Moody’s Says Splitting Up AIG Would Be Credit Negative


Moody’s Says Splitting Up AIG Would Be Credit Negative

Moody’s Investor Service today said that a break-up of American International Group (AIG) and removal of its systemically important financial institution (SIFI) designation as called for by activist investors would have a negative effect on the insurer’s debt. Splitting the company would remove the diversification benefit of its multi-line insurance operations and of the capital and risk management oversight by the U.S. Federal Reserve of SIFIs, both of which the rating agency said are positive credit factors now.

Also,  a step-up in share repurchases would also be credit negative to the extent that it reduced the capital adequacy of the ongoing businesses, Moody’s said.

Moody’s was responding to activist investor Carl Icahn’s recent letter to AIG CEO Peter Hancock urging him to split AIG into three separate companies – a property casualty, life and mortgage insurer.  Another activist investor, John Paulson,  joined with Icahn to urge the insurer to split up to avoid the SIFI tag, which brings with it regulation by the Federal Reserve.

In the letter he published last Wednesday, Icahn also accused CEO Hancock of failing to provide decisive leadership for the company.

Hancock defended his approach in a statement. “We have taken important and significant steps to reposition AIG by both simplifying and de-risking the company, and realizing attractive valuations from non-core asset sales,” he said. “We remain on course and are determined to continue and accelerate these efforts.”

The rating agency endorsed the path AIG has been taking on divestiture.

Moody’s said AIG currently enjoys “healthy liquidity” thanks to its leading market positions in its major segments and its diversification. It is one of the few carriers that can serve multi-national accounts with complex insurance needs, Moody’s said. The strength of AIG’s life operations, among the largest in the U.S., are “tempered by the company’s record of weak profits and volatile reserves in property/casualty insurance, its above-average exposure to structured and alternative investments, and the challenge of risk management across its diversified business portfolio,” the agency said.

While the Fed is still developing rules for non-bank SIFIs, according to Moody’s these rules will “likely include rigorous capital adequacy and liquidity tests, plus extensive requirements for risk management structures and processes.” This will amount to group-wide regulation that Moody’s sees as credit positive, even though it may somewhat limit the company’s management of its operations and capital structure.

Moody’s commended AIG for how it has simplified its business portfolio since the financial crisis of 2008, completing more than 30 divestitures for aggregate proceeds exceeding $70 billion. “In applying these proceeds, AIG has balanced the interests of creditors and shareholders, leading to significant debt reduction and improving financial leverage and fixed charge coverage metrics,” Moody’s said.

For the remaining businesses, Moody’s said AIG has “shifted its focus toward higher-value offerings, such as insurance for multi-national accounts and certain consumer lines, from relatively volatile product lines, notably long-tail U.S. casualty insurance.”  AIG has also been improving its risk selection, personnel, claims handling and operating efficiency —  changes that have raised expenses but that Moody’s said it expects AIG to be able to reduce over time. “Splitting the group into three separate companies would not necessarily facilitate or accelerate the reduction in aggregate expenses,” the rating analyst said.

The Wall Street Journal last week reported that AIG directors have been discussing the sale of the company’s mortgage insurance business “for a while” but “no final decision has been made about the unit.”  AIG’s mortgage insurance unit is Greensboro, North Carolina-based United Guaranty.

Related:

Call for Splitting AIG a Challenge to CEO Hancock

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Florida DMV Requests Dismissal of Taxi Companies’ Rideshare Complaint


Florida DMV Requests Dismissal of Taxi Companies’ Rideshare Complaint

In a move that is sure to further frustrate Florida taxicab companies, the Florida Department of Highway Safety and Motor Vehicles (FDHSMV) has asked a Leon County, Florida, judge to dismiss a complaint requiring the state agency to clarify Uber and Lyft insurance requirements in the state.

In an Oct. 27 filing with the Leon County Court, FDHSMV claims the taxicab companies’ interpretation of the laws do not legally justify the court to grant a declaratory judgement and writ of mandamus.

The original lawsuit was initiated by taxi companies B&L Services Inc. of Fort Lauderdale, Capital Transportation Inc. of Tallahassee, and individual Jeremy Lynch, as a means to finally get resolution to inquiries on the insurance requirements and regulations of the Florida ridesharing industry. The FDHSMV had failed to respond to numerous requests from the Florida taxi industry over whether for-hire passenger transportation vehicles used by Uber, Lyft and other TNCs comply with minimum insurance required by Florida statutes.

“We filed [the complaint] because there needs to be clarification relative to what is required for insurance on for-hire vehicles,” John Camillo, president of B&L Service, Inc., told Insurance Journal of the suit it filed back in September. “These are questions the DMV has not responded to that have been posed to it by the industry and governmental agencies.”

