Venezuelan investor sues Willis

Venezuelan investor has sued global insurance broker Willis Group Holdings Ltd. over the collapse of the Stanford banking empire, saying he relied on assurances from Willis that Stanford was sound. The lawsuit, filed as a class action in U.S. federal court in Miami Friday by investor Reinaldo Ranni, accused Willis of fraud, negligence, misrepresentation and violations of U.S. and Florida securities laws.

A similar lawsuit was filed against Willis in federal court in Dallas earlier this month by a group of Mexican investors. Willis is located in Bermuda and has large British and U.S. operations. Chicago's Sears Tower, the tallest U.S. skyscraper, was renamed Willis Tower last week. Stanford Financial was put under the control of a receiver in February when the U.S. Securities and Exchange Commission sued for civil fraud. Prosecutors brought criminal charges against founder Allen Stanford and others in June. Stanford enticed investors with promises of higher-than-normal returns on certificates of deposit. Investigators say the bank ran a $7 billion Ponzi scheme in which early investors were paid with money from new investors. Willis played an instrumental role in enabling Allen Stanford and his companies to perpetrate a massive multibillion-dollar fraud against scores of investors, largely Venezuelans and other South Americans, the lawsuit said. Investors relied on phony assurances their CDs were insured and that Stanford's bank could be trusted, it said. Willis supplied the proof for Stanford, the lawsuit said, by issuing safety and soundness letters to Stanford agents on Willis letterhead and signed by a Willis executive that identified the insurance policies underlying operations at Stanford International Bank in Antigua and Barbuda. The letter proclaimed SIB's employees to be first-class business people and claimed that SIB had undergone a stringent risk management review by an outside audit firm, the suit said. None of it was true.

TigerRisk, Karen Clark join to evaluate cat risks

Reinsurance brokerage TigerRisk Partners L.L.C. said it has entered into a partnership with catastrophe modeling and consulting firm Karen Clark & Co. to help insurers assess, price and manage catastrophe risks. The partnership aims to help insurers develop consistent metrics for evaluating catastrophe risk, according to a joint statement Monday.

The program includes an assessment of how companies capture and collect data, and a review of how firms dissect and validate catastrophe model output. Today there is an overreliance on cat models, said Karen Clark, president and chief executive officer of Boston-based Karen Clark & Co. There are ways to assess risk independent of catastrophe models and to apply that knowledge to more effective use of the models, she said. The Karen Clark partnership with Greenwich, Conn.-based TigerRisk will help organizations enhance the profitability of their portfolios without model bias, according to the statement.

Pennsylvania probing Blues' trade practices

The Pennsylvania Insurance Department is launching an investigation of the states four Blue Cross and Blue Shield Assn. affiliates to determine if any engaged in unfair trade practices. Even though Highmark Inc. and Independence Blue Cross withdrew their consolidation proposal earlier this year, anticompetitive dynamics remain at play in Pennsylvania health insurance marketplace, Insurance Commissioner Joel Ario said in a statement.
The purpose of these four examinations is to determine whether there are any anti-competitive practices that violate current law and, if so, to take steps under the law to remedy the effects on competition, Mr. Ario said. In addition to Highmark and Independence, other plans that will be investigated are Blue Cross of Northeastern Pennsylvania and Capital BlueCross. Investigators from Pennsylvanias Insurance Department will review each companys data and business agreements. Investigators also will study the states competitive dynamics to determine things such as whether the four Blues plans use their market power to unfair advantage in areas that include provider contracting. All four of the Blues plans said they would cooperate with the investigation, but three of them added they are disappointed the commissioner is pursuing such action at a time when momentum is building in Washington to reform health care. Those three plans Highmark, Independence and Capital BlueCross also issued statements saying the Pennsylvania market is competitive and that the examinations would put additional cost burdens on the plans that eventually would trickle down to plan members. Blue Cross of Northeastern Pennsylvania said it welcomed state regulators periodic reviews of market conditions, saying the public can only benefit from more information and understanding about how the insurance industry works in Pennsylvania, which is the only U.S. state with four Blues plan.

PartnerRe to buy rival Paris Re in $2 billion deal

Bermuda-based reinsurer PartnerRe said late on Sunday it will acquire smaller rival Paris Re in a $2 billion deal that catapults the company into the No. 4 spot among global reinsurers. PartnerRe Chief Executive Patrick Thiele said the financial and global economic crisis led the company to pursue the acquisition. "The world is in the process of change and reinsurers and insurers will likely have to change as well. We feel we will be more competitive with a larger amount of capital and diversification," he said in a telephone interview. PartnerRe will exchange 0.30 of its common shares for eachParis Re common share in an exchange offer that currentlyvalues the deal at $1.7 billion. In addition, Paris Re also plans to make a special cashdistribution to shareholders of $310 million, or about $3.85 ashare, prior to PartnerRe securing majority ownership. Paris Re's shares closed on Friday at 12.30 euros ($17.17). PartnerRe, which said it had already acquired about 6% of Paris Re's outstanding shares, intends to acquirefull ownership through a two-part exchange offer, including anagreement with a group of Paris Re's founding private equityshareholders to purchase about 57 percent of outstanding stockthrough a block transaction expected to close in the fourthquarter. The company said it expects to be able to acquire thebalance of outstanding shares by the first quarter of 2010. A final integration plan is not yet hammered out becausethe deal is still six to nine months from closing, said Mr. Thiele. PartnerRe, which was formed in 1993 in response to contraction in the property-catastrophe reinsurance marketafter Hurricane Andrew, bought Paris reinsurer SAFR in 1997, and Winterthur Re, the reinsurance operations of Winterthur Insurance Group, in 1998. The Paris Re acquisition is not expected to affectPartnerRe's financial strength ratings, added Mr. Thiele. PartnerRe, which derives nearly half of its premium volumefrom the European market, has a large operation in Paris. Mr. Thiele said that gives the two companies a "compatibleculture," and minimizes any risks in integrating Paris Re intothe company. He did not rule out job cuts. Paris Re has about 400 employees, and PartnerRe has about 1,000. Paris Re was formed in 2006 by a consortium of investorsled by Trident III, a fund managed by Stone Point Capital, theformer private equity arm of insurance broker Marsh & McLennan. Other investors included Hellman & Friedman, Vestar CapitalPartners and ABN Amro. PartnerRe Chief Financial Officer Albert Benchimol told Reuters the acquisition was expected to be modestly accretiveto PartnerRe's book value, and open up significant opportunities. In December 2006, Paris Re reached an agreement to assumethe reinsurance business of French insurer AXA. AXA still ownssome Paris Re stock and has agreed to the Partner Re exchangeagreement, said Mr. Thiele. In addition, AXA will remain responsible for maintaining reserves for any AXA Re liabilities prior to 2006, cutting therisk of prior-year claims. PartnerRe, based on shareholders' equity, currently ranksas the 8th largest global reinsurer, and expects to land in theNo. 4 spot after the acquisition, said Mr. Benchimol. The world's top three reinsurers are Munich Reinsurance Co., Swiss Reinsurance Co.,and the reinsurance operations of Warren Buffett's BerkshireHathaway.