New York Federal Reserve Bank President William Dudley and St. Louis Fed chief James Bullard, both of whom will vote at the June 18-19 meeting, made clear further economic progress was needed before they would support curtailing bond purchases.

Wall Street stocks rallied, with both the Dow Jones industrial average and Standard & Poor’s 500 Index closing at new all-time highs after their remarks eased investor concerns that the Fed would reduce its stimulus of the economy.

“Inflation is pretty low in the U.S.,” Bullard told reporters after delivering a lecture in Frankfurt. “I can’t envision a good case to be made for tapering unless the inflation situation turns around and we are more confident than we are today that inflation is going to move back toward target,” he said.

A core inflation gauge closely monitored by the Fed slowed to just 1.1 percent per annum in March, barely half the central bank’s long-term 2.0 percent annual inflation goal. In addition, the U.S. jobless rate stood at a lofty 7.5 percent in April.

The U.S. central bank has a dual mandate for price stability and maximum sustainable employment.

MARKET MOVER

In addition to boosting stocks, the U.S. dollar softened and prices for U.S. government debt moved higher on Bullard’s remarks, and were given a further lift by Dudley, a close ally of Fed Chairman Ben Bernanke who said the central bank’s asset purchases could go up as well as down.

Furthermore, underscoring the significant communication challenge the Fed faces if they alter the bond buying program, Dudley cautioned that investors could over-react to the first adjustment in the pace of asset purchases.

Since cutting policy interest rates to almost zero in late 2008, the Fed has more than tripled the size of its balance sheet via a campaign of massive bond purchases to hold down long-term borrowing costs and spur corporate hiring.

It decided on May 1 to keep buying at an $85 billion monthly pace, and many economists say mixed economic data warrants keeping up the purchases through year-end.

But persistent warnings from more hawkish Fed officials had fanned talk that it might start to wind back soon.

Bullard, who has been a reliable centrist in his policy votes, made clear that he did not share this view.

“I do think we should be willing and ready to change the pace of purchases when the time comes but I don’t think we are there yet,” he said.

Bernanke could provide more clues on the Fed’s next step in testimony to the U.S. congressional Joint Economic Committee on Wednesday at 10 a.m. (1400 GMT). His remarks will be followed by the release at 2.00 p.m. (1800 GMT) of minutes of the last Fed meeting, which economists expect to give further details of how it will eventually manage the exit from ultra-easy policy.

BERNANKE ALLY

Dudley told the Japan Society in New York on Tuesday that he could not be sure whether policymakers would next reduce or increase the amount of purchases due to the “uncertain” economic outlook.

After its last meeting, the Fed said it was prepared to shift its bond buying in either direction as economic conditions warranted, and Dudley’s remarks signaled that the Fed was aiming to preserve its flexibility.

Echoing past comments by both himself and Bernanke, he said the Fed might adjust the pace of bond purchases as the outlooks for inflation and the labor market change “in a material way.”

While tighter fiscal policy has crimped the production, job growth, the retail sector and housing have remained surprisingly resilient.

“At some point, I expect to see sufficient evidence to make me more confident about the prospect for substantial improvement in the labor market outlook,” Dudley said. “At that time, in my view, it will be appropriate to reduce the pace at which we are adding accommodation through asset purchases.”

The Fed has said it will continue to buy bonds until the outlook for the job market has “improved substantially.”

Dudley said the Fed would monitor the impact of fiscal drag as it weighed on policy. Economists say it likely will not be possible until at least until the third quarter to determine how big a blow belt-tightening in Washington has dealt the economy.

In a possible peak at Fed thinking on how it will eventually trim back the size of its balance sheet, Dudley also said the Fed could adjust its two-year old plan for reducing the balance sheet in the years ahead, calling parts of it “stale.”

“To the extent that the committee wants to reduce the risk of disrupting market functioning during normalization, it could decide to indicate that it will avoid selling the MBS (mortgage-backed securities) portfolio during the early stages of the normalization process,” he said.

“Moreover, to the extent that the committee wants to mitigate the risk of a sharp increase in long-term rates, it could judge that it would prefer not to commit to agency MBS sales.”

(Additional reporting by Eva Kuehnen, writing by Alister Bull; Editing by Chizu Nomiyama)

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People in the United States didn’t see a need for litigation financing because lawyers can get contingent fees, whereas in England lawyers weren’t allowed to work for a share of the recovery, according to Jonathan Molot, chief investment officer and co-founder of Burford Capital.

Also, while personal injury and class action lawyers work for a contingent fee—they don’t get paid unless they win— commercial litigators generally don’t work that way, said Molot, a former practicing attorney and current Georgetown University Law School professor.

The third-party funding vehicle was reconsidered in the United States in order to enable commercial disputes to be brought by businesses, he said.

Molot has studied how commercial parties, both plaintiffs and defendants, handle litigation risk. He identified a problem that can happen for both sides if there is a lack of resources to pursue litigation.

