The Guernsey Financial Services Commission has reported an increase in the number of applications for insurance licenses, in spite of a quiet start to the year. “Although 2009 began a little quietly, applications for insurance licenses have shown a marked increase since April,” the Commission said. During the first five months of the year Guernsey received 14 license applications, six of which have been for pure captives. There were just nine applications made during the first five months in 2008. “This is extremely positive news for Guernsey’s insurance industry,” said Peter Niven, chief executive of Guernsey Finance - the promotional agency for the Island’s finance industry. “Undoubtedly conditions in the commercial markets, such as increasing premium rates and the threat of a further hardening in the future, are stimulating interest in alternatives, such as captives.”

The Obama administration has named Kenneth Feinberg to a newly created post as compensation overseer to set the salary and other compensation of executives at AIG and other companies that have been the largest beneficiaries under the US government programme to rescue the financial services sector. Mr Feinberg is to work out of the Treasury Department and set the salaries and bonuses of 175 senior executives at the seven largest recipients of bailout funding, which in addition to AIG include Bank of America, Citigroup and General Motors. “The financial crisis had many significant causes, but executive compensation practices were a contributing factor”, said Treasury secretary Timothy Geithner. “Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excess leverage. By outlining these principles now, we begin the process of bringing compensation practices more tightly in line with the interests of shareholders and reinforcing the stability of firms and the financial system”. Mr Feinberg, a Washington attorney, had a previous task of setting compensation for families of victims of the 2001 destruction of the World Trade Center. The Obama administration has also proposed that Congress draw up legislation that would enable shareholders of all publicly traded companies to hold non-binding votes on executive compensation. Many companies criticise such caps on compensation on the grounds that such a policy would limit their ability to attract the best talent. In order to avoid governmentally imposed restrictions on operations, 10 banks, including JP Morgan Chase, Goldman Sachs and Morgan Stanley, plan to return $68.3bn in funds that they received under the Treasury’s Troubled Asset Relief Programme. Meanwhile, the US Federal Reserve said Wednesday that it posted combined Q1 losses of $5.2bn on loans tied to the rescues of AIG and Bear Stearns through facilities called Maiden I, II and III. Despite those losses, the Fed still posted Q1 income of nearly $2.7bn.

Insurance broker Marsh has predicted that the UK construction sector faces a “perfect storm” as exposures rise at a time of increasing professional indemnity premiums. Fifty-six percent of consultants and contractors surveyed by Marsh have experienced increased litigation, and 25% said that the size claims were increasing. The broker said that the economic conditions had led to increased competition for work, larger limits of liability being placed on firms by clients and the threat of increased litigation. Despite this more complex risk landscape, the survey found that two-thirds of respondents did not have a dedicated risk manager, and a third did not have written risk management procedures in place. “PI insurance can be the third highest cost after employees and premises for many firms and it is tempting to cut back on cover when money is tight,” said John Doe, a senior vice president in the Financial and Professional Practice at Marsh. “However, as the findings of our survey demonstrate, litigation tends to increase during recessions as businesses look for ways to avoid payment.”

In his first speech to an insurance audience since becoming chairman of the Financial Services Authority, Adair Turner said that there was no need for a revolution in insurance regulation on par with that being considered for the banking sector. Addressing delegates at the Association of British Insurers annual conference, Mr Turner noted that risks for insurance companies differ from banks. “The regulation of insurance companies needs to be different from the regulation of banks. But while there is no need for a revolution, there will still be major changes, because the context for all of financial services has changed significantly,” he added. He also said that regulatory changes implemented in 2004 by the FSA have helped put the insurance industry in a stronger position to meet the challenges of the current economic environment.