Judge George S. Reynolds III of the Second Judicial Court for Leon County ordered FDHSMV on Sept. 17 to respond within 40 days or he would issue a decision on the matter.

The response, however, is not what the taxi companies were looking for and may bring more questions than answers on who is ultimately responsible for regulating and enforcing insurance requirements of TNC companies. The matter now lies with the judge to decide.

Among its reasons for why the case should be dismissed, FDHSMV said that the taxi companies cannot request a declaratory judgement relating to the rights of another entity that is not named in the case – i.e. Uber and Lyft. Citing case law that says declaratory judgments cannot be issued in situations where the affected parties are not part of the proceedings, FDHSMV claims the taxi companies and the individual who filed the suit are not “appropriate” parties to request the declaratory judgement.

The motion also alleges that FDHSMV is merely the state agency that enforces already established laws, not the agency that determines the law when it comes to insurance. FDHSMV says the Florida Office of Insurance Regulation (OIR) is the state agency ultimately responsible for setting insurance requirements for the ridesharing entities, and they are also not named in the original complaint.

“Here OIR is the state entity responsible for compliance and enforcement of the statutes and rules related to insurance requirements in Florida, including their interpretation. OIR is not party to this proceeding,” the dismissal motion states. “Therefore, this Court should refuse to enter the declaratory judgment requested by Plaintiffs and dismiss this action as being improperly brought by parties whose rights are not in question and whose action fails to include persons whose rights would be affected by such a declaration.”

FDHSMV claims the writ of mandamus sought in the Florida taxicab complaint also does not have merit, saying the Plaintiffs have failed to demonstrate any “clear legal right to relief” and that their rights were not violated.

The taxicab companies claimed in their original complaint that FDHSMV had failed to uphold its duty of ensuring a for-hire passenger transportation vehicle is “insured at all times with the requisite commercial coverage,” as stated in Florida Statutes 324.031 and 324.031.

The taxi lawsuit claims the law is “clear and unambiguous” in mandating that a for-hire passenger transportation vehicle be insured at all times and it does not contemplate that a vehicle may only be an insured for-hire passenger transportation vehicle sometimes, but not at all times.

FDHSVM countered in their request for dismissal that this argument does not merit a response from the agency.

“Plaintiffs apparently request a writ of mandamus in order to compel the Department to follow their interpretation of [Florida Statute 324],” FDHSMV states in their response.

The FDHSMV argued against the taxi companies’ claims that the Uber James River insurance policy does not provide adequate limits or coverage for when ridesharing drivers are not logged into the app. In addition, it countered the complaint that James River is not a member of the Florida Insurance Guaranty Association as required by the statute can be subject to interpretation.

The response to the lawsuit cites two policies – the James River coverage and a policy from Old Republic Insurance Co. – as proof the rideshare company has insurance, which is what the agency is required to regulate.

Based on these facts, there is not enough evidence for the court to rule the FDHSMV has failed in upholding the regulations, the complaint states.

“Plaintiffs have demonstrated no clear error by the Department – to the contrary, it is Plaintiffs interpretation of [the statute] that is erroneous,” the agency said.

Both parties await the judge’s final decision on the matter, which will come after hearing where both sides will argue the merits of the motion. In the meantime, Camillo says he feels confident the judge will not grant the DMV’s request.

“A motion to dismiss is a legal tactic the DMV has engaged in to avoid answering a question of great importance to the Florida’s residents and visitors – what limits of insurance are required for vehicles transporting passengers for compensation?” Camillo wrote in a statement Nov. 2 to Insurance Journal. “Ultimately, we are looking for an answer to this question. The DMV’s position that the Plaintiffs’ have no standing to bring this case is without merit. The suit seeks to determine what insurance limits are necessary not just for Transportation Network Companies such as Uber and Lyft, but for all for-hire operators including the Plaintiff taxicab companies.  Likewise the DMV’s position that the Department of Insurance regulates insurance, while correct, ignores the DMV’s responsibility to ensure compliance with Florida’s financial responsibility requirements. Compliance with the financial responsibility requirements is vested with the DMV and not the DOI.”

Camillo added that if higher limits are only required when passengers are being transported for compensation, taxicab companies will look for an insurance product that complies with that requirement, and carry lower limits when vehicles are not transporting passengers for compensation.

“The Florida Department of Highway Safety and Motor Vehicles is responsible for enforcing any state statute that oversees financial responsibility for motor vehicles under the provisions of the current law, Chapter 324, F.S.,” FDHSMV Press Secretary Alexis Bakofsky said in an e-mail to Insurance Journal.

FDHSMV said it could give no further comment on pending litigation.

As of now, OIR is not involved in this case. However, Commissioner Kevin McCarty’s office has stated in the past that Uber’s insurance policy is in excess of the state limits required by taxicabs and livery services and provides similar coverage.

“The policy appears to follow the typical business auto policies that are used by licensed and admitted carriers in Florida to provide coverage for commercial autos,” OIR Deputy Chief of Staff Monte Stevens said in a memo to the Hillsborough County, Florida, Public Transportation Commission earlier this year.

Related:

Florida City Approves Ridesharing, Taxi Rules
Florida Judge Orders State to Clarify Uber Insurance Requirements
Consumer Advocate to Florida Lawmakers: Ridesharing Proposal ‘Hell-on-Wheels’
Uber to Cease Operations in Florida’s Broward County
Opinion: Florida Sending Mixed Messages About Uber Insurance Requirements
Uber Auto Policy Meets State Requirements, Says Florida Regulator

 

2015 CA 002137 DHSMV Response

About Amy O’ Connor O’Connor is associate editor of MyNewMarkets.com. More from Amy O’ Connor

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Cross Insurance Promotes Heaslip to President of Rhode Island Branch


Cross Insurance Promotes Heaslip to President of Rhode Island Branch

Gary Heaslip

Cross Insurance, an independent agency based in Bangor, Maine, has promoted Gary Heaslip to the position of president for Cross Insurance Inc. – Rhode Island, located in East Providence, Rhode Island.

In his new role, Heaslip will be responsible for all agency operations throughout the state of Rhode Island.

Heaslip previously served as an executive at Cross Insurance – Rhode Island. He also oversaw Cross Insurance’s growth through new production, and the acquisition of agencies and producers in Rhode Island.

Prior to joining Cross Insurance – Rhode Island, Heaslip served as vice president/sales manager for Cross Insurance subsidiary TGA Cross in Wakefield, Massachusetts.

Founded in 1954, Cross Insurance has nearly 800 employees in more than 35 offices, serving 100,000 customers throughout the New England region. Family-owned and operated, Cross Insurance, a subsidiary of Cross Financial Corporation, provides insurance and financial products including personal and commercial insurance lines, employee benefits, surety bonds, risk management services, and specialized products focused on higher education and high net worth needs.

 

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Man Charged in St Louis-Area Church Arsons


Man Charged in St Louis-Area Church Arsons

Authorities charged a 35-year-old black St. Louis man with arson for two of the seven church fires in a predominantly African-American part of the St. Louis region, and federal investigators said there is no evidence of a hate crime.

David Lopez Jackson was charged in St. Louis Circuit Court with two counts of second-degree arson in the fires at Ebenezer Lutheran Church and New Life Missionary Baptist Church, both in the city. St. Louis Police Chief Sam Dotson said investigations continue into the other fires — three in St. Louis, two in nearby Jennings — and Jackson is a suspect in all of them.

The fires were set between Oct. 8 and Oct. 22. Five of the congregations are predominantly black, one is racially mixed and one is mostly white.

The fires spurred a hate-crime investigation to determine if the attacks were motivated by race or religion. But the Bureau of Alcohol, Tobacco, Firearms and Explosives downplayed that possibility in a statement on Oct. 31.

“There appears to be no indication of a hate crime or sign … any one particular Christian denomination or ethnic group was being targeted,” the federal agency said.

Dotson gave no alternative explanation for the attacks, saying investigators “are still trying to understand” the motive.

The region is still recovering from the events surrounding last year’s police shooting death of 18-year-old Michael Brown in Ferguson, a St. Louis suburb, and a grand jury’s subsequent decision not to charge the officer who shot him. Brown was black and unarmed when he was shot by white Darren Wilson in a case that helped spur the national “Black Lives Matter” movement, and it renewed concern about the treatment of minorities in and around St. Louis.

Most of the fires were during the night when churches were unoccupied, although one at a Catholic church was during the day when a priest was there.

No one was hurt in any of the incidents. Damage was mostly minimal, but New Life Missionary Baptist Church was so badly damaged that pastor David Triggs wasn’t certain if the congregation would rebuild or move.

In all seven fires the front doors were ignited. Dotson said gas was used as an accelerant in both fires that resulted in charges against Jackson. He said forensics evidence linked Jackson to the crime, though he did not elaborate. Surveillance footage also tied Jackson’s car to one of the fires, and Dotson said police found evidence in the car that included a gasoline canister and a Thermos bottle that smelled of gas.