“I guess on either side, the problem is where there’s an imbalance between the parties in resources or risk preferences. That one party can afford to go to trial and the other party can’t,” Molot said.

He formed Litigation Risk Solutions to focus on situations where litigation risks were interfering with business—such as when a merger or deal between companies is hampered because the company being purchased or acquired is involved in litigation.

Soon after, he formed Burford Capital, which looks at both defense and plaintiff risks.

Use of Third-Party Funding Rising

Although third-party lawsuit funding vehicles are likely on the rise, there’s no way for an opposing party to know for sure, according to a 2011 paper published by the National Association of Mutual Insurance Companies (NAMIC).

“We think that it is on the rise, although one of the difficulties with this issue is that…we don’t really know. If one is up against a plaintiff whose lawsuit is being financed by a third-party litigation funder, one usually doesn’t know that,” said Robert Detlefsen, vice president of public policy for NAMIC.

In most instances, the court doesn’t know whether a third-party funder is financing the litigation either.

“That makes it difficult for us to know just to what extent, how prevalent it is, or whether it’s on the rise. We think so, but we don’t have figures, and we don’t know,” Detlefsen said.

States Taking Action

Although a few bills have been introduced by states attempting to address third-party litigation funding, currently no states ban it outright.

Detlefsen points out there are two types of third-party litigation lending.

“In principle, they’re very much the same, but in practice they tend to operate somewhat differently. They have different actors involved, and they tend to apply to different types of lawsuits,” said Detlefsen.

He said bills introduced thus far have mainly addressed the type of third-party litigation loan that is utilized by either lawyers or plaintiffs themselves that are involved in relatively small claims litigation.

“Usually the suit, it’s a slip-and-fall type of a thing, or very often it’s an auto accident case, and the loan is made very often directly to the plaintiff in the case, but usually for an amount of several thousands of dollars,” Detlefsen said. “The terms of the arrangement are such that the borrower, the recipient of the funds, gets money upfront and is required to pay interest, usually on a monthly or maybe even a weekly basis interest that accumulates on a weekly or a monthly basis to the funder, until a settlement is reached or the case goes to court and a damage award is ordered by the court,” he explained.

These are non-recourse loans, meaning the borrower is under no obligation to repay the funder if the lawsuit doesn’t result in a favorable judgment or settlement, Detlefsen said.

The legislation introduced so far mainly takes aim at the lack of transparency and interest rates charged.

The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) has drafted a model act. Detlefsen said his organization and others in the insurance industry are working with the ILR to encourage states to introduce legislation based on the model.

“The ILR model act would require that a party notify the party that it is suing, as well as the court, if there was a litigation funder financing the lawsuit,” Detlefsen said.

Molot said the Chamber of Commerce’s position on litigation funding is antithetical to its position on other issues, which emphasize free enterprise and freedom from government regulation.

“I think the only explanation for why the Chamber is trying to suppress litigation funding is a fear of precisely what litigation funding is intended to do, which is to level the playing field so that cases are resolved based on their merit, rather than based on unequal resources or risk preferences,” Molot said.

Institutional Investors

The other kind of third-party litigation lending involves funders that are large institutional investors, like hedge funds. Detlefsen said they are mostly interested in commercial litigation because there’s more money at stake.

He said that instead of charging interest on the loan proceeds they advance, they negotiate an arrangement with the plaintiff party whereby the plaintiff agrees to share a certain percentage of whatever the recovery is with the funder. There hasn’t been any legislation at the state level introduced to specifically address this type of funding.

With respect to transparency, Molot sees no reason for anyone to know who is funding a lawsuit.

“There’s no reason for it for a couple of reasons. Companies all the time have to decide how to finance their legal fees. Most big companies finance it from retained earnings,” Molot said.

Other options, he said, include raising funds by issuing bonds, through an equity or debt raise or through retained earnings.

He said courts would never inquire into how money was raised to fund a lawsuit.

Another reason funding transparency is unnecessary, said Molot, is that opponents inquiring into financing arrangements could get into the head of the opposing party and acquire the work product and strategy for the litigation, Molot said.

“It’s sacrosanct in our system that each side should be able to strategize with their lawyer and come up with a strategy for the case that is protected from the other side’s…getting access to their strategy,” he said.

Financing discussions could reveal the litigant’s optimism or pessimism about the case, he said.

“It’s going to reveal what their budget is. You don’t want the other side to know that they have $5 million to spend, and if that runs out, they’re not going to have any more. Then the other side will just force them to run up $5 million in expenses. You don’t want the other side to know that if it comes in at a settlement above X, the litigation finder gets one percentage, and if it comes in at Y, it gets a different percentage. That’s just not something the other side should have access to,” said Molot.

Chaos in the Civil Court System

An increase in third party litigation financing in large commercial litigation cases could cause an increase in frivolous lawsuits, according to Detlefsen.

