Management liability:
The Supreme Court and the Tech Bubble
Management Liabilities
Workers compensation
Loss Costs
• Medical and pharmaceutical expenses • Lost Time
Liability
Professional, Products/Completed Operations Management Liabilities
• Directors & Officers • Employment Practices Liability • Fiduciary Liability
Cost of Risk: 1990-2003*
$13 $12 $11 $10 $9 $8 $7 $6 $5 $4 90 91 92 93 94 95 96 97 98 99 00 01 02 03
* Cost of risk includes insurance premiums, retained losses and administrative expenses Source: 2003 RIMS Benchmark Survey; Insurance Information Institute
$11.96
$8.91 $8.30 $7.70 $6.40 $7.30 $6.49 $5.70 $5.25 $5.71 $5.20 $4.83 $6.46
$6.10
How the Risk Dollar is Spent (2003)
Firms w/Revenues < $1 Billion Firms w/Revenues > $1 Billion
Retained Liability 11% Admin Costs 5% Property Premiums 16% Retained Property 6% Admin Costs 9% Retained Liability 4% Property Premiums 20%
Liabilty Premiums 14%
Retained Property 3% WC Premiums 14%
Liabilty Premiums 18%
Retained WC 21%
Other 2%
WC Premiums 8% Total Prof. Total Mgmt. Liab Liab. 10% 8%
Other 4% Retained WC 10%
Total Prof. Liab Total Mgmt. 13% Liab. 7%
Source: RIMS (2003); Insurance Information Institute
Capital Myth: US P/C Insurers Have $350 Billion to Pay Terrorism Claims
Total PHS = $298.2 B as of 6/30/01 = $291.1 B as of 12/31/02
= $347.0 B as of 12/31/03
Only 33% of surplus backs “target” lines net of reserve deficiency
"Target" Commercial* $114 billion 33%
Commercial Reserve Deficiency $30 billion (est.) 9% Other Commercial $58 billion 17%
Personal $146 billion 42%
*”Target” Commercial includes: Comm property, liability and workers comp; Surplus must also back-up on non-terrorist related property/liability and WC claims Source: Insurance Information Institute estimates based on A.M. Best Q.A.R Data.
Med Costs Share of Total Costs is Increasing Steadily 2003p
1993
1983
Medical 44%
Indemnity 45%
Medical 55%
Indemnity 51%
Medical 49%
Indemnity 56%
Source: NCCI (based on states where NCCI provides ratemaking services).
Workers’ Comp Underwriting Performance and Profitability
16% 14%
123 122
14.4% 14.3% 13.3% 12.4% 12.8% 115
122 118 111
125
Calendar Year Combined Ratio
120 115
Return on Equity (%)
12% 10% 8% 6%
109 8.6% 101
4.9%
108 8.8%
6.0%
108
110 105
101 97 100
4.5% 2.3% 1.7%
6.0%
100 95 90
4% 2% 0% 91 92 93 94
95
96
97
98
99
00
01
02
03*
*2003 ROE figure is III estimate; 2003 Combined Ratio is NCCI estimate Source: A.M. Best, NCCI
Workers Comp Pure Loss Ratio: 1993–2003E
85% 80% 75% 70% 65% 60% 55% 50%
74.0%
WC losses ratios fell substantially during the mid-1990s but rose sharply in the late 1990s through 2001
62.1% 56.7% 58.0% 57.9% 62.4%
79.0% 74.3% 70.8% 74.4% 70.0%
WC has a long way to go before performance rivals that of the mid-1990s
93
94
95
96
97
98
99
00
01
02 03E
Source: NAIC; Insurance Information Institute; 2003 estimate from NCCI.
ROE: WC vs. All P/C Lines 1991–2003*
16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4%
WC went from profit juggernaut to balance sheet black hole within just 4-5 years
91 92 93 94 95 96 97 98 99 00 01 US P/C Insurers Workers Comp 02 03
Source: Insurance Information Institute; NAIC, ISO; 2003 WC figure is NCCI ROS estimate.
