A summary of the Lloyd’s and Equitas insurance expertise of Bill Hager. In this document, I (i) first provide a brief background to Lloyd’s (Section I. Lloyd’s: A Brief Background), then (ii) a discussion of Equitas (Section II. Equitas), a facility created in the 1990s to deal primarily with Lloyd’s U.S. asbestos exposure, (iii) then I set forth my expertise as to Lloyd’s.
I. Lloyd’s: A Brief Background.
Lloyd’s is not an insurance company. It is an insurance market of members. As the oldest continuously active insurance marketplace in the world, Lloyd’s has retained some unusual structures and practices that differ from all other insurance providers.
Originally created as an unincorporated association of subscribing members in 1774 it was incorporated by the Lloyd’s Act 1871, and is currently governed under the Lloyd’s Acts of 1871 through to 1982.
Lloyd’s itself does not underwrite insurance business, leaving that to its members (see below). Instead the Society operates effectively as a market regulator, setting rules under which members operate and offering centralized administrative services to those members.
An Act of the British Parliament, the Lloyd’s Act of 1982, defines the management structure and rules under which the British insurance market Lloyd’s of London operates. Under the Act, the Council of Lloyd’s is responsible for the management and supervision of the market. It is regulated by the Financial Services Authority (“FSA”) under the Financial Service and Markets Act.
There are two classes of people and firms active at Lloyd’s. The first are members or providers of capital, the second are agents, brokers, and other professionals who support the members, underwrite the risks, and represent outside customers (for example, individuals and companies seeking insurance, or insurance companies seeking reinsurance).
For most of Lloyd’s history, wealthy individuals (referred to as “Names”) backed policies written at Lloyd’s with all of their personal wealth. Since 1994, Lloyd’s has allowed corporate members into the market, with limited liability. The losses in the early 1990s devastated the finances of many Names (about 5% of the Names were declared bankrupt).
Names. Today, individual Names provide only 10% of capacity at Lloyd’s, with corporations accounting for the rest. No new Names with unlimited liability are admitted, and the importance of individual Names will continue to decline as they slowly withdraw, convert (generally, now, into Limited Liability Partnerships) or die.
Managing Agents. Managing agents sponsor and manage syndicates. They canvas members for commitments of capacity, create the syndicate, hire underwriters, and oversee all of the syndicate’s activities. Managing agents may run more than one syndicate.
Member Agents. Members’ agents coordinate the members’ underwriting, and act as a buffer between Lloyd’s, the managing agents and the members. They were introduced in the mid 1970s and grew in number until many went bankrupt. Many of the businesses merged, and there are now only four left (Argenta, Hampden, Alpha and LMAS (which has no active names)). It is mandatory that unlimited Names write through a members’ agent, and many limited liability members choose to do so as well.
Lloyd’s Brokers. Outsiders, whether individuals or other insurance companies, cannot do business directly with Lloyd’s syndicates. They must hire Lloyd’s brokers, who are the only customer-facing companies at Lloyd’s. They are therefore often referred to as ‘intermediaries’. Lloyd’s brokers shop customers’ policies among the syndicates, trying to obtain the best prices and terms.
Integrated Lloyd’s Vehicles (“ILVs”). When corporations became admitted as Lloyd’s members, they generally disliked the traditional structure. Insurance companies did not want to rely on the underwriting skills of syndicates they did not control, so they started their own.
An integrated Lloyd’s vehicle is a group of companies that combines a corporate member, a managing agent, and a syndicate under common ownership. Some ILVs allow minority contributions from other members, but most now try to operate on an exclusive basis.
Types of Policies. Lloyd’s syndicates write a diverse range of policies, both direct insurance and reinsurance, covering property, auto, liability, marine, aviation, catastrophe and many other risks. Lloyd’s has a unique niche in unusual, specialist business such as kidnap and ransom insurance, fine art insurance, aviation insurance and marine.
The general public knows Lloyd’s for some unusual policies it has written. Lloyd’s has insured the following:
- Silent film comedian Ben Turpin’s eyes against uncrossing;
- Betty Grable’s legs;
- Jimmy Durante’s nose;
- Celine Dion’s vocal cords;
- Tempest Storm’s breasts;
- various wrestler’s lives including Joe Laurinaitits, better known as the Road Warrior Animal
Along these same lines, Lloyd’s has been involved with Virgin Galactic in regard to insurance for spaceflights.
II. Equitas/ Lloyd’s.
“Equitas” is the general label given to a group of companies linked to Lloyd’s of London. In particular, Equitas was established in 1996 to reinsure non-life liabilities that had accumulated in the Lloyd’s syndicates on policies written from the 1930s through 1992. (1)
This business was reinsured by Equitas Reinsurance Limited (“Equitas Reinsurance”), which was also appointed to run off the related underlying books of business, with the liabilities retrocede to Equitas Reinsurance.
The Equitas proposal was accepted by 90% of the 34,000 “Names” who under-wrote policies at Lloyd’s during the stated period of time and it became mandatory for all members to reinsure their related liabilities into Equitas. At its start, Equitas had significant liabilities which were projected to take up to 40 years to settle.
