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GAAP vs. IFRS laws: Is convergence on the horizon?

global_revenueFollowing a May 28th conference between two of the world’s largest accounting regulatory agencies, members from both groups issued new joint standard they hoped would help smooth out discrepancies between the U.S.’s Generally Accepted Accounting Principles (GAAP) and the International Finance Reporting Standards (IFRS). While the leaders aimed to create a middle ground that combined the GAAP’s specific protocols (there are currently over 100 specific rules for various transactions and industries) with the IFRS’s broader scope of regulations, SEC officials remain skeptical about the success of a global set of accounting standards. Reports say the new global rules would aim to make it harder for companies to lie about their revenues to investors, and would take effect in 2017. Read more…

Mounting claims expenses bring changes to MLI policies

ProfessionalLiabilityIn the last two years, Management Liability Insurers have shifted their underwriting guidelines for privately-held organizations by  increasing rates, retention levels and a reduction in coverage and total limits offered. Wage and hour defense cost sub-limits have also been reduced or removed entirely, and some carriers are not renewing policies based on industry, asset size of risk, financial condition and loss experience.

While there are still Management Liability Insurers willing to write these accounts, the marketplace appears to be reaching a point where this capacity will no longer be utilized to offer terms that the industry has become accustomed to seeing in recent years.

Why is this happening?
Based on conversations with several Management Liability Insurers, there are several reasons:  Read more…

As TRIA expiration lingers, work comp carriers show their own “go forward” strategy

capitol_wc2Amid growing concern over TRIA/TRIPRA’s expiration on 12/31/14 and the government’s long-term commitment to a Federal  Backstop program, many Worker’s Compensation carriers have are thinking ahead when it comes to renewals and securing new business.

When Congress extended TRIA in 2007, it also revised the definition of “acts of terrorism” to include domestic terrorism. Domestic Terrorism has three components:

  • All acts of terrorism outside the scope of the Act or the Foreign Terrorism Premium with an aggregate workers compensation losses in excess of $50 million.
  • Earthquake: The shaking and vibration at the surface of the earth resulting from underground movement along a fault plane or from volcanic activity where aggregate workers compensation losses from the single event are in excess of $50 million.
  • Catastrophic Industrial Accident: Any single event resulting in aggregate workers compensation losses in excess of $50 million.

Read more…

SEC to FINRA: Toughen up standards, penalty fines are too low

wall_street_fineFINRA, the Financial Industry Regulation Authority, came under fire recently to toughen its sanctions and enforcement actions against financial firms and Wall Street executives. The Wall Street journal recently reported that during a 5 year period through 2013, FINRA trailed the SEC in the number of fines issued against financial firms and individuals. The report found that compared to the SEC, which imposed fines of $1million or more 259 times through 2013, FINRA issued only 55, an average of less than once per month. The analysis also showed that the SEC’s largest penalties reached upwards of $300 million, while FINRA’s fines amounted to just $12 million. Following the report, SEC commissioners urged FINRA employees to update and strengthen the standards used to determine financial punishments against Wall Street wrongdoers. Penalties must have a significant impact and send a strong enough message, the commissioners said, to hold perpetrators responsible and discourage unlawful actions. Read more…

New EU med device legislation targets saftey, improved coordination

In an effort to re-vamp medial device regulations, the European Commission (EC), the executive body of the European Union responsible for proposing legislation, unveiled new legislation aimed at strengthening the safety of products and better coordination between the Commission and it’s Member States. While the European Union’s (EU) lenient product regulations often make it the first market for new medical devices, a 2012 scandal involving defective breast implants from a French manufacturer prompted the EC to re-examine it’s standards. While some safety measures have been successfully implemented since the scandal, EC officials felt the need for further action, acknowledging that “some key improvements . . . require a reinforced legal basis.” In response, the EC has developed a new action plan introducing several changes to the laws in order to improve product safety and consumer confidence. Earlier this month, the Employment, Social Policy, Health Read more…

