In the wake of the Chinese earthquakes and Myanamar cyclone, the Insurance Information Institute released a list of the top ten deadliest disasters.

Topping the list is a 1970 storm and flood that hit Bangladesh killing 300,000. The Tangshen Earthquake is second on the list. The recent Chinese earthquakes are the deadliest natural disaster since the December 2004 tsunami that hit South Asia.

Of the ten events listed, seven are earthquakes.

The devastating earthquakes in Sichuan Province, China this week have left a currently reported death toll of over 12,000 persons. Still the death toll from this earthquake is apparently much lower than the Tangshen earthquake in 1976 that is purported to have killed 240,000. The photo to the right is the Tangshen Memorial. Courtesy, Alexis Rondeau.

Earthquakes can devastate national insurers. In the United States, the 1994 Northridge earthquakes caused $12.5 billion in covered claims for U.S. insurers and caused the creation ot the California Earthquake Authority (CEA). The CEA is a public body to assist insurers by limiting claims faced by insurers when earthquakes strike. It also enables homeowners and business owners the ability to afford earthquake insurance premiums.

Unlike the U.S. insurance market, China's insurance market and Chinese insurers are newborns in the world of insurance. The Chinese Insurance Regulatory Commission is less than ten years old. The industry is growing in China in the wake of many economic reforms. But, the industry is divided between newer development and older construction.

According to experts, much of the area hit by the quake consists of newer post-1978 development designed specifically to withstand a Tangshen type disaster. Newer development in China is often insured, with 40% or more of structures being insured, while older structures and rural structures - those least able to withstand an earthquake - are not insured, with less than 4% of structures being insured. Reports from China Daily state that 60% of the buildings in the epicenter were destroyed.

Unlike 1976, China's infrastructure is vastly more modern and insured or reinsured increasingly with foreign insurers. China's telecommunications industry is reporting severe damage from the quake and newer businesses in the reformed economy are reporting severe damage as well. Damage estimates are being compiled, but it appears this will be the first test of the Chinese insurance market.

American International Group, the largest business insurer in the U.S., reporteda $7.8 billion loss for the first quarter of 2008. The loss is attributed to the weakening housing market and a "disruption in the credit markets." The loss equates to a $3.09 per diluted share loss.

The insurer states it will raise $12.5 billion is capital to "fortify its balance sheet" and improve flexibility. It reports that its core business remains solid and that stricter accounting rules are, in part, a reason for the extent of the reported loss. The insurer will hold a conference call on Friday, May 9, 2008, at 9:30 a.m., to discuss the first quarter report.

An article in Business Insurance predicts that most of the damage suffered by Myanmar when Cyclone Nargis slammed into the country over the weekend is not insured by any international insurers. Thus, the losses will be borne in Myanmar itself and will not affect the international market.

Myanmar nationalized its insurance industries in 1963. All business insurance in Myanmar is written through Myanma Insurance. All foreign investors must purchase insurance through the company. The Myanmar Finance and Revenue Ministry claims on its website that the company possesses $36 million in reserves and has reinsurance.

Erie Insurance and its Lookin' Out Program for teen drivers (with a MySpace page by the way) conducted an extensive survey of driving teens. The Auto Channel, an online source for auto information, posted about the results of the survey from August, 2007. The survey found that 91% of American teens believed they are safe drivers, but only 42% of the same teens reported that their fellow teens were safe drivers. The study interviewed over 2,000 drivers from age 16 to 19.

The teens claimed they were safe drivers, but reported the following activities:

• 58% reported regularly talking on a cell phone while driving.
• 52% reported sending and receiving text messages while driving.
• 10% reported driving under the influence.

As a business owner if you employ teen drivers, it is critical for the teen's safety, and for your bottom line, to train the drivers and adopt a zero-tolerance policy regarding unsafe driving habits. Teen drivers are involved in twice as many fatal accidents as adults and automobile accidents remain the number one killer of U.S. teens.

Happy May Day! Celebrated around the world as International Worker Day, May Day is a remembrance of the labor movement of critical events leading to the creation of eight-hour workdays for workers, improvement of safety standards, and the right to organize. Over time and through the Cold War, May Day, in the United States became associated with Communism and the former Soviet Union and has not been celebrated or recognized in the U.S. as it is in the rest of the world. Odd, since the American labor movement had much to do with recognition of the day.

The Occupational Safety and Health Administration or OSHA is the agency charged with enforcing and creating federal standards for workplace safety. This week Senator Edward M. Kennedy, Chairman of the Health, Education, Labor and Pensions Committee, held hearings on the effects and enforcement of OSHA penalties. Senator Kennedy plans to move for an increase in the penalties OSHA is allowed to impose. Pointing out that penalties for violations of the South Pacific Tuna Act are nearly five times the penalties OSHA is legally allowed to impose for a willful violation, Kennedy argues that worker safety is not properly protected by OSHA.