Equitas also had assets exceeding its liabilities, making it one of the largest start-up companies (2) of its time. Under its governing provisions, Equitas writes no new business; it is simply structured to run off the underlying liabilities. Equitas is run by a board of directors and is owned by trustees who hold the shares on behalf of the Names who reinsured their liabilities into Equitas.
Equitas has made clear that its assets are adequate to pay its liabilities. Indeed, in March of 2007, for example, National Indemnity Company (one of Warren Buffet’s insurers) provided an additional $7bn of reinsurance to Equitas, with the transaction approved by UK and US regulators. National Indemnity took over the staff and the running of Equitas, together with all its assets and liabilities, effective April, 2007 and Equitas was renamed Resolute Management Services Limited (“RMSL”). The transaction included £90m contributed by Lloyd’s with the transaction calling for a small distribution to all reinsured Names.
The effect of all of this is that Equitas was transformed when it entered into the agreement referenced under which National Indemnity Company, a member of the Berkshire Hathaway group of companies, reinsured Equitas’ liabilities and another member of the Berkshire Hathaway group, Resolute Management Services Limited, took over responsibility for the run-off. As stated, this first phase of this transaction was completed in March 2007.
The second phase of the transaction was completed when the High Court made an order in June of 2009 approving the transfer under Part VII of the Financial Services & Markets Act 2000 of the 1992 and prior non-life business of members and former members of Lloyd’s to Equitas Insurance Limited.
The transfer covers all the business reinsured by Equitas at the time of Reconstruction and Renewal in 1996, and includes the PCW syndicates’ business reinsured by Lion cover Insurance Company Limited and the Warrior syndicates’ business reinsured by Centre write Limited.
The transfer took effect at the end of June 2009, and means that Names are no longer liable for their 1992 and prior years’ underwriting liabilities at Lloyd’s as a matter of UK law.
Equitas continues to be responsible for ensuring that the run-off is managed in the best interests of Names, consistent with their obligations to policyholders. Equitas does not, however, manage claims. Any claims related matters today are handled by RMSL.
Equitas creation followed a time of significant turmoil in the Lloyd’s marketplace during the late 1980’s and early 1990’s. A surge of losses, particularly U.S. asbestos and pollution losses threatened the solvency of many syndicates. Indeed, U.S. regulators and insureds questioned the solvency of Lloyd’s. To deal with these issues, the leadership of Lloyd’s formed Equitas.
The reinsurance contract used to establish Equitas is known as the Reinsurance and Run-Off Contract (“Contract”) and runs in excess of 100 pages. The Contract (i) indemnified the Names for liabilities under insurance policies and reinsurance contracts (Part 1 § 3.1), (ii) but did not affect the liability of the Names to their clients (Recitals J) and (iii) did not create any rights on behalf of third parties (Part 1 § 3.7); (iv) in addition, the Contract provided for proportionate payment of claims should Equitas have insufficient assets to pay all claims (Schedule 3); (v) the Contract granted full authority to Equitas to manage claims and related services (Part II § 9.2), including the authority to (1) negotiate, contest and settle claims with cements, insureds and claimants; (2) hire and fire adjusters, attorneys and consultants; (3) pursue subrogation and salvage; (4) enter into commutations and other market arrangements; and (5) collect and apply reinsurance.
III. Specific Expertise of Hager
1. Expertise As to Lloyd’s Policies.
A. Lloyd’s Policy Expertise as an Insurance Regulator. I have had extensive and substantive experience relating directly to Lloyd’s policies (inclusive of reinsurance policies) inclusive of the entire range of Lloyd’s policies discussed above including commercial general liability (sometimes, “CGL”) policies including interpreting policy language and determining the insurer’s obligations under such policies. As a regulator for eight years in three positions ((i) Assistant Attorney General assigned to the Department of Insurance (Iowa), (ii) First Deputy Commissioner of Insurance and (iii) Commissioner of Insurance), along with my staff, I approved (or disapproved) of the language of Lloyd’s insurance policies. This regulatory action also included the approval of most all policy application forms and policy forms themselves in use today by Lloyd’s. In addition, I regularly served as an Administrative Law Judge (3) in matters relating directly to Lloyd’s insurance policies.
B. Lloyd’s Insurance Policy Expertise: NAIC. While Commissioner, I also served as a member of the National Association of Insurance Commissioners (“NAIC”), (including membership on its Executive Committee), the nationwide organization of all state insurance commissioners. That organization has responsibilities for establishing model insurance administrative regulations and model statutes for consideration by all of the states. While with the NAIC, I served among others as:
- Chair of the Midwest Zone. I was elected to this position by my fellow Insurance Commissioners from this zone (composed of the Midwest states) to provide leadership before the balance of the states.
- Member of the Executive Committee. As a member of the Executive Committee, in effect the steering committee of the NAIC, I provided leadership organization wide. The Executive Committee had direct oversight over the Property Casualty Committee.
- Member, Commercial Lines Committee. This Committee exercised national oversight over the functioning of commercial lines insurance.
