For some, the answer is that it at least has become fairer. In the past there were areas that were paying for other types of claims while being overcharged themselves. For example, the healthcare portfolio has seen a price increase due to the high incidence of claims in this area. Conversely, the fire segment of the business has gone down in price. In the past the fire segment balanced the difference in claims experience of the healthcare portfolio, but now the premiums are charged more for the actual cost of that type of insurance.

Previously, insurance companies were not readily willing to provide coverage for trucks, which tend to experience high claims. Now that the motor insurance pool has been set up and was effective on April 1, 2007 the problem has been negated as the insurance company will use the funds from the common pool to help pay for a claim instead of having to pay the entire amount by itself.

On the Horizon

Individuals can anticipate that the premium payments they have to make will continue to reduce when it comes to car and homeowners’ insurance. Surely this will come as good news to most people. The change to the premiums has been partially regulated by the Insurance Regulatory and Development Authority. For the first six months since the regulatory change, the insurance companies had a range of 20-40% for changes in policy pricing, but this is now gone and free pricing is here.

For Auto Insurance there are two components: the own damage component that covers damage to your own vehicle and the third-party liability component. The premiums have gone down for the own damage component, while the premiums have gone up on the third-party liability component. You will be happy to know that on the whole they are projected to go down. This right-pricing will have a positive effect for consumers. What you pay will depend more on what you drive and your driving habits. Drive safely! For Home Insurance the changes are not pronounced. The fire component made up only a part of the premium, so while it will go down it won’t make a significant change in the premium.

The tough news is that the premiums for health insurance will increase. As mentioned, this was being subsidized by the fire premiums for insurers but with the right-pricing that is hitting the industry these premiums will be rising. It may be a good time to review your plans and talk to your insurance professional.

This is the eighth annual ranking for Alpha magazine. If you total up the earnings of the twenty-five top earning Hedge Fund managers the amount comes to $11.6 billion dollars. Truly a staggering statistic. This rates as the third highest total over the eight years that the list has been compiled. The highest position on this years list goes to James Simons, who is the founder of Renaissance Technologies Corportation, based in New York. Simons total reaches an unbelievable total of $2.5 billion. Simons has moved back into the top position after being ousted by John Paulson who took the prize in 2008. Simons was the top earner for both 2006 and 2007. John Paulson had his banner year in 2008 hedging against the sub-prime lending market. A pretty good move in retrospect, don’t you think? It seems that somebody had the foresight to move against this bloated mess and that person was Paulson. The 53 year old Paulson achieved the sum of $3.7 billion in 2007, and while he is down for the year 2008, he still managed to reach $2 billion. The next spot goes to John Arnold, just 34 years old and founder of Centaurus Energy based in Houston. His total for last year came in at $1.5 billion and the next on the list is George Soros, aged 78 who came in at $1.1 billion. He made his money primarly betting against the American Dollar.

Arnold is the only one that is not a repeat in the top four of the ranking. Alpha magazine rolled out the highest 11 earners with profiles of each, and on March 26 they produced the profiles of the next 14 to make the honor’s list. This information is all available online on their website, www.alphamagazine.com. They have also included the biggest loser list, a group of Hedge Fund Managers that found a way to lose a total of $6.2 billion in 2008. It seems that not everyone had a good year in the Hedge Fund Market.

Being at the top of the list may seem to be an honor but there is also a side effect that the top hedge fund managers hope does not get repeated from past years; the top five managers from the Alpha list were all called to testify before the House Committee on Oversight and Government Reform regarding the risks posed by hedge funds. Not a great way to spend a day. As stated by Michael Peltz, Executive Editor of Alpha magazine, “The hedge fund industry has a well-deserved reputation for enormous wealth creation, but events of the past year have been a grim reminder that the hedge fund industry can also be a source of incredible wealth destruction.”

The regulation of the financial services industry has a history of being highly regulated, and this is never truer than it is now. The speed and complexity of transactions being made is incredible and continues to increase. In order to compete, companies require a technology platform that allows the utmost in client service while maintaining the necessary preservation and retention of records that is mandated by the various governing bodies of the financial services industry. With the current global crisis and the finger-pointing that has accompanied its arrival, the regulations are only likely to increase. Vigorous enterprise content management (ECM) systems are essential to a global supplier of financial services in today’s economy. Penalties for non-compliance are also substantial, and this makes it necessary for companies to use a system that is not only fast but robust and safe. In the less severe cases a company will have to endure fines, and this goes hand in hand with a loss of shareholder value. In the more severe cases criminal sentences can be handed down to the executives of a company.

As many corporations now operate in multiple time zones, it is even more important that they have systems that can run constantly. Whether the information stored is for client applications, tax filings or storage of contracts, the availability of the system to staff at any time of the day is crucial. Accurate and complete storage of this information is essential not only for the business continuity but for compliance, and it must be adequately protected against all forms of loss and corruption.