St. Louis Mayor Francis Slay said the fires hit at the heart of the community — places of worship.

“It’s just absolutely despicable that somebody would go after churches,” he said.

Msgr. Robert J. Gettinger of St. Augustine Catholic Church, damaged in a fire on Oct. 14, said he and his congregation of about 300 families, most of them black, are pleased that the suspect is off the street and no longer a threat, although Jackson was not charged with the fire at the Catholic church.

“There was a fear in a lot of people, so you’re certainly relieved,” Gettinger said. “Hopefully he’ll get some kind of help.”

Gettinger was also relieved that the attack was apparently not racially motivated.

“It’s helpful” for the region, Gettinger said. “We don’t need anything else like that with Ferguson going on.”

The Rev. Rodrick Burton of New Northside Missionary Baptist Church in Jennings, which suffered damage Oct. 10, agreed.

“I believe the St. Louis community will have a sigh of relief,” Burton said. “Given our history of racial division, it will be a great relief that it is not motivated by prejudice.”

The churches represented several denominations — two Catholic, two Baptist, one Lutheran, one Church of Christ and one non-denominational.

Related:

St. Louis Police Increase Patrols in Wake of Church Fires
Fires at 5 St. Louis-Area Churches in a Week Deemed Suspicious
Police: 7th St. Louis Church Property Torched in 2 Weeks Copyright 2015 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Stephens Insurance Adds Energy Experts Wallace Moore in Houston


Stephens Insurance Adds Energy Experts Wallace Moore in Houston

Stephens Insurance LLC has hired industry veterans and energy specialists, Stuart Wallace and Morgan Moore, in Houston.

Wallace will serve as president of the recently opened Stephens Insurance Houston office. Previously, Wallace was with Arthur J. Gallagher & Co. for more than 15 years, where he was a lead producer and held several senior management positions concluding with managing director of the Energy Practice Group.

Moore joins as senior vice-president. She previously worked with Stuart at Arthur J. Gallagher where she focused on energy-related primary casualty programs and client relations. Her experience spans guaranteed cost, deductible, self-insured retentions and captive insurance programs.

Earlier, she was a national accounts underwriter for the Global Marine & Energy, Primary Casualty Division at American International Group (AIG) in both the Houston and Manhattan offices.

Stephens Insurance is headquartered in Little Rock, Ark., and has more than 150 associates in offices in Fayetteville, Jonesboro, Dallas, Austin, Jackson and most recently, Houston. It is a subsidiary of Stephens Inc., a full service investment banking firm headquartered in Little Rock.

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Injury Claims Become Commodities with Litigation Funding Claim Aggregation


Injury Claims Become Commodities with Litigation Funding Claim Aggregation

For all the black robes and ceremony, the American legal system often operates more like a factory assembly line than a citadel of individualized justice. Ninety- five percent of criminal prosecutions end in plea deals. Many defective-product claims settle in mass pacts that benefit attorneys more than putative victims. Now a legal dispute within a plaintiffs’ law firm that organizes massive torts is threatening to pull back the curtain on the mechanics of high- volume litigation.

It’s not a pretty picture.

Amir Shenaq, a 30-year-old financier, sued his former employer, the Houston law firm AkinMears, over $4.2 million in allegedly unpaid commissions. To earn those fees, Shenaq says he raised nearly $100 million used to purchase thousands of injury claims from other lawyers. The suit portrays a claim-brokering marketplace that normally operates in secret, with clients recruited en masse through TV and Internet advertising who are then bundled and traded among attorneys like so many securitized mortgages.

AkinMears “is not run like a traditional plaintiffs’ law office, and the firm’s lawyers do not do the types of things that regular trial lawyers do,” according to the Shenaq suit, which was filed in Texas state court in late September by another Houston firm, Oaks, Hartline & Daly. AkinMears doesn’t do “things like meet their clients, get to know their clients, file pleadings/motions, attend depositions/hearings, or, heaven forbid, try a lawsuit,” Shenaq alleges. Rather, AkinMears “is nothing more than a glorified claims-processing center, where the numbers are huge, the clients commodities, and the paydays, when they come, stratospheric.”

AkinMears’s outside attorney, Allan Neighbors IV of Houston, declined to comment or make the firm’s name partners, Truett Akin IV and Michelle Mears, available for interviews. In court filings, AkinMears denied wrongdoing and said Shenaq had been fired last July 31 for unspecified reasons. Shenaq,  a former Wells Fargo Securities leveraged-finance banker, alleges Akin fired him to avoid paying the multimillion-dollar commissions.

