Maritime Law: Allianz Joins List Of Too-Big-To-Fail Insurers

July 22, 2013

Along with AIG, Allianz SE, is now among nine insurers deemed systemically important by global financial rule makers, meaning they may face tougher capital standards and tighter regulation. The list of nine too-big-to-fail insurers, including MetLife and Prudential Financial in the U.S. and France's Axa SA, was published by the Financial Stability Board (the "FSB"), the Basel, Switzerland-based body set up by the Group of 20 nations. It is reported by the Daily Business Review on July 19th that the companies on the FSB list were included based on criteria such as size, global activity and the amount of non-insurance businesses they have.

The FSB, led by Bank of England Governor Mark Carney, is coordinating global regulators' response to the last financial crisis to prevent a repeat of the turmoil that followed the collapse of Lehman Brothers Holdings and the bailout of AIG. Also on the list are Prudential Plc and Aviva Plc of the UK, China's Ping An Insurance Group Co. and Italy's Assicurazioni Generali SpA.

Insurers identified as too big to fail will have to hold higher reserves and draw up recovery and resolution plans to limit the economic fallout should they go bust, the International Association of Insurance Supervisors have reported. Implementation details for higher "loss absorbency requirements" are to be developed by the end of 2015 and will apply starting in January 2019, as reported by the FSB.

A group of U.S. regulators led by Treasury Secretary Jacob J. Lew this month said AIG is systemically important, meaning it could threaten the financial system if it failed. The group, called the Financial Stability Oversight Council, also voted to designate Prudential Financial as systemically risky. Prudential Financial, the second-largest U.S. life insurer, is appealing the designation, which may impose tougher capital rules and extra oversight from the U.S. Federal Reserve.

Allianz is an international financial service provider, reported on their website to be offering solutions to more than 78 million customers in 70 countries. While it is too soon to give a detailed assessment of the ramifications of the FSB designation, it is clear that any recommendation by national or international regulators that certain insurers hold higher levels of capital need to consider the impact on consumers, including the impact on price and availability of certain products and that measures to be implemented in a cross-border consistent manner. Allianz said in a statement on their website that "Allianz enjoys a widely diversified, resilient business model, a very solid capital base and sustainable profitability. Therefore we are well positioned to manage the new requirements this designation will lead to regardless of the specific form they take."

Allianz marine industry insurance services includes marine hull and machinery cover; cargo cover; inland marine coverage; shipyard and marine trades; marine general liability, excess liability, employer's liability and bumbershoot, as well as liability coverage for ship repairers, ports and terminal operators, wharfingers, stevedores, charterers, etc; marine risk consulting; specialist marine policies; property and liability coverages for the marine sector; as well as other specialized coverages for the marine industry.

If you are interested in contact me, you may do so by writing to me atmov@chaloslaw.com.

Maritime Law: South Florida Sets Export Record

July 15, 2013
As reported in several papers, including the Daily Business Review on July 11, 2013, international trade through South Florida has surged. Merchandise exports in the region hit a record $47.9 billion in 2012. That represents an 11 percent ($4.7 billion) increase from 2011. South Florida has apparently not had to wait for the Panama Canal expansion to enjoy this surge in activity.

Top destinations included Brazil, Colombia, Mexico, Switzerland and Venezuela. I personally am seeing a lot of business from Venezuela right now. South Florida was one of 32 metropolitan areas recording more than $10 billion in exports.

 If you interested in receiving a copy of the Daily Business Review report or are interested in contacting me, you may do so by email at mov@chaloslaw.com.

Maritime Law: FMC Proposes New Rules for OTIs--Have You Made Your Views Known?

July 10, 2013

On May 31, 2013, the United States Federal Maritime Commission ("FMC") issued proposed rulemaking, significantly affecting the licensing, financial responsibility and duties of Ocean Transportation Intermediaries ("OTI"). The rulemaking started a 60-day notice and comment period, ending July 31, 2013, during which affected or interested parties can provide feedback, objections and other comments to the proposed rule. The proposed new rules impose significant new conditions and alter the regulatory environment and risks for OTIs.

Licensing

Under current regulations, an OTI license is for an unlimited term. Under the proposed rules, OTI licenses would have to be renewed every two years. Renewal applications would have to be submitted at least 60 days prior to the expiration date, and would include Qualifying Individual (QI) identification and contact information along with changes to the OTI's business or organization, trade names, tariff publication, physical address and electronic contact data.

