US Terrorism Program Non-Renewed; Senate Adjourns Without Voting To Renew

Posted by on December 17, 2014 | Be the First to Comment


Latest Developments (as of Dec. 17, 2014, 2 p.m. CT)

Yesterday evening, the Senate adjourned without voting on S.2244, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA). Absent unlikely intervening action, the Act is set to expire on Dec. 31, 2014 and will be revisited after the next Congress reconvenes on Jan. 6, 2015.

The non-renewal has wide-reaching industry implications, as the Federal backstop will be unavailable to traditional insurers as well as domestically domiciled captive insurers. Rating agency interest in insurers will likely be heightened as a consequence.

The marketplace response to these developments is fluid. For clients with an elevated exposure profile, Lockton teams are facilitating client-specific discussion with their insurers to examine any immediate impact. Policy language varies and may contain provisions allowing for cancellation, exclusion or re-rating in the absence of the Federal backstop.

For More Information:
Read more about the Bill, including an option to track its progress with email alerts. Lockton’s previous update is also available.


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US Terrorism Program Still Pending

Posted by on December 16, 2014 | Be the First to Comment


Latest Developments (as of Dec. 16, 2014, 11:30 a.m. CT):

Industry stakeholders continue to closely monitor last minute developments with the Dec. 31 expiration of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA).

The Bill awaits Senate approval following a Dec. 10 vote by the US House of Representatives to extend the federal government’s terrorism insurance backstop program for six more years. The measure (S.2244) passed by the House would raise the trigger for government reimbursement from $100 million to $200 million and increase companies’ co-payments from 15 percent to 20 percent.

Adding to the tension presented by the timing of TRIPRA’s pending expiration and a lame-duck session, the Senate has been vocal about its disdain for the House-approved Bill’s inclusion of an unrelated rider, amending Dodd-Frank Wall Street Reform. Also included in the House Bill – but seemingly less contentious – is the creation of a National Association of Registered Agents and Brokers, NARAB.

The press is indicating optimism about the measure’s passage prior to its expiration; however, as of this writing it remains pending.

Preparing Our Clients:
The industry is watching this decision carefully. In the meantime, Lockton is preparing options for clients should they become necessary. If the US Terrorism Program is not renewed, we expect the following:

  1. A rise in terrorism insurance rates
  2. Constrained capacity for both property and WC coverage in high profile, high concentration geographies in the US
  3. A need for creativity in structuring your insurance program.

We are prepared to help you navigate these issues in the coming days.

For More Information:
Read more about the Bill, including an option to track its progress with email alerts.

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FMCSA Rescinds ‘No Defect’ DVIR Rule for Motor Carriers of Property

Posted by on December 12, 2014 | Be the First to Comment


This week U.S. Transportation Secretary Anthony Foxx announced that effective Dec. 18, 2014, professional truck drivers will no longer have to comply with a burdensome daily paperwork requirement. This requirement had drivers completing daily vehicle inspection reports (DVIR) even if no defects were found on the vehicle.

Drivers of commercial motor vehicles (CMV) will still be required to perform pre-trip evaluations of equipment condition, and complete DVIRs if any defects or deficiencies are reported during the day’s operations. However, this new change does not affect drivers of passenger-carrying CMVs who must till complete a DVIR every day.

Leading to this decision, the U.S. Department of Transportation noted that approximately 95 percent of all DVIRs completed list “No Defects.” This change would save the industry an estimated $1.7 billion annually without compromising safety.

Even with this change, here are three tips for motor carriers to maintain a regular inspection schedule:

  • Carriers should continue to diligently train their drivers on how to conduct an effective vehicle inspection and advise them of their driver responsibilities.
  • Follow up on scheduled vehicle maintenance results with the driver.
  • Quietly observe drivers conducting vehicle inspections; observing them when they believe “no one is looking” will give insight into their normal routines.

These tips will help ensure with compliance with Part 396.13 of the FMCSR, which states that the driver shall be satisfied with the motor vehicle is in safe operating condition before driving it. That does not change with this new rule.

Read my full bulletin here for further information on the new requirements, additional tips on intrastate operations, and access to the full ruling by the FMCSA.

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5 Ways Employers Can Help Reduce Distracted Driving

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Multi-tasking, the need for information at the tip of your fingers, and the desire to stay connected are strong forces in today’s society. Unfortunately, if done behind the wheel, it is much more likely that you will be involved in an accident. The US government estimates that 421,000 people were involved in an accident involving a distracted driver in 2012.

Although there are many potential sources of driver distraction, we can classify distracted driving into three categories:

  • Visual—when the driver looks at something other than the road.
  • Manual—when the driver takes his or her hands off the wheel.
  • Cognitive—when the driver’s mind is engaged in another activity and is no longer paying sufficient attention to what is happening on the road.

Given the prevalence and potential severity of distracted driving, here are five important ways employers can help prevent or minimize distracted driving within their organizations:

  1. Educate your drivers
  2. Define your own policies
  3. Advise drivers to familiarize
  4. Set the example
  5. Ensure employees are held accountable

Read my full white paper, for further detail on these five tips, information on state driving laws, and some of the most common distractions while driving.

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Commercial Surety: The Revival of the Private Equity Deal Placement

Posted by on December 4, 2014 | Be the First to Comment


Historically, private equity placements in the commercial surety marketplace have been challenging. Today, much of the new business flowing into the commercial surety market is coming from PE-owned, or soon to be owned, entities.

Sureties are still scrambling to become well-versed in underwriting this unique business model, so they remain competitive in today’s overall market. Lockton Surety Operations has seen an increased appetite for PE deals from many sureties—those outside of the top 10 surety providers.

Items that surety companies like to see in a PE deal that make them more appealing to bond include:

  • “Low risk” type bond exposure
  • Historically successful company prior to the PE buyout
  • Management team stays intact after buyout to run the new company
  • PE Firm has a balanced approach to funding the purchase (equal debt to capital contribution)
  • Maintaining positive working capital and tangible equity after buyout occurs
  • Strong business plan in place for the future of the new company

This is a competitive time in the commercial surety marketplace, which has led to the revival of the PE deal placement. Read my full white paper, which provides additional insight into topics such as “Lack of Indemnity from Parent Company,” “Balance Sheet of the Purchased Company,” and “Divestiture of Acquisitions.”

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