The worst wildfire season in the history of modern California is taking another bad turn, as three major fires have destroyed more than 200 homes and buildings.
Strong winds will be fanning the flames. The state’s foresters have issued a purple wind alert for Southern California, something they have never done before.
This follows a Department of Insurance report that insurers have incurred more than $9 billion in claims so far from the October fires, being $8.4 billion in residential claims, $790 million in commercial property, $96 million in personal and commercial auto, and $110 million from other commercial lines. County-level details here.
The New York Times has a 2-minute video summarizing why this year’s wildfire season has been so bad.
- Wet winter followed by hot summer. The moisture encouraged plant growth. The heat turned those plants to tinder.
- Longer fire season, perhaps linked to climate change.
- Growing residential areas. Development is encroaching on forests.
- Santa Ana winds. As noted above, the winds are blowing harder this year.
I.I.I. Facts + Statistics on wildfire can be found here. Here’s a prior Terms + Conditions post on filing claims. (It was written for the October fires, but the message will not have changed much.)
Organizations representing the actuarial profession in Canada and the United States reported recently that the Actuaries Climate Index™ reached a new record high in winter 2016–17, following the record value measured in fall 2016. The change reflects increasing deviation of weather extremes and sea levels from historically expected patterns for the two countries.
“This hurricane season has brought renewed attention to the question of whether extreme weather is increasing, and for a broad swath of North America, the Actuaries Climate Index data were trending in that direction to February 2017,” said Caterina Lindman, chair of the Climate Change Committee.
The Actuaries Climate Index (ACI) was designed as an objective indicator of the frequency of extreme weather and the extent of sea level change. It is available for the United States and Canada and is updated on both a monthly and a seasonal basis. The data are available here for anyone to explore.
The ACI is sponsored by the American Academy of Actuaries, the Canadian Institute of Actuaries, Casualty Actuarial Society and Society of Actuaries.
This in from Swiss Re Institute’s Global Insurance Review 2017 and Outlook 2018/2019 report:
The cyclical upswing in the global economy is set to continue in 2018 and 2019, supporting insurance premium volume growth.
Global non-life premiums are forecast to grow by at least 3 percent annually in real terms in the next two years and life premiums by 4 percent.
Emerging markets, particularly in Asia, will remain the driver of global non-life and life premium growth, according to Swiss Re.
Cyberattacks from other countries are now seen as a major threat to the U.S. by 72 percent of Americans, according to a national survey from the Pew Research Center.
This view has changed little in recent years, apparently. But what has changed is public opinions about other global threats.
Take climate change—now viewed as a major threat by 58 percent of Americans, up 7 points since January, and the highest share since 2009.
The survey was conducted October 25-30 among 1,504 adults.
The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:
- Eight people were killed in lower Manhattan, and scores were injured, when a 29-year-old man drove a van down a bicycle path in what is now widely considered a terrorist attack.
- FEMA is still paying for more than 60,000-plus Texans to live in hotels in the aftermath of Hurricane Harvey, which made landfall on Aug. 25, according to The Wall Street Journal.
- Florida’s Office of Insurance Regulation says insured claim payouts arising out of Hurricane Irma statewide now stand at $5.3 billion.
The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:
- A lone gunman killed 58 people, and injured hundreds of others, in Las Vegas in the single deadliest mass murder in U.S. history on Sunday, October 1. The tragedy is already raising insurance liability issues.
- The Trump administration is asking Congress to authorize a $29 billion disaster relief package for costs associated with 2017’s Hurricanes Harvey, Irma, and Maria.
- In a 6-3 vote, The Financial Stability Oversight Council (FSOC) rescinded its determination that American International Group (AIG) is a systemically important financial institution (SiFi).
I.I.I.’s James Ballot, Senior Director of Marketing and Content Strategy, contributes these highlights from the IIS Global Forum 2017.
Established millennia ago and since visited continually by perils ranging from fire, flood, pestilence, civil unrest and wave upon wave of attacking foreign enemies, it’s no great stretch to call London the de-facto global headquarters of resilience. So it’s fitting that London should host this year’s International Insurance Society’s (IIS) Global Insurance Forum (GIF), given that the event’s focus was set squarely on Global Resilience and the Role of Insurance.