C. Lloyd’s Insurance Policy Expertise: American Academy of Actuaries. Along these same lines, I served as general counsel and chief lobbyist to the American Academy of Actuaries, Washington D.C. The Academy is the national professional association for actuaries. These professionals establish premium levels for policies. In addition, because policy language dictates premium levels, actuaries are also active in determining policy language.
D. Lloyd’s Insurance Policy Expertise: CEO of A Major US Insurance Entity. After serving as a regulator, I served as President and Chief Executive Officer for the National Council on Compensation Insurance (“NCCI”), New York City, a nationwide industry owned organization with about 1,500 employees with annual revenues of about $150 million that did (and does) business in about 40 states. NCCI was domiciled in Florida and did business throughout most of the United States.
This means while CEO, NCCI was subject to the full authority of the various state departments of insurance (“DOIs”) as well as the state and federal courts of each of these states.
Among my responsibilities at NCCI was (together with my staff) to formulate all workers compensation insurance policy forms as used in our 40 states of operation. This work included drafting all policy language (tailored to the specific state’s insurance code) as well as drafting all endorsements and all other policy forms. In addition, my responsibilities included gaining state insurance department approval of all such policy forms as a condition precedent to their use as submitted by some 600 insurance companies. I am very familiar with the meaning and relevance of specific state approval of policy forms, endorsements and applications and related documents and matters.
E. Lloyd’s Expertise: Reinsurance Arbitrator. I am also one of about 200 certified reinsurance arbitrators (by ARIAS-US) and have sat as an arbitrator on commercial general liability insurance issues in disputes about policy language between reinsurers, such as those at Lloyd’s and their insurers.
2. Expertise as to Duties of Lloyd’s, Including Claim Settlement Obligations.
A. Expertise as to Claim Settlement Duties of Lloyd’s Entities As Commissioner of Insurance. I have also had significant experience and responsibility in connection with determining and passing judgment on insurers’ (like Lloyd’s) responsibilities as to insurer’s claim settlement duties such as those involved here. In particular, in my three regulatory positions previously described, I had daily responsibility to assure and to hold accountable all of the state’s 1,000 property casualty insurers for their related obligations, inclusive of claim settlement obligations relating to all policies. I did so through a series of action steps and tools. The action steps and tools included the following:
1. Unfair Claims Settlement Act: Lloyd Policies. Like most every other state, Iowa enacted the model NAIC Unfair Claims Settlement Practices Act (“UCSA”) which set forth standards against which the Insurance Commissioner could pass judgment on a property and casualty insurer’s claims settlement practices. As Commissioner and as First Deputy and earlier as Assistant Attorney General assigned to the Department, I had daily responsibility to enforce this act and assure all insurance companies were in compliance with the act. That was the same act as adopted in most every other state in substantially similar form and enforced on regular basis by the DOIs.
2. NAIC Market Regulation Handbook: Lloyd Policies. In addition to the standards set out in the UCSA, as Commissioner, I had as an available tool, the NAIC Market Regulation Handbook (“Examiners Handbook” or “Handbook”). This Handbook sets forth standards to assess insurance agent and insurer claim settlement behavior and is used by every department of insurance in the United States. The standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC. The claim settlement standards of the Handbook are universally recognized as appropriate standards against which to judge insurer claim behavior.
3. Market Conduct Examination: Lloyd Policies. On a regular basis, my agency conducted Market Conduct Examinations of property insurers utilizing the Examiners Handbook to determine whether in fact the target insurer was meeting all of their claim settlement obligations. This action entailed physically going into the insurers claim operations and studying claim files to determine any errant action or inappropriate claim settlement behavior. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.
4. NAIC Financial Examiners Handbook. As Commissioner, I had available another tool, namely the NAIC Financial Examiners Handbook (“Financial Examiners Handbook”). Among other things, the Financial Examiners Handbook sets forth standards to assess property casualty insurer solvency (including that of Lloyd entities) on a triennial basis. Among other documents reviewed by examiners in reaching financial conclusions are agent contracts and policyholder matters. As with the Market Conduct Examiners Handbook, the Financial Examiners Handbook is used by every department of insurance in the United States. Similarly, these standards have been universally agreed to by all of the nation’s Commissioners of Insurance as adopted formally by them through the NAIC. The standards of the Financial Examiners Handbook are universally recognized as appropriate standards against which to judge property casualty insurer behavior.
5. Financial Examinations. On a regular basis, my Department conducted financial examinations of property casualty insurers utilizing the Financial Examiners Handbook to determine whether in fact the insurer was and was likely to remain solvent. As with market conduct exams, financial examinations entailed physically going into the insurers’ operations and studying, among others, files to (i) assure compliance with agent and policyholder duties and (ii) to assure that financial reporting as to agent and policyholder matters were properly carried out. As further discussed below, errant insurers were warned, disciplined and prosecuted as required.
