Volume 6: October 2, 2007

TRIA Bill Passes House

TRIA .................1

NFIP .................1-2

Catastrophe Bill.....................2

Newsbytes........2

NAIC.................3

Florida Title ......3-4

Member News ..3-4

Catastrophe Update..............4

Inside Insurance News: bill to extend the Terrorism Risk Insurance Act for 15 years passed the House 312-110 last

month. The bill faced a Pay/Go test that delayed its approval for several weeks. Under current rules, the Congressional Budget Office stated that the measure would cost over $10

billion in the first 10 years. This was strongly debated by supporters, who said that payments would only happen in the event of an attack. Finally, language was added that requires that in the event of an attack, Congress would vote again to release funding for the program. The House TRIA bill would: • Extend TRIA for 15 years • Incorporate domestic terrorism acts • Set trigger at $50 million • Insert a nuclear, biological, chemical, or radiological (NBCR) component that requires insurers

to make available NBCR coverage on same terms and conditions, but postpones implementation of NBCR mandatory offer requirement until the renewal or purchase of a TRIA-covered policy after January 1, 2009

• Establishes a 3.5 percent insurer deductible for NBCR events that increases by 0.5 percentage point each year, and applies current 15 percent co-payment above the deductible up to the program cap, with a step-down mechanism that significantly decreases the co-payment for larger events

• Provide additional legal certainty to insurers by clarifying annual cap language to ensure that the program cap takes into consideration workers' comp and other State mandatory coverage laws and by reimbursing insurers for payments exceeding the cap that are made before the Treasury notice that the cap has been pierced

• Add group life to TRIA's covered lines • Add multi-peril farm owners' insurance to lines of insurance covered by TRIA • Add a reset mechanism for significant terrorist attacks (over $1 billion) to lower the deductibles

and triggers to rebuild market capacity and then gradually increase private sector obligations over time

• HR 2761 was sent to the Senate Banking Committee for consideration. The Senate Banking Committee has not commented on the legislation, but it is expected to pass a bill that would provide less expansion for TRIA. A markup is expected later this month.

• The administration has threatened to veto the House version of the bill, and has set forth three conditions that must be met in order to not receive a veto. First, the program should be temporary. Second, it should not be expanded. Finally, it should increase private sector retentions.

• Read a detailed summary of the legislation. Read HR 2761. DM

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Insurance News is a bi-weekly

publication of the

AMERICAN BANKERS

INSURANCE ASSOCIATION

1120 Connecticut Washington, DC

20036

1800 BANKERS THEABIA.COM

J. Kevin A. McKechnie

and Deanne R. J. de Mariño

Editors

Copyright © 2007 by The ABIA

NFIP Bill Passes House, Senate Hearing Today H.R. 3121, the Flood Insurance Reform and Modernization Act (FIRM) was passed by the House last week, by a vote of 263-146. The bill would renew the National Flood Insurance Program for five years, through 2013. It would also require the Federal Emergency

Management Agency to update the flood maps, and would provide a phase-in of actuarial rates for commercial properties and non-primary residences.

The White House has threatened to veto the legislation. Why? FIRM adds wind coverage to the flood coverage in certain situations where the wind vs. water debate could occur. Note that the bill limits multiple peril policies to areas where local governments agree to adopt and enforce

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he House Financial Services Committee passed H.R. 3355, the Homeowners Defense Act, last week. The legislation would allow states to plan for disasters before a catastrophe event occurs. The bill provides a

venue for local-, state- and regionally-sponsored qualified insurance funds to voluntarily bundle their catastrophe risk with one another, and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts. The bill would also create a National Homeowners Insurance Stabilization Program to provide federal loans to states impacted by severe natural disasters. By doing so, the federal government will be providing the capital needed to begin the rebuilding process. Specifically, the program makes available two types of loans: liquidity loans and catastrophic loans. Liquidity loans would allow a state's catastrophe fund to cover its liability in the event that it is not fully funded. Catastrophic loans would allow state catastrophes fund to cover damages that exceed its liability.

Representative Tim Mahoney spoke about the legislation at the recent meeting of the National Association of Insurance Commissioners (NAIC). He emphasized the voluntary nature of the participation by states, a concept that gave rise to a quick letter of support received from the NAIC. Read the bill. DM

n ABA telephone briefing on October 15 will focus on the

banking institution's rights as an in-sured and how it can seek to maxi-mize its insurance coverage and po-tential recovery for a claim under its policies. Read more.

he new $5 bill design will feature two watermarks, a repositioned

security thread, a purple seal on the front and a large, purple numeral "5" on the back, according to govern-ment officials who unveiled the new bill during an Internet news confer-ence yesterday. The changes are simi-lar to those made to the $10, $20 and $50 bills in an effort to stay ahead of counterfeiters. Circulation for the $5 bill is planned for the spring so that vending machine operators have time to make the necessary changes. Free informational material also is available to prepare cash handlers to recognize the new bill. Read more.