Return on Major P/C Lines, 1993-2002 Average
14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6%
13.1% 10.2% 10.1%
9.0%
7.4% 7.0%
10-Year returns in the commercial insurance commercial industry have been low and volatile
6.4% 6.1% 5.1% 3.3%
-4.1%
Fortune Inland 500 Marine All Workers Other Comp Med Mal All Lines Other Liab Fire Comm Auto CMP Allied
Source: NAIC; Insurance Information Institute
Management Liabilities
Professionals
Board members
Professional liability Directors & Officers Employment practices
Employers
Not insurable: failure to comply, SEC fines, penalties, associated costs of civil or criminal lawsuits
Who is being sued
Service & retail – 53% Government entities – 28% Manufacturing / industrial – 15% Transportation – 4%
Who is suing??
other third party 5% government 2%
employees 30% shareholders 51%
competitors 6%
customers and clients 6%
2003 Tillinghast D & O Survey Report, Towers Perrin Tillinghast
http://www.chubb.com/rims/2003survey.pdf
http://www.chubb.com/rims/2003survey.pdf
Target liability issues
Is it part of the business practices? Is it a matter of professional conduct as a certified professional? What is the insurer’s pre-loss/claim and post loss involvement? What is the cause of loss or damage? Who is alleged to have caused the loss? Litigation or trial? Conditions:
What is proper notification by our insured? Offering limits: settlement/cooperation
Cause & Effect
What is the duty of care? What is the relationship – professional to client What is the standard of care? Failure in fulfilling that standard of care to that client based on that duty? Proximate cause – no discontinuity Compensable injury or damage
Accounting Problems are Getting Many Companies into Trouble
•Enron was tip of an iceberg
•Major implications for insurers (p/c and life)
Duties of Directors & Officers
1.
The ABC’s of D&O
Duty of Care: • D&Os must exercise “reasonable care” • Courts hold that D&Os are not guarantors of profitability • Directors not required to have special knowledge of business Duty of Loyalty to Corporation: • Undivided loyalty required (should be no conflicts-ofinterest) Duty of Loyalty to Shareholder: • Prohibits insider trading, for example Duty of Disclosure: • Officers must disclosure material facts to directors • Officers must disclosure material facts to regulators • Officers must disclosure material facts to creditors or potential creditors • Officers must disclosure material facts to stockholders, bond holders, potential investors
2.
3.
4.
3 Components of D&O Coverage
A.
The ABC’s of D&O
Personal Coverage: protects directors and officers against
liability arising out of ―wrongful acts‖
B.
Corporate Reimbursement Coverage: reimburses organization when legally required/permitted to indemnify D&Os for their ―wrongful acts‖
C.
Entity Coverage: reimburses for claims made directly against the organization (including those that name no individual insureds) • Today, about 90% have entity coverage today, compared to 30% 5 years ago.
Sources: AICPCU, Tillinghast-Towers Perrin, Ins. Info. Inst.
What is Side A?
The ABCs of a Directors & Officers Liability Insurance Policy
Insuring Agreement A
• Insured Individuals, Non-Indemnifiable Losses
Insuring Agreement B
• Company Reimbursement, Indemnifiable Losses
Insuring Agreement C
• Entity Coverage in Securities Claims
What are the damages alleged or remedies sought?