AkinMears asked the trial judge to seal Shenaq’s suit, saying his disclosures “will cause immediate and irreparable harm to the continued nature of financial and other information belonging to AkinMears and those with whom it does business under terms of confidentiality.” Judge Randy Wilson granted the gag order earlier this month, but only after the original filing had been disseminated online. Shenaq and the Oaks firm did not respond to requests for comment.

While it primarily concerns Shenaq’s attempt to get paid commissions he says he’s owed, the employment suit illuminates the now-common practices of litigation finance and claim aggregation. Shenaq alleges that in 2014, five-attorney AkinMears switched strategies away from “buying non-stop advertisements and acquiring clients in a random, unpredictable manner.” Instead, the firm’s principals decided “to start making direct investments in ongoing mass tort litigation” over such products as hip implants, Viagra, and Lipitor.

To finance those investments, AkinMears asked Shenaq to raise tens of millions of dollars from outside investors. The former banker says he did that primarily by obtaining nearly $100 million from the Chicago-based hedge fund Gerchen Keller Capital. The fund specializes in betting on other people’s lawsuits—a form of alternative investing known as litigation finance.

With the Gerchen capital, according to the Shenaq suit, AkinMears purchased some 14,000 defective-product claims, most of them concerning so-called transvaginal mesh, a type of implant designed to bolster sagging organs. Some women have complained that once implanted, the devices also cause injury and severe pain. By Shenaq’s calculations, the mesh cases cost AkinMears between $2,500 and $3,125 apiece and yielded attorneys’ fees of $15,000 each.

It isn’t clear from the court filings how much the plaintiffs stood to gain from settlement of their claims or where the AkinMears-owned cases stand. It also isn’t clear which companies AkinMears sued with the client information it acquired. Among the defendants that have been sued in connection with transvaginal mesh implants are C.R. Bard, Boston Scientific, and Johnson & Johnson.

Gerchen Keller managing director Travis Lenkner declined to comment, citing client confidentiality, but the hedge fund has been highly visible in the burgeoning litigation finance field. The firm announced a new $475 million fund in February for investments such as the AkinMears financings. Taken all together, Gerchen Keller says it manages some $800 million in assets for pension funds, endowments, foundations, and financial institutions—enough to make it one of the largest players in litigation finance.

In some instances, Gerchen Keller invests in litigation in exchange for a cut of any recovery. The investments with AkinMears, however, were essentially loans extended at an interest rate of “slightly below 16 percent,” according to the Shenaq suit.

The U.S. Chamber of Commerce has condemned both claim aggregation and litigation finance as likely to encourage frivolous and abusive lawsuits. “The allegation that a law firm used hedge fund money to buy and sell thousands of personal injury lawsuits shows plaintiffs have become little more than commodities,” says Lisa Rickard, president of the Chamber’s Institute for Legal Reform. “This case appears to be a new example of how litigation financing perverts the justice system and puts the interests of lawyers and financiers ahead of actual plaintiffs.”

More about the plumbing of mass lawsuits could become public if the Shenaq case defies the odds and proceeds to a public trial. And even the information available so far has helped to underscore that the life of a plaintiffs’ attorney isn’t necessarily what’s taught in law school. “Despite the fact that AkinMears’s lawyers do not have to dirty their hands with the mundane chores that come with actually practicing law,” the suit alleges, “the firm nonetheless charges a robust 40 percent contingency fee for its efforts (which is then divided in some fashion among the various participants in its ever-shifting syndicate).” Lucrative work, if you can swing it.

 

Copyright 2015 Bloomberg.

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R E Chaix Associates Taps Crombie in California


R E Chaix Associates Taps Crombie in California

Irvine, Calif.-based R. E. Chaix & Associates has named Kevin Crombie to its property/casualty team.

Crombie will be an independent advisor to Chaix’s P/C teams, and he will assist in securing new business opportunities.

He began his career in the insurance industry at Hartford more than 40 years ago and has since worked within the industry on both the carrier and brokerage sides. Crombie was most recently vice president of sales and new business development at American Safety Insurance. Prior to ASI, he operated his own excess and surplus brokerage in Southern California for more 10 years and previously managed a national program for construction business.

R.E. Chaix & Associates also has offices in Napa, San Diego and Rancho Cucamonga.

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Strong Quake Hits Afghanistan Pakistan India Ongoing Search for Survivors


Strong Quake Hits Afghanistan Pakistan India Ongoing Search for Survivors

Afghanistan’s strongest earthquake in more than six decades shook buildings across South Asia, prompting officials from Kabul to Islamabad to New Delhi to send out rescue teams to search for survivors. More than 130 people have died.