He said a cause for concern is a large, well-capitalized institutional investor who could hedge its risks over a broad portfolio of investments. Similar to a junk bond investment risk where there is a good chance of default, but with a potentially big payout, third-party litigation funders financing high stakes, large scale commercial litigation, including class action cases, could invest in a case that might not have been filed because the likelihood the suit would fail was relatively high.

“A law firm that’s operating on a contingency fee basis, for example, probably wouldn’t want to take such a case. But a third-party litigation funder might look at a case like that and say, ‘Well, when you consider it against the backdrop of all the other investments that we have, this is a risk that’s worth taking because the potential payout is very large,’” said Detlefsen. “A case that looks weak on its face, if you manage to get the case certified in a certain jurisdiction and you manage to get a certain kind of jury to hear the case, even though the case is weak on the merits there is a chance that it could go in favor of the plaintiff, and the payout could be very large.”

He said insurers fear that because third-party litigation financing may be involved, more of those types of cases will be filed and settlements negotiated could be higher than what might otherwise be the case.

Molot disagrees.

“The surest way for a litigation funder to lose money is to fund a losing lawsuit. It’s doesn’t make any sense that someone would fund a suit that’s a bad suit…there is a respect in which litigation funders are going to be even pickier than contingent fee lawyers in deciding whether to take a suit,” he said. “I think that the people who are saying litigation funding is going to lead to an increase in frivolous litigation are dead wrong. They’re really doing it in order to protect themselves from meritorious claims.”

Detlefsen said class action lawsuit abuse is foreseeable.

“You could imagine that kind of abuse escalating if you have a third-party funder and the law firm that’s representing the plaintiff class working together to try to pursue the litigation in a way that delivers an outcome that is mutually advantageous to the funder and the firm or the attorney that’s bringing the lawsuit,” he said.

Molot said: “I’ve heard people wonder about mass torts. Where there’s some drug defect. Is someone going to finance plaintiffs? I don’t see a need for third-party litigation finance there. I don’t see that that’s the market because there’s already a contingent fee plaintiff’s bar that handles those cases,” said Molot.

Insurers have little cause for concern when it comes to large-scale litigation funding, according to Molot.

“I can’t remember a case where an insurance company would have to pay out that was funded. The reason for that…is generally, contingency lawyers deal with personal injury suits. They deal with product defects. They deal with class actions, the sorts of things that might be insured,” he said. “The cases where there’s not contingency lawyers…generally commercial litigators who work by the hour, are cases where there’s not insurance. It’s commercial disputes, a contract breach between two parties. I think from an insurer’s perspective, this is largely irrelevant.”

Molot said the only time Buford has encountered insurers on a case involving third-party litigation financing is when the company has been on the same side of the suit as the insurers.

“In fact, in Europe, litigation funding is integrally related to insurance. It’s insurance companies that historically have provided litigation funding,” Molot said. In fact, Burford owns the largest provider of after-the-event insurance in the UK, and it has a very close relationship with Munich Re, which provides reinsurance.

(This article was originally published on Claims Journal’s website. Reporter, Denise Johnson, is the editor of Claims Journal.) 

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Among the issues with which CEA’s first CIO says he will be concerned when he starts his job on June 3 are security, efficiency and the task of integrating new technology into the organization.

Acting in the role of opportunist Coombes also plans to be mindful of what he calls the “consumerization of IT,” or as he puts it another way, “the technology in hands of everyone now.”

CEA is among a slew of organizations that are adding CIO positions to their executive ranks, and more firms are placing growing importance on that role, making it more of a transformative position, experts say.

We have seen an increasing share of companies who put the CIOs right up at the top as the core of people who run the company.

“We have seen an increasing share of companies who put the CIOs right up at the top as the core of people who run the company,” said John Challenger, CEO of Challenger, Gray & Christmas Inc., an outplacement consulting organization. “I think it’s a recognition by companies that the strategy around what information is collected and how it’s used to change behavior— to report to customers, and report to shareholders –is core to a company’s strategy.”

“CIOs used to just be the technologist who fixed the machine or operated it, but now businesses are so dependent on the technology and the risks are so great to the company through the technology that many more companies have started to do this,” Challenger said.

CEA’s governing board approved adding a CIO position to the CEA executive team following a recommendation by consulting firm PricewaterhouseCoopers.

A memo last year from the board of the privately funded but publicly managed not-for-profit provider of residential earthquake insurance stated the CIO “role would extend to CEA’s relationships with key vendors and with participating insurers.”

“While achieving much success in its core business segments, CEA’s development of internal business processes—including information technology—has often lagged behind because of staffing limitations that have restricted the organization’s ability to build a diverse skill bank,” the memo states.

The memo notes that CEA’s business model assigns its most complex and demanding technology-dependent business functions, such as policy issuance, billings, and customer notices, to its participating insurers.