6. Complaints From the Public: Lloyds Policies. On a daily basis, my Department received incoming consumer complaints as to insurance company claim settlement practices. This division was staffed by Department lawyers who resolved the individual complaint but equally important, those lawyers also determined whether an insurer evidenced unacceptable claim settlement practices. That is to say, staff lawyers determined whether the incoming consumer complaints in fact constituted a red flag as to the insurance company’s potential behavior across the board.
7. Prosecution. To the extent insurer behavior required formal action (whether a result of complaints from the public or a result of Department investigation through a Market Conduct Examination), my Department prosecuted such insurers under the state’s civil Administrative Procedures Act. In connection with such prosecutions, I served in various capacities during my eight years as a regulator as (i) prosecutor (as Assistant Attorney General), (ii) as the decision maker as to whether to initiate prosecution in the first instance and (iii) as the Administrative Law Judge (“ALJ”) (4) who presided over the prosecution and defense of the case and entered findings of fact and conclusions of law as to insurer claim settlement practices. I have served as an ALJ in scores of such cases where the insurer’s claim settlement practices in property claim settlement matters were the primary issue and entered final decisions in such matters.
B. Expertise as to Claim Settlement Duties of Insurance Companies Inclusive of Lloyd’s From the Perspective of an Industry Executive. In addition to my experience as a regulator, as reflected above, I have had specific industry experience (in other positions) as to insurer claim settlement practices. Some of those positions included the following:
1. CEO of a Major US Insurance Organization, Regulated Throughout the US; Domiciled in Florida; President and Chief Executive Office of the National Council on Compensation Insurance (NCCI; Boca Raton, Florida), 1990 – 1998. I referenced above, under policy expertise, my experience at NCCI. In addition to exposure as to insurance policy forms, this same NCCI experience also provided significant background as to insurer claim settlement obligations.
NCCI: Claim Settlement. In addition, NCCI had a vested interest in member insurer claim practices in that the industry’s reputation for fair underwriting and claim settlement practices ultimately impacted regulatory attitudes toward NCCI’s premium approval process.
NCCI: Industry Standards of Practice. While President and CEO of NCCI, I visited and physically toured and reviewed in excess of 400 insurance companies including Lloyd entities and gained direct exposure to the procedures and processes and standard industry practices of the U.S. insurance community and its claim settlement practices. I have had extensive exposure to insurer practices and procedures.
2. General Counsel and Director of Government Relations to the American Academy of Actuaries (Washington, D.C.), 1980 – 1983. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries, including advising on admissions, discipline, federal antitrust and general corporate law. I represented the 10,000 member professional organization before Congress (e.g., Senate Committees on Banking, Commerce, Finance and Labor, and House committees on Education, Labor, Energy, and Ways and Means) and the various federal regulatory agencies.
Academy and Lloyd’s. The Academy is the professional organization of actuaries and includes qualified actuaries from all disciplines and all forms of insurers, including Lloyd entities. Academy members included affiliation with virtually every property insurance company in America. Such actuaries had duties relating to policy language and policy pricing. The Academy’s Board of Directors was likewise made up of leading insurance company executives from such companies, including Lloyd entities.
3. Attorney in Private Practice: Lloyd’s. As an attorney in private practice, I represented a number of agent and insurer interests including those of Lloyd’s and became familiar with applicable regulatory and industry claim settlement standards of practice. Those interests included the position of Iowa Counsel to the Property Casualty Insurance Association of America (“PCIAA”). Those interests also included intimate involvement with commercial property insurance, as counsel to the:
- Professional Insurance Agents of Iowa (property casualty insurance agents, including the sale of Lloyd policies);
- Iowa Association of Life Underwriters (life, health and annuity insurance agents); and
- The Property Casualty Insurers Association of America (“PCIAA”); I served as Iowa Counsel to this trade group, the trade association of smaller stock property casualty insurers, most of whom sold CGL policies.
Specific duties as counsel at both the Professional Insurance Agents of Iowa (who sold, among other coverages, Lloyd coverages) and the Iowa Association of Life Underwriters (life, health and annuity insurance agents) and the PCIAA included in-depth familiarity with insurers, their agents and their claim settlement practices. Specific duties at the PCIAA included daily counsel to member insurers as to their claim settlement duties.
C. Expertise As to Lloyd’s Managing Agents, Member Agents, Brokers and Integrated Lloyd’s Vehicles.
1. Expertise as to Lloyd Intermediaries as a Regulator: Licensure. I have had extensive and substantive experience relating directly to the duty of care that comes to bear on Lloyd’s Managing Agents, Member Agents and Brokers (collectively: Lloyd’s Intermediaries) in their various relationships. As an Assistant Attorney General (see above), I have prosecuted property Lloyd Intermediaries for violations relating to their duty of care. As an insurance regulator (see above), along with my staff, I have screened thousands of agents for character and background (separate and apart from subject matter testing). As to subject matter, I have formulated agent-licensing exams in the first instance. Upon passage of the exam, I have licensed hundreds of thousands of insurance agents.
2. Expertise as to Lloyd’s Intermediaries0 as a Regulator: Prosecution and CE. I have had full responsibility for continuing education for licensed (as required) Lloyd’s Intermediaries (approving CE courses in the first instance for acceptable content; overseeing the administration of such courses and granting and denying credit for such courses). I have initiated agent revocation actions and prosecuted those actions to completion.
