Industry Groups Gather in Sacramento to Help Keep Teens Safe on the Road

Over 1,000 people die each year in crashes with teenage drivers during the ‘100 deadliest days’ of summer which span from Memorial day until students go back to school.

I.I.I.’s California representative Janet Ruiz reports in her blog on a media event that took place on July 20th where speakers from concerned groups including AAA, CDI, CHP, PCI and I.I.I. gave parents advice on how to keep teens safe on the road.

Coastal resilience, or putting an insurance policy on nature

Our earlier post Working with nature to build resilience to hurricanes discussed how insurers look to natural infrastructure like coastal wetlands and mangrove swamps to mitigate storm losses.

The Mesoamerican Reef, which runs south for some 700 miles from the tip of the Yucatán Peninsula protects coastal communities and property by reducing  the force of storms, but its corals require continued repairs.

For every meter of height the reef loses, the potential economic damage from a major hurricane triples, according to The Nature Conservancy (TNC).

Now thanks to TNC and Swiss Re, the reef is about to get its own insurance policy.

From Bloomberg:

“After Hurricane Wilma struck in 2005, causing $7.5 billion of damage in Mexico, beachfront hotel owners began paying extra taxes to the state government to handle beach restoration and protect the reef.”

TNC has proposed a different approach:

“The extra money paid by the hotel owners to the government could be converted into premium payments to Swiss Re to cover the reef. The policy would be what’s called parametric insurance, in which a large hurricane would trigger near-immediate payouts. By having the money arrive quickly, reef repairs could begin sooner.”

From Artemis blog, via TNC:

“One of the most promising new developments to maximize the value of nature is the possibility of putting an insurance policy on habitats like reefs and beaches. By combining insurance and new science, we can protect and improving the health of reefs and beaches so they can continue to protect us.”

 

Cyber protection gap akin to nat cat

FedEx Corp has disclosed in a securities filing that its international delivery business, TNT Express BV, was significantly affected by the June 27 Petya cyberattack.

Apparently, the courier company did not have cyber insurance or any other insurance that would cover losses from Petya, according to this report by The Wall Street Journal, via the I.I.I. Daily.

A new emerging risk report from Lloyd’s and risk modeling firm Cyence notes that cyberattacks have the potential to trigger billions of dollars of insured losses, yet there is a massive underinsurance gap.

Take its first modeled scenario: a cloud service provider hack. The event produced a range of insured losses from $620 million for a large loss to $8.1 billion for an extreme loss (overall losses ranged from $4.6 billion to $53 billion).

This left an insurance protection gap of between $4 billion (large loss) and $45 billion (extreme loss), so between 87 percent and 83 percent of the overall losses respectively were uninsured.

In another modeled scenario, the mass vulnerability attack, the underinsurance gap is between $9 billion for a large loss and $26 billion for an extreme loss, meaning that just 7 percent of economic losses are covered by insurance.

From the report:

“In some ways, the cyber insurance market can be considered in the same light as underinsurance in the natural catastrophe space – risks are growing and insurance penetration figures are low.”

High rise fire risk in Asia

Insurance Information Institute research assistant Brent Carris authors today’s post:

In Gen Re’s Property Matters series, Tom Qiu reports that with the super high rise (SHR) construction rate growing each year, there is potential for large scale loss of life and significant property/casualty claims.

Per the Council on Tall Buildings and Urban Habitat (CTBUH) Year in Review: Asia recorded 107 of the 128, or 84% of the completed high rise constructions for 2016. China alone, accounted for 84 (67%) of the global total.

Incidents like the Grenfell Tower fire this year in London (see our prior post) and Address Downtown hotel fire of 2015 in Dubai, remind us of the fire risk and resulting huge claims surrounding high rises.

In order to properly rate SHR buildings, underwriters must carefully assess technical survey reports along with visual inspections. In addition to underwriting risks, claims management can be very difficult due to the numerous types of policies involved in a SHR building fire.

Private market flood insurance is cheaper in many cases

Alongside the National Flood Insurance Program (NFIP), a thriving private flood insurance market would provide wider and in many cases cheaper coverage options, according to a new study.

Consulting firm Milliman, in partnership with risk modeler KatRisk, looked at three states – Florida, Texas, and Louisiana – which combined account for 56 percent of NFIP insurance policies in-force nationwide.

Its analysis compared modeled private flood insurance premiums to those of the NFIP.

Key findings:

  • Some 77 percent of single-family homes in Florida, 69 percent in Louisiana, and 92 percent in Texas could see cheaper premiums with private insurance than with the NFIP.
  • Of the homes modeled, 44 percent in Florida, 42 percent in Louisiana and 70 percent in Texas, could see premiums that are less than one-fifth that of the NFIP.
  • Conversely, private insurance would cost over twice the NFIP premiums for 14 percent of single-family homes in Florida, 21 percent in Louisiana and 5 percent in Texas.

prior post discussed how private carriers are dipping their toes in the flood insurance market.

