OPENING PANEL TACKLES TIMELY TOPICS

Rough Notes, Oct 2004 by Zinkewicz, Phil

Panelists will offer an "outsider's" perspective

Property and casualty underwriting cycles, class action lawsuits, directors and officers liability insurance, the role of regulators and analysts in insurance company collapses, European insurers pulling out of the American insurance market, the changing relationship between reinsurers and primary insurance companies-these controversial subjects could provide fodder for any insurance industry annual meeting. But at next month's annual PLUS international conference, these subjects will be addressed right off the bat at the very first panel discussion. Not only that, but the panel will not consist of insurance chief executive officers as is customary at PLUS annuals. Rather, it will consist of a plaintiff's attorney, a defendant's attorney, a stock analyst, and an insurance regulator-all of whom routinely deal with insurance issues, but all of whom are on the "outside" looking in.

Chosen to moderate the panel, which is titled "Outside Perspectives on the Professional Liability Insurance Industry," and to "fire provocative bombshell questions," as he puts it, is Tom Baker, director of insurance law at the University of Connecticut School of Law. Panel members will be: Gandolfo "Vince" DiBlasi of Sullivan & Cromwell, a defendant's law firm specializing in securities litigation; William Lerach of Lerach, Coughlin, Stoia, Geller, Rudman & Robins, plaintiffs' attorneys; Leandro S. "Pedro" Galban, Jr., analyst for Credit Suisse First Boston; and John Garamendi, insurance commissioner for the state of California.

The first topic on Baker's list to be discussed is insurance industry underwriting cycles. "In the past 15 years, the insurance industry has gone from an incredibly long, soft market, to a hard market, and now we're moving back into a soft market," says Baker. "I want to ask the panel, especially Mr. Garamendi, whether there are any regulatory controls that may be imposed to mitigate the effects of changing market cycles."

Congress has been wrestling with class action reform for some time now. Baker plans to address the subject with gusto. "We have a plaintiffs' lawyer and a defendants' lawyer on the panel. I plan to ask: 'Is the class action lawsuit system out of control, as some say? If so, who is at fault? Are plaintiffs benefiting from the class action system as it was originally intended?' I think all the panelists will have opinions on this subject, but I think Mr. DiBlasi and Mr. Lerach may go head to head."

What's around the corner in the area of D&O? That's another question Baker plans to put to the panel. "We've gone through Enron and all the other corporate scandals that have taken their toll on the D&O market," says Baker. "But what's next? Will there be more scandals, more lawsuits? I think Mr. Lerach might address this issue."

Baker has some questions for Galban as well. "What is the analyst's role in monitoring what companies are doing during different underwriting cycles? What's around the corner for specialty underwriters in the areas of accountants liability, lawyers liability and directors and officers liability? What drives the loss costs? Were analysts taken by surprise when Kemper closed its doors? That question would also apply to John Garamendi. Were regulators taken by surprise in the Kemper situation?"

In the last year or so, European insurers with stakes in the United States market have been pulling up those stakes and concentrating on their own home markets. Baker says that Galban might be interested in examining this phenomenon. "Did European insurers over-extend themselves when they came into the US. market?" asks Baker. "Are they making a mistake in pulling out now?"

There was a time when reinsurers overseas and U.S. primary insurers shared a symbiotic relationship. However, since 9/11, the relationship between reinsurers and primary insurers has become more antagonistic. "Primary insurers say that reinsurers are playing hard ball and refusing to pay some claims," says Baker. "On the other hand, reinsurers say that primary insurers tend to stay with their reinsurers during soft market years and then, when the market hardens, they 'run off to Bermuda.' Which is the correct scenario? I want to ask all the panelists about this situation."

Baker says that the format for the panel will consist of each panelist being introduced and then being given a couple of minutes to make an opening statement. After those statements, Baker will begin firing these as well as other probing questions. "I don't want us all to be a bunch of talking heads' up there. The questions I have will be provocative and I hope that the questions from the audience will be so as well."

Phil Zinkewicz is the author of the articles appearing on pages 86 through 103.

He is an insurance journalist with some 25 years' experience covering the international insurance and reinsurance arenas. Phil was the insurance editor of the Journal of Commerce for a number of years, handling all their domestic and international supplements. In addition, he regularly writes for a number of London publications.