3. Expertise as to Lloyd’s Intermediaries as a Regulator: ALJ. I have sat as the Administrative Law Judge in such actions and entered findings of facts and conclusions of law in a number of cases in which agents were prosecuted for violations relating to standards of care in connection with property casualty insurance matters and I have had direct responsibility for the appointment process by property casualty insurance companies (some 1,000 property casualty insurance companies) of all of their property casualty agents. I have supervised as well the ongoing relationship of all property casualty insurance companies in the state with all of their appointed agents.
4. Expertise as to Lloyd Intermediaries: Legal Representation. As a lawyer, I have defended Lloyd Intermediaries against allegations (in administrative law forums) of violations of their duty of care.
5. Expertise as to Lloyd Intermediaries: Industry CEO. As President and Chief Executive Officer of a major Florida domiciled and licensed insurance entity (NCCI) doing business in some 40 states, I have had substantial working relationships with the U.S. insurance agent and agency community, including Lloyd’s Intermediaries.
IV. Additional Lloyd’s Expertise
A. Formal Education.
1.Bachelors Degree in Mathematics. I hold a bachelors degree in secondary mathematics education from the University of Northern Iowa;
2. Masters Degree in Psychology. I hold a masters degree in educational psychology from the University of Hawaii; and
3. Juris Doctor’s Degree. I hold a J.D. degree from the University of Illinois.
B. Licensure and Certification.
4. Certified Reinsurance Arbitrator: Lloyd’s. I am certified by ARIAS as one of about 400 U.S. certified reinsurance arbitrators and routinely sit on cases with Lloyd’s entities as a party to the arbitration;
5. Admitted to Practice Law. I am licensed and admitted to practice law upon examination in the states of Iowa, Illinois (inactive) and Florida; and
6. Admitted to Practice before the U.S. Supreme Court. I am also admitted to practice before the U.S. Supreme Court.
C. Insurance Expert.
7. Expert Witness: I have served as an expert witness in several cases throughout the U.S. and have been qualified at trial as an expert witness in more than 20 states.
Expert Witness: Lloyd’s Cases. I have testified as an expert a number of times in cases in which Lloyd’s was either a plaintiff or defendant.
8. Insurance Consultant to the U.S. Attorney. By way of example of my various assignments, I have been retained by the U.S. Attorney, the Middle District of Florida, as an insurance consultant in a complex civil insurance matter.
9. Insurance Consultant to the U.S. Department of Justice. Similarly, I have also been retained by the U.S. Department of Justice as an insurance consultant in a complex insurance case relating to insurer solvency.
Air Force: CGL Expert. In addition, I have been the Air Force’s lead insurance expert in a complex CGL case relating to California rocket manufacturer’s exposure relating back to the 1960s.
10. Expert Witness: on Behalf of Various Departments of Insurance. I have also been retained as an expert witness by the: (i) Florida Department of Insurance and testified on their behalf in Florida both in state and federal court, and (ii) the Arizona Department of Insurance and testified on their behalf. Along these same lines, I have testified as an expert before the following Departments of Insurance: Florida (5), South Dakota, Nevada, Texas and Oklahoma.
D. Industry Background: Reinsurance Arbitrator.
12. Reinsurance Arbitrator: Lloyd’s Cases. November 2003 to Present. My background includes extensive exposure to the various reinsurance mechanisms and relationships. Along these same lines and as indicated above, I am a certified ARIAS-US reinsurance arbitrator (see immediately below) and have sat as an arbitrator in cases between CGL insurers and their reinsurers. Similarly, I have sat as an arbitrator in connection with cases in which Lloyd’s entities were either the moving or responding party. The relevance of this experience is that reinsurers have substantial influence on the claim standards of insurers.
As of November 2003, I was certified by AIDA Reinsurance and Insurance Arbitration Society, United States (“ARIAS-US”) as an arbitrator for reinsurance and insurance matters. Today, there are about 200 individuals so certified by ARIAS in the United States.
ARIAS-US certifies knowledgeable and reputable professionals for service as panel members in reinsurance and insurance arbitration matters. The organization’s criteria for certification are as follows:
- 10 years of significant specialization in the insurance/reinsurance industry;
- Arbitration experience – must have completed appropriate credited ARIAS seminars;
- A member in good standing of ARIAS-US;
- Appropriate endorsement from existing members.
13. CEO of a Major US Insurance Organization; Regulated Throughout the U.S.: President and Chief Executive Office of the National Council on Compensation Insurance (NCCI; New York City, 1990 – 1998). NCCI is one of the larger and more pervasive U.S. insurance organizations. During my tenure as President and CEO, NCCI had (and continues to have) responsibility to accurately price and file pricing for some $12 - $15 billion of workers compensation insurance in 39 states throughout the U.S. NCCI prepared proposed premium filings for regulators to approve by extracting key data from its 600 member insurance companies and then used that data to project necessary premium changes. NCCI accomplished this mission through some 1,000 employees of which approximately 600 were professionals, and had an annual revenues of $140 million.