ed by surging voluntary health offerings, second quarter 2007

worksite sales increased by 12 per-cent. This marks the fourth consecu-tive quarter of double-digit growth, according to the latest Worksite sur-vey by LIMRA International. Read more. (9/25)

hile the majority of Americans feel that life insurance is a ne-

cessity, many would do just about anything than take the first step to obtain it. Conducted in support of Life Insurance Awareness Month in September, the LIFE survey found that one in 5 said they would rather go to the dentist for a root canal than investigate their life insurance needs. Read more. (9/17)

Newsbytes

Life Insurance Painful?

Banks as Insured

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Worksite Sales Up

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building codes and standards designed to minimize wind damage, in addition to the existing flood program requirements for flood plain management. Any community participating in the flood insurance program could opt into the multiple peril option. The additional wind portion would be required to be “actuarially sound.”

To encourage participation in the NFIP, the bill provides for a new community outreach program, and provides for a study on how to increase participation by low-income families. In order to help ensure that those homeowners who should have flood insurance actually do have flood insurance, the bill increases the fines on lenders who do not enforce the mandatory flood insurance policy purchase requirement for those who live in a floodplain and hold a Federally-backed mortgage. However, the bill contains a “safe harbor” provision for an institution which is in non-compliance due to circumstances beyond its control. It also would allow institutions to correct non-compliance before penalties are assessed. Read the ABA letter of support. Read the bill.

The Senate Banking Committee held a hearing today to review the National Flood Insurance Program. The hearing reviewed the many issues that others have raised regarding the NFIP—insolvency, lack of updates for flood maps, incentives to build in risky areas, rates that aren’t actuarially sound, and more. There is not yet a bill in the Senate. We expect the discussion to become more defined when a bill is introduced. DM

New $5 Bill

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Flood Insurance continued from page 1

Catastrophe Legislation Passed in Committee

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On This Day On October 2, 1947, Formula One racing was formally established. The "formula" in the name is a set of rules which all participants and cars must meet. Read more.

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October 2, 2007 ABIA Insurance News Continued

new insurance product designed to meet the unique needs of his-

toric and vintage commercial proper-ties, Historic Property-Gard, has been introduced by Fireman’s Fund Insur-ance Company, and the coverage in-sures buildings and districts that are certified by the National Park Service as well as those that are eligible for historic certification. Read more. (9/24)

IG introduced AIG Passportfor Errors & Omissions (E&O), a

service created for multinational com-panies to facilitate purchasing locally admitted E&O liability insurance to cover their international operations and subsidiaries. AIG Passport pro-vides an efficient service platform to address clients' need for admitted insurance policies in countries in which they have business operations. AIG Passport for E&O is available for new and renewal business, and will initially be available in 18 of the most in-demand countries. Read more. (9/24)

rudential is partnering with Life Line screenings to offer a num-

ber of tests to clients, including vas-cular screening. Read more. (10/2)

untington Bancshares an-nounced that approximately

600,000 former Sky Bank consumer household and business accounts were successfully converted to Hunt-ington during the weekend of Sep-tember 21, resulting in more conven-ience and more product choices for customers. "This merger... represents an ideal combination,” said Thomas Hoaglin, chairman and chief execu-tive officer. Read more. (9/24)

Member News Historic Buildings

Prudential Screening Info

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AIG E&O International

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Huntington-Sky Merger

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he National Association of Insurance Commissioners (NAIC) held its quarterly meeting this past weekend in Washington, DC. There were a number of topics of interest to ABIA members, and we will prepare a

complete summary of activities for the next issue of Insurance News 10/16. We wanted to note that for the first time, Optional Federal Charter is in the air. OFC was mentioned in a number of different committees and working groups. One task force, the Receivership and Insolvency Task Force, which is part of the Financial Condition (E) Committee, has begun a review of a portion of the legislation which is near and dear to states, the state guaranty funds. As the legislation leaves these intact, except in the unusual situation where a state guaranty fund is not a qualifying guaranty fund per NAIC models, we believe there is little to review.

The sharpest comments came during the Interstate Insurance Product Regulatory Commission (IIPRC or the Compact Commission). The insurance compact allows compacting states to delegate regulatory authority to the compact commission, so that filings can be applied the same in all 30 compacting states. There are many issues we have reviewed, which have impacted uniformity, but the process is moving forward and there have been 6 filings since June 2007. The Commission has a legislative committee, on which sit a handful of state legislators, including State Representative Bob Damron, from Kentucky. During the report by the legislative committee, Representative Damron stated, “The biggest threat to the compact is Optional Federal Charter. We need to redouble our efforts [to defeat it]; keep our eye on the real ball.”