Halliburton case decision: Companies get another (expensive) bite at the dismissal apple

court_gavelThis time the smart money was right. As most readers know, in the Halliburton case the Supreme Court was presented with a challenge to its 1988 case (Basic v. Levinson) that made many shareholder class-action securities cases possible. Plaintiffs’ lawyers hoped that the Court would uphold Basic, while business groups advocated reversal. Most who heard oral arguments before the Court felt that the justices were struggling to find an acceptable compromise — limiting the scope of Basic but not requiring each and every plaintiff to show individual reliance on an misrepresentation. The Court found that middle ground. It gave defendant companies an opportunity early in a purported securities class action case to convince judges to deny class certification to plaintiffs — and thereby prevent the claims from moving forward.  Read more…

FDA suggests social media standards for pharma and med device companies

fda_twitterThe FDA issued a pair of guidelines on Tuesday for pharmaceutical and medical device companies regarding the use of social media and internet communication for medical products. While other industries, including financial services , retail and real estate have immersed themselves in using social media as a marketing tool,  pharmaceutical companies have been slower to embrace the trend, due to strict regulatory and privacy laws. But as technology continues to drive consumer and patient behavior – a 2013 study found that one in four interactions with doctors, healthcare professionals and patients in the U.S. is digital – the FDA recognizes a need to adapt to these changes and in turn, establish industry best practices for social media use. The long-awaited guidance aims to provide consumers with more accurate, accessible information online, and proposes guidelines for pharmaceutical and medical device companies about how to correct misinformation posted online by others. Read more…

The other arbitrage in the movement of drug company domicile for EU tax inversions

EU_boardroomLast month, Pfizer attempted to purchase and merge with AstraZeneca in order to obtain a lower corporate tax rate in the European Union. While the pharma giant’s effort may have been a failure, this week’s non-hostile merger of EU-based Covidien PLC (a company actually run by a U.S. management team) with Medtronic is an even bigger whopper, and another lesson on just how far a company will go to in order to reduce its tax rates.

In addition to tax reductions, the merged company could also see their Directors’ & Officers’ Liability (D&O) insurance rates drop. Historically, there have been several different ways to structure D&O programs for these re-domiciled entities. In recent years, many U.S. companies facing compliance issues while re-domiciling (frequently through a merger) have moved their D&O program from a U.S. placement to an international one. Since D&O programs provide coverage for the Parent Company and all majority owned entries under it, the merged company is able to follow that organizational structure and receive coverage. Read more…

Businesses adapt the threat of climate change

flood_businessTwenty years ago, data on climate change was primarily only used and needed by researchers and federal agencies. But as extreme temperatures, major floods and torrential storms continue to knock out communities across the globe at an alarming rate, understanding the causes and threats of climate change has become a lesson everyone involved must learn. Analysts at the Insurance Information Institute say three of the top six years for catastrophic losses have occurred since 2005, totaling more than $140 billion in insured losses.

Furthermore, with reports from federal researchers indicating that climate change in the U.S. is accelerating at a faster pace due to more greenhouse gas emissions, climate-related risks are sure to increase. The more often these disasters strike, the Read more…

Growth of solar energy eclipses wind power

solar_workerSolar energy may have just eclipsed wind power. While the latter has long dominated the alternative energy industry, last year marked the first time the U.S. produced more solar than wind energy. According to industry experts, more solar installations took place in the past 18 months than in the last 30 years, with over 6,000 solar companies now operating nationwide. The boom has also led to changes in the energy job market – solar jobs have increased over 50% in the past four years. Furthermore, production costs have fallen by more than half in the last three years. As a result, the insurers have become more adamant with using “functional equivalency” as opposed to “replacement cost”. Underwriters explain this as a valuation system that involves replacing solar panel installations with those that are functionally equivalent to the property that was damaged, which tends to be priced lower than what it had originally cost. Read more…

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