Damages
Mistakes causing BI, PD Mistakes causing economic loss Wrongful termination
Non-monetary damages SEC fines Disgorgement
5 Year Analysis for Employment Cases
30 25 20
Percentage of Total Cases Race Religion Sex Age Retaliation National Origin Disability
15 10 5 0 1997 1998 1999 2000 2001
Trends in EPLI
Discrimination
Race Sex/gender Age Disability National origin Religious
Retaliation
Discrimination Harassment
Risk management strategies: employment matters
Prevention
Recruitment practices, applications, background checks, other selection tools Compensation, job descriptions, postings Manuals, training Policies & procedures that meet company, state, and federal guidelines Documented disclosures, skill/performance evaluations Well trained and retrained management Proper investigations, methods or responding to wrongdoing, appropriate corrective action Legal counsel review Documentation, consistency, privacy, routine review of the plan, and update
Insurance: EPLI basics
Eligibility
Definitions:
Not: attorneys, employment agencies Not: open/pending claims
Insured Employee Injury Defense Expense Claims and Suit Discrimination
Limits of Insurance Deductible Conditions Rescission (and material misrepresentation, fraudulent intent, severability)
Exclusions: EPLI / D & O
BI/PD Criminal, fraudulent, or malicious acts Known loss Pollution ERISA, COBRA, W/Comp, Violation of laws Personal gain Derivative, prior, subsidiaries
Costs and volume
41% of total incurred are defense expenses 80% of claims under D & O/EPLI policies (management liability) are employment related
D & O/EPLI: Not-for-profit
Eligible:
Not: labor unions, RRG’s, public entities and officials, housing authorities, colleges, nursing homes, health care or medical services, providers of controversial programs or services
• Included in another program
• Condominium Associations • Churches
Retentions ($1000 – 25000) Defense in addition to limits Insureds: organization and individuals Wrongful act: act, error, omission, misstatement, misleading statement, neglect or breach of duty
Includes personal injury, wrongful employment practice, discrimination/sexual harassment against third party
D & O/EPLI: for-profit
Three components
Suits against
• Company • Directors & officers
• For wrongful act • Where not excluded
Suits by
• Employees
• For wrongful employment action • Includes retaliation for employee’s action against employer with regard to law for protection of such employee
Shareholder Class Action Lawsuits*
600 500 400 300
202 231 163 188 110 178 110 236 209 216
Shareholders typically recover just 2.56% of amount lost; 1/3 of that goes to lawyers & expenses**
487
200 100 0
164
91
92
93
94
95
96
97
98
99
00
01 20
19
19
19
19
19
19
19
19
19
20
*Securities fraud suits filed in U.S. federal courts; 2002 figure is through June 14, 2002 **Suits of $100 million or more. Source: Stanford University School of Law;Woodruff-Sawyer & Co.; Insurance Information Institute
20
02
*
Legal Liability Theories Available to Victims - Terrorism
Negligence Express or Implied Contract Strict Liability Duty to Maintain Secure Common Areas Breach of the Voluntary Duty to Protect
D&O (Duties of care/loyalty/disclosure)
Source: Rivkin Radler LLP
Liability Limits & Damages
Defense expense in ―damages‖ * BI/PD • non-professional-related BI/PD may be covered in CGL or Work Comp CCC • dentist, accountant Punitives • where permitted by law Privacy Judgment or settlement ―limits‖ Premium (and financing it) Self-insured retention (SIR) Per claim/annual aggregate & Extended Reporting Period Litigate or take to trial?
EPLI, and Dentists (state laws govern)
* In addition to limit for not-for-profit D & O, EPLI, Condo D & O,
Factors Driving Severity
Why Are Awards Getting Bigger?
More Sophisticated & Innovative Plaintiff’s Bar Trial Bar is Flush With Cash Rush to file cases before reform legislation Medical Inflation Venue—Judicial ―Hellholes‖ in these states: TX, MS, AL, CA, NY, FL, IL, LA Class Actions Erosion of Tort Reform/Acceptance of ―Junk Science‖ as Fact Jury Desensitization to Money/Deep Pockets Syndrome Sensationalized Media Coverage (e.g., Mold) Concern over Corporate Image—Cos. Quick to Settle Supreme Ct/Congress: No Effective Caps on Non-Econ. Awards Some US Corporations do Really Dumb Things (Enron,etc.)
Resources
Sarbanes-Oxley
courtesy of
Jay Kelly Wright Arnold & Porter Washington, DC
Employment Practices
courtesy of
Jason Scott Boulette Employment Litigation Vinson & Elkins L.L.P.