“In that regard, the CEA recently experienced numerous undue complications as it tried to implement new, lower rates, revised policy forms, a new product, and related (and required) systems enhancements,” the memo states. “Those experiences well illustrated the inefficiencies inherent— and inescapable— in the current operating structure, as some participating insurers’ aged computer systems presented (and to this day present) difficulties that are labor-intensive and costly to remedy, inhibiting CEA’s ability to effect timely, needed change.”

To oversee changes that are often fundamental to how a company operates requires not merely technological knowhow, but business smarts, according to Tom Silver, senior vice president at Dice.com, a career site for technology and engineering professionals.

“What we’re also seeing is that the role of a CIO is now broadening to someone who not only has technical capability, but someone who has business understanding and business acumen,” Silver said.

According to Silver the number of companies hiring CIOs or creating such a position continues to be on the rise, and the importance of the role is being bared out by the salaries for which the position is being rewarded.

The average salary of CIOs was $119,000, up 5 percent from a year ago, according to Dice.com’s annual salary survey for 2012-2013.

“Salaries for CIOs have demonstrated the importance of the position within an organization,” Silver said.

Overall tech salaries are up, according to Dice.com. Tech professionals in 2012 earned a greater than five percent increase in average annual wages to $85,619, up from $81,327 in 2011.

The increase in wages comes at a time when the vast majority of tech professionals (64 percent) say they are confident they could find a favorable new position in 2013, the survey shows.

Coombes, a business-technology executive with more than 25 years of leadership experience in insurance and other industries, comes to CEA from ITT Educational Services Inc., where he was executive vice president and CIO. Before ITT, he was part of the leadership team at CNO Financial Group.

It was for his work at CNO that in 2012 Computerworld named Coombes one of its “Premier 100 IT Leaders.”

Coombes sees opportunity in the changes being undertaken at CEA, as well opportunities such as those being brought about by cloud computing, and the ever-expanding capabilities of mobile devices, enabling an organization like CEA to communicate in more and more powerful ways to its customers and insurance agents.

“It creates opportunities and it raises expectations,” Coombes added.

He was referring to the rising expectations from the consumer community, which is being equipped with faster and more capable technology that is enabling them to complete just about any task, including buying insurance, on their smartphones and handheld devices.

Coombes believes more consumers will place a greater emphasis on a conveniences like as being able to buy policies and communicate and give information from a smartphone when choosing carriers and services.

“It’s the expectation people have about what the new normal of technology is all about,” he said.

Coombes said that “new normal” is something the insurance business and CEA needs to be out in front of.

“In terms of the insurance business overall I think that technology will be much more integrated into the entire value chain,” he said. “The CEA in particular is interested in creating more accessibility to the products, and operating with more efficiency, and providing better support for the insurance organizations.”

There’s another benefit to putting a CIO in the C-Suite, according to Challenger.

In an environment of increased regulation, as well as growing concern and public suspicion over the ethics of corporate practices, moving to add a CIO can help provide greater transparency, something that can help protect a company from itself, according to Challenger.

“Information shines a light on what’s happening,” Challenger said, adding that by having a CIO as a top-tier executive it makes it difficult for information to be obfuscated.

“Authorizing it at the C-Suite level gives more power to that information, and more power not to hide it. We’re in an era of transparency. Information is transformative. Transparency is what drives change,” he said.

(This article was originally published on Insurance Journal’s website. Reporter Don Jergler is the West Coast editor of Insurance Journal.)

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In an interview with Reuters after touring the area, Doak said that losses were likely to be greater than in the Joplin storm, which he said caused about $3 billion in damage.

“This will likely exceed that,” Doak said.

The insured losses from Joplin exceeded $2 billion and are expected to rise as claims are settled.

(Reporting by Carey Gillam; Editing by Gary Hill and Jim Loney)

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Sixty-four percent of more than 500 executives in a Forbes Insight survey said that cloud-based collaboration helps their firms execute faster than would be possible otherwise. This can shorten time to market, quicken product upgrade cycles and lead to faster responses to competitive challenges, according to the Cisco-sponsored survey, “Collaborating in the Cloud.”

That 64 percent figure increases to 82 percent among “leaders” defined in the survey as executives including CEOs, CIOs, CTOs and other department heads with greater experience and familiarity with cloud-based collaboration tools and strategies than others in the survey.

Other Survey Findings

• Cloud enhances collaboration across time zones and functional boundaries. Fifty-five percent of those surveyed—87 percent of leaders—say that capabilities enabled by cloud-based solutions represent a true breakthrough in collaboration. Cloud-based collaboration tools enable enhanced capabilities in areas such as communication, product and service delivery, information sharing, tapping knowledge resources and group problem solving.
• Cloud enables more-efficient business processes. Fifty-eight percent of total respondents—and 90 percent of leaders—report that cloud-based collaboration has the potential to improve business processes. Business processes include purchasing, manufacturing, marketing, sales and technical support.
• Cloud collaboration spurs innovation. Fifty-nine percent of executives—93 percent of leaders— agree that cloud-based collaboration stimulates innovation.
• Cloud is not solely an IT discussion. Seventy-five percent of those identified as “leaders” say that non-IT executives are becoming more involved in the selection, implementation, and management processes relating to cloud-based collaboration tools. In short, cloud collaboration is not an IT discussion but a broader business discussion.

