Protecting CPAs: A Camico Commitment

When Camico’s professional liability and risk management program was endorsed by the New York State Society of CPAs, there were several reasons cited by the NYSSCPA for the endorsement, not the least of which is our exclusive focus on CPAs. That focus has enabled us to provide top-notch programs and services that are customized for CPAs and their evolving practices.

But there is another important aspect of our focus that goes back to the original mission of Camico when it opened its doors for business in 1986. At that time a prolonged rate-cutting cycle had left many insurance companies with insufficient funds to pay claims, causing most of them to discontinue their professional liability insurance programs for CPAs. The companies that remained in the market imposed huge premium increases, making insurance unaffordable for many CPAs. Our company was formed by CPAs to make sure that CPAs would not be subject to skyrocketing premiums and restricted availability when the next “hard market” arrived. Part of our original mission was to form a mutual insurance company owned by and for CPAs to ensure that our member-owners had access to excellent coverage at reasonable, stable rates.

Among the consequences of the Sept. 11 attacks is the fact that the enormous loss of lives, businesses and property will seriously disrupt world insurance markets. Estimates of insured losses range from $40 billion to $60 billion—an amount that will eclipse anything the insurance market has seen before. The losses will have severe impacts on the surplus of many insurance companies, and surplus (“retained earnings” to most of us accountants) is a major component of the health of an insurance company. It is possible that some large and well-known insurers may be seriously weakened by the losses. The main rating agency for the insurance industry, A.M. Best Co., has already downgraded a number of insurance companies and reinsurance companies.

Insurance companies will be spreading their losses through their contracts with reinsurance companies, but the magnitude of the amounts will test the claims-paying ability of reinsurance providers that have already been weakened by prior losses and 10 years of “soft market” price competition. Industry-wide reductions in surplus will reduce the amounts of risk that can be underwritten, causing restrictions in the availability of coverages. When those factors are combined with the downturn in the economy and unpredictable investment income, a hard market is certain to develop. While it is still too early to predict the degree to which prices will rise and availability will contract, there will be some instability in the marketplace.

Whatever future impacts these developments may have for the insurance industry, Camico remains a strong, stable insurer, specializing in professional liability insurance to CPAs only. That means we have no significant exposure as a result of the disaster, and we do not expect to see any contraction of our surplus or capacity. We have always followed a conservative philosophy with respect to buying reinsurance from top-rated companies only. We are a desirable program to reinsurers because we are well run, profitable, and have exposures limited to the CPA profession. We have already received commitments from our reinsurers that Camico has adequate capacity and reasonable rates for 2002.

Over the past 15 years, we have managed Camico to make sure we will be there for CPAs, especially during uncertain and turbulent times. We remain committed to providing a stable, reliable source of protection for CPAs across America, and we fully expect to keep that commitment into the future.