The Associated Press recently reported on efforts by the General Assembly to re-evaluate regulations involving car insurance permiums in the state. Among the sources cited in the article is Dr. David Marlett, Walker College professor and chair Finance, Banking and Insurance department.

The article describes the North Carolina Reinsurance Facility, which is a "pool for drivers that insurers aren't willing to insure at the rates worked out through the Rate Bureau." Legislators are looking at ways to decrease the number of drivers in that pool, while also keeping overall rates low. It's a delicate balancing act.

Marlett suggested lawmakers could consider granting flexible rates to encourage insurers to take on more bad risks currently in the pool. The change would lower the facility size, and the surcharge for everyone could fall.

That, however, doesn't resolve the huge number of clean risks in the pool. Some argue allowing insurers to charge higher rates for clean risk could raise the percentage of drivers who avoid insurance altogether.

There are good things about North Carolina's market, Marlett said. It's competitive, average premiums are low and auto insurers make profits. But the size of the facility should raise flags, Marlett said.

"We have the largest one in the nation by far, and that's the sign of an unhealthy market," he said.

Late last Friday, Standard & Poor cut the credit rating of the United States, from AAA to AA+. It was the first such downgrade in the country's history. The stock market reacted with a 550-plus drop at one point during trading Monday. 

Also Monday, Walker College banking professor Dr. Harry Davis released his quarterly "Business Barometer" for the NC Bankers Association. It's not yet online. The report is now online. According to one reportbut accoding to newsobserver.com, Davis doesn't believe the credit downgrade is of great importance.

The economist for the N.C. Bankers Association is unimpressed by either Washington's efforts to reduce the federal deficit or Standard & Poor's decision to downgrade the U.S. government's credit rating. ...

"As the rating change was announced, the world was buying Treasuries, pushing down interest rates to near record lows. The anemic rate of growth in the U.S. economy is much more important to yields than the credit rating change."

With regard to the recent debt-limit legislation approved by Congress, Davis says it will have little impact on the national debt.

"The economy is growing much slower than the figure used in the budget projections," Davis noted. "As a result the deficit will be $4 trillion larger over the next ten years than the original estimate used in the negotiations which called for cuts of just $2.5 trillion."

The Triangle Business Report has additional details on Davis' Business Barometer, including comments on housing.

The housing sector continues to take its lumps. Renting rather than ownership is now preferred, Davis says. In the last 12 months, the rise in occupied housing units is more than 800,000. “For the period, there are 1.4 million more rentals while the number of owner occupied homes dropped 600,000. The home ownership rate peaked in 2004 at 69.2 percent and is now at 65.9 percent and falling,” he says.

Philip Ostwalt '83 ACC is a partner with Atlanta-based KPMG and a member of the Walker College Business Advisory Council. He's also one of three authors of a new report investigating fraud among senior management officials in the financial industry. They found that the recent economic downtown has made it easier to commit fraud, a statement backed up by some numbers, according to a report in the UK newspaper Guardian.

What should send alarm bells ringing across companies is a jump in the number of cases involving the exploitation of weak internal controls – up to 74% in 2011 from 49% in 2007.

The recession and continued difficult economic climate may be partially to blame, according to the report. Tighter budgets are forcing some companies to cut costs in risk management and control, giving fraudsters more opportunities to falsify accounts or siphon off funds. But personal greed remains the prime motivation for fraud, followed by pressure to reach tough profit and budget targets.

"Organisations should take some of the blame," wrote Phillip Ostwalt, Richard Powell and Mark Leishman, the authors of the KPMG report. "For them, it is time to consider how they contribute to fraud when failing to detect or respond to lapses or gaps in controls, or by setting overly onerous targets... There tends to be less fraud in companies that make intolerance of fraud part of the corporate culture and which set realistic and achievable targets for employees."

The report is based on 348 investigations by member firms of KPMG, an audit, tax and advisory services firm. Not only did it document the number of fraud cases, but how the cases were instigated.

One in seven frauds (13%) are now discovered by chance, up from 8% in 2007. Formal whistleblower reports account for only a tenth of fraud detections, compared with a quarter in 2007, while anonymous tip-offs led to the uncovering of 14% of frauds this year. A further 8% came to light after complaints by customers or suppliers and another 6% were revealed in response to issues raised by regulators, banks, tax authorities, rivals or investors.

Earlier this week the State of the North Carolina Workforce 2011-2020 was released. Compiled by the NC Commerce Department and a state workforce commission, it focused on the Tar Heel economy's move from manufacturing to services. According to the Winston-Salaem Journal, the report said, "A large number of current job seekers are not as prepared as needed for the transition and will face challenges in adapting to these economic change."

Among the state economists quoted in the article is Todd Cherry, Walker College economics professor.

The findings highlight the importance of workforce development and quality, "which cannot be stressed enough in today's political climate," said Todd Cherry, the director of the Center for Economic Research and Policy Analysis at Appalachian State University. "If lower taxes come at the expense of education, research and a high-skilled workforce, then the lower taxes will undermine economic growth," he said.

The article also quotes NC Commerce Secretary Keith Crisco, who was the luncheon speaker at the CEO Leacture Series earlier this year. Crisco said the report "once again shows that education and economic development go hand-in-hand."

"In order for North Carolina to compete on a national and global level, we must continue to invest in educating and training our workforce for the jobs of today and tomorrow. We simply can't go backward on this commitment."