Property and Casualty Insurance (C) Committee
Property and Casualty Insurance (C) Committee Page
Joint Executive (EX) / Plenary Committee Summary Report
Winter 2009 Meeting Summaries Index

The Property and Casualty Insurance (C) Committee met Dec. 7, 2009. During this meeting, the Committee:

• Adopted minutes of the Nov. 16 conference call.

• Adopted a recommendation revising Chapter 25 titled “Conducting the Advisory Organization Examination” of the Market Regulation Handbook. The recommendation was proposed by the Advisory Organization Examination Oversight (C) Working Group and referred to the Market Regulation and Consumer Affairs (D) Committee for inclusion in the Market Regulation Handbook.

• Discussed the public policy issues related to regulatory exclusion in D&O policies as the Receivership and Insolvency (E) Task Force requested assistance from the Committee. Certain regulatory exclusions contained in D&O insurance policies pertain to receivers, conservators and liquidators, and the Task Force expressed concern that the use of the exclusionary language would become more common, and potentially hinder the receiver’s ability to exercise and enforce all the rights, remedies and powers of any insured, creditor, shareholder or member. This would result in a limitation of the receiver’s ability to collect all monies due to pay claimants. The Committee is concerned with the practice of D&O insurers including a regulatory exclusion in their policies. The issue is whether the receiver, conservator, liquidator or state guaranty funds should be afforded coverage for acts of directors and officers of an insolvent insurer. There are financial implications for the public and all insurers through their participation in guaranty funds. The Committee agreed to send a notice to every jurisdiction informing them of the issue, as perhaps each jurisdiction may want to disapprove existing forms. In addition, a referral will be made to the Receivership and Insolvency (E) Task Force to consider including language not allowing such exclusions in the Insurers Receivership Model Act.

• Discussed concerns related to the use of credit-based insurance scores. The Committee agreed to conduct a conference call in January and consider a list of questions that will be used for a data call of all companies using credit-based insurance scores in all jurisdictions. The results of the data call will be compiled and considered further as perhaps providing legislatures with information and/or drafting a model law or guideline for jurisdictions that have not yet taken a position on the use of credit-based insurance scores.

• Received an update on the Chinese Drywall Public Hearing held earlier today. There has been exposure from Chinese drywall imported into the United States between 2004 and 2007 causing an impact in property damage and bodily claims. The drywall has been installed in over 100,000 homes in 32 states, and the Consumer Product Safety Commission has recorded nearly 2,100 reports of defects. There are costs to repairing homes, increased health costs, legal fees for the plaintiffs’ lawyers, defense costs and indirect costs. Testimony included:
• David Kodama (Property Casualty Insurers Association of America—PCI), who said insurance companies will continue to review each claim to determine coverage. This is a complicated issue because, although there is correlation from drywall, there is no direct causation from the drywall.
• Amy Bach (United Policyholders), who said the impact includes renters, homeowners, contractors, builders and suppliers. There are widespread stories on issues, and more information needs to be gathered. She said she hopes there will not be a panic situation, even though the potential exists for the overall dollar impact to exceed the hurricanes in 2004 and 2005.
• Charles Miller (Insurance Law Center), who testified that he believes regulators should conduct multi-state examinations of insurers to check that their investigation protocols of the companies are appropriate and to develop a model guideline on the protocols to be followed in investigating Chinese drywall claims.

• Heard a report on takaful insurance, which works on the principle that each participant needing protection must be present with the sincere intention to donate to other participants faced with difficulties. Therefore, Islamic insurance exists where each participant contributes into a fund used to support one another, with each participant contributing sufficient amounts to cover expected claims. The objective of takaful is to pay a defined loss from a defined fund. The principles of takaful insurance are: policyholders cooperate among themselves for their common good; every policyholder pays his subscription to help those that need assistance; losses are divided and liabilities spread according to the community pooling system; uncertainty is eliminated in respect of subscription and compensation; and it does not derive advantage at the cost of others.

• Adopted proposed revisions to the Catastrophe Modeling Handbook as proposed by the Casualty Actuarial and Statistical (C) Task Force.

• Adopted reports of the following task forces and working groups: Casualty Actuarial and Statistical Task Force, Surplus Lines Task Force, Workers’ Compensation Task Force, Advisory Organization Examination Oversight Working Group, Catastrophe Insurance Working Group, Catastrophe Reserve Working Group, Consumer Guides Working Group, Crop Insurance Working Group, Earthquake Study Group, Terrorism Insurance Implementation Working Group, and Title Insurance Issues Working Group.

• Discussed the recent announcement by the Council of Insurance Agents & Brokers (The Council) and LexisNexis forming a partnership to build an insurance exchange. The insurance exchange will automate the insurance intermediary and insurer distribution workflow. Automation will enable access to key market information and analytics for better decision making. The exchange allows brokers to see insurance product availability, pricing and coverage differences from multiple insurance carriers, which thereby enables them to place business that best matches their client needs. The insurance exchange will initially concentrate on commercial lines. All sizes and lines of property/casualty insurance will eventually be supported and other lines of business to be added thereafter. A detailed and formal presentation will be made by The Council at an upcoming national meeting.