[ql06] TORT: Lloyds Of London Chairman Blasts US Tort System
- From: "Ken Campbell -- LAW'06" <2kc16@xxxxxxxxxxxxxxxx>
- To: <ql06@xxxxxxxxxxxxx>
- Date: Sat, 27 Sep 2003 12:15:36 -0400
Lloyds Of London Chairman Blasts US Tort System
-By Steven Vames; Dow Jones Newswires; 323-658-3874;
steven.vames@xxxxxxxxxxxx
September 15, 2003 3:50 p.m.
LOS ANGELES -- The chairman of insurance marketplace Lloyds of London
blasted the U.S. tort system Monday, saying it is inflating insurance
premiums and discouraging the kind of risk-taking that leads to
innovation and economic growth.
"The fear of being sued is making everyone more and more cautious - to
the detriment of everyone," said Lord Levene, chairman of Lloyds of
London, referring to what he termed the "pernicious, cancerous and
ruinous" compensation culture in the U.S.
Lord Levene was delivering prepared remarks to a meeting of Town Hall
Los Angeles, a business development group.
Levene said that a survey co-produced by Lloyds and Town Hall L.A. found
that 95% of executives surveyed said that the cost of litigation is a
drain on the economy and 94% are concerned about the impact of liability
costs on their own business.
In an interview earlier Monday, Levene said that Lloyds remains in sound
financial condition despite stresses placed by the Sept. 11, 2001
terrorist attacks in the U.S. and a number of natural disasters in
recent years. He said that the company is closely monitoring Hurricane
Isabel, which is moving toward the U.S. East Coast and threatening
wide-spread damage.
Levene said the increasing frequency of natural disasters due to global
warming and greater terrorism fears after the Sept. 11 attacks make it
harder for insurers to write profitable policies.
The historic concerns of insurers, he said, are being compounded by
litigation and U.S. trade barriers for foreign insurers. But unlike
storms and disasters - the unpredictable events that insurance companies
have traditionally dealt with - litigation and trade restrictions can
actually be remedied by regulatory reforms, Levene said.
According to Lloyds estimates, the total cost of the U.S. tort system
over the past 50 years has grown 100-fold while the gross domestic
product has grown about 34-fold over that period. At current levels, it
estimates that U.S. tort costs are equivalent to a 5% tax on wages, or
about $721 per person per year.
Meanwhile, tort reform in the U.S. might serve as an example for the
U.K., where liability litigation has been edging upwards and causing
insurance premiums to also rise.
"Tackling this problem matters to me not just because I like America,
nor because Britain is falling into the same abyss of the blame culture,
but because our economy is entwined with yours," said Levene.
Lloyds of London acts as both a marketplace and guarantor for insurance
and reinsurance policies. The majority of its business - about 35% - is
with the U.S., while about 32% is in the United Kingdom and 14% in the
rest of Europe.
Levene also criticized U.S. policies toward foreign insurers, saying
that collateral requirements for Lloyds creates unfair disadvantages,
despite its track record of paying promptly on claims for natural
disasters, terrorism and other liabilities.
Though laws vary from state to state, he said that Lloyds and other
non-U.S. insurers are generally required to hold collateral to cover
more than its total liabilities in the U.S.
"In practice, this means that Lloyds currently has about $9 billion tied
up in such funds in the U.S., when we actually pay U.S. claims out of
funds held in the U.K.," he said
He said that Lloyds is working with the National Association of
Insurance Commissioners to try to change the requirement.
"We will go on lobbying politicians and legislators for reform along
these lines," he said.
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