Insurance industry employment by the numbers

Today’s Insurance Information Institute (I.I.I.) Daily reports that the U.S. Labor Department’s Bureau of Labor Statistics (BLS) just published data as of May 2017 on detailed insurance industry employment.

Updated multi-decade trend data in chart form is available at the I.I.I. website. The I.I.I. slides show employment trends for property/casualty, life/annuity, health insurers, and reinsurers, agents & brokers, independent claims adjusters, and third-party administrators.

In May 2017, on a year-over-year basis, employment in most segments of the insurance industry was up by varying degrees: P/C carrier employment rose by 11,200 (+2.0 percent) to 566,800.

Data for the last few months are preliminary and are often revised later, but revisions are usually small.

 

 

Why music festivals are among the hardest risks to insure

Headed to a music festival this summer? It’s the insurance for these events, rather than the music, that is drawing the headlines.

From Bloomberg, via Claims Journal:

“Big events, those the caliber of Coachella and Bonnaroo, typically take on at least five kinds of insurance policies: cancellation, including terrorism coverage, general liability, umbrella policies, workers’ compensation, and business auto coverage.”

FiveThirtyEight asks: what’s the typical cost of cancellation insurance for a music festival? Bloomberg has the answer:

“Cancellation insurance will typically cost 1 percent to 1.5 percent of the overall cost of an event, as much as $150,000 for a $10 million festival.”

Unpredictable weather, the threat of terrorism, and the demographics of festival attendees, are some of the factors that make music festivals one of the hardest risks to insure.

From the Argo Global blog, a post by David Boyle, contingency class underwriter, offers this perspective on why: Without intervention, festivals are likely to disappear from insurers’ books:

“Festivals, which sometimes include dozens of acts, can’t often be rescheduled in the event of inclement weather unlike concerts or other live performances.”

And:

“Threats to festivals are not isolated to the increasingly unpredictable weather. Terrorism is now a very real threat to high profile events which often lack the security procedures of more permanent crowded places.”

Key takeaway:

“In our view, if the festival insurance market is to return to profitability, then intervention will have to come in the form of significantly increased pricing and, particularly for smaller events, improved risk mitigation processes.”

How many homeowners have a home inventory?

The Insurance Information Institute (I.I.I.) gets questions all the time. Here is one that was sent to our California representative:

Q:  Do you have recent statistics about the percentage of people without a home inventory?

A: The I.I.I. regularly surveys people on this topic. In November 2016, 50 percent of the homeowners we polled said that they had a home inventory, down from 52 percent in 2015. Only 37 percent of Millennial homeowners reported having an inventory compared to 50 percent of Gen Xers and 51 percent of Baby Boomers. A home inventory can be used to help make coverage decisions and can simplify filing an insurance claim, so it’s important to make one and keep it updated.

Advice on how to create a home inventory can be found on the I.I.I. website

Property losses from severe convective storms spark focus on resilience

More than $14 billion. That’s the expected insured loss from severe convective storms, thunderstorms, tornadoes, large hail and associated damaging winds in the United States in the first six months of this year.

From the Artemis blog, via Impact Forecasting, the catastrophe risk modeling center at Aon Benfield:

“The insurance and reinsurance industry faces more than $14 billion of losses after the first-half severe storm activity in the U.S., while the economic loss is set for $22 billion or higher, putting 2017 as the fourth most costly year for both economic and insured losses due to convective weather activity.”

Check out the U.S. tornado count, 2017 from NOAA:

An important message on building resilience from Munich Re, as reported by Business Insurance:

“Munich Reinsurance America Inc. has released a tornado virtual reality experience tool to highlight the risks posed by tornadoes and the importance of embracing resiliency in building construction to help reduce future property losses.”

And:

Many building codes in the United States do not require a home to withstand more than a 90-mph gust of wind for three seconds, which is the equivalent of a weak EF1 tornado with wind speeds between 86 to 110 miles per hour.

Get Insurance Information Institute facts and statistics on tornadoes and thunderstorms here.

Get serious about the lightning threat from the Insuring Florida blog.

 

Some states make progress in tackling opioid epidemic

Prescription opioid use among injured workers decreased in many states, but not all, according to the Workers Compensation Research Institute (WCRI).

Find out which states saw the largest decreases in this new WCRI study.

The National Safety Council (NSC) has developed a new industry specific online calculator that informs employers how much the opioid epidemic is costing companies each year.

The tool provides business leaders with specific information about the cost of substance use (including prescription drug abuse and misuse, alcohol abuse and misuse, opioid and heroin addiction as well as abuse of other illicit drugs and marijuana) in their workplace based on size of employee base, industry and state.

Posted here, the NSC calculator combines latest government and private sector research to estimate annual costs in three categories: time lost form work, job turnover and retraining, and health care costs.

A new NSC survey found only 39% of employers view prescription drug use as a threat to safety, and only 24% feel it is a problem, despite 71% saying they have experienced an issue.

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