What CYA SmartRecovery ECM system users can rely on is the security and speed of access that they need by having synchronized backups that maintain the links between content and its associated metadata (audit trails, digital signatures, workflows, etc.). Without the need to take applications offline, the data can be restored quickly and without missing components. This is in addition to previous backup solutions.

“There are many popular solutions in use today such as CDP that enable companies to perform hot backups of ECM system information. What many people don’t realize, however, is that they’re not suitable for addressing logical failures because they don’t back up content and metadata in a synchronized fashion, which results in corruptions,” said Wayne Crandall, president of CYA Technologies. “Using CYA SmartRecovery in conjunction with these other backup solutions is the only surefire way to ensure complete protection against all forms of ECM information loss while maximizing application uptime.”

CYA Technologies continues to bring us into the next century of stable, fast and reliable enterprise content management with innovative, real-time backup solutions.

The company has also released information regarding the non-performing status of loans to somewhere in the neighborhood of $21 million to $23.5 million. These numbers represent the range of just under two per cent of the total issued loans covering the first quarter of 2009. This is an increase over the last quarter of last year, which saw a non-performing loan percentage of 1.10% or a total of $14.4 million.

Southern Community also announced that it anticipates nonperforming loans to increase to a range of approximately $21.0 million to $25.3 million, or 1.60% to 1.93% of total loans in the first quarter of 2009, up from $14.4 million or 1.10% of total loans in the fourth quarter of 2008. The Company also anticipates net charge-offs of approximately $3.1 million to $3.3 million or approximately 0.95% to 1.01% of average loans on an annualized basis, up from $1.4 million or 0.44% of average loans (annualized) in the fourth quarter of 2008. As a result of the increased level of nonperforming loans and net charge-offs, Southern Community expects to record a provision for loan losses of approximately $4.0 million. The allowance for loan losses is expected to be in the range of $19.6 million to $19.8 million or 1.50% to 1.51% of total loans, up from $18.9 million or 1.43% of total loans in the fourth quarter of 2008.

F. Scott Bauer, Chairman and Chief Executive Officer stated that “The suspension of our quarterly dividend, while disappointing, is a prudent step in preserving our capital during this severe economic crisis. In addition, we proactively took this step and believe that cash dividends should be paid from current and expected earnings preserving our capital. We estimate that our decision will save nearly $2.7 million in capital annually, or $671 thousand per quarter…As it was in the fourth quarter of 2008, the increase in nonperforming loans and net charge-offs during the first quarter of 2009 was primarily related to our residential construction and development loans, which have been negatively impacted by the persistent slow housing market. Our lending officers are proactively monitoring delinquencies, and we are continuing to work with builders to effectively resolve problem credits and provide relief until market conditions improve. This includes monitoring the completion of homes, meeting with borrowers, employing key realtors who are actively selling properties and reducing housing inventories. While the provision for loan losses is expected to increase significantly in the first quarter of 2009 compared to the fourth quarter of 2008, we expect to remain modestly profitable in the first quarter of 2009. Our capital remains strong exceeding the regulatory standards for well capitalized institutions. As a result of the increased loan loss provision and strong capital position, I believe we will be better positioned to weather the uncertain economic climate that is expected to unfold throughout 2009.”

Southern Community Financial Corporation headquarters are located in Winston-Salem, North Carolina.

HDFC Standard Life, one of the top insurers in India, is experiencing a decline of 30-60% annual growth due to the current crisis. The meltdown had a profound effect on the company bringing down sales because consumers are fleeing to safety. HDFC expected an estimated growth margin of 50% but instead got a devastating 20%.

HDFC might have a lower growth rate compared to its usual 50% but they’re proud to say that it did not stop or worse, went negative. They are grateful for their clients who continually support them and those potential policyholders who trust them enough to invest their hard earned money in an insurance saving. Because of this, the security firm plans to launch a new product offer featuring a new health security product and called it SurgiCare. Also, the firm is eyeing an opportunity for opening a new health saving plans for the next fiscal year.

While insurers in India are surviving the critical meltdown, insurance companies from other parts of the globe are having a hard time coping with it. The American International Group Inc (AIG) is once again in need for government subsidy to rescue it from its sunken state. Last Monday, the administration gave a $30 billion bailout but the company declared that it has lost twice the amount, $62 billion, over a period of three months.

The insurance firm offers multiple security policies (i.e. homeowners, life, travel, etc) with over 30 million policyholders in the United States. It also provides leases to aircrafts through its International Lease Finance Corporation although the market for such has gotten smaller.

The US government will continually give its support to AIG for fear that if it collapses every industry in the United States or even beyond, would go down with it. It is believed that if AIG falls, it would set a chain reaction amongst the different financial markets in the world and so the US administration is sustaining it in full force before the economy could go into depression. From the first bailout to the current one, a total of $170 billion has been shelled out just to rescue the company.

