“You can’t get a hotel room in Philadelphia this week. We’re having to put people at the airport, and over in Jersey,” says John Beauchamp, who weighs and prices weather damage and other environmental risks for companies as an underwriter in the Philadelphia office of London-based specialty insurer Beazley Group.
He’s talking about RIMS 12, the New York-based Risk and Insurance Management Society’s annual conference at the Pennsylvania Convention Center, which has collected crowds of pros who track floods, fires, storms, financial fraud, medical-data security, fear of terrorism, global warming, and other modern ills for their living.
There’s plenty to talk about, says Beauchamp: “2011 was a global record for natural catastrophes. Tsunami, earthquake, tornadoes. We had a lot of rain. It was a substantial year. So carriers are looking at their risk modeling and starting to shift the property insurance market.”
Still, the long-awaited “hardening” of prices has not reached the point where consumers will notice they’re paying more, says Nicholas Economidis, Beachamp’s colleague at Beazley. Today’s low interest rates make life tough for insurers. When investments are profitable, underwriters can cut prices and make it up from the market. Low yields leave them scrambling.
Last month, as local underwriters gathered at Philadelphia Insurance Day, a kind of rehearsal for the larger national gathering, “the big topic of conversation was the property market: ‘If this continues we will see drastic changes.’ But what if it was just a one-year anomaly?” asked Beauchamp.
The warm winter, the latest Plains tornadoes, make it look as if there’s more to come. Americans may have to choose between paying more to live at the Shore and other weather-sensitive places, and evacuating for higher, cooler ground — though, as investors say, past performance is no guarantee of future results.
RIMS is a big national conference that has also been in New York, San Francisco and Chicago. “Philadelphia is still very much an insurance town,” still home to Ace Ltd.’s former Insurance Co. of North America business and a lot of smaller, specialized underwriters, even if headquarters companies like Cigna, General Accident and Reliance “have moved on,” says Economidis.
Owners want more
Gov. Corbett’s insurance commissioner, Michael Consedine, brushed aside complaints from rival suitor Liberty Mutual and lawsuits by policyholders and shareholders who said they were not getting a good deal, and on Monday approved Nationwide Mutual Insurance Co.’s planned acquisition of Harleysville Mutual Insurance Co.
Harleysville Mutual policyholders still have to vote on the deal. And the courts have yet to rule on all the lawsuits, whose brief history filled six pages of a Securities and Exchange Commission filing by the group’s for-profit affiliate, Harleysville Group Inc., on Monday.
Two shareholders sued Harleysville Mutual and Nationwide in Chancery Court in Delaware, alleging the companies undervalued the deal; six policyholders filed Common Pleas Court suits in Pennsylvania against Harleysville Mutual, arguing that mutual directors who also sit on the board of Harleysville Group favored themselves and other shareholders over policyholders when they voted to accept Nationwide’s offer of $60 a share for their interest in the mutual, while giving the mutual’s policyholders no cash.
Industry observers Brian Sullivan, a onetime Inquirer reporter who edits California-based Risk Information Inc., and David Schiff, retired publisher of Schiff’s Insurance Observer, said previous sales of Pennsylvania mutuels were slowed by litigation until buyers agreed to pay cash to policyholders — the mutuels’ owners.
Harleysville and Nationwide insist that they are acting within their rights under Pennsylvania law and that the merger will leave Harleysville policies better funded than staying independent; Consedine agrees. The policyholder suits are the subject of a scheduled Philadelphia Common Pleas Court hearing on Thursday and Friday to consider an injunction that could slow the sale, which would strengthen the plaintiffs’ case.
Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com or @PhillyJoeD on Twitter.