A 7.5 magnitude quake struck 254 kilometers (158 miles) north of the Afghan capital at a depth of 213 kilometers [132.35 miles] at 2:39 p.m. Indian time, the U.S. Geological Survey said. It was the first major temblor in the region since April, when a 7.8 earthquake in Nepal killed more than 8,000 people and triggered deadly avalanches on Mount Everest.

“The strongest earthquake in recent years has caused heavy damages and casualties in the nation,” Abdullah Abdullah, Afghanistan’s chief executive officer, told the country in a televised address. He said that 11 children died in a stampede as they tried to run out of a school building during the earthquake.

The quake caused landslides, disrupted mobile phone networks and caused houses to collapse in Pakistan, according to news reports. Omar Abdullah, the former chief minister of India’s northern Jammu & Kashmir state, wrote on Twitter that electricity was cut off in the main city of Srinagar. Office workers in New Delhi evacuated buildings.

The death toll in Pakistan has reached 123, with 956 people injured, the country’s military spokesman said on Twitter.

Afghan President Ashraf Ghani convened an emergency meeting to assess the damage. India’s Prime Minister Narendra Modi called for an urgent assessment of the earthquake and said his nation is ready to provide assistance. Pakistan said its army had begun rescue efforts in the country.

The South Asia region has a history of catastrophic earthquakes because the tectonic plate that carries the Indian subcontinent is pushing northward into the main Asian plate. The 7.5 earthquake is the biggest to hit Afghanistan since 1949, according to USGS data.

“This was by far the most severe earthquake I’ve felt in my lifetime,” Abdullah Ahmadzai, the Asia Foundation’s Afghanistan representative, said by phone from Kabul. “The region near the epicenter is not a highly populated district, but the structures there are very basic and vulnerable to these sorts of natural disasters. There is a lot of concern about mass destruction there.”

(An earlier version of this story corrected the distance of the earthquake from Kabul.)

–With assistance from Natalie Obiko Pearson, Bibhudatta Pradhan, Tom Lasseter, Kartikay Mehrotra, Sunil Jagtiani, Indranil Ghosh and Anurag Kotoky in New Delhi, Khalid Qayum in Islamabad and Ravil Shirodkar in Mumbai.

 

Copyright 2015 Bloomberg.

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NJ Lawmakers FEMA Maps May Have Exaggerated Flood Risk Across State


NJ Lawmakers FEMA Maps May Have Exaggerated Flood Risk Across State

New Jersey’s Congressional delegation members sent a letter to the Federal Emergency Management Agency (FEMA) on Oct. 23, expressing “significant concerns with the methodology” of the Flood Insurance Rate Maps (FIRMs) for New Jersey.

In a letter to FEMA Administrator Craig Fugate, the lawmakers said the evidence suggests that several core flaws may have exaggerated the flood risk across New Jersey, resulting in higher insurance premiums. They urged FEMA to take measures to ensure that the maps are scientifically accurate in order to represent the true risk to communities and individual property owners.

The letter was signed by U.S. Sens. Robert Menendez and Cory Booker (D-N.J.) and Reps. Chris Smith (R-4th Dist.), Frank Pallone (D-6th Dist.), Rodney Frelinghuysen (R-11th Dist.), Frank LoBiondo (R-2nd Dist.) Bill Pascrell (D-9th Dist.), Albio Sires (D-8th Dist.), Leonard Lance (R-7th Dist.), Donald Payne, Jr. (D-10th Dist.), Donald Norcross (D-1st Dist.), Bonnie Watson Coleman (D-12th Dist.) and Tom MacArthur (R-3rd Dist.).

“Being placed in a greater risk zone results in higher and sometimes unaffordable insurance premiums, reduction in property values, and costly retrofitting. With the consequences of FIRMs being so broad and far-reaching, it is critically important that these maps be objective and accurate,” the lawmakers said in a letter to Fugate.

The legislators said dozens of New Jersey municipalities, organizations and individuals are appealing the latest FEMA maps.

“We have received letters from multiple boroughs, organizations and individual homeowners who cannot afford the dramatic increases in insurance premiums associated with the FIRMs—increases that appear to go well beyond the risk,” they wrote. “In some cases, individuals will simply no longer be able to afford their homes or businesses—while at the same time, they may be unable to sell them with such high premiums.”

“As several appellants have already demonstrated, fundamental methodological errors—including, but not limited to, inadequacies in validation and deficient tidal effects—have resulted in erroneous estimates of the 1 percent Flood Risk elevation by several feet. This difference has enormous implications for tens of thousands of New Jersey homeowners and small businesses,” New Jersey’s Congressional delegation members said.

