Lloyd’s Levene holds out hope for tort reform

Lloyd’s of London chair Lord Peter Levene says that there is still hope for tort reform in the U.S. to stem the tide of escalating losses to global insurers.
“If there were an Oscar awarded for the most talked about issue, resulting in the least action, then tort reform would win it,” Levene told a meeting of the New York Downtown Association this week. “But as we enter 2004, I am as convinced as ever of the need for expedient and far-reaching change.”
That the last class action bill presented in the U.S. legislature was defeated by just one vote, leading Levene to predict a compromise is attainable. He adds that on the subject of medical malpractice reform, while the federal government has failed to address the issue, specific states have made some progress.
He stresses that legislators should be viewing tort reform as an economic issue rather than a political football, particularly given the closeness of the next presidential election. “The negative impact of spiraling litigation on the American people transcends all political boundaries and crosses most industry sectors.”
Levene also addressed the issue of free trade, urging the U.S. to enact rules that allow international insurers to do business more easily there. “In the U.S. one of the major costs which we face is the obligation to localize funds, whether for surplus lines business or in relation to reinsurance,” he says. “The American Credit for Reinsurance laws require foreign reinsurers to over-fund by enormous amounts under a gross liability system even when they are placing retrocession back into the U.S. market.”
He adds that the U.S. should take into account the level of regulatory control placed on international players in their home countries.
The cost of regulation is either passed onto policyholders or cedents through rates, or forces players out of the marketplace altogether.