“The ability to collaborate in the cloud is becoming a key driver of competitive advantage,” said Bruce Rogers, chief insights officer of Forbes Media. “Leading companies are doing more to foster cloud-based collaboration—not only internally, but also with an ever-wider swath of external groups including customers, suppliers, partners, and even regulators.”

The benefits of cloud-based collaboration, Rogers said, include “greater efficiency, organizational dexterity, and innovation.”

Eric Schoch, vice president and general manager, Cisco Hosted Collaboration Solution business unit, said the survey results show that cloud-based collaboration acts as a significant enabler of business success.

“Clouds accelerate the roll-out of collaborative technologies such as voice, video, and conferencing so that companies can improve the efficiency of their decision-making and the quality of their customers’ experiences,” Schoch said. “As clouds and macroeconomic factors increase the speed of business and collaboration, businesses look to clouds as a means to gain a competitive edge.”

The report is based on a global survey of 532 senior executives from companies with sales ranging from $250 million to over $20 billion. It includes commentary from interviews with 15 corporate executives as well as Q&A-style case studies.

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Cases filed under the Fair Labor Standards Act (FLSA) in have continued to skyrocket in 2013, despite indications that these filings had moderated during the past 12 months, the firm said.

There were 7,764 FLSA cases filed in 2013, up 10 percent from 2012 which saw 7,064 cases filed, according to data from the Federal Judicial Center.

Richard Alfred, chair of Seyfarth’s wage and hour litigation practice, said the claims forming the bulk of these numbers include misclassification of employees, alleged uncompensated “work” performed off the clock and miscalculation of overtime pay for non-exempt workers.

“With no clear catalyst during the past 12 months, this strong spike and new high for FLSA claims makes them one of the top threats to U.S. employers,” said Alfred. “We’ve seen an astonishing rise in FLSA claims, but with a slim one percent increase in 2012, it’s surprising to see a sharp increase like this.”

Alfred believes several factors may be responsible for the jump in 2013 filings, including:

• The improving economy may provide incentives for plaintiffs’ counsel to sue new and relatively unsophisticated companies, employers whose workforces are growing, and companies whose improved financial position has made them more attractive targets.
• The economic recovery has seen an increase in employment demands on all employees, both exempt and non-exempt, which cause them to question their employer’s pay practices.
• More lawyers who had not considered wage and hour claims in the past–both employment specialists and general practitioners–are now filing wage and hour lawsuits, perhaps motivated by large settlements in past cases.
• Employees are more sensitized to wage and hour issues, at least in part as a result of their access to social media.

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The number two in the Chinese leadership offered New Delhi a “handshake across the Himalayas” and said the world’s most populous nations could become a new engine for the global economy if they could avoid friction on the militarised border.

“Both sides believe that we need to improve the various border-related mechanisms that we have put into place and make them more efficient. We need to appropriately manage and resolve our differences,” Li said at a joint news conference with India’s Prime Minister Manmohan Singh.

The two men appeared smiling and relaxed. India’s Foreign Ministry said they got on well. There were small breakthroughs on trade, but no major agreements were signed.

China and India disagree about large areas of their 4,000 km (2,500 mile) border and fought a brief war 50 years ago.

Among the measures being looked at to reduce the risk of confrontation is allowing higher level meetings between regional military commanders, an Indian official said.

While there has not been a shooting incident in decades, the long-running dispute gets in the way of improving economic relations between the neighbours, who account for 40 percent of the world’s population and whose fast growing markets stand in contrast to the stagnant economies of the West.

TRADE GAP

Bilateral trade reached $66 billion last year but both sides believe the potential is much greater. India runs a $29 billion deficit with China, a sore point that they sought to address in a joint statement, with specific reference to pharmaceuticals, IT services and agriculture.

However, similar promises made in previous joint statements failed to slow the ballooning trade gap.

India’s Essar Group conglomerate is nonetheless set to sign a $1 billion loan deal with China’s China Development Bank and China’s largest oil and gas producer PetroChina during the trip, sources said. They said the loan would be backed by the supply of refined products to PetroChina.

After a welcome ceremony at India’s presidential palace, Li said he wanted to build trust and cooperation.

“World peace and regional stability cannot be a reality without strategic mutual trust between India and China. And likewise, the development and prosperity of the world cannot be a reality without the cooperation and simultaneous development of China and India,” he said.

Li said he chose New Delhi as his first destination on his four-nation tour to show how important India is for China and also because he had fond memories of visiting as a Communist youth leader 27 years ago.