AIG is combating the setbacks laid upon it with the help of the administration and its subsidy. But many believe that this particular corporation seems to be stagnating, if not, even going deeper into the pit and so many investors are uncertain if they should pour out their money into the firm. There are still people though who think that it will rise against the economic crisis. Hopefully, it will bounce back..

S & P expects that insurance companies to continue to pay attention to the various capital management strategy, product pricing and affect the business structure of the portfolio, profits, capital market risk ratings. At the same time, S & P pointed out that the current economic climate during the recession have become more realistic, in the past, a small error could now lead to serious consequences.

S & P said that in 2008, the United States had a  few insurance companies in the field of vision to negative, which means that in the coming year up to 18 months, downgrades to the number of bodies will be more than the number of upgrades. The imbalance is likely to drag a number of insurance companies. S & P believes that 2009 will be a challenging year. This will be the most prominent aspects of capital adequacy ratio. Of course, the whole, the insurance industry in North America’s capital adequacy situation is relatively better, and there is a clear risk.

In addition, the S & P believes that the insurance industry in North America on the assessment of credit quality, strong risk management has become increasingly important.

Taking into consideration the insurance industry as a whole operating performance, S & P said that the United States will risk individuals (including vehicle insurance and home insurance) from a stable outlook to negative due to the continuing decline in revenues.

S & P expects that the economic slowdown will continue until 2009 story, so that the insurance industry faces the challenge of further expanding the environment. Decision-making and implementation of operational mistakes will enable a number of insurance companies and their rating of “injured” in the current financial crisis during the performance will be more evident.

S & P predicts that in 2009 U.S. commercial insurance situation will not risk more than a good number. In line with the above-mentioned point of view, the 2009 S & P will maintain the U.S. insurance business (including property and casualty insurance) negative rating.

TowerGroup expects “four Rs”— risk, revenue, regulation and retirement—to shape the insurance industry  in 2009. Risk and regulation will be the topmost priority as insurance companies pump money and resources into initiatives designed to improve risk management and meet new regulatory mandates. Increasing costs and decreasing revenues will lead to further industry consolidation and redistribution of assets. As a large number of experienced insurance workers reach retirement, the financial strain on insurers will increase as experience and expertise walk out with the retirees.

Karen Pauli, a research director said: “The convergence of several negative economic influences has resulted in unprecedented financial pressure on insurance carriers”.  Pauli also believes that the challenges are daunting and it is critical that carriers maintain a long-term vision despite the short-term economic imperatives. Carriers that focus on both financial and human resources at the enterprise level, incorporating both operational efficiency and risk management, will come out of the current crisis ahead of the pack.

TowerGroup believes that data management and predictive analytics and technology initiatives have become corporate necessities. Carriers that fail to recognize this fact will see significant deterioration in their results as well as plummeting loss of competitive position.

The research suggests that Insurance carriers must implement effective risk governance initiatives that span both the organization and its distribution partner network, where integrating information is imperative.
A drop in investors’ and policyholders’ confidence resulting from the current economic crisis will lead to increased instability in the industry and heightened merger and acquisition activity in 2009.

Cost containment must be a top priority for insurers in 2009, as well ast customer-facing initiatives to improve customer service and the ease of doing business.  Focus on customer needs  will be key to rebuilding confidence among policyholders and shareholders,” says Rachel Alt-Simmons, a research director in the TowerGroup insurance practice.

Customer-focused insurers that emphasize solutions rather than products will emerge as the top competitors in the market. Product innovation and superior service will prevail in times of economic turmoil.

Rates for property, general liability, and directors and officers (D&O) liability premiums all decreased at a materially slower pace than in recent quarters, according to the RIMS Benchmark Survey, a survey of policy renewal prices as reported by North American corporate risk managers.

Although many buyers stuck with their existing insurers, nearly all renewed their general and excess liability policies for less than they paid a year earlier-but not necessarily because of lower rates, underwriters and brokers say.

“Risk managers tracking RIMS Benchmark Survey results are keenly aware that we may not see continued price reductions for long,” says Daniel H. Kugler, member of RIMS board of directors and assistant treasurer, risk management at Snap-on Inc. “The most recent data show that the soft market isn’t over yet, but it may be losing steam.”

“Overcapacity has driven a long soft market and the events of this past quarter may portend a market shift for commercial insurance,” says Dave Bradford, executive vice president at Advisen. “In addition to much higher than average catastrophe losses in 2008, insurance companies are facing claims from the subprime meltdown, global credit crisis and now even from the Madoff scandal. Reserves for these claims and material losses in investment income have led to negative earnings and new capital is scarce,” Bradford said. “We expect the next few quarters of data from the RIMS Benchmark Survey to show the end of the soft market.”

out of concern about the financial stability of their incumbent insurer, experts say.