Strategic Risk Management
courtesy of
Kingson Group (www.kingsongroup.com)
AICPA Programs
Professional Liability Program Underwriters Corner
D & O, EPLI: PricewaterhouseCoopers, LLP
Shareholder’s questions – 2004 *
*Business Strategy & Operations Q’s 108-120
Directors & Officers, and …
Final Rules – SEC & securities law violations, Sarbanes-Oxley and “Fair fund” compensation to victims Significant Issues with Respect to Directors' and Officers' Insurance Policies in the Post SarbanesOxley Era © 2003 Goodwin Procter LLP
•
Corporate Fiduciary Liability Claims In The PostEnron Era © 2002 Ross, Dixon & Bell, LLP
• By David M. Gische and Jo Ann Abramson
by Joseph L. Johnson III, P.C. (also PDF article Jan 2003)
Corporate Governance Alert © 2003 Akin, Gump, Strauss, Hauer & Feld, LLP
Fiduciary liabilities
Corporate Fiduciary Liability Claims In The Post-Enron Era
The disclosure claims raised in these complaints, as well as similar ones alleged in ERISA lawsuits filed against the directors and officers of such companies as Xerox, Lucent Technologies, Tyco International and Nortel, can be summarized as follows: Claims against company officers and directors for deceiving plan participants and beneficiaries by knowingly providing false and misleading information about the company's financial condition and future performance either in statements made to the general public in SEC filings and press releases or in statements made directly to employees; and…
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
Disclosure claims…
Claims against directors and officers for failing to affirmatively provide accurate information about the company's true financial picture; and
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
Disclosure claims, cont’d…
1.
2.
3.
Claims against plan fiduciaries, who are also corporate officers, that they had knowledge of the company's financial irregularities and misrepresentations but failed to disclose this information to plan participants and beneficiaries; failed to disclose the same information to other plan fiduciaries who had responsibility for investing plan assets; and failed to correct misleading statements made to plan participants and beneficiaries by other corporate officers and fiduciaries.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
Relationship
Federal securities laws, enacted after the stock market crash of 1929, focus primarily on the disclosure of financial and other information so that securities holders and the public in general have information relevant to evaluate investment decisions. The Securities Act of 1933 is chiefly concerned with initial offerings, whereas the Securities Exchange Act of 1934 deals with securities trading and secondary markets and requires companies with publicly traded stocks to file periodic financial reports. Both acts prohibit deceptive and manipulative practices in the sale of securities.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
ERISA vs Securities laws
On the other hand, ERISA was passed in 1974 in response to the rapid growth of employer benefit and pension plans. It establishes certain standards of conduct for persons responsible for plan administration and management and requires the reporting of certain information with respect to those plans. These disclosures are generally limited to providing plan participants with certain enumerated plan documents, benefit statements and other information relating to plan terms and eligibility. Thus, while disclosure is an element of ERISA, it is not its central theme.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
ERISA…
The statute does not impose liability on all corporate directors and officers, only those who are considered fiduciaries. A person is a fiduciary with respect to a plan to the extent that: he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,
he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or he has any discretionary authority or discretionary responsibility in the administration of such plan.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
ERISA, cont’d…
29 U.S.C. § 1002(21)(A). ERISA, therefore, establishes three areas of fiduciary responsibility: (1) managing or administering a plan; (2) providing investment advice; and (3) investing plan assets. To the extent that a person exercises any discretionary authority or control in connection with these functions, that person is a fiduciary.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
ERISA lawsuits, fiduciary liability, D & O exposures
…these lawsuits usually combine misleading disclosure allegations with other ERISA claims for breach of fiduciary duty, such as the failure to adequately diversify plan assets or investigate the suitability of other investments
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
Fiduciary liability policies
Fiduciary liability policies generally afford coverage for named fiduciaries, who are often named as defendants in these lawsuits, as well as for corporate officers, directors, trustees and employees who meet the definition of a functional fiduciary, so long as they are acting in a fiduciary capacity with respect to a covered plan. Thus, even if the claims involving misleading financial disclosures are ultimately dismissed by the courts as not governed by ERISA, the filing of these complaints potentially implicates coverage under the fiduciary policy, which triggers the insurer's duty to defend or obligation to advance defense costs.
