Philly Deals: Risk managers note a big year for catastrophes

"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.