Srikanth Kondapalli, an academic and expert on China said progress was at best incremental, despite the warm words from Li and a media campaign around his trip apparently aimed at cooling Indian public anger following the three-week standoff on the Himalayan plateau that ended on May 3.

“There was a lot of hype created before this visit, but the new leadership didn’t show many new ideas,” Kondapalli said.

EARLY SOLUTION?

While most observers think it will take years to resolve the border dispute, recent statements suggest China’s new leaders would like to speed things up, perhaps to shift its attention to disputes elsewhere in Asia, including the South China Sea.

Singh said negotiators would meet soon to seek an early agreement on a framework to settle the border, a goal that has eluded representatives in 15 rounds of high level talks.

The stand-off on the border was the latest reminder that sensitivity runs high. It distracted diplomats’ attention from talks on investment and trade ahead of Li’s trip and soured public opinion toward China in India.

The disagreement over who owns barren patches of the Ladakh plateau and the entire Indian state of Arunachal Pradesh means there is almost no road or rail connectivity between the giants.

At a meeting with Singh in Durban this year, Chinese President Xi Jinping said the two countries should seek a solution “as soon as possible” – a departure from previous language. His urgency was echoed in Delhi last week by foreign ministry spokesman Qin Gang, who said the two sides needed to “redouble efforts” to reach a solution at an “early date”.

It would be politically difficult for an Indian politician to concede territory to China. Protests by nationalist groups in Delhi and the northern state of Kashmir on Monday against Li’s visit highlighted anti-China feeling among some Indians.

Prior to Monday’s meetings, a senior official at the Foreign Ministry said India was sceptical of recent overtures and would wait to see if China would bring anything new to the table.

After India, Li is due to visit Pakistan, Switzerland and Germany and is likely to carry a message that China wants more open foreign relations and should not be seen as a threat.

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Those of us who grew up worshiping cheesy sci-fi movies from the 1950s are undoubtedly familiar with that line. It is what the aliens who land on earth usually say to the first people they meet.

That phrase actually is a misquote of an Alex Graham cartoon in the March 21, 1953 issue of the New Yorker. In the cartoon, two ant-like extraterrestrials descend from their flying saucer and request of the first earth creature they meet, “Kindly take us to your President.”

One wonders what answer the aliens got, considering the earth creature they so earnestly questioned was a horse.

Being earthlings, with some familiarity with the planet, its inhabitants, and its governance structure, we know a horse is a horse, of course, of course, and no one can talk to a horse of course, that is, of course, unless the horse is the famous Mister Ed. But the unfortunate aliens—like many a consumer, investor, or regulator looking at a company for the first time—had no way to tell with just one glance.

Here is where I make my point. Mindless meandering through the detritus of my childhood though it may have seemed, there was, believe it or not, a reason for this tortured anecdote. In a nutshell, it is this: leadership matters, and no regulator, investor, policyholder, or alien can fully understand an organization without understanding its leadership.

To extend that, corporate governance matters, and the National Association of Insurance Commissioners (NAIC) is making corporate governance its next focus as it continues its Solvency Modernization Initiative (SMI).

Those who think this is still our father’s NAIC would be surprised at the speed with which the organization’s Corporate Governance Working Group chaired by Vermont Commissioner Susan L. Donegan has moved toward implementing new corporate governance requirements.

At the last NAIC meeting, the Working Group made requests for new model laws consistent with its charge to outline “high-level corporate governance principles and determine the appropriate methodology to evaluate adherence to such principles.”

If you have not yet had a chance to read it, the Working Group’s “Proposed Responses to a Comparative Analysis of Existing U.S. Corporate Governance Requirements” is actually well worth perusing.

One regulator close to the process told me that the intention was that a combination of the Own Risk and Solvency Assessment (ORSA), the Form F filing for enterprise risk for holding companies, and the proposed corporate governance disclosure would provide a relatively quick, concise, and accurate picture of any insurer.

Included in the new corporate governance disclosure would be timelier and more detailed descriptions of an organization’s leadership, including the board, its structure, senior management, compensation, risk management and much more. Insurers meeting the size threshold would also be required to have an independent internal audit function.

As with much of what the NAIC has proposed under the SMI, the enhanced corporate governance requirements can be seen as a prudent response to the events precipitating the last fiscal crisis, as a preventative against future crises, and as proper preparation for the next. But also, as with any regulatory requirement, these corporate governance enhancements run the risk of being relegated to a compliance exercise. That would not be in the best interest of the industry or of any insurer.

As with the ORSA, these corporate governance enhancements may in time become basic expectations for risk management for all insurers. Insurers, in turn, may benefit from realizing the added value that these proposed enhancements can bring.

In a recent whitepaper issued by some of my Deloitte colleagues, the writers noted that “the expectations of regulators, investors and other stakeholders regarding governance have shifted over the past few years.” Greater involvement and more active oversight by boards are basic elements of these new expectations.