© 2002 Ross, Dixon & Bell, LLP By David M. Gische and Jo Ann Abramson
Sarbanes Oxley puzzle
Financial
Reporting risk
Effectiveness
of internal controls and financial reporting systems Disclosure of material changes Close links to enterprise-wide risk monitoring and reporting
Critical Business Issues
•
• • • •
Cost constraints
Security of data and privacy Stakeholder returns Managing business risk Innovation
Source: The Gartner Group, 2003
ERM & Corporate Governance
Satisfying Corporate Constituencies
External
• Improves transparency and reliable disclosure of risks • Diminishes shocks and prevents unacceptable surprises • May help mitigate the rising cost of insurance • Satisfy institutional shareholders and rating agencies
Board of Directors
• Provides focus to the audit committee and internal audit functions • Coordinates strategic and business planning efforts • Reduces uncertainty associated with management’s key choices • Facilitates rapid understanding of emerging issues
Internal
• Creates an improved fact base to make the case for risk management changes • Defines a method for continuous improvement • Enables and encourages interactive knowledge sharing • Eliminates disconnects to reduce volatility exposure of earnings and cash flow
Courtesy of RIMS 2004 conference – AON session
Four Pieces of the Sarbanes-Oxley Puzzle
Expanded representations by certifying officers Disclosure of material changes on a ―rapid and current basis‖
Section 302
Section
409 Section 404
Assessment of the effectiveness of internal controls and attestation from Independent public accountants
Section 906
Focused representations by certifying officers linked to criminal provisions of the Act
409 excerpt: “Reports are required on a rapid and current basis of any event that could have an impact on the financial condition or operations of the organization”
The COSO ERM Framework Consists of 8 Interrelated Components and 4 Objectives
Sarbanes-Oxley Section 404 COSO ERM Framework:
• Is a process
• Is effected by people • Is applied in strategy setting • Is applied across the enterprise • Is designed to identify potential events • Manages risks within risk appetite • Provides ―reasonable assurance‖ • Supports achievement of key objectives
Source: COSO proposed ERM Framework
Risk Examples from COSO Framework
82/309 (26%) have some insurance implications
•Inadequate cash security (141) •Materials not tested against specification
(195)
•Acquired Assets inadequately described
(143)
•Inadequate physical security (198) •Inadequate safety considerations (207) •Unauthorized data access (211)
•Eligible employees excluded (149) •Ignorance of regulations (165)
•Inadequate security procedures
•Inadequate training (186) •Hazardous conditions (285)
(176)
•Inaccurate or untimely information (246)
•Poorly maintained or inadequate equipment (288) •Poor information on accident costs (291) •Legal counsel unaware of all activities
(294)
•Ineffective safety training procedures (287) •Natural or other disasters (317) •Inadequate product testing (325)
•Disruption of normal shipping channels
(347)
Components of the COSO ERM Framework
Internal Environment •Helps to frame the most effective structure for implementing an ERM process •Establishes a philosophy regarding risk management •Defines the organization’s risk appetite •Determines the quantitative and qualitative measurement criteria for risks throughout the organization •Considers external factors that may influence the organization’s risk profile •Establishes strategic objectives, selects strategy and establishes related objectives, cascading through the enterprise and aligned with and linked to the strategy •Views objectives in the context of four distinct, but overlapping, categories: strategic, operations, reporting & compliance
Objective Setting
Event Identification
•Requires an understanding of an organization’s strategy and objectives, including any related external and internal forces •Involves identifying events or circumstances that could impact the achievement of strategy and objectives •Considers opportunities and well as negative impacts of associated with identified risks •Defines event risks by one or more root cause risks •Understands the organization-wide (portfolio) impact of risk
• Considers the positive and negative consequences of events underlying identified risks across an organization • Assesses risk on both an inherent and residual basis • Incorporates at least two dimensions of risk: likelihood and severity / impact • Recognizes that there may be a range of possible results associated with an event • Employs a combination of both qualitative and quantitative risk assessment methodologies
Risk Assessment
Components of the COSO ERM Framework