Insurance Program: Lloyd’s. As CEO, I had daily exposure and responsibilities to the U.S. workers compensation program as administered by the various states, which constitutes one of the largest property casualty insurance programs in the world with some 100 million worker lives insured (in addition, of course, other important coverages are provided through workers compensation, most notably life insurance, wage replacement and medical coverage). The same insurers who issue CGL policies likely also issue workers compensation policies. In addition, Lloyd’s is instrumental in the U.S. Workers Compensation marketplace in various ways including that of reinsuring such risks.
Claim Settlement Practices: Lloyd’s. In addition, NCCI had a vested interest in member insurer underwriting and claim practices in that the industry’s reputation for fair underwriting and claim settlement practices ultimately impacted regulatory attitudes toward NCCI’s premium approval process.
Industry Standards of Practice: Lloyd’s. While President and CEO of NCCI, I visited and physically toured and reviewed in excess of 400 insurance companies and gained direct exposure to the procedures and processes and standard industry practices of the U.S. insurance community and its underwriting and claim settlement practices. I have had extensive exposure to insurer practices and procedures. I have also visited Lloyd’s of London.
Familiar with the Regulatory Scheme that Oversees Lloyd’s. While CEO of NCCI, it was (and remains) domiciled in Florida and licensed in some 40 or so states to do business. In that capacity, my company, NCCI, was subject to licensure by the various state DOIs and was subject as well to the regulatory scrutiny of those DOIs as well as being subject to all applicable provisions of those 40 state Insurance Codes. NCCI was also subject to state and federal jurisdiction in all such states. As such, I am familiar with the regulatory and statutory scheme that is brought to bear on insurance matters and more specifically the statutory scheme that comes to bear on Lloyd’s in the various states.
14. General Counsel and Director of Government Relations to the American Academy of Actuaries (Washington D.C.), 1980 – 1983. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries, including advising on admissions, discipline, and federal antitrust and general corporate law. I represented the 10,000 member professional organization before Congress (e.g., Senate Committees on Banking, Commerce, Finance and Labor, and House committees on Education, Labor, Energy, and Ways and Means) and the various federal regulatory agencies.
Lloyd’s. The Academy is the professional organization of actuaries and includes qualified actuaries from all disciplines and all forms of insurers. Academy members included affiliation with virtually every insurance company in America, including many such insurers that have extensive relationships with Lloyd’s. The Academy’s Board of Directors was likewise made up of leading insurance company executives from such companies. Any number of actuaries of the American Academy of Actuaries have significant relationships with Lloyd’s including that of direct and indirect employment.
15. Risk Metrics Corporation. I co-founded this Florida based information company in 1998. Risk Metrics (including Datalister, Inc.) gathers and sells public data relating to workers compensation to a wide range of insurance oriented customers, including insurance agents. I sold my interest in this corporation several years ago.
16. Attorney in Private Practice. As an attorney in private practice, I represented a number of agent and insurer interests and became familiar with applicable regulatory and industry standards of practice. Those interests included the position of Iowa Counsel to the Property Casualty Insurers Association of America (“PCIAA”).
Lloyd’s and Insurance Issues. Those interests also included intimate involvement with CGL insurance, as counsel to the:
- Professional Insurance Agents of Iowa and
- Iowa Association of Life Underwriters (life, health and annuity insurance agents).
Specific duties as counsel at both the Professional Insurance Agents of Iowa (who sold, among other coverages, commercial property insurance and other Lloyd’s related coverages) and the Iowa Association of Life Underwriters (life, health and annuity insurance agents) included in-depth familiarity with property insurers, their agents and their claim settlement practices. In addition, as counsel to the PCIAA, I was involved on a daily basis with members of this association. Members are smaller property casualty stock insurers, many of whom have intense relationships with Lloyd’s.
17. Commissioner of Insurance, Iowa 1986 – 1990. As Insurance Commissioner appointed by Governor Terry Branstad in July 1986, I was responsible for the regulatory oversight of all insurance companies, agents and brokers authorized to conduct business in the state of Iowa. My agency was responsible for solvency oversight, insurance company examinations, financial and accounting matters of insurance companies, consumer protection, agent and broker licensing, and oversight of commercial property insurance company practices, including claim settlement practices. In particular, that oversight included the responsibility of overseeing practices of commercial property insurer claim settlement practices. In addition, I oversaw the state regulation of the securities industry with Iowa’s Superintendent of Securities reporting directly to me.
Regulatory Oversight: Lloyd’s Insurer Practices. In addition, as Insurance Commissioner, my responsibilities included oversight over the education, licensing, discipline and general supervision of all insurance companies in the state inclusive of all Lloyd’s related entities. I am very familiar with the responsibilities and applicable obligations that come to bear upon Lloyd’s insurance companies and syndicates.
Regulatory Oversight: Lloyd’s Insurance Claims Settlement. As Insurance Commissioner, I also had day-to-day responsibility to assure that all underwriting and claim settlement practices carried out by insurance companies doing business in the state, inclusive all Lloyd’s entities, met their duties, obligations and statutory and regulatory responsibilities as they underwrote policies and settled cases.
