National Newsbriefs
N.Y. AG Indicts Former Marsh Execs:
New York Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills announced the indictment of eight former executives of insurance brokerage giant Marsh Inc. for their roles in a bid-rigging scheme that officials maintain defrauded clients of millions of dollars.
The former executives are accused of colluding with executives at leading insurance companies to arrange noncompetitive bids and conveying these bids to Marsh clients under false pretenses.
The indictments come after 17 individuals at five companies, including eight former Marsh employees, previously pleaded guilty to criminal charges in the ongoing insurance industry investigation that began a year ago.
The indictment charges that from November 1998 to September 2004, the defendants colluded with executives at American International Group, Zurich American Insurance Company, ACE USA, Liberty International Insurance Company and other companies to rig the market for excess casualty insurance.
The indictment charges the following individuals: Greg J. Doherty, Marsh’s ACE Local Broking coordinator team leader and senior vice president; Kathleen M. Drake, Local Broking coordinator team leader and managing director; William Gilman, executive marketing director and managing director; Thomas T. Green Jr., senior vice president; Edward J. Keane Jr., assistant vice president; William L. McBurnie, Coverage and Carrier specialist and senior vice president; Edward J. McNenney, Global Placement director and managing director; and Joseph Peiser, head of Global Broking Excess Casualty and managing director.
If convicted of the top count of first degree grand larceny, defendants Gilman, Peiser, McNenny, Doherty and Green face a minimum of one to three years and up to 25 years in state prison. The top count for the remaining defendants, second degree grand larceny, carries a maximum term of 15 years.
State Regulators Settle with MarshMac:
More than 30 state insurance regulators working collaboratively through the National Association of Insurance Commissioners announced a multi-state regulatory settlement with the nation’s largest insurance broker, Marsh & McLennan Cos. Inc.
The settlement agreement is designed to see that the extensive compensation and disclosure reforms are implemented by Marsh. The agreement adopts Marsh’s agreement made in January 2005 to pay its clients $850 million in restitution to resolve allegations of fraud and anti-competitive practices leveled by New York Attorney General Eliot Spitzer and New York State Insurance Superintendent Howard Mills.
The business reforms Marsh adopted include limiting its brokerage compensation to a single fee or commission at the time of placement, banning contingent commissions, and requiring disclosure of all forms of compensation to the clients. The participating regulators will receive ongoing compliance reports from Marsh, have the authority to enforce reforms, and retain the ability to continue ongoing investigations with Marsh’s cooperation.
“The regulatory controls that are embodied in this global agreement are prudent and comprehensive,” said Diane Koken NAIC president and Pennsylvania Insurance Commissioner.
Marsh clients had until Sept. 20 to join the settlement pool and release Marsh from further claims.
What’s Next After Katrina?:
In the near term, insurers are expected to raise rates and tighten terms, while public insurance programs will expand because of Hurricane Katrina, according to a new report published by Celent, “After Katrina: What Now for the Insurance Industry?”
The report says that in the long term, there may be fundamental changes to the insurance industry’s business model including: transforming capital requirements, new pricing methods, and a different approach to underwriting and claims.
The report also describes the role that technology can play to support these changes and outlines the implications for insurers and technology vendors.
“The human and economic consequences of Hurricane Katrina are still unfolding, but what is already clear is that Katrina is not just another big storm,” said Donald Light, Celent analyst and author of the report.
“Even in these early days, the unprecedented scale of Katrina and its aftermath demands a look at the longer-term implications for the insurance industry.”
Bill May Shield Volunteers Contractors:
The U.S. House of Representatives is weighing legislation to protect contractors who respond to declared federal, state and local emergencies or disasters from lawsuits arising out of their volunteer efforts.
“The Good Samaritan legislation is designed to provide contractors, such as those responding to Hurricane Katrina, with qualified immunity from liability when providing services in volunteer situations that arise from a disaster or emergency,” said Associated General Contractors of America CEO Stephen E. Sandherr. “When construction expertise is needed, there should not be anything to make the construction industry hesitant in responding to help and possibly save lives and property.”
The measure was introduced by Reps. Dave Reichert (R-Wash.), Gary Miller (R-Calif.), Dan Lungren (R-Calif.) and Jim Matheson (D-Utah).
Many states with Good Samaritan statutes do not include contractors within the protections of those statutes. The new House legislation would provide a uniform federal basis for protections for contractors throughout U.S.
The bill would provide construction entities with immunity from liability for negligence when providing services or equipment on a volunteer basis in response to a declared emergency or disaster. It would not cover gross negligence or willful misconduct.
Feds Argue RRGs Need Uniform Standards:
State insurance regulators should adopt consistent standards for risk retention groups and Congress should consider continuing the RRG exemption from state insurance laws only in states that adopt the new standards, according to a report from the Government Accountability Office. The report also urges Cogress to establish minimum corporate governance standards for RRGs.
The Liabiltiy Risk Retention Act, which authorized the formation of RRGs, exempts them from certain state regulations, a fact that the report says has led to “a regulatory environment characterized by widely varying state standards,” with some states chartering RRGs as captives. Most captives are not subject to uniform solvency standards and state requirements in financial reporting also vary.
“The combination of single-state regulation, growth in new domiciles, and wide variance in regulatory practices has increased the potential that RRGs would face greater solvency risks,” said the report, concluding RRGs would benefit from uniform regulatory standards.