Premium reductions were more a reflection of an insured’s decreased exposures rather than rate cuts, although accounts with good loss histories did get single-digit rate decreases, they note.

After nearly four years of declining rates, the general and excess liability market is bottoming out and rates likely will rise throughout 2009, they say.

While the financial crisis-including the near-collapse of American International Group Inc., a leading general liability and excess casualty underwriter-may have hastened firmer rates, its biggest effect has been more buyers marketing their programs, brokers say. Collateral issues also have been a central theme of renewal discussions, brokers and insurers say (see story, page 12).

“We are experiencing a time in our discipline right now that we’ve never experienced before,” said Marty Gould, managing director and head of Marsh Inc.’s national excess casualty group based in New York. “We’ve never experienced a period where the financial ability of a carrier to pay has been questioned or challenged the way it’s been challenged over recent months. Most clients are asking us to conduct an aggressive marketing effort on first-layer umbrellas in particular. We’ve been successful in putting viable alternatives on the table. Some clients have moved, but not the majority.”

Federal intervention in the insurance industry is one of the key outlooks of insurance companies for this year. Many agents associations believe that supporters of tougher insurance regulation will attempt to bring about federal supremacy over states in the regulation of the industry. It is widely believed that proponents of federal regulation of insurance are using the current financial services crisis to further their cause.

Some advocates of federal regulation of insurance are pointing to the downturn of the mortgage sector to justify the complete regulation of insurance industry. In reality, the insurance sector has largely been insulated from the worst of the financial problems.

In fact, the economic crisis proves that insurance should not be brought into the federal system which that failed so miserably in its supervision of banking and securities sector. The National Conference of Insurance Legislators (NCOIL) suggests that the state insurance regulatory system should serve as a model for reforms to the federal regulatory system for banks and securities, not vice-versa.

Currently, there is no single Federal agency that is tasked to the monitor the insurance industry as a whole. The industry relies on the individual state regulatory guidelines of their respective states.

However, theAIG situation should be a wake up call for companies to practice enterprise risk management (ERM). Many companies are being hurt by risks they’ve made for another business unit. Diversification is not necessarily a good thing especially if management is not aware of how different elements of a corporation affect each other.

Prospects are not grim for the insurance industry in 2009 as there may be a possible turnaround. The crisis in the financial services market has made all the headlines, but there were unexpected events Hurricanes Ike and Gustav. Ike was the third largest insurance event ever with tens of billions in property damage alone. The property insurance market will make headway considerably in 2009. Life, casualty, and other insurance markets are expected to grow slightly but insurance buyers should prepare themselves for a period of uncertainty and volatility in the coming months.

Insurers had been aggressive in offering these riders as they compete for market share as rising equity markets made them easier to fund. However, the current volatility in the equity markets is making variable annuities and their guaranteed benefits a tough sell for the life insurers this year.

A variable annuity is basically a tax-deferred investment vehicle that comes with an insurance contract, it is usually designed to protect one from losses in capital. Thanks largely to the insurance clause, earnings inside the annuity will be tax-deferred, and the account isn’t subject to annual contribution limits.

Variable annuities can either be immediate or deferred. With a deferred annuity the account grows until you decide to make withdrawals. And when that time comes (which should be after age 59 1/2, or if withdrawn earlier, you will owe an early withdrawal penalty) you can either annualize your payments which will provide regular payments over a set amount of time.

When a customer purchases a variable annuity, the insurer will invest the money in a portfolio of mutual-fund like assets. This strategy exposes the variable annuity to market fluctuations, whereby the annuity holder may see a potentially bigger payout when markets are rising, but may also risk less of a payout when markets are going down.

Insurers tend to offer a wide range of guaranteed benefits, such as guaranteed minimum withdrawal benefits. In this case, a holder can receive an income for life regardless of the value of the underlying account. Insurers may also offer a guaranteed minimum accumulation benefit, whereby the insurer will guarantee that the account will grow at a certain percentage.

Declining equity markets may also have a negative impact for those insurers with sizeable variable annuity businesses through accelerated deferred acquisition cost (DAC) amortization. Companies use DAC to defer the sales costs that are associated with acquiring a new customer over the term of the insurance contract. If a sustained decline in equity markets reduces estimated gross profits on annuities, an unlocking of assumptions may occur, causing DAC to amortize faster. Also, such changes in assumptions may lead to increased reserves for products with guaranteed minimum death or living benefits.

Experts maintain a neutral outlook on the life and health insurance industry and do not recommend broad exposure to the variable annuities for major investments. There are ways to limit one’s risk by spreading your money among several stocks protects you from a meltdown in one firm. Splitting your stash among annuities from two or more highly rated insurers reduces the odds that all your money will disappear in one go.