Rebuilding A Vital Insurance Industry

The TV news magazine “60 Minutes” with high excitement delivered what they believed to be the sensational story of the Century. They called it the demise of the aged and legendary LLOYD’S OF LONDON. As to their presentation it was a funeral, a death after 400 years of continuous service. It was likened to the fall of the Leaning Tower of Pisa.

WRONG! So embarrassed over their inept and unknowledgeable story they used silence to distance themselves from the faux pas. And they missed a tremendous business story that followed. Lloyd’s overcame the obstacles created by natural events and unprincipled people to become greater, stronger and of greater service to the insurance industry (see the story, “Reconstruction and Renewal of Lloyd’s”, below).


International DI Society: Gathers Momentum

This newly formed organization apparently fills the need for many of those involved in the DI Industry, as its inaugural meeting in Tampa, Florida, on October 6th-8th will now be attended by more than 100 people. Not only will executives from, MetLife, Berkshire-Guardian, The Principal, Mass Mutual,
Northwestern Mutual, Union Central, Illinois Mutual, Assurity, Pan American, Mutual of Omaha and The Standard attend, people from Canada, Puerto Rico, and England are now signed up as well.

Familiar names to this segment of the industry will also be in attendance: The Plus Group, W. Harold Petersen (Petersen International), Mike and David Eskra (DIBroker), Steve Crawford, Lawrence Geller, Ian Callaway, Gerry Katz, Caryn Montague, David Runyon, Ron Cohen, Irwin Cohen, Larry Schneider,
Andra Grava and many others.

As this meeting joins all segments of the industry under one roof, at one time, to share and educate its members, this seminar, “A Generation of Change”, seems to be appropriately titled. “Our industry has survived the 90’s, yet this survival has left us with 28 carriers where once there were 1400 in the DI marketplace”, Ron Cohen (one of the Founding Members) says. “We have been in a state of confusion, without organization for many years and now it is time to gather our own, and educate our members and our industry for the good of the public as a whole”, Cohen said.

Cohen sites,” The need is obvious by the response, as we find ourselves with not only company participation, but brokerages, brokers, agents, claims people, reinsurers, attorneys and advisors who want to participate”.

The Reconstruction and the Renewal of Lloyd’s

The ominous natural disaster years of 1989 and 1990 hit many insurers very hard. Some failed as multiplying claims exceeded the reserves and reinsurance. Lloyd’s too, was hard hit by this condition. But, Lloyd’s encountered another problem. Some Attorneys discovered that liability policies issued before and after the beginning of the 20th century were not on a “claims made basis” and so they had a long tail.

Extensive advertising and research uncovered many asbestoses cases and billions of dollars of such claims were demanded of Lloyd’s. Many Syndicates that issued such early day policies no longer existed. The issuers of the policies never contemplated “tails of liability” and consequently did not reserve for a contingency. The courts ruled that Lloyd’s as a market, representing past and current Syndicates, must pay the liability claims. Its was impossible to do and
many jumped to the conclusion that Lloyd’s was dead.

The resourceful Brits were not about to give up. First they changed the rules and for the first time in history accepted Corporate Capitol to supplement the capital raised from individuals over the past centuries. Billions of dollars of new capital became available.

Next they created a reinsurance company called “Equitas” to accept all claims originating prior to 1992 thus freeing new capital of the unexpected and unethical claims that had their origin prior to that date.

The claims against Equitas are being paid by collections of just-due assessments of the shareholders who had always accepted the basis of unlimited liability and a payment of a modest percent of premiums from the current Lloyd’s Members. The collections and repayments are ahead of schedule and Lloyd’s has enjoyed a string of excellent profit years.

This experience leads to the belief that our U.S. Disability Insurance Industry can perform much better, attract more carriers, be profitable and become the main block in building a financial plan. The International DI Society is dedicated to those objectives. Membership in this historic organization is encouraged and solicited.