In response, FEMA spokesman Rafael Lemaitre said the federal agency used the best available science and technical data to create the Flood Insurance Rate Maps. “These maps aren’t created in a vacuum. We work closely with community officials, residents and other stakeholders to make sure everyone has input and is included in this process,” he said in a statement.

The following is the full text of the letter:

October 23, 2015

The Honorable Craig Fugate
Administrator
Federal Emergency Management Agency
500 C Street S.W.
Washington, D.C. 20472

Dear Administrator Fugate:

We are writing to express our significant concerns with the methodology FEMA is using to modify Flood Insurance Rate Maps (FIRMs) for New Jersey. As several appellants have already demonstrated, fundamental methodological errors—including, but not limited to, inadequacies in validation and deficient tidal effects—have resulted in erroneous estimates of the 1% Flood Risk elevation by several feet. This difference has enormous implications for tens of thousands of New Jersey homeowners and small businesses.

As you know, FIRMs are an important tool developed to quantify flood risk all around the country. They are used, not only to determine flood insurance premiums, but also to guide building codes and mitigation activities. Subsequently, these determinations have significant real world consequences for families and business owners. Being placed in a greater risk zone results in higher and sometimes unaffordable insurance premiums, reduction in property values, and costly retrofitting. With the consequences of FIRMs being so broad and far-reaching, it is critically important that these maps be objective and accurate.

To date, dozens of New Jersey municipalities have appealed their preliminary FIRMs as currently drafted. Analysis from Jersey City, for example, shows that FEMA has overestimated properties in the Special Flood Hazard Area (SFHA) by as much as 34 percent, unnecessarily putting approximately 28,000 Jersey City residents in the SFHA at a potential cost of millions of dollars. Similarly, the City of Elizabeth predicts that the inaccurate expansions of SFHAs will begin “driving residents from their homes,” especially in older communities, while the City of Newark expects a devastating effect centered on its vital Ironbound community, potentially depleting this important tax base. Additionally, we understand that the City of New York has appealed their preliminary FIRM based on what they believe to be fundamental flaws in FEMA’s methodology. As FEMA evaluates the appeal, we ask that you consider the impact that potentially flawed methodology would have on the preliminary FIRMs for communities throughout all of New Jersey.

We have received letters from multiple boroughs, organizations and individual homeowners who cannot afford the dramatic increases in insurance premiums associated with the FIRMs—increases that appear to go well beyond the risk. In some cases, individuals will simply no longer be able to afford their homes or businesses—while at the same time, they may be unable to sell them with such high premiums.

With the memory of the devastation caused by Superstorm Sandy fresh in our minds, we along with our fellow New Jerseyans are more than cognizant of the need for accurate flood maps to identify risk and steer rebuilding in a more resilient manner. We understand and take flooding very seriously. However, including more homes and neighborhoods into SFHAs than necessary adversely affects families and, more broadly, calls into question the credibility of the FIRMs. In order to justify full compliance with the NFIP, FIRMs and flood insurance rates must reflect the most accurate predictions that technology affords.

The evidence laid out in a number of appeals suggests that several core flaws may have exaggerated the flood risk across New Jersey, resulting in insurance premiums that are neither sustainable nor reflective of the most accurate science. We strongly urge you to ensure all communities have the technical assistance and resources to exercise their right to appeal, and act with all expedience to resolve these discrepancies so New Jerseyans have access to reliable, objective, and accurate flood risk information.

 

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CoreLogic Report ‘Windy City’ Not the Windiest City


CoreLogic Report ‘Windy City’ Not the Windiest City

Jackson, Miss., is the windiest city in America, according to catastrophe modeling firm CoreLogic’s just released rankings of the windiest cities in the country.

The CoreLogic Windy City Ranking report, which provides a national ranking of the nation’s windiest cities, was generated by calculating the total force caused by all severe wind gusts of 60 mph or more for wind events dating back to 2006.

CoreLogic assigned a numerical score from 1 to 100 on the 293 cities it analyzed with data captured at the city center plus a 10-mile radius between January 2006 and June 2015. It also took into account the total number of wind events during this time period.

Based on these factors, Jackson topped the list with 153 wind events since January 2006 and a max wind speed of 99 mph giving it a CoreLogic ranking of 95. Springfield, Mo., was second on the list with 128 wind events and a max wind speed, followed by Boston with 121 wind events. Cambridge, Mass., was No. 4 with 116 wind events, and Shreveport, La., was No. 5 with 108 wind events.

According to the catastrophe modeling firm, Chicago, which is well known by its nickname “The Windy City,” actually came in at No. 50 for the nine-year time frame.

