%1

Storms, floods and fires killed 688 people across the U.S last year and caused more than $145 billion of losses, the third-highest tally in records going back to 1980, a government report showed, Bloomberg News reported. There were twenty disasters that exceeded $1 billion of losses each, according to the National Centers for Environmental Information. They included last month’s tornado outbreak across Central U.S., western wildfires and heat waves, and four hurricane and tropical storm strikes on the Gulf of Mexico. Last year was the country’s fourth-warmest on record, and there were 21 named storms formed in the North Atlantic, the third most-active season. Six of the warmest years have occurred since 2012. “Disaster costs over the last five years exceeded a record $742 billion, reflecting the increased exposure and vulnerability of the U.S. to extreme weather and climate events,” the agency said in the report.

The Boy Scouts of America reached an $800 million settlement with Chubb Ltd.’s Century Indemnity Co. over childhood sexual abuse within the youth group, potentially boosting the funds available for abuse victims under its chapter 11 plan, WSJ Pro Bankruptcy reported. The proposed deal caps Chubb’s exposure under insurance policies it sold the Boy Scouts and is supported by a coalition of law firms representing the bulk of the roughly 82,200 men who filed claims in the youth group’s bankruptcy over past abuse. The settlement with Chubb, if approved in bankruptcy court, would add to the nearly $1.9 billion in compensation the youth group has already pieced together from its own assets, its affiliated local councils, the Church of Jesus Christ of Latter-Day Saints, and another major insurer, Hartford Financial Services Group Inc. “The proposed settlement trust to compensate survivors is now expected to exceed $2.6 billion, and we anticipate additional insurance proceeds and other settlement contributions will be added to this fund in the coming weeks,” the Boy Scouts said yesterday. The youth group is under intense pressure to win the backing of abuse survivors for its bankruptcy plan, which would lift the Boy Scouts out of court protection and resolve its financial liability related to decades of failures to protect children from predators. The Boy Scouts, which filed bankruptcy last year over a growing wave of lawsuits from abuse survivors, has apologized and said the chapter 11 plan will provide equitable compensation and preserve the organization’s mission.

USA Gymnastics, U.S. Olympic & Paralympic Committee and their insurers have agreed to fund a $380 million settlement with victims of longtime national team physician Larry Nassar, drawing to a close a five-year legal battle that has upended American Olympic sports governance, the Wall Street Journal reported. The sum is among the largest ever recorded for victims of sex abuse and includes hundreds of athletes who were assaulted over three decades. The decision by the final holdout insurer, TIG Insurance Company, to pay a substantial share of the settlement was confirmed Monday in a hearing in bankruptcy court in Indianapolis. The settlement also includes a direct contribution from the USOPC of around $34 million and a $6 million loan from the USOPC to USA Gymnastics to contribute, as well. The settlement will include claims from Olympic gold medalists such as Simone Biles, Aly Raisman and McKayla Maroney, who were treated by Nassar during his time as the U.S. women’s squad doctor. It also includes gymnasts competing for local clubs who sought treatment from Nassar on the strength of his national reputation, and a handful of victims of abusive coaches who had been pursuing claims against the sport’s governing bodies.

The cost of insurance to cover problems involving M&A has nearly doubled in just two years, underwriters and brokers said, after an explosion of global dealmaking during the COVID-19 pandemic, Reuters reported. Potential buyers take out insurance to protect against issues such as misrepresentation by a target of its performance or order book, while sellers buy cover to ensure a clean exit. After years of falling rates due to tough competition, 2021 was the first year in which M&A insurance rates have risen since the market began more than two decades ago, said Andrew Johnson, director of M&A at broker Paragon. Some in the insurance industry said a lack of due diligence has led to a spike in claims, while the boom in mergers and acquisitions has translated into steeply higher premiums. "From August/September last year, we saw incredible deal volumes, [and] that has encouraged insurers to raise rates," said James Swan, a partner at insurance broker McGill and Partners. Global M&A activity hit a record $4.33 trillion in the first nine months of 2021, leaping 97% from $2.2 trillion scored in the first nine months of a pandemic-hit 2020, as firms positioned themselves for life after COVID. The M&A insurance market has risen to more than $5 billion from less than $3 billion a year ago, Swan said, adding that a contract he was working on in Europe was priced at around 1.9% of the cover available, up from around 1% a couple of years ago.

