Record Losses May Dry Up Commercial Market / for Property, Casualty Insurance Industry

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Record losses in 1984 suffered by the property and casualty insurance industry - nearly $21 billion in underwriting losse s and about $13 billion in actual losses - threaten to dry up the commercial market by the end of 1986 and could force the federal government to enter the field, which would mean less coverage and higher rates for commercial customers, according to officials polled by The Journal Record.

Add to that a "raging battle" in the property and casualty industry over the change from "occurence" coverage to "claims made" coverage, and the future of the industry, if not exactly dim, is certainly clouded and unpredictable.

"I fear that we are going to come into a time of a lack of availability of (commercial) insurance," said Dwight Journey, a partner with the Oklahoma City firm of McEldowney, McWilliams, Dearduff & Journey.

"There are some dire predictions that at the end of 1986, a significant portion of the commercial insurance market will not be able to find insurance," Journey said.

"If that does happen, the government is going to step in. . .and that's my greatest fear."

That "significant potion" includes the traditional Oklahoma industries such as oil and gas, along with others such as Gulf Coast fishing fleets and trucking companies.

A recent example was the filing of a lawsuit in Oklahoma federal court by 20 trucking firms against a number of insurance firms, including Lloyd's of London. The suit was filed and a temporary restraining order was issued because the insurers had declined to renew the truckers' coverage, according to the suit.

Without that coverage, the truckers could be put out of business because state and federal law requires them to carry some type of liability coverage. The case is pending before U.S. District JudgeLee West in Oklahoma City federal court.

The lessened capacity of commercial insurers to write coverage would impact on these traditional industries especially hard, Journey said, "because there are limits to the level of risk that any business should take.

"With the heavy underwriting losses, the amount (of coverage) a company could write was reduced. They (the insurers) are going to save that capacity for the good customers," Journey said.

"The companies are saying that if you are in an industry group that we don't like, or if you have excessive losses, we're not going to write your insurance. We're going to save that capacity for the companies with good risk."

If the situation does not change, Journey said, the federal government, along with state governments, would probably increase their penetration into the insurance industry, thus driving up rates and lessening the coverage a company could expect.

"I fear that if we do not maintain a market for (commercial) insurance, we will face the threat of government intervention. . .by the end of 1986," Journey said.

"That's bad because I don't think they (the government) can do it very well. . .I don't like them involved in the free enterprise system.

"You'll have dramatically higher rates. . .with less coverage."

Another dramatic change in the property and casualty market is the form of the insurance policies under which a particular company is covered.

Those are going to change from an "occurence" form to a "claims made" form. The essence of the change is this, Journey said:

"The present type of policy is called an occurence." It means the company is going to pay for an event that happened during the policy period, even though a claim may be brought years after the policy period ended.

Under the "claims made" policy, it makes no difference when the event occurred, but when the claim was made. Thus, the new policy of a company would cover the claim, and not the policy in effect atthe time of the occurence.

This is an effort to "cut the tail off" and close the policy year, Journey said. …