Nevertheless, OSHA can impose a $70,000 fine per violation. For small businesses, such penalties can be devastating. OSHA citations, in some cases can also be used against the business in lawsuits and workers compensation hearings. Adopting and maintaining a proper, OSHA compliant, worker safety plan and training employees is one of the best ways to lower business insurance premiums and to avoid penalties and fines.

The United States Supreme Court heard oral arguments on April 23, 2008 in a case that, depending on its outcome, could dramatically affect the way employers handle health and disability claims handling.

The case, Metropolitan Life Insurance Co. vs. Wanda Glenn, involves a situation where Ms. Glenn had a serious heart condition and was on permanent disability through her employer's disability plan. The claims administrator and insurer are one in the same. At some point, the claims administrator determined she could go back to work on light duty and her disability payments were terminated (even after the Social Security Administration determined she was disabled). She sued her employer in federal court with the Sixth Circuit finding in her favor. In doing so, the Court considered the fact that the claims administrator and the insurer funding the plan were the same. This "conflict of interest" was a factor that could be considered when reviewing the claims administrator's decision. Metropolitan appealed to the United States Supreme Court. In agreeing to hear the case the Supreme Court added its own question to be answered:

If an administrator that both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?

If the Court decides that such an arrangement is a conflict and is to be considered in any review of a benefits determination, large employer health and disability plans may need to consider independent third-party claims administration. This would add costs to the review process and those costs would be passed on to the employee - or so the insurers argue.

To my Pennsylvania Readers, take a deep breath, the Democratic Primary will be all over soon and the machine will leave your state. No more auto calls or visits from college kids. They were here in my state and left. I am sure they will leave you too.

Otherwise, enjoy Earth Day! What does Earth Day have to do with Business Insurance? Everything. In fact, I will make the argument here that, if it was not for insurance companies, the current attention given to climate control initiatives and other environmental issues would not exist.

Insurers make money by controlling and predicting risk. Insurers have been at the forefront of fire safety, consumer safety, and automobile safety. Those safety initiatives led to the creation of the Insurance Institute for Highway Safety and Underwriters Laboratory. By making things safer for their insureds, insurers can better manage risk and earn a greater return on investment. Simply put, less accidents, less claims.

Climate change and pollution disrupt the insurers ability to control risk. More floods, famines, tornadoes, droughts - more claims. More claims means less return on investment. All of the big insurers have made it corporate policy to investigate the effect people are having on the Earth and to encourage climate protection. Insurance brokers, such as Marsh have been at the forefront of encouraging ways to reduce global impact to reduce risk. In fact, in 2006, Michael G. Cherkasky, president and chief executive officer of Marsh "identified climate change as one of the most significant long-term issues facing world businesses."

The surest and quickest road to change is when there is a profit motive. Insurers and brokers have an immense profit motive to encourage environmentally friendly policies and to protect the Earth. And, that is not a bad thing.

The Mississippi Insurance Commissioner is reminding those that live in Mississippi to check their insurance policies for earthquake coverage. This is good advice for all businesses and homeowners in the six state area affected by last week's earthquake. The earthquake last week and aftershocks this morning are really not that unusual in the area.

Mississippi lies in part over the New Madrid Seismic Zone and seismic activity affecting the 6 states bordering the zone is not unusual and may, in fact, be increasing over the past twenty years. In fact, Mississippi insurance regulations require insurers to have informed homeowners in writing of the existence or lack of earthquake and flood insurance in their policies.

This mornings aftershocks were centered in Illinois and measured 4.0 to 4.5 on the richter scale. Such aftershocks are sufficient to cause older buildings and those in a poor state to suffer minor damage. Read your policy and check whether earthquakes are covered in order to make a decision about whether you need a separate policy to cover your business during such events.

Just to keep everyone updated on the continuing dispute between Allstate and the State of Florida. On April 4, 2008, the District Court of Appeal, First District, State of Florida, ruled that the state was within its rights to impose a suspension on Allstate for failing to comply with certain subpoenas and document requests.

As I noted in my post on April 7, 2008, the State of Florida took the position that the ruling meant the suspension went back into effect immediately. Allstate disagreed, arguing that the court allowed briefing on the issue until April 14. The court clarified its Order allowing briefing on the matter and staying the suspension until after the briefing. Allstate filed its 45 page brief asking for reconsideration or the right to take the issue to the Florida Supreme Court and Florida responded with its 6 page brief.

So, what does this mean? As it stands the suspension is stayed until the court considers the briefs. I want to clarify that the suspension has no effect on Allstate's ability to serve current customers in Florida. The suspension would only affect its ability to write future business until it complied with Florida's subpoena and document demands.