But while insurance companies and other financial services industry (FSI) participants may agree on the need for more effective governance models, implementation of the required improvements is not yet complete.

In a study by Deloitte’s Center for Corporate Governance referenced in the whitepaper, proxy statement disclosures show that while FSI companies are bolstering governance and oversight, only one in three have management risk committees, less than half disclose whether risk management/oversight is aligned with strategy, and fewer than one in five note the board’s oversight with regards to corporate culture.

That might indicate there is room for improvement. In in our experience, while establishing an enterprise-wide corporate governance program does have its challenges, having an effective governance operating model makes taking that step easier.

Effective risk management is the basis of any effective corporate governance program, and my colleagues and I have found that the same parties responsible for effective risk management share responsibility for corporate governance. This includes the board, which sets the tone and is responsible for oversight; executive management which is responsible for driving governance and risk practices throughout the organizations; and the business units and supporting functions where risk activities occur and ownership lies.

What should the governance operating model do?

In their whitepaper, my colleagues explain that it should organize operational, financial, risk management and reporting processes so the board gets the information it needs to provide good governance while management and the business units are able to properly fulfill their functions.

As any executive knows, just saying it is not enough. It, whatever it is, has to be heard and understood by the people responsible for execution at all levels. A proper governance operating model can help translate an organization’s governance framework to the explicit level of roles and responsibilities, turning intent into operational reality.

What does that mean?

It means that the model should help everyone within the organization answer basic questions such as: Why are we doing this? Is this okay? Who should make this decision? Who needs to know? It will also help everyone in the organization know when to ask these questions.

Finally, a governance operating model will create a feedback loop so the board and management can identify and respond to the needs that arise as the internal and external environments change. This feedback loop enables the board and management to properly sustain effective governance.

The NAIC deserves credit for recognizing the importance of effective corporate governance for today’s complex financial organizations. For insurers, taking advantage of this regulatory nudge may lead to improved risk management, better leadership, and better outcomes, whatever challenges tomorrow may bring.

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That confidence extends throughout the survey findings, with 44 percent of those surveyed predicting that industry financial prospects will improve during the next six months, compared to 34 percent in the fall.

Since last summer, the number of CFOs who believe the pricing or fees charged by their industry will increase in the next six months has jumped seven percentage points to 37 percent.

In addition, when CFOs were asked about employment opportunities during the next six months, more than a third (40 percent) said their company’s head count would increase, rising six percent from the fall.

“The results of our spring survey are encouraging — particularly with respect to the uptick in expectations for improved financial prospects,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “Seemingly, steady improvements in key economic indicators, including labor and housing, have helped stimulate greater optimism among CFOs, at least in the near-term.”

Amost two-thirds of CFOs (65 percent) expect the average cost of an employee’s salary to increase during the next 12 months, up from 59 percent in the fall. The total cost of employee benefits, including bonuses (56 percent), stock options (72 percent), 401(k) match (86 percent), and other company-matched retirement contributions (81 percent), are expected to remain unchanged from the year prior.

These findings come on the heels of similar data from the Grant Thornton International Business Report, which found that optimism in the performance of the nation’s economy among U.S. business leaders rose from -4 percent in fourth quarter 2012 to 31 percent in first quarter 2013.

While increased optimism among CFOs was prevalent throughout the survey results, they still cite legislative bottlenecks as an area of concern. Almost half of all CFOs surveyed (47 percent) say they are unable to make a major decision that would allow their company to grow because of uncertainty surrounding the funding of the U.S. government. Thirty-one percent of respondents ranked tax reform as the second greatest bottleneck.

Grant Thornton LLP conducts its CFO Survey twice a year with CFOs and other senior financial executives across the United States. The spring 2013 survey took place between April 3 and April 24, with 1,259 CFOs and comptrollers participating.

The survey has a confidence interval of +/- 2.5% at a 95% confidence level.

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In 2012, the workers’ comp calendar combined ratio dropped six points from 2011, coming it at 109. The drop in combined ratio marks the first decrease since 2006, according to the State of the Line workers ‘compensation market analysis published by the National Council on Compensation Insurance (NCCI).

“By many measures, the industry condition is indeed improving,” said NCCI President and CEO Steve Klingel. “While we are pleased to see that the positives are beginning to outweigh the negatives, there remains great opportunity for improvement.”

Long-term challenges still linger over the future of workers’ comp, says Klingel. External forces such as the economy, healthcare reform, and new legislation could still negatively affect the market. “But for now, we view the overall industry condition as encouraging,” he says.

According to the NCCI report, the workers’ compensation calendar year combined ratio for private carriers was 109 for 2012.

The accident year combined ratio experienced a similar six-point improvement. NCCI estimates that the accident year combined ratio for 2012 is 108, following 114 in 2011.