At the Forum more than 500 delegates and other attendees gathered to set a truly global agenda for how insurance and other parties–NGOs, policymakers, businesses, educational institutions, the media, among others—will respond to challenges ranging from political instability to cyberthreats to the need to create the right talent infrastructure to master the technological changes presently shaping our industry to innovating ways to address threats posed by intensifying natural catastrophe cycles.
Among the highlights:
- A video address from HRH The Prince of Wales to open the Day 3 Insurance Development Forum (IDF) in which he outlines four key areas where insurance can assume leadership in fostering resilience.
- Wide-ranging discussions of the “insurance gap” and how narrowing it is essential to building financial resilience against cyberattacks, as well as mitigating uninsured natural catastrophe losses among vulnerable populations in developing nations.
- The Nature Conservancy, a top-line partner at this year’s GIF, introduced an innovative insurance product underwritten by Swiss Re that insures coral reefs and other natural coastal fortifications.
- Insurtech and emerging innovations are changing the business—mostly by creating a climate in which, as one insurance fund capital manager asserted, insurance and tech startups can partner to help make “yesterday’s risks insurable today.”
A lot to cover in a single posting, to be sure. For a deeper dive into the goings-on at IIS Global Forum, Asia Insurance Review (AIR) offers gavel-to-gavel coverage of the event, as well as valuable insights from Forum participants.
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.
“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.”
Strong buildings, levees and seawalls play an essential role in increasing resilience to floods and hurricanes, but insurers are also looking to natural infrastructure to mitigate storm losses.
As the 2017 Atlantic hurricane season officially begins, an ongoing effort by insurers, risk modelers, environmental groups and academics is focused on understanding how natural defenses like coastal wetlands and mangrove swamps can reduce the impact of storms.
A 2016 study led by researchers at the University of California, Santa Cruz, the Nature Conservancy and the Wildlife Conservation Society, found that more than $625 million in property losses were prevented during Hurricane Sandy by coastal habitats in the Northeast.
Where wetlands remain, the average damage reduction from Sandy was greater than 10 percent. Researchers expect analysis of the effects of Hurricane Matthew will demonstrate the value of similar protections.
The study was conducted in association with Risk Management Solutions and Guy Carpenter, with funding from the Lloyd’s Tercentenary Research Foundation and additional support from the Science for Nature and People Partnership.
Business Insurance has more on this story here.
This is just one example of how reinsurers and insurers collaborate with different sectors to build resilience and mitigate storm damage.
For example, Swiss Re is working with the Nature Conservancy to explore the economics of nature-based coastal defenses.
I.I.I. CEO Sean Kevelighan writes about how the insurance industry collaborates with different groups to build resilience to natural disasters in this article on PC360.
Check out I.I.I. issues update Climate Change: Insurance Issues.
The World Economic Forum (WEF) is calling for a redoubling of efforts to protect and strengthen systems of global collaboration in the face of increasingly disruptive risk trends.
In its just-released Global Risks Report 2017, the WEF warns that risk drivers such as income inequality, polarization of societies, and climate change need to be addressed collaboratively if solutions are to be found to the world’s most complex problems.
Nowhere is cooperation more urgent than in addressing climate and environmental risks, the WEF said. While important strides have been made in the past year, the pace of change is not fast enough and more needs to be done.
The WEF cited the Paris Agreement on climate change now ratified by 110 countries, and the landmark agreement to curb CO2 emissions from international aviation as important examples of global cooperation in 2016.
But political change in the United States and Europe is putting this progress at risk.
“This is a febrile time for the world. We face important risks, but also opportunities to take stock and to work together to find new solutions to our shared problems. More than ever, this is a time for all stakeholders to recognize the role they can play be exercising responsible and responsive leadership on global risks.”
The environment dominates the global risks landscape outlined in the WEF report, with extreme weather events emerging as the single most prominent global risk and climate change the number two underlying trend this year.
Society is also not keeping pace with technological change, the WEF noted. While new and emerging technologies can provide solutions they also exacerbate risks.
Artificial intelligence and robotics were identified as having both the highest potential for negative consequences and also the greatest need for better governance in this year’s risk survey.
The private and public sectors need to work together and collaborate to address the challenges of the Fourth Industrial Revolution, the WEF said.
“It is critical that policy-makers and other stakeholders – across government, civil society, academia and the media – collaborate to create more agile and adaptive forms of local, national and global governance and risk management.”