Canadian Underwriter

What’s new: In brief (October 24, 2004)

October 24, 2004   by Canadian Underwriter

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Standard & Poor’s has lowered the rating on Aon Corp. as a result of expected earnings impact from the broker’s decision to discontinue market service agreements (MSAs). Fitch has also placed Aon on a negative watch as a result of the move, with S&P putting fellow brokerage Willis on negative watch as well. The rating actions follow the world’s largest brokers deciding to discontinue MSAs, also known as placement service (PSAs) or contingent commission agreements, as a result of civil charges filed against Marsh in mid-October by New York’s Attorney General. The raters note the discontinuation of such agreements will take a chunk out of broker earnings in the near term, and the negative watch status reflects the possibility for other brokers to face government action and private litigation relative to commission practices.

A.M. Best has affirmed the ratings of Kingsway Financial’s subsidiaries in both Canada and the U.S., citing the parent company’s support and two new quota share treaties providing surplus relief and protection to the Canadian companies and Pennsylvania-based Lincoln General. Affirmed at “A-” are Lincoln General, Universal Casualty, Jevco Insurance and captive reinsurer Kingsway Reinsurance (Bermuda). Affirmed at “B++” are Kingsway General, American Service and York Fire & Casualty. And affirmed at “B+” are American Country and Southern United Fire Insurance.

Scientists say the 2004 Atlantic hurricane season may be a sign of things to come. Speaking at the Center for Health and Global Environment at Harvard Medical School, experts say there is growing evidence that storms are becoming more intense and cite a recent “Journal of Climate” article pointing to more severe hurricanes in the future. There are also some signs of a link between increasingly intense hurricanes and global warming. More intense storms mean heavier rainfall, flooding, mudslides, coastal erosion and more in high-risk regions such as the Florida Panhandle, Alabama, Louisiana, Texas, Georgia and the Carolinas.

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