Experience requirements for QIs are expanded and are stated in more detail than before. Under current regulations, an OTI's license may be revoked for failing to respond to a lawful order, making false or misleading statements or failing to have a current tariff or bond. The proposed new rules add that an OTI's license may be revoked for processing, booking, accepting or transporting cargo for the account of an NVOCC with knowledge that said NVOCC is not licensed or registered.

The Commission also proposes to streamline the appeals process for any license revocation by eliminating an OTI’s right for a full evidentiary hearing. Instead, the FMC proposes to establish a procedure by which appeals could be handled by a hearing officer on a written record without any apparent right of discovery concerning matters that may be in the FMC’s files.

Financial Responsibility

Financial responsibility levels also increase with the new rules:

• Ocean Freight Forwarders: from $50,000 to $75,000

• NVOCCs: from $75,000 to $100,000
• Registered (foreign) NVOCCs: from $150,000 to $200,000

However, the FMC would eliminate the $10,000 additional bonding required for each unincorporated branch office. The proposed new rules also establish three payment priority tiers for claims against an OTI bond, with shipper and consignee claims given priority over common carriers, ports, terminals and other third-party creditors.

Foreign NVOCCs

Under current regulations, foreign NVOCCs without a physical presence in the United States may operate in U.S. trades without a license if they: (1) file a Form FMC-1; (2) establish a bond of $150,000; and (3) publish an ocean tariff. Under the proposed new rules, a licensed foreign-based NVOCC must establish a U.S. office qualified to do business in the state and operated by a bona fide employee. The registered NVOCC must use a licensed OTI as its agent and registrations must be renewed every two years.

Comments Currently Requested

Given the effects of the new rules, industry participants are strongly encouraged to provide comments. Non-confidential comments must be submitted to the FMC no later than July 31, 2013. Such comments may be submitted confidentially if they are clearly marked as such on each page. After reviewing the comments submitted, the FMC will issue a revised final rule, as well as an effective date for all changes and new requirements.

The proposed rule can be viewed here => OTI Proposed Rulemaking. If you are unable to access the link, if your business is impacted by these new proposed regulations, if you are interested in submitting comments or understanding how these new proposed regulations will affect your operations, please feel free to contact me at mov@chaloslaw.com. 

Maritime Law: Insurers Not Faring Well with Florida Supreme Court

July 05, 2013

The insurance industry may be feeling like it is taking a beating in the Florida Supreme Court lately. 

In three different cases with very different circumstances, the Supreme Court justices ruled against insurance companies and in favor of policyholders and medical providers. The cases divided the court and, ultimately, all had financial implications for insurers and the other parties.

The first case involved a dispute between Geico and medical provider Virtual Imaging Services, Inc. regarding payments for magnetic-resonance imaging tests that were performed after Geico customer Maria Tirado was injured in an auto accident in 2008. Virtual Imaging sent a $3,600 bill to Geico under Tirado's personal injury protection ("PIP") coverage. But Geico, using a formula derived from Medicare fees, paid slightly less than $2,000, prompting a legal fight. The Supreme Court, in a 5-2 opinion, ruled in favor of Virtual Imaging because it said Geico had not disclosed in the policy that it would use the Medicare-based payment formula.

Justice Barbara Pariente, who wrote the majority opinion, said state law allowed Geico to use the Medicare-based formula, but that the insurer needed to disclose its intent to do so.

The court split along the same 5-2 lines in a second case that involved how much Florida Peninsula Insurance Co. should pay policyholder Amado Trinidad, whose home was damaged in a fire in 2008. Trinidad had what is known as a "replacement cost policy", but did not repair or contract with someone else to repair the home. While Florida Peninsula was still required to pay replacement costs, the legal battle centered on whether those costs should include what otherwise would go to a general contractor's overhead and profit.

In an opinion again written by Pariente, the majority said those general-contractor costs should be factored in, just like other potential replacement expenses such as labor and materials.

In the third insurance case, the justices split 4-3 in a class-action lawsuit that involved interpretation of policies for home health-care services. The dispute focused on the scope of automatic benefit increases included in the policies. The majority, which ruled against Washington National Insurance Co., said language in the policies was ambiguous and, as a result, should be interpreted broadly in favor of policyholders.

The Court is clearly signaling the need for the insurance industry to be absolutely clear in the policies issued to its insureds. Failure to be crystal clear on just what is being excluded or what is being covered can be fatal.

If you are interested in receiving copies of any of these decisions or wish to contact me, you may do so by writing to me at mov@chaloslaw.com.