Another item that received ample attention at this meeting was the first ever “Legislative Liaison” meeting. This was established after state representatives, chiefly Representative Brian Kennedy from Rhode Island, complained loudly about the many closed meetings at the NAIC. Indeed, the NAIC made an effort to reduce the number of executive sessions, and renamed them “Regulator to Regulator,” perhaps to emphasize that they are not so much for privacy, but for confidentiality. Although state legislators were given precious little time on the agenda of the Legislative Liaison session, Representative Kennedy did manage to comment that renaming the closed-door meetings does not open the door. After discussion, it appeared that the NAIC would narrow the policy for closed-door meetings.

ABIA staff will distribute a full NAIC summary in the next issue of Insurance News on October 16th. DM

NAIC Meeting Hits on OFC, Open Meetings

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ffective yesterday, October 1, 2007, Florida is changing the requirements for agents and agencies licensed to sell Title Insurance in the state. The law, HB 111, initiates new licensing and continuing education

requirements for non-resident title agents. Non-resident title agents must pass Florida’s title Insurance examination to be licensed and must comply with continuing education requirements. The new law also changes the reporting requirements certain for title charges on the HUD-1 Settlement Statement. The examination of records and the title search are no longer to be considered “Related Title Services.” Additionally, the term “Related Title Services” on Line 1101 of the HUD-1 has been replaced with the term “Closing Services.” The

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New Florida Rqmts. for Title Agents & Agencies

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statute also allows title agents and agencies to return any portion of the agent’s share of the premium or any other agent charge or fee to the person responsible for paying the related premium, charge or fee. This is not a referral fee, but a permissible rebate, and must be noted on the HUD-1 Settlement Statement. Read the Florida Department of Financial Services bulletin that describes the change. DM

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New Florida Title Requirements continued from page 3

ederal efforts have been “deep and wide” in the last month as legislation is being analyzed and moved forward in both the House and the Senate, as described above. Of lesser notice, and perhaps impact, are proposals that

have been made by trade associations and companies. These proposals some-times do not make it into legislation, but the ideas are usually innovative, and spark conversations that help to bring depth to the dialogues and debates. In 2005, for example, the National Association of Professional Insurance Agents (PIA) suggested adding business continuation coverage to TRIA, and that pro-posal is part of the current House draft of the legislation. Recently, Travelers proposed a completely different framework for natural catastrophes, which would create a coastal wind zone, and presented it at the recent NAIC meeting. (Its inclusion of the entire state of Florida earned the derision of Florida Insur-ance Commissioner Kevin McCarty, but even he thanked them for offering some other ideas.) We’ll keep you abreast of other proposals as they come around, even if it’s just for the sake of discussion.

Litigation: Litigation continues, and the decisions made by judges and ju-ries are being watched around the country and around the world. A couple of cases demonstrate the trend of jury vs. judge. A federal jury in Mississippi found that all damage was caused by wind, and the case was settled. In Florida, the Su-preme Court overturned a lower court ruling to affirm that insurers are only re-quired to pay for covered damages, not uncovered perils. Reinsurers are watch-ing these cases closely. They value their own contracts, settled or not, and may not pay in the case of a settlement that they believe is unmerited.

State Legislation & Regulation: State governors and state insurance com-missioners from the Southeast recently gathered in separate hearings to share ideas on managing catastrophe risk. They heard about the Homeowners Defense Act and the Travelers proposal, both described above, among other proposals. All agreed that public-private partnerships are needed to achieve a stable insur-ance environment. In other disaster news, California’s legislature passed a bill, SB 430, which would add another $1.3 billion to the California Earthquake au-thority, ensuring the solvency of the pool.

Federal Legislation: See articles on pp. 1-3. Insurance Market: Florida Insurance Commissioner Kevin McCarty an-

nounced he will deny eight rate filings. The rate increases, he said, don’t reflect the savings that insurers should be seeing after the expansion of Citizens earlier this year. Instead, Florida is expecting filings that reflect rate decreases. In hap-pier news, the Times-Picayune reports that catastrophe bonds are on the upswing (Katrina fanning cat bond growth. 9/16/07). Though the article admits that cat bonds are introducing new regulatory challenges, it also indicates that capacity is on the rise, and this vehicle can be a good alternative for some specific kinds of risk. DM

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S. Bancorp, the parent company of U.S. Bank, continues its dedi-

cation to the communities it serves by supporting nonprofit organizations, and encouraging and rewarding the volunteer work of its 53,000 employ-ees with the third annual U.S. Bank Five Star Volunteer Award program. Read more. (9/20)

orking Mother magazine today named MassMutual a 2007

Working Mother Best Company. Leading a significant and ongoing culture shift, MassMutual is using company-wide benefits and programs to help ensure the retention and ad-vancement of working mothers. Read more. (9/25)

ells Fargo announced the launch of the Retire Secure

Index(RSI), an interactive, online cal-culator that estimates the number of years a person’s retirement funds will last once they stop working. “We want to take the mystery out of retire-ment readiness and the Retire Secure Index is a great first step,” said Pam-ela Reed, senior vice president of Wells Fargo’s Integrated Products. Read more. (10/2)

he Hartford conducted a study to review why important college

savings instruments remain under-used in a nation that places such high value on college degrees. The study has uncovered three important myths that keep Americans from saving ade-quately for college and debunking those myths now forms the basis of a new educational campaign from The Hartford called "Save Smarter!". Read more. (9/25)

Member News U.S. Bancorp Volunteerism

Wells Retire Secure Index

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MassMutual 100 Best

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October 2, 2007 ABIA Insurance News Continued

Life Coverages Panel Co-Chairs: Ellen Murtha, Huntington Insurance and

William Keffer, WHK Consulting The teleconference calls will be held quarterly on the 4th Thursday of the month @ 1:00 p.m. Eastern according to the following schedule:

See you in 2008!

Agency Integration Panel Co-Chairs: Valerie Jordan, The South Financial Group,

and James Bradner, TowneInsurance Agency, Inc.

The teleconference calls will be every other month on the 2nd Monday of the month @ 4:00 p.m. Eastern ac-cording to the following schedule:

October 8: Richard Koll with Invest Financial

Corporation: Integrating a Broker/Dealer to an Insurance Operation

Annuities Panel Co-Chairs: Steve Saltzmann, NorthStar Financial; Ken-

neth Kehrer, LIMRA International The teleconference calls will be every other month on the 3rd Tuesday of the month @ 3:30 p.m. Eastern ac-cording to the following schedule:

Postponed to November 1, 2007 @ 3:30 PM

Compliance Panel Co-Chairs: Cathy McLaughlin, Wachovia Insurance

Services and Andrew Kramer, Bank of America

The teleconference calls will be held quarterly on the 2nd Tuesday of the middle month at @ 2:00 p.m. Eastern according to the following schedule:

See you in 2008!

Community Bankers Panel Co-Chairs: Valerie Teagarden, First United Insurance

Group and Chris Melton, ProfitStars, a Jack Henry Company

The teleconference calls will be held quarterly on the 3rd Thursday of the month @ 11:00 a.m. Eastern according to the following schedule:

See you in 2008!

he ABIA Best Practice Panels are underway again for 2007. Thanks to the Panel Co-Chairs, the

Speakers and the panel members for their hard work and attendance to make these teleconferences successful in 2006. The schedule below is for all of the panel tele-conferences’ for 2007. Mark your calen-

dar and plan to attend a future teleconference of inter-est to you. If you have not already signed up to partici-pate, please contact Mike Polychrones at mpolychr@aba.com and he will add you to the panel(s) of your choice. Don’t miss out on one of the best bene-fits of ABIA membership!!

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October 2, 2007 ABIA Insurance News Continued

RESOURCES Government Relations Contact Kevin McKechnie at kmckechn@aba.com Insurance News Contact Deanne Marino at dmarino@aba.com

Conference Questions? Contact Valerie Barton at vbarton@aba.com ABA Job Bank For more information visit the Job Resume Bank at: http://aba.careerbank.com/default.cfm

Dues and Publications Contact Valerie Barton at vbarton@aba.com ABIA Best Practices Panels Contact: Mike Polychrones at: mpolychr@aba.com

Reinsurance Panel Co-Chairs: Jim Mann, Bank of America Insurance

Group and Jay Votta, Ernst & Young The teleconference calls will be held quarterly on the 2nd Tuesday of the month @ 11:30 a.m. Eastern according to the following schedule:

Postponed

P & C Panel Co-Chairs: Missy Elder, First Horizon Insurance and

Beth Beal, Huntington Insurance Services The teleconference calls will be held every other month on the 3rd Thursday of the month @ 1:00 p.m. Eastern according to the following schedule:

October 18: Brett Rosen with Digital Insurance: Effective Marketing to

Small Business Customers

Credit Insurance and Debt Cancellation Panel Co-Chairs: Bruce Bradley, Life of the South and Diane

Weinberger, Vice President, Comerica Bank The teleconference calls will be held quarterly on the 4th Thursday of the month at 3:00 p.m. Eastern according to the remaining schedule:

See you in 2008!

Direct Marketing Panel Co-Chairs: Thomas Munoz, Allied Solutions/Securian

and Jack Hollingsworth, Regions Insurance Services.

The teleconference calls will be held every other month on the 4th Tuesday of the month @ 3:00 p.m. Eastern according to the remaining schedule:

See you in 2008!

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Contact the ABIA Office for information on how to become a Premier Partner.

October 2, 2007 ABIA Insurance News Continued