Printer Friendly

One good bail out deserves another.

As we watched, somewhat stupefied, at the brilliant landing, rescue and salvage of U.S. Air's now famous Hudson River ferry, one point was not lost on us: that is as the water began to come into the cabin and the passengers were rescued, one reporter referred to it as a successful "bailout." Interesting, AIG insures the plane, I guess one good bail out deserves another. In this case, the exposure of the jumbo insurer may well be limited by the savings of lives and by the salvaging of the ship. AIG owes Captain Sullenberger a big, er, debt of gratitude.


... We have great cause for optimism with the inauguration of a new president and with the results of 2008, not nearly as bad as newscasters and others predicted. In fact, we are all sitting and reviewing results of the past year in our rather expensive homes, or in our rather costly offices, in our $2,000 dollar suits, together with lifestyles that would be the envy of the rest of the world.... On the horizon, or perhaps by the time you read this, the appointment of Caroline Kennedy to fulfill the post of Hillary Rodham Clinton may have been made. This is a small cause for despair in our view, in an otherwise optimistic time, because Caroline Kennedy is simply not qualified for the job. What constitutes qualification is changing radically, we do admit that. A president who lists as a qualification "community organizer" gives us pause. Caroline Kennedy has none of even his meager experience, despite her pedigree. The ascendancy of celebrity status in a world where public service, policy knowledge and proven dedication should be the marks of credibility, must be avoided at all costs. Governor Paterson may appoint Caroline Kennedy for all the wrong reasons. We favor the appointment of Andrew Cuomo, who has got the kind of gumption required for the proper representation of New York State and for national level decision making...Meanwhile, all across the state people are wondering when Rudy Giuliani will reengage. He seems like the character played by Tom Cruise in Top Gun, who disengages psychologically, but finally reengages with a clear head to the advantage of his team. We think that a one party state is a precarious place in which to live, since the future would seem to be determined by a single line of reasoning about financial, economic and social issues. The extent of taxation in New York is repugnant and de-motivational top business. Where are the checks and balances.., and a Giuliani?

Congratulations are in order to John Baldwin.

The Board of Directors of First Rehab Life (The First Rehabilitation Life Insurance Company of America) is pleased to announce that John Baldwin, CEO and President, has been elected to assume the office of Vice Chairman of the Board. John's s great friend to agents and brokers and has built a successful enterprise. All the best, John.


Congratulations, too, or, maybe, our sympathies, to Neil D. Breslin, new Senate Insurance Committee chair who gets the job as storms gather in different camps off exit 23 and 24....

Speaking of storms, experts say that an above average Atlantic Basin Tropical Cyclone season is in store for 2009. A report called Extended Range Forecast of Atlantic Season Hurricane Activity also predicts an above average probability for a major hurricane landfall in the United States. The report written by Philip Klotzbach and William M. Gray, goes on to substantiate the basis for their forecast and their methodology and quite convincingly makes the point for this potential in 2009.... On an other note, we have noticed a continued tendency, speaking of potential "coastal" damage, that courts in Atlantic County New Jersey are among the most problematic for tort reformers across the country. Known as the nation's medicine cabinet, New Jersey has become the destination of choice for people suing pharmaceutical companies. In many cases, lawyers are seeking massive payouts in this venue for individuals who may or even those who may not have been harmed; contingency lawyers make about 50% of the revenues. The American Tort Reform Association refers to the Atlantic County Courts as among its "judicial hell holes". Take a look at the site; you will find some amazing realities for the American Judicial system... In this edition we welcome back the pen of Erika Rosenfeld, an astute writer who has appeared on our pages on and off for some years. Erika, in this issue, tackles the implications of the "Made-off" fraud, about which not enough damning can be done by those who were affected adversely by this monstrous Ponzi mechanism. We refer in our publication to the implications on insurance alone, but the longstanding implications on financial services and regulators' approaches may not be quantifiable. The acts of some seem again and again to sway public sentiment disproportionately against the institutions for which they stand. Madoff, an unscrupulous advisor, has taken down the business of advising. It is in the interest of the public to distinguish carefully between the schemers and crooks and the people who are legitimate allies of the insuring and investing public ... A recent statement by the GNAIE, the group of North American Insurance Enterprises, to the FASB, set squarely part of the blame for the worldwide credit crisis to fair value accounting measurements. We believe that it was courageous to issue its statement and we present it as follows:

Specifically, GNAIE told the FASB in a letter that "the application of fair value accounting measurements to an inactive, illiquid, and disorderly market for structured credit products helped fuel the worldwide credit crisis." GNAIE's proposed Financial Statement Presentation EITF 99-20-a, holds that while the organization does not believe that fair value measurements caused the global credit crisis, "unreliable and non-transparent fair value measurements served as a powerful accelerant." According to the group, fair value accounting rules require assets be valued at their current market price or "marked to market," rather than the price paid for them. Under the financial bailout legislation, the SEC is required to study the effects of fair value accounting measurements and report to Congress by the end of the year.

The December letter to Robert Herz, FASB Chairman from Kevin Spataro, chairman of GNAIE's accounting convergence committee, said that "Fair Value Measurement (SFAS Statement No. 157) was pushed beyond its limitations and does not produce reliable measurements representative of fair value (in the traditional sense of a willing buyer/seller) when markets are inactive illiquid and disorderly."

GNAIE, whose members include the largest global providers of life insurance, property/casualty insurance and reinsurance, also advanced what it considers to be a practical and easily implemented solution to the issues created by SFAS 157 using existing mechanisms within U.S. GAAP.

According to GNAIE, an example of the fundamental shortcomings of SFAS 157 involves situations where the condition of a market migrates from active, liquid and orderly to inactive, illiquid and disorderly, resulting in the unavailability of sufficient data to support fair value measurements either on a direct or indirect basis. The letter observed that these values are fundamentally incompatible with financial statements presented on a going-concern basis, and with a reporting entity's intent and ability to hold such securities for the foreseeable future; which is typically the case for insurance companies.

GNAIE believes the severity of the current situation is largely attributable to SFAS 157's replacement of the basic notion of a "willing buyer and seller in an arm's length transaction other than in a forced or liquidation sale" with the "price received to sell an asset or paid to transfer a liability in an orderly transaction at the measurement date."

GNAIE's proposed solution is to migrate from a "fair value measurement under SFAS 157 to an amortized cost/incurred loss measurement paradigm applied to identical loams outside the structured credit products that are not held in securitized or certificated form, but only in situations where markets are not active, liquid or orderly.

In its letter to the FASB, GNAIE called on regulators and standard setters to work together to identify and implement sound solutions that will be effective as of December 31, 2008.

GNAIE's goal is to influence international accounting standards to ensure that they result in "high quality accounting and solvency standards for insurance companies and, to that end, to increase communications between insurers doing business in North America and international regulators and standard setters."

We fully endorse their goals and approach.
COPYRIGHT 2009 CINN Group, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2009 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:FOREWORD
Author:Acunto, Steve
Publication:Insurance Advocate
Date:Jan 26, 2009
Previous Article:Taxi passenger gets no coverage for opening car door into bicyclists path: no use or operation involved.
Next Article:Hearing aids.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters