Latest Studies - October 2014

Each month the Insurance Information Institute compiles recent studies from industry, government, academic and other sources. Topics include consumer issues, industry trends, climate and environment, and studies covering individual lines of business like automobile liability and workers compensation.

1. MUTUAL INSURERS: BUILDING FINANCIAL STRENGTH THROUGH POLICYHOLDER SERVICE AND NICHE FOCUS
Conning. Study.; Page N/A
September 22, 2014

Property/casualty mutual insurers continue to sustain and develop their financial strength through their focus on policyholder service and relationships, and their geographic or niche focus, according to a new study by Conning, “Property Casualty Mutuals: Resilient and Staying Relevant.” The study assesses the mutual sector’s current health and future prospects through analysis of a proprietary Conning survey of mutual executives, interviews with independent agents, segmented peer comparisons and comparisons to stock companies. The study concludes with an exploration of how mutuals are confronting the challenges of technology, regulatory uncertainty and capital enhancement. It is available for purchase from Conning by calling (888) 707 1177 or from the company’s website at www.conningresearch.com.


2. THE AON BENFIELD AGGREGATE. RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2014
Aon Benfield; 32 Pages
September 8, 2014

The latest edition of the Aon Benfield Aggregate (ABA) report assesses the financial performance of 31 of the world’s leading reinsurers in the first half of 2014. The reported shareholders’ funds of the 31 companies forming the ABA stood at $351 billion (62% of global reinsurer capital), an increase of 4 percent, or $14 billion. Full Report


3. WASHINGTON, D.C. AND THE SURGING SEA. A VULNERABILITY ASSESSMENT WITH PROJECTIONS FOR SEA LEVEL RISE AND COASTAL FLOOD RISK
Climate Central; 30 Pages
September 1, 2014

According to this report by Climate Central, a non-profit research group, Washington, D.C. is likely to see record flooding by 2040 under a mid-range sea level rise scenario. A low-range scenario leads to a better-than-even chance by 2030 of flooding more than 6 feet above the local high tide line – a level topped just once in the last 70 years. And under high-range projections, there is a near certain chance of flooding above 10 feet by end of century. Some $4.6 billion in property value, and 1,400 people in 400 homes, sit on this area. These figures jump to $9 billion and 4,833 people residing in 1,900 homes on 2,500 acres of land under 10 feet. The District has 21 miles of road below 6 feet, plus two military facilities; one hospital; one museum; and 12 EPA listed sites such as hazardous waste dumps and sewage plants. At 10 feet, these numbers grow to 46 miles of road, four military facilities, one hospital, three museums, and 26 EPA-listed sites.  To forecast future risk, the analysis integrated historic local sea level trends and flood statistics with global sea level rise scenarios, developed by a multi-agency federal task force led by NOAA in support of the recent U.S. National Climate Assessment. Climate Central created a Surging Seas Risk Finder tool for the D.C. area, providing much more detailed and localized findings, it is accessible via: http://sealevel.climatecentral.org/ssrf/dc  


4. STAFF REPORT ON THE GM IGNITION SWITCH RECALL: REVIEW OF NHTSA
U.S. House of Representatives Committee on Energy and Commerce; 45 Pages
September 16, 2014

The House Energy and Commerce Commission released this highly critical report concluding that the National Highway Traffic Safety Administration (NHTSA) did not respond in a timely manner to evidence of defective ignition switches in General Motors’ vehicles. The report also found that NHTSA’s key staff lacked an understanding of how advanced airbag systems functioned. Full Report.


5. LIABILITY CLAIMS TRENDS: EMERGING RISKS AND REBOUNDING ECONOMIC DRIVERS
Swiss Re, sigma 4/2014; 33 Pages
September 9, 2014

According to this Swiss Re report liability insurance has been more profitable than expected in recent years, due in part to the slow economic growth that has helped keep the claims environment calm. The technological, social and regulatory changes that are now underway are likely to increase the severity of claims as well as the demand for liability insurance. These technological changes include hydro fracking and autonomous cars. Cyber risks are also expected to increase as criminals gain technological expertise. The tort reforms that lessened the severity of claims are not expected to have a significant effect in the future. Litigation and its funding are spreading to a greater number of nations. Large, mature liability markets are expected to be the primary source of premium growth, and these advanced markets now account for 93 percent of total liability premiums. Increases in demand for liability insurance will correlate closely with greater claims growth. Since claims are often settled years after liability insurance is written, these risks are difficult to underwrite and price. In order to remain competitive, insurers need underwriting expertise and must maintain capital strength. Insurers must also be innovative and make use of modeling and “big data” to meet the changing demands for insurance and to maintain the strength of their underwriting. The report includes numerous charts, tables and graphs on various aspects of the liability insurance market. Full Report.