Net written premium (including state funds) also improved, increasing to $39.63 billion in 2012. The NCCI reports this is a 9 percent increase from 2011. Net written premiums increased 8 percent in 2011. The premium increases follow a cumulative 27 percent decline in premium from 2006–2010.

The report also revealed that lost-time claim frequency improved significantly in 2012 — down 5 percent on average in NCCI states. The 5 percent decline is slightly larger than NCCI’s long-term annual estimate of a of 2 to 4 percent decline per year.

Previous NCCI research indicated that distortions in the calendar year premium data resulting from the recession and subsequent recovery affected our measure of claim frequency for 2010 and 2011. Current research indicates that those distortions are no longer significant for 2012.

Despite the improving conditions, the workers’ compensation line continues to deal with a variety of significant challenges, says NCCI Chief Actuary Dennis Mealy.

“These include poor underwriting results, low investment yields, and continued uncertainty regarding the impact of the implementation of the federal healthcare reform bill,” he said.

Even so, the fact that the industry is seeing a return to a long-term pattern of declines in frequency and premiums are on the rise suggests that the underwriting performance of the industry, while still not good, is not as bad as it has been over the last two to three years, says NCCI’s Chief Economist Harry Shuford.

“For the last three years the operating gain, which basically measures the overall profitability in workers’ compensation, has basically been zero for three years in a row,” Shuford said. “Investment income has been just sufficient enough to cover underwriting losses and there was nothing left over. This year there is some positive return due primarily from the improvement in underwriting results.”

Like Mealy, Shuford said that he sees investment yields as a concern for the future health of the workers’ comp market.

“With this period of the last five or six years of very low interest rates, the industry has been able to maintain their investment income but we are concerned about what happens as they (insurers) start replacing maturing securities, particularly bonds that had high interest rates when they bought them, and they have to place them at much lower interest rates that are currently available,” Shuford said.

“We are concerned we are going to see downward pressure on investment income over the next two to three years in the insurance industry, particularly if the Federal Reserve has to continue this aggressive monetary policy because of the slow recovery.” This challenge is “sort of the wild card,” he says.

“If that happens, I think I would see even more premium increases, tighter underwriting and continued growth in the residual market,” Shuford said.

Other market indicators/trends highlighted in NCCI’s 2011 State of the Line report:

• The impact on premium of changes to bureau loss cost/rate filings was about 2 percent in NCCI states for 2012. For 2013, the impact of bureau loss cost/rate filings is basically flat in NCCI states. In the last filing cycle, NCCI filed 25 increases and 13 decreases, mostly for effective dates in 2013. Carrier discounting from bureau loss costs and rates declined about 2.5 percent in 2012 in NCCI states. About 40 percent of the increase in premiums in 2012 can be attributed to increases in bureau loss costs and rates, and the decline in carrier discounting.
• The private carrier reserve position continued to deteriorate in 2012 for the fifth consecutive year. NCCI’s estimate of the reserve position for the private carriers as of Year-End 2012 is a $13 billion deficiency.
• Investment returns for the workers’ compensation line remained strong. For the third consecutive year, the ratio of investment gains on insurance transactions to premium was at or above 14 percent.
• Investment results combined with underwriting results produced a workers’ compensation pretax operating gain of 5 percent for 2012. This is in-line with the industry’s long-term average, and an improvement following three years of near-zero operating gains or losses.
• In NCCI states, the average indemnity cost per lost-time claim increased a modest 1 percent in 2012, after increasing 2 percent in 2011 and declining 3 percent in 2010.
• The average medical cost per lost-time claim increased by 3 percent in 2012 after increasing 3.6 percent in 2011 and increasing 1.4 percent in 2010. Combined, the total lost-time claim cost increased about 2 percent in 2012, which is about the same rate as the change in average wages.
• The workers’ compensation residual market experienced significant growth in 2012. Premiums grew by close to 50 percent, and the average market share in the residual market increased from 5 percent to 7 percent. The pace of growth is continuing into the first quarter of 2013.
• The residual market combined ratio improved from 117 in policy-year 2011 to 112 in 2012. The total underwriting loss in the residual market pools serviced by NCCI was $99 million for policy-year 2012, up slightly from the $85 million in 2011.

2012 Results Summary

In 2012, the workers’ compensation line showed some signs of recovery. Results improved materially, including the following:

• The combined ratio for workers’ compensation improved for the first time since 2006
• Premium grew for the second consecutive year
• Claim frequency declined significantly for the first time since 2009
• Claim severity increases remained modest
• Even with the improvements, workers compensation is faced with some ongoing challenges:
• The combined ratio, while lower, still remains too high
• Slow growth in employment, particularly in the manufacturing and construction industries, is impeding additional premium growth
• In addition, the impact of the implementation of the Patient Protection and Affordable Care Act in 2014 looms as a huge uncertainty for the line

(Reporter Andrea Wells is the editor-in-chief of Insurance Journal.)

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