ is the second massive alleged fraud to hit the headlines in a matter of months. It follows the recent charging of Wall Street financier Bernard Madoff in connection with a $50 billion investor fraud. That schemeÃ¢â‚¬â„¢s collapse has fueled litigation on a number of fronts. Hat tip to the D&O diaryÃ‚ for details of the first securities class action lawsuit filed by investors in connection with the Stanford fraud allegations. Also check out I.I.I. information on the liability system.Ã‚