Below is a complete list of the top 10 windiest cities between January 2006 and June 2015, according to CoreLogic.

Windy City Ranking (Jan 2006-June 2015)

Rank
City
State
CoreLogic Rankings
Number of Wind Events
Max Wind Speed
Date of Max Wind Speed 1
Jackson
Miss.
95
153
99
4/4/2008 2
Springfield
Mo.
92
128
97
1/7/2008 3
Boston
Mass.
89
121
83
10/29/2012 4
Cambridge
Mass.
88
116
83
10/29/2012 5
Shreveport
La.
87
108
77
7/26/2013 6
High Point
N.C.
86
110
76
3/28/2010 7
Nashville
Tenn.
86
102
86
6/26/2010 8
Gainesville
Fla.
85
106
71
4/15/2007 9
Columbia
S.C.
85
101
73
7/17/2007 10
Boulder
Colo.
85
79
108
6/6/2007

 

According to Lindene Patton, global head of hazard product development for CoreLogic, the company took information from various data sources in order to compile the report, including home weather stations managed by the National Weather Service, news reports, Twitter alerts and photos, to analyze the information at a more property-specific level.

Patton said most risk decisions are currently based on radar data that measures incidents of wind off the ground and not what happens on the ground or at specific geological points.

“Many other reports measure data from airports, but no one lives in an airport,” said Patton. “If people are interested in protecting assets and measuring risks they want to understand what is happening not an airport but on their block.”

CoreLogic looked just at cities with populations of 100,000 or more because urban areas have the most reliable sources of data, said Patton. It did not measure tornado events because they have specific meteorological conditions that are short and sporadic.

“The insurance industry separates wind events and there are different rules that apply to coverage and claims for different wind events. We wanted to really look at wind at that granular level,” Patton said.

She said CoreLogic choose 2006 as a data gathering start date because that is when certain data became available in sufficient enough volume and reliability to move forward.

“It is also almost a 10-year period to look at what happens over a period of time,” she said.

CoreLogic plans to conduct this report annually going forward. It also analyzed and reported what cities have had the most wind events and highest wind speeds this year through June 30.

Jackson ranked No. 1 again for the total number of wind events through June 30 with 14. Five of the top 10 cities for this year were in the Southeast with Jacksonville, Fla., at No. 2 with 10 wind events; Columbia, S.C., at No. 4 with eight wind events; Tallahassee, Fla., at No. 8 with eight wind events and Charlotte, N.C., at No. 9 with seven wind events. It is important to note that all of these wind events were recorded prior to the storm that happened on the Southeast coast in early October.

U.S. Cities Ranked by Total Number of Wind Events in 2015 (through June 30)

City
State
Count
Wind Speed
Date Jackson
Miss.
14
75
4/13/2015 Jacksonville
Fla.
10
71
6/13/2015 Cincinnati
Ohio
8
72
4/9/2015 Columbia
S.C.
8
69
6/30/2015 Norman
Okla.
8
80
5/16/2015 Pittsburgh
Pa.
8
71
5/29/2015 Shreveport
La.
8
73
5/25/2015 Tallahassee
Fla.
8
70
4/19/2015 Charlotte
N.C.
7
68
6/2/2015 Dayton
Ohio
7
72
5/26/2015

 

The city with the highest wind speed through June 30, 2015, was Reno, which recorded a speed of 119 mph on Feb. 6; followed by Boulder, Colo., with a wind speed of 87 mph on Jan. 1; and Wichita, Kan., with a wind speed of 86 mph on April 2.

U.S. Cities Ranked by Highest Wind Speed in 2015 (through June 30)

City
State
Wind Speed
Date Reno
Nev.
119
2/6/2015 Boulder
Colo.
87
1/5/2015 Wichita
Ks.
86
4/2/2015 Amarillo
Texas
84
6/14/2015 Salt Lake City
Utah
84
4/14/2015 Reno
Nev.
83
3/15/2015 Sioux Falls
S.D.
83
6/21/2015 Oklahoma City
Okla.
81
5/16/2015 Huntsville
Ala.
80
4/3/2015 Norman
Okla.
80
5/16/2015

 

Patton said a greater emphasis is being placed on wind events in the insurance industry as more people move into larger cities where there is more wind and specific wind characteristics – such as natural wind paths between buildings.

“Also there are circumstances now where there are multiple wind events and more information is needed on how to adjust for claims,” Patton said. “There is a tremendous amount of interest in wind events in insurance and the more events that occur the more interest you get.”

About Amy O’ Connor O’Connor is associate editor of MyNewMarkets.com. More from Amy O’ Connor

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