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President Obama Will Sign Flood Insurance Relief Bill

President Barack Obama is set to sign into law a bipartisan bill relieving homeowners living in flood-prone neighborhoods from big increases in their insurance bills.

The legislation, which cleared Congress on Thursday, reverses much of a 2012 overhaul of the government’s much-criticized flood insurance program after angry homeowners facing sharp premium hikes protested.

The Senate’s 72-22 vote sent the House-drafted measure to Obama. White House officials said he’ll sign it. (more…)

Filed under: Classic — Manager @ 10:03 pm March 18, 2014


Captive Insurance Fronting: Why is it important?

In its most common form, a commercial insurance company (“fronting company”), licensed in the state where a risk to be insured is located, issues its policy to the insured. That risk is then fully transferred from the fronting company to a captive insurance company through a reinsurance agreement, known as a fronting agreement. Thus, the insured obtains a policy issued on the paper of the commercial insurance company. However,  financially, the risk of that coverage resides with the captive insurance company.

There are several business reasons for this type of fronting arrangement:

-The need for a licensed carrier to issue the insurance policy for particular risk.
-The need for a carrier with a minimum AM Best rating and/or the ability to meet other financial strength measures to issue the insurance policy for a particular risk.
-The potential ability to achieve tax deductibility of premiums by the insured through successful risk-shifting.

An additional use of fronting exists where the captive, usually a single parent captive, serves as the fronting company and issues a policy directly to the insured parent company. When this happens, the risk is fully reinsured to one or more domestic or foreign reinsurers. Consequently, the fronting captive would not retain any of the risks and the parent company has gained access to the reinsurance market. The reinsurers would not have been legally able to write the risk directly.

The fronting company will require reimbursement by the captive insurance company of all costs related to the fronted policies it issues plus payment of a fee. Costs passed through typically include commissions, premium taxes, costs of guarantee fund participation and sometimes claims administration and underwriting costs. Costs and fees may be as low as 6% or as high as 30% of gross premiums paid by the insured. As the fronting carriers role varies, so too does the percentage of premium required for the fronting company by the participant.

The fronting company will almost always require collateral to secure the captive’s obligations to the fronting company under the fronting agreement. Collateral takes one of three forms: captive funds withheld by the fronting company, a trust agreement funded by investment securities of the captive or a letter of credit issued on behalf of the captive by a bank (usually secured by investment securities of the captive).

Dating back to the hard market days of 2001, captive insurance companies began to experience difficulties in implementing or retaining favorable fronting arrangements. Certain fronting carriers have exited the market, thus requiring existing captives to find new fronting relationships. This has decreased dramatically the number of fronting carriers available to captives. Remaining fronting carriers are more selective, thus making it more difficult for captive insurance companies to locate a fronting company. Finally, the fees charged by the remaining fronting carriers have increase by several points, reducing the margins of the captive insurance companies bearing the risk. The difficulties that captive insurance companies have experienced in finding suitable fronting carriers at cost effective rates is one of the greatest challenges facing the captive insurance industry today.

Filed under: Classic — Manager @ 3:19 am


Newly Discovered Fault Lines Highlight Need for Earthquake Insurance

Several new earthquake fault lines were recently discovered on the West Coast, including two in Los Angeles and Spokane, Wash. However unlikely an earthquake may seem, it is important to get the facts and take prudent financial precautions, including opting for earthquake insurance to protect your assets.

Typically, we think of earthquake risk existing only in a small portion of the country: California, Oregon and Washington. However, recent experience tells us that the Midwest region including Illinois, Arkansas, Indiana, Kentucky, Mississippi, Missouri and Tennessee is also at a relatively high risk due to a fault line that runs through those states.

Most homeowners policies exclude earthquake damage, so you will need to purchase either a supplemental policy to your current homeowners policy or a separate earthquake insurance policy. (Automobile insurance policies generally cover vehicles for earthquake damage under the optional comprehensive portion of the policy.)

Earthquake policies typically cover damage to your house and your belongings, up to the insured amount. If possible, you’ll want to buy enough to cover the cost of rebuilding your house and replacing your belongings. While your standard homeowners policy may cover fire damage that results from an earthquake, an earthquake policy is important to cover damage that results from shaking, such as structure collapse.

Because of the massive potential risk associated with an earthquake, coverage tends to be expensive. Your premium amount will depend on your location, along with the age and structural composition of your home.

Don’t take your belongings for granted—earthquakes can happen at any time. Contact us today for more information on earthquake insurance.

Filed under: Classic — Manager @ 3:08 am


Older Workers Need Longer Recovery Time

Workers age 65 and older had the lowest incidence rate of nonfatal occupational injuries and illnesses, with 89 cases per 10,000 full-time workers in 2012. Workers ages 45-54 had more cases of injuries and illnesses than any other age group, with more than 290,000 cases.

While older workers are less likely to suffer severe work injuries than their younger counterparts, if they do get ill or injured on the job, the time they’ll need away from work to recover is much longer.

According to recent data published by the Bureau of Labor Statistics, workers age 65 and older spent an average of 14 days away from work to recover from an occupational injury or illness, while the median for all other age groups was nine days.

Data from the U.S. Census Bureau suggests that by 2016, one-third of the total U.S. workforce will be age 50 or older. When it comes to managing an aging workforce, it’s important to understand aspects of the aging process—including loss of visual acuity, hearing loss, decreased aerobic capacity and osteoporosis—that might increase their susceptibility to injuries.

Some ways to address the health and safety of older workers include:

-Implementing age awareness training for supervisors and managers so they understand aspects of the aging process
-Analyzing job positions and targeting specific activities or job duties that may be modified to accommodate the physical demands of the work activity
-Providing reasonable accommodations in the worksite and work process for older workers

If you’d like more information on how to address the health and safety needs of an aging workforce, contact Warren G. Bender Co today. We have a variety of available resources related to the health and safety of older workers.

Filed under: Classic — Manager @ 2:58 am


Study Finds Small Businesses More Susceptible to Mobile Payment Fraud

Small merchants that accept at least one type of payment using a mobile payment option rely on fewer fraud prevention solutions than larger merchants do, according to a recent study published by LexisNexis and Javelin Strategy & Research. A lack of adequate fraud prevention solutions opens up these businesses to the schemes of cyber thieves.

Credit card fraud is one of the largest threats merchants that accept mobile payments face. While offering mobile payment options enhances the customer service that companies can offer, it also exposes businesses to new opportunities for payment fraud, including identity theft. To prevent payment fraud, businesses should implement several fraud prevention solutions, including PIN and signature authentication, and browser and malware tracking.

The study revealed that large merchants use as many as four fraud prevention tools, whereas small businesses typically use just two. As a result, large merchants are able to prevent nearly eight times as many fraudulent transactions as small merchants.

For more information on identifying and understanding the cyber risks that could affect your business, contact Warren G. Bender Co. today.

Filed under: Classic — Manager @ 2:51 am