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The demarcation between years always seems to take on a contemplative aspect. We look back to where we’ve been, and then look forward to weigh our expectations. Will the market continue to harden? Will the dot-coms take our business? Will badly damaged lines, like workers’ comp, recover in states like California? How will Gramm-Leach-Bliley change our business?For our industry, the Year 2000 began with the event that never happened—the Y2K bug’s bite was much more vicious in our dreams than in reality.But not everything was so gentle. In Fort Worth, the tornado that ripped through downtown left visible scars. Saul Steinberg, the czar of Reliance, had his own catastrophe, which rippled through the industry.Two elected commissioners, Chuck Quackenbush from California and Jim Brown from Louisiana, made history—albeit the kind that isn’t good—through their actions. But the news isn’t all bad. The insurance industry made progress internationally, entering a variety of countries including China. U.S. catastrophes on the whole were non-existent. And the hard market we’ve been begging for finally showed signs of its arrival.We hope you enjoy our snapshot of the 10 biggest insurance stories of 2000. Drop us an e-line at [email protected] if you have additions to our list. Here’s to a great 2001!Kimberly Young, Executive Editor We knew the Reliance debacle had really hit rock bottom when embattled former Chairman Saul Steinberg was served with a particular lawsuit. But more on that in a moment.After two years of relentlessly embarrassing revelations, Reliance is in “active discussions with insurance regulators, bank lenders and bondholders over the terms of our restructuring,” said Joel Weiden, spokesman for Reliance Group Holdings. “At this point in time, it’s premature to say what may happen. The talks are ongoing. We’re hopeful that we will be able to reach an agreement over the terms of the restructuring with those parties.”The ratings agencies aren’t really hopeful. A.M. Best in early December dropped Reliance Group’s rating to “D,” the lowest level before full regulatory control. The company is under watch by the Pennsylvania Department of Insurance, the lead regulator on this case, but it appears more likely that the company might face more formal supervision, said Karen Horvath, Best’s vice president of property/casualty ratings. There’s a greater likelihood of bankruptcy as well, she noted.“Their major focus now is how to ultimately restructure and pay their claims and hopefully have something left over for shareholders. Which is questionable because they don’t have enough money left to pay their debt,” Horvath observed.Steinberg has personally lost $1 billion as majority shareholder of the once venerable, worldwide brand name.The story of Steinberg’s flashy lifestyle is well- chronicled. The company was leveraged for years. There were losses in construction, marine, aviation and toxic waste transportation lines. The failed Unicover workers’ comp reinsurance pool resulted in a $117-million charge.The death knell came in June: a buyout deal with Leucadia National fell through, and A.M. Best hammered Reliance by dropping the rating to a “B++” from “A-.” For huge chunks of ratings-sensitive areas—such as government entities and banks—Reliance was out of play for brokers, even if they wanted to do business with the company. At that point, Reliance stopped writing any business.Best’s Horvath figures the Unicover mess “was one symptom of a greater problem… [T]his company grew very rapidly in a very soft market. They really lost control of the quality of the business in the book, as well. And because they didn’t have the appropriate controls, they were underreserving for this business. Unicover was part of that. Negative publicity associated with that was a greater problem.”At the same time, Reliance had adverse reserve developments in other lines of business, Horvath said. Debt came due and the company had been taking a lot of capital out of the insurance subsidiaries to pay debt and shareholder dividends. And a significant portion of its assets was invested in common stocks—and concentrated in a select few issues to boot.“If you take any one of those factors by themselves they probably would have been okay. But not a confluence of all,” Horvath said.David Schiff, editor of Schiff’s Insurance Observer, has written extensively on Reliance and the Steinbergs. Many insurance companies can fail, he offers. A hurricane can come along and wipe them out, for example. But Reliance “was a long-term disaster,” Schiff said. “They were speculating their long-term strategy, and it caught up with them.“What they did was a little too much of everything. They grew during an unlikely time, which is easy to do in the insurance industry. You just offer more coverage at a lower price, and if you get lucky, you can write your way out of it. But they didn’t…Steinberg’s strategy was to walk on the edge. They played everything so dangerously. It was a reckless strategy.”Some 75 percent of Reliance has been sold off, consistent with the plan to run off the company, spokesman Weiden said. The Hartford took Reliance’s D&O, E&S and inland marine lines—plus a bunch of employees. Claims processing was outsourced to Aon’s Cambridge unit. Markel purchased renewal rights to childcare, social services and healthcare books. Combined Insurance, another unit of Aon, bought the accident and health book.Travelers bought the surety business and renewal rights to middle-market accounts. Kemper bought renewal rights to large risk casualty and construction wrap-ups. Sounds like a Moroccan bazaar.“Obviously this is a very difficult period for long-term employees of Reliance,” Weiden added.It got more difficult-or shall we say “ugly” -last September, when The Wall Street Journal reported that Anne Steinberg, 83, is suing her son for allegedly failing to repay a $4.7-million loan.Sure, this is business and there are three sides to every story (Saul’s side, mom’s side and the

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