Securities class action (SCA) claims against the management and directors of public entities have increased at a record pace for the period 2017 through 2019 relative to prior years . Among the contributing factors are legal allegations resulting from the #MeToo movement, cybersecurity breaches, environmental, social, and governance (ESG) failings, and workplace violence (e.g., mass shootings).
The coronavirus pandemic is likely to add to the number of
SCAs brought against public companies. At least two such actions were initiated
in March 2020.
SCA claims are generally covered by Directors and Officers (D&O) liability insurance for both the expenses defending such claims and the cost of settlements or verdicts. It’s probable that additional SCAs will be filed as the effects of the virus on businesses continue manifesting themselves.
In this article, Milliman’s Joy Schwartzman and Phil Borba outline potential allegations that may be brought against an organization’s management.
The risks exposing corporate boards, especially for public companies, to potential lawsuits continue to increase. As the premiums for directors and officers (D&O) insurance are rising for many companies, it is important to understand the nature of the coverage offered. The type of coverage purchased will affect policy limits available to protect corporate officers.
In her article “Reevaluating your D&O coverage,” Milliman consultant Joy Schwartzman highlights the difference between Side A-only coverage and Side A/B/C coverage and whether the company or the directors are the chief beneficiary of such coverage. She also explains why it’s important for a company and its board to discuss the objective of purchasing D&O insurance and how to maximize the effectiveness of the coverage purchased to meet those objectives.
Milliman consultants have experience working on many facets of mergers and acquisitions (M&A). This series of videos highlights Milliman’s global cross-disciplinary team of M&A experts.
In this video, Joy Schwartzman talks about Milliman’s international team of M&A consultants.
Milliman’s approach to M&A transactions includes understanding a client’s financial pressures and market needs. Jim Murphy discusses the approach in this video.
Evaluating a company’s enterprise risk management procedures during the overall M&A process is important. Steve Schreiber offers some perspective.
In this video, Stephen Conwill discusses how Milliman consultants simplify financial analyses and help Japanese businesses conduct cross-border M&A transactions.
With Solvency II pending, nonlife insurers in Europe may seek diversification between their lines of business. Tigran Kalberer explains in this video.
Sanket Kawatkar discusses how Milliman’s M&A consultants help valuate India’s life insurance companies by looking beyond technical assessments.
In 2013, Milliman again published a wide variety of articles and videos, including timely analysis related to issues such as sinkhole peril, improving claims analytics through text mining, predictive modeling and analytics, and Solvency II developments. In addition, we published extensively on ongoing challenges related to managing healthcare costs, healthcare reform, retirement planning, and insurance and risk management issues.
Here are this year’s ten most viewed articles and reports:
10. Fees: What everyone is NOT talking about!
By Douglas A. Conkel
How do plan sponsors ensure that actual fees paid by each participant are fair and reasonable when compared to other participants within the plan?
9. Planning for NAIC ORSA
By Chris Suchar, Joy A. Schwartzman, Matthew G. Killough, Wayne E. Blackburn
Sophisticated risk assessment will be key to complying with U.S. ORSA requirements.
8. Operational risk modelling framework
By Joshua Corrigan, Paola Luraschi
Current methods and emerging practices in operational risk across the world.
7. ACA: An act of unknown consequences for workers compensation
By Derek A. Jones
How will healthcare reform mandates for preexisting condition coverage and broader healthcare access affect workers’ compensation claims and costs?
6. President Obama’s transitional policy for canceled plans
By Hans K. Leida
The November 14, 2013 announcement that health insurance issuers would be permitted to renew certain canceled health insurance policies has raised new questions for the individual and small group marketplaces in 2014.
The underwriting performance of surplus lines insurance fell below that of the total property and casualty (P&C) industry in 2012. Tropical storm Sandy contributed an estimated $25 billion in insured losses to the segment, according to an A.M. Best special report (subscription required). Here is an excerpt from the press release:
While it’s unclear how much of [the storm’s] insured loss the surplus lines market will absorb, these insurers’ fourth-quarter loss ratio surged nearly 12 points, to 64.8 from 52.9, indicating that surplus lines were not spared. A.M. Best Co.’s domestic professional surplus lines peer composite experienced a downturn in profitability in 2012, causing pretax operating income to decline 24.3% and net income to drop 10.2%. Net income, however, was still sizable at $1.57 billion, compared with $1.75 billion in 2011.
Such storms tend to produce higher accident-year loss ratios for surplus lines compared to the balance of the entire P&C industry. As with 2005 and 2011, the relatively adverse results for 2012 are attributable to a catastrophe event with large property losses borne by the insurance industry and surplus lines writers in particular.
Milliman’s Joy Schwartzman highlights that tendency in her paper “Surplus lines: On the mend – but will it last?” Here’s an excerpt:
Accident-year loss ratios for the surplus lines carriers have run between two and 10 loss ratio points more favorable than they have for the balance of P&C industry writers in the last 10 years, with only two exceptions: accident-years 2005 and 2011.
Accident-year 2005 had the largest insured catastrophe losses for the surplus lines carriers on record as a result of Hurricanes Katrina, Rita, and Wilma. Catastrophe losses for 2011 include Hurricane Irene as well as multiple tornadoes and other storms occurring that year. With 20-25% of premium generated by property coverages for the surplus lines carriers, an adverse catastrophe year is certain to have an adverse influence on results for surplus lines.
The National Association of Insurance Commissioners (NAIC) launched its Solvency Modernization Initiative to establish an Own Risk and Solvency Assessment (ORSA) similar to the European Union’s Solvency II directive. The ORSA guidance is designed to give regulators the capability to examine and evaluate the strength of an insurer’s enterprise risk management (ERM) framework.
In a new paper entitled “Planning for NAIC ORSA,” Milliman’s Wayne Blackburn, Matt Killough, Joy Schwartzman, and Conning’s Chris Suchar provide perspective on how insurers can develop ERM risk assessment practices suitable to the company’s risk profile and size. Here is an excerpt:
…There is a broad spectrum of activities that insurers should consider when developing a risk assessment framework.
Qualitative vs. quantitative assessment
The Guidance Manual allows for the possibility that some risks are not amenable to quantification, and that qualitative approaches may be appropriate for such risks, citing operational and reputational risks as specific examples. It is true that it is no simple task to quantify the probability and severity of loss from such risks, and even insurers with relatively sophisticated ERM frameworks have often resorted to purely qualitative approaches to them. The actuaries and investment professionals employed by the insurance industry have developed sophisticated tools for quantifying balance sheet risks, but insurance companies have not historically devoted significant resources to developing similarly sophisticated quantification methods for operational and strategic risk. Continued reliance on qualitative methods will likely be viewed as low-hanging fruit for insurers looking to minimize the investment of further resources in satisfying the ORSA requirements.
There is an opportunity here, however, for insurers interested in truly improving their risk management processes. In this age of extremely rapid innovation, strategic risk could well be the most significant risk facing many insurers, and companies would be well-advised to bring every available tool to bear. Tools have been developed to assist management in turning their qualitative understanding of such risks into quantitative probability distributions. Often the process itself can be its own reward: Forcing managers to think about these risks in new and unfamiliar ways can be an extremely effective tool in helping them find new risk management strategies. It is interesting to note that the Solvency II ORSA requirement is less flexible than the NAIC in this area. European companies will be required to quantify every risk.