A bankruptcy judge cleared Mallinckrodt PLC of liability for allegedly charging anticompetitive prices to health insurers on its flagship product, rejecting their claims for $382 million in antitrust damages, WSJ Pro Bankruptcy reported. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., ruled yesterday that Humana Inc. and other health insurers had failed to prove that the high price charged by Mallinckrodt for its H.P. Acthar gel product after its chapter 11 filing last year stemmed from ongoing anticompetitive conduct. As a result, the insurers aren’t entitled to the $382 million in top-ranking administrative claims they had brought against Mallinckrodt in its chapter 11 proceedings, Judge Dorsey said. Humana and others had sued Mallinckrodt before its bankruptcy over price increases for Acthar, which is used to treat infantile spasms, multiple sclerosis and other ailments and costs roughly $38,000 a vial, up from about $50 in 2001. The insurer argued the cost of any wrongdoing should continue to accrue while Mallinckrodt is in bankruptcy and be treated as administrative expenses, which must be paid in full ahead of other creditors for the company to leave chapter 11. Humana has said it continues to pay about $7.5 million every month for the drug, a price it alleged is inflated by anticompetitive conduct.

Twenty-six former high-level figures at LeClairRyan, including firm founder Gary LeClair, CEO Eric Gustafson and former general counsel Lori Thompson, have reached an agreement with their insurer and the bankruptcy trustee for the defunct firm to settle a set of pending claims against them for $10 million, Law.com reported. Trustee Lynn L. Tavenner, the 26 defendants, and Columbia Casualty, which issued the firm’s management liability policy, participated in an all-day settlement conference Nov. 16 in which Columbia agreed to pay the trustee $9.425 million to resolve claims including conspiracy, breach of fiduciary duty, and trade secrets against the defendants, and an additional $575,000 to satisfy claim expenses. Together, this sum equals the $10 million liability limit on the Columbia policy.

U.S. life insurers are backing Americans’ policies with bigger slugs of riskier, higher-yielding investments, the Wall Street Journal reported. Holdings of real estate, below-investment-grade bonds, mortgage loans, private equity, hedge funds, limited partnerships and privately placed debt increased 39% from 2015 to 2020, outpacing the 26% increase in total cash and invested assets, according to a new report by Moody’s Investors Service. As a result, these so-called illiquid assets represented about 35% of insurers’ $4.04 trillion in investments as of Dec. 31, 2020, up from 32% out of $3.2 trillion in 2015. Higher yields from these investments have helped slow an industrywide decline in investment income since U.S. interest rates plummeted during the financial crisis of 2008-09, Moody’s said. Investment income as a percentage of cash and invested assets has fallen to 4.3% from 5% since 2015, according to Moody’s. A drawback to the trend is that the assets can be harder to sell than the publicly traded bonds they tend to replace. Should an insurer need to raise a lot of cash quickly, they could be especially difficult to unload in an economic downturn. So far at least, the industry has plenty of other assets to tap for quick sale. “These investments generate higher returns than other traditional long-term investments and are a good match for insurance companies’ long-term insurance liabilities and capital surplus,” Manoj Jethani, a senior analyst at Moody’s, said about the rise in illiquid investments.

Businesses suing insurers for billions in losses from COVID-19 shutdowns are entering a new phase: jury trials, the Wall Street Journal reported. Over the past year, judges have ruled in favor of insurers in hundreds of cases, backing up the carriers’ rejections of “business interruption” insurance claims. Many of those rulings have involved policies with virus-specific exclusions, which can make the cases more open-and-shut for judges. But last month, a jury in federal court in Kansas City, Mo., heard a restaurateur duke it out with a unit of Cincinnati Financial Corp. in a case without the virus-specific exclusion. It was the first coverage dispute, out of more than 1,800 COVID-19 lawsuits filed so far, to reach jurors, according to a COVID-19 litigation-tracking effort at the University of Pennsylvania Carey Law School. While Cincinnati Financial still won, the trial signals that policyholders may be entering a new phase, in which their cases survive early motions to dismiss and get a fuller hearing than they have generally gotten so far. The plaintiffs in this new wave are expected to feature some large companies and organizations, such as Major League Baseball, a far cry from the local restaurants and other small businesses that so far have dominated action. And these big clients in many instances are represented by law firms with deep experience in insurance-coverage disputes, potentially setting the stage for some dragged-out, high-stakes legal fights. Large companies often have tailored policies, which don’t always have the boilerplate virus-specific exclusion that is common in policies sold to smaller businesses, said Tom Baker, a Penn law-school professor who runs the litigation-tracking project.