Financial Examination of Lloyd’s Insurance Companies. As Insurance Commissioner, I directed and oversaw the examination of all insurance companies authorized to do business in the State of Iowa. Those examinations included focus on both financial matters (so called triennial examinations of insurers – of which well over 100 such examinations were conducted while I was Commissioner) and examinations of specific complaints about insurers (so called Market Conduct Examinations - well over 50 such exams were conducted while I was Commissioner).
Market Conduct Examinations of Lloyd’s Insurer Claim Settlement Practices. Market Conduct Examinations focused on marketplace issues, specifically examining Lloyd’s insurance companies as to compliance with their claim settlement practices. Concurrent with such exams, I personally reviewed and approved the final Examination Reports before they were issued. In addition, in many of these instances, I visited the subject insurer before the Examination Report was issued, including walking the floors of such insurance companies – reviewing their effected operations first hand.
Prosecution of Insurance Companies and Lloyd’s Entities. As Insurance Commissioner, I employed a full time team of lawyers who fielded consumer complaints relating to all areas of insurance company operations including Lloyd’s. Indeed, many of these complaints, as well as results of Market Conduct Examinations, resulted in formal action under the state’s Administrative Procedures Act. From time to time, I served as the Hearing Officer as to such matters.
Major Insurance State. Iowa has about 1,000 authorized property and casualty insurance companies, many of whom write Lloyd’s related insurance and an unusually large number of domestic insurance companies and as such, insurance regulation in that state is a serious job.
Familiarity with U.S. Lloyd’s Insurance Regulation. As Insurance Commissioner in Iowa with interaction with all Commissioners of Insurance throughout the U.S. as a member of the NAIC with frequent interaction with all such regulators and as CEO of NCCI, which was licensed and actively doing business as a major property casualty company in most of the states of the U.S. I am familiar with the regulatory scheme in place in the various states as to Lloyd’s.
Familiar with Lloyd’s. All of this experience underscores my Lloyd’s background and grounding to enter the expert opinions entered here.
18. National Association of Insurance Commissioners (NAIC), 1986 – 1990. Concurrent with my service as Iowa Insurance Commissioner, I served as a member of the NAIC. The NAIC is an organization of the Insurance Commissioners of all 50 states and meets quarterly in locations throughout the U.S. to consider and evaluate national insurance issues. Further, the organization is professionally staffed with more than one hundred personnel. The organization is based in Kansas City, Missouri. The NAIC considers all major insurance issues and then promulgates model insurance laws and regulations, which are then routinely (but optionally) adopted at the individual state level.
NAIC Chairmanships – Chairman of the Midwest Zone. I was elected by my fellow Insurance Commissioners from the Midwest Zone (composed of the Midwest states, constituting about one quarter of all of the states) to provide leadership and representation of the Midwest before the balance of the states. This position included a position on the Executive Committee of the NAIC as well as major responsibilities relating to the assignment of states (and their related examiners) to specific examinations, both triennial and Market Conduct.
NAIC Leadership: Member of the Executive Committee: Lloyd’s. I also served as an elected member of the Executive Committee of the NAIC, the body that served as the steering committee of the organization, providing leadership between full membership meetings and providing recommendations to the full membership as to complex or politically charged issues within the organization. It represented all of the states in its decision making processes including that of national authority over Lloyd’s policies and Lloyd’s operations.
Other NAIC Chairmanships: I also served in a number of NAIC capacities including Chairman of the Financial Services and Insurance Regulation Task Force.
Member: Commercial Lines Committee: CGL Policies: Lloyd’s. Among the many committees, I chaired or was a member of, was the Commercial Lines Committee, which had responsibility to set national policy with respect to commercial lines insurers and their products such as CGL insurance and Lloyd’s. Lloyd’s is a major player in the U.S. CGL marketplace.
In addition, my service on the following NAIC Committees was also helpful in this regard:
- Member, the Blanks Committee
- Member, Guarantee Fund Committee
- Member, Rehabilitator and Liquidators Committee
- Member, Casualty Actuarial Committee
- Member, Commercial Lines Committee
- Member, Valuation of Securities Committee
- Member, International Insurance Relations Committee
- Member, Accounting Practices and Procedures Committee and
- Member, State and Federal Legislative Committee.
NAIC Chairmanships – Chair of the Life Insurance Committee: Underwriting Issues. As a member of the NAIC, I served as both Vice Chairman and Chairman of the NAIC Life Insurance Committee. The charge of this Committee was oversight over all issues relating to life insurance products (including illustrations) as well as commercial CGL insurers, including practices such as underwriting.
NAIC Chairmanships: Chair of the Universal Life Insurance Task Force. In addition to chairing the Life Insurance Committee, I also chaired the Universal Commercial CGL Insurance Task Force.
NAIC Chairmanships: Chair of the Life Insurance Product Development Task Force. I also chaired the Life Insurance Product Development Task Force. While chairman of this task force, I led the development of model disclosure statements for universal and indeterminate premium life products designed to assist consumers in their comparison of different types of interest sensitive life insurance products.
