Dear Member:
Once again we have witnessed a tragedy that could further alter the world and ultimately impact the availability and cost of many types of insurance. The events of July 7, 2005, similar in nature to those of September 11, 2001 combined with what already appears to be an active hurricane season could halt or possibly even reverse the recent downward movement of premiums charged for some lines of insurance coverage. You will recall that the tragic events of September 11, 2001 accelerated the rate of premium increases and decreased the availability of coverage for many lines of insurance including professional liability.
It is much too early to predict whether such events will or will not have any direct influence on attorney's professional liability insurance. Obviously these and other catastrophic events do not directly affect claims against attorneys for alleged acts of malpractice. However, the financial repercussions could impact the entire industry through the cost for reinsurance. As many of you are aware, most primary insurors do not retain 100% of the liabilities they assume when an insurance policy is purchased. Instead the primary insuror obtains protection or insurance against catastrophic or large losses through the purchase of reinsurance. Interestingly, the subject of reinsurance has suddenly drawn considerable attention from the press and regulatory authorities who have focused specifically on a product called "finite" or "financial" reinsurance. The primary objective of these investigations is to determine whether there has or has not been a real transfer of risk from the primary insuror to the reinsurer. Although there are advantages and disadvantages to this type of reinsurance arrangement, depending upon individual circumstances, TLIE has never used such agreements in its reinsurance program. TLIE has historically utilized an "excess of loss" reinsurance program which transfers the risk of loss to reinsurers when a claim exceeds TLIE's retention.
It only seems appropriate to once again emphasize the importance of professional liability insurance and TLIE's ability to honor its commitments to policyholders. During the period May 1, 1979 through June 30, 2005, TLIE has received notices of 6,574 claims and has paid a total of $478,412,058 in indemnity and defense costs. Claims still pending will, based on our evaluation, produce an additional $23,951,781 in costs. Actual and projected costs of legal malpractice claims against TLIE insured attorneys now exceed $500,000,000.
For over 25 years we have greatly appreciated your loyalty and support and we look forward to continuing our service to the attorneys of Texas.
Very truly yours,
James R. Lovell
Chairman of the Board