Risk Response •Identifies and evaluates possible responses to risk, including avoiding, accepting, reducing and sharing risk •Evaluates options in relation to the organization’s risk appetite, cost of capital, competitive position and other relevant measures •Assesses the effect of the potential risk response options on organization’s stakeholders •Selects and executes its response based on evaluation of the portfolio of risks and the range of potential responses •Ensures the effectiveness of actions taken to address risk •Determines if the defined policies and procedures related to risk management are carried out and effective •Looks for consistency throughout the organization, at all levels and in all functions •Captures a range of activities including approvals, authorizations, verifications, reconciliation, reviews of operating performance, security of assets and segregation of duties •Integrates multiple data and information flows to provide an overview of the organization’s risk profile •Provides necessary information at all levels of an organization to assist in identifying, assessing, and responding to risk •Identifies, captures and communicates pertinent information in a useful form •Communicates in a broader sense, flowing down, across and up the organization •Views the ERM process as a high-level, critical process •Reviews the ongoing effectiveness of the enterprise risk management components via monitoring activities, evaluations, surveys and other measures •Integrates into the normal management process •Determines scope and frequency of separate evaluations depending primarily on the assessment of risks and the effectiveness of ongoing monitoring procedures
Control Activities
Information and Communication
Monitoring
Typical ERM Project Objectives
• • • •
•
•
Develop a common ERM framework across business units Integrate existing risk information and resources into a consistent enterprise-wide model Identify and prioritize critical risks Create a risk register template to catalog critical risk information Identify and provide linkage to any on-going risk management efforts Provide the tools and frameworks to establish an on-going ERM process
Applied ERM Project Focus
Define current cost of risk Evaluate the efficiency of current risk strategies Identify opportunities for reducing cost of risk Measure potential impact Determine risk ownership Catalog current controls Develop recommendations
Resources & Charts
…and other interesting stuff
3
Other Resources
Errors & Omissions Directors & Officers
FindLaw:
Corporate Governance
(Gray Cary)
The Exposure Draft of the Enterprise Risk Management Framework (COSO)
Liability Insurance and Excess Casualty Markets: Trends, Issues & Outlook: Impact on Insurance Liability and Excess Casualty Markets from the Risk &
Insurance Management Society Annual Meeting 4/3/2003
Injury Tort Law Insurance Law Corporations & Enterprise Law Commercial Fifth Circuit Update
World: Top 10 Biggest Catastrophes vs. Asbestos (by insured loss)
$125 $100 $75 $50 $25 $0
122
$ Billions, in 2000 $
$40 $19.6 $16.3 $7.1 $6.1 $6.0 $5.8 $4.6 $4.2 $4.2
*III Estimate; Includes life, liability and workers compensation losses. Source: Swiss Re, Insurance Information Institute.
Te rr or i
A sb st es A to tta s ck H ur s( r. '0 1) A * nd N or re w th ri ('9 dg 2) e Eq .( Ty '9 4) ph .M ir ei lle W S D ar ia W S Lo H ur th r. ar H M ug isc o St ('9 or 5) m s/F lo od s W S V iv ia n Ty ph Ba rt
EPLI: Top 13 bad answers
13. I’m sure we have a policy on that, but I can’t tell you what it says. 12. She told me she would take care of it herself and made me promise not to tell anyone. 11. We couldn’t fire her; she’s our top producer. 10. Everybody sends those e-mails around. 9. There was nothing sexual about it. 8. It was just a joke between us. 7. You should see the skirts she wears. 6. She never that she was offended. 5. It had nothing do with work; it was at a happy hour. 4. It was just harmless flirting. 3. I don’t see what the problem is; we had a consensual relationship. 2. Sugars really does have a great salad bar. 1. I don’t even know this woman – and besides that, she’s ugly.
5 Year Analysis for Employment Cases
30 25 20
Percentage of Total Cases Race Religion Sex Age Retaliation National Origin Disability
15 10 5 0 1997 1998 1999 2000 2001
Institutional Investor Market in Corporate Equities
by Amounts Outstanding, as of December 31, 2001
Insurers $1,120.4 15% All Others Total: $459.5 6% Mutual Funds $2,836.8 38%
$7,534.7 billion
State & Local Gov't Retirement Plans $1,215.7 16%
Insurers are the 4th largest holder of corporate stocks
Private Pension Funds $1,902.3 25%
Source: Insurance Information Institute from Federal Reserve Flow of Funds Report
Institutional Investor Market in Corporate Bonds*
By Amounts Outstanding, as of December 31, 2001 Total: $3,730.1 billion
Banks, SIs, Trusts $515.2 14% All Others $387.3 10% Mutual Funds $608.7 Private 16% Pension Funds $345.5 10% State & Local Gov't Insurers are the Retirement largest holder of Plans corporate bonds $343.0 9%
Insurers $1,530.4 41%
Life = $1,336.5 (87%) Non-Life = 193.9 (13%)
*Includes foreign bonds. Source: Insurance Information Institute from Federal Reserve Flow of Funds Report
Accounting Problems are Getting Many Companies into Trouble
•Enron was tip of an iceberg
•Major implications for insurers (p/c and life)