Ongoing Regulatory Involvement. In the years since leaving the regulatory ranks, I have continued to be closely involved with the NAIC and the regulatory community. As President and CEO of NCCI, I was in regular attendance at meetings of the NAIC and continue to attend these meetings and to be actively engaged with the regulatory process. Included in this attendance were my observations at the NAIC of the regulation of the commercial CGL industry.
19. First Deputy Commissioner of Insurance, Iowa 1976 – 1978. As First Deputy Insurance Commissioner, I was responsible for the regulatory oversight of all insurance companies, agents and brokers authorized to conduct business in the state of Iowa. I was responsible for solvency oversight, insurance company examinations, financial and accounting matters of insurance companies, consumer protection, agent and broker licensing, and oversight of Lloyd’s insurance entity practices, including claim settlement practices. In particular, that oversight included the responsibility of overseeing Lloyd’s claim settlement practices.
Regulatory Oversight: Lloyd’s: Insurer Practices. In addition, as First Deputy Insurance Commissioner, my responsibilities included oversight over the education, licensing, discipline and general supervision of all Lloyd’s entities in the state. I am very familiar with the responsibilities and applicable obligations that come to bear upon Lloyd’s.
Regulatory Oversight: Lloyd’s Insurance Claims Handling. As First Deputy Insurance Commissioner, I also had day-to-day responsibility to assure that all claim settlement practices carried out by Lloyd’s insurance entities doing business in the state met their duties, obligations and statutory and regulatory responsibilities as they settled cases.
Financial Examination of Lloyd’s Insurance Entities. As First Deputy Insurance Commissioner, I directed and oversaw the examination of all insurance companies authorized to do business in the State of Iowa, including Lloyd’s insurance entities. Those examinations included focus on both financial matters (so called triennial examinations of insurers – of which well over 50 such examinations were conducted while I was First Deputy Insurance Commissioner) and examinations of specific complaints about insurers (so called Market Conduct Examinations - well over 50 such exams were conducted while I was First Deputy Insurance Commissioner; see the discussion that follows).
Market Conduct Examinations of Lloyd’s Claim Settlement Practices. Market Conduct Examinations focused on marketplace issues, specifically examining Lloyd’s as to compliance with their claim settlement practices. Concurrent with such exams, along with the Commissioner, I personally reviewed the final Examination Reports before they were issued. In addition, in many of these instances, I visited the subject insurers before the Examination Report was issue, reviewing their effected operations first hand.
Prosecution of Lloyd’s. As First Deputy Insurance Commissioner, I oversaw a full time team of lawyers who fielded consumer complaints relating to all areas of insurance company operations. Indeed, many of these complaints, as well as results of Market Conduct Examinations, resulted in formal action under the state’s Administrative Procedures Act. From time to time, I served as the Hearing Officer as to such matters.
20. Iowa Assistant Attorney General Assigned to the Insurance Department, 1975-1976; serving as the Department’s General Counsel. As Assistant Attorney General, I had departmental prosecutorial responsibilities for violations of the Insurance Code under the state’s APA act including those committed by Lloyd’s. The Attorney General responsibility also included issuing Attorney General Opinions as to the construction of insurance laws and regulations.
21. Legal Counsel to House of Representatives. As legal counsel to the Iowa House of Representative (1975 session), I provided counsel on all relevant caucus issues and provided the following support:
- Researched pending legislation,
- Prepared memorandums in support of proposed legislation,
- Provided legal advice, and
- Participated in bill drafting, including that relating to Lloyd’s matters.
22. Lecturer at the Bar Review School, authoring and delivering the Insurance Course to students studying for the Iowa Bar Exam (from about 1985- 1991). I was invited to provide the insurance content review material and lecture for the insurance section of the bar review course in Iowa. Included in this lecture was extensive law applicable to the interpretation and construction of laws and regulations applicable to Lloyd’s, including their underwriting practices. I authored this material and provided this lecture to students studying to pass the bar for about six years, until accepting the position of President and CEO of NCCI in Florida.
23. Administrative Assistant to the U.S. Congress. I served as an Administrative Assistant to the U.S. Congress in Washington D.C. to an Iowa Congressman for about a year. Among others, I participated in legislative drafting of insurance and reinsurance legislation.
- Equitas’ website is located at http://www.equitas.co.uk/ As stated, Equitas actively manages the non-life liabilities arising from policies written by Lloyd’s syndicates in 1992 and prior years. This includes agreeing to comprehensive settlements and policy buy-backs that extinguish current and future claims from these policyholders. The Names reinsured their liabilities into Equitas but retained the legal liability to pay valid policyholders’ claims. Underlying policyholders are those who bought a non-life policy from Lloyd’s Underwriters that was allocated to the 1992 or an earlier year of account.
- Even though its function was to serve as a run off reinsurer.
- Then known as a “Hearing Officer.”
- Then known as a “Hearing Officer.”
- Recently renamed the Florida Department of Financial Services.