6. THE STATE OF INSURANCE FRAUD TECHNOLOGY. A STUDY OF INSURER USE, STRATEGIES AND PLANS FOR ANTI-FRAUD TECHNOLOGY
The Coalition Against Insurance Fraud and SAS Institute; 11 Pages
September 1, 2014

This study is a follow up to a 2012 survey, conducted to better understand how insurers are deploying technology to tackle insurance crimes. The study compares the degree to which insurance fraud has changed since the previous study and how advances in technology enable insurers to better combat insurance crime. The general consensus is that suspicious activity is increasing and the tactics used by fraudsters are more sophisticated. The fight against fraud is taking place on many fronts, and insurers increasingly are leveraging technology to combat opportunistic and organized fraud across all lines of business. Among the findings: 95 percent said they use anti-fraud technology, an increase from 88 percent in 2012. However, less than half use technology for non-claims functions such as underwriting and internal fraud. More than half of insurers said the amount of suspicious activity had increased over the past three years while only 2 percent say fraud has decreased. Full Report


7. CAPITAL MARKETS: THE REINSURANCE EVOLUTION CONTINUES
Guy Carpenter; 27 Pages
September 1, 2014

 

This report by Guy Carpenter examines the growth in the insurance linked securities (ILS) market during the past year and some of the important evolutionary elements of catastrophe bond structure and risk transfer. According to the report, over the past 24 months, approximately $20 billion of new capital has entered the market through investments in ILS, funds and sidecars as well as the formation of hedge fund-related reinsurance companies and collateralized reinsurance vehicles. Full Report


8. THE BIG ONE: THE EAST COAST’S USD 100 BILLION HURRICANE EVENT
Swiss Re; 22 Pages
September 1, 2014

 

Using proprietary modeling tools, Swiss Re has tracked the path of the 1821 Norfolk Long Island hurricane, a Category 4 hurricane that caused devastation along the East Coast, and compared this with superstorm Sandy, a Category 1 hurricane. The findings show that should a 1821 Norfolk Long Island type hurricane hit in the near future, it would cause far greater damage, demonstrating that metropolitan areas like New York are not prepared for such an event. The study concluded that if a storm of the magnitude of the 1821 hurricane hit tomorrow it would potentially cause more than $100 billion in damages. Such a storm would cause 50 percent more economic loss than Sandy and flooding would leave large parts of Manhattan underwater. The study is replete with charts and illustrations. Full Report


9. TRAVELERS CONSUMER RISK INDEX
The Travelers Indemnity Company; 14 Pages
October 1, 2014

For the second consecutive year, the Travelers Consumer Risk Index has found one in four U.S. consumers believe that today’s world is very risky, with six in 10 respondents reporting their feeling that the world is growing riskier. This annual Travelers survey, which measures Americans’ general perception of risk in daily life, was conducted by Hart Research in late-July. Severe weather, personal privacy loss/identity theft and distracted driving were found to be among the major concerns for the second year. One third of Millennials (defined in the survey as 18- to 34-year-olds) feel their overall risk level is low compared to older age groups.  The study also found that more Americans are preparing for uncertainty and are being proactive in managing their risk. When asked about steps they are taking to mitigate risk, 85 percent of respondents conduct safety checks on their car, 82 percent of respondents have installed smoke detectors in their home and 64 percent indicated they had stored food and water in their home to prepare for extreme weather. Millennials are less likely than other age groups to have a clear plan for what to do before and after an extreme weather event.  Full Report


If you have a suggestion for a study to be included in this section please email info@iii.org.