Archive for July, 2008

Tomorrow marks the one-year anniversary of the Minneapolis Interstate 35W bridge collapse that resulted in 13 fatalities (see our August 3, 2007, posting). A year on, a new report by the American Association of State Highway and Transportation Officials (AASHTO) outlines the difficult challenges that lie ahead in maintaining, repairing, and replacing the nation’s bridges. Age, deterioration, soaring construction costs, and increasing traffic congestion were cited by the AASHTO as some of the major bridge problems facing the U.S. The report notes that the average bridge in the U.S. today is 43 and almost 20 percent of these “Baby Boomer” bridges are now over 50 years old. It puts the price tag to repair or modernize the country’s 600,000 bridges at $140 billion. The report calls for increased investment in transportation at all levels of government; support for revenue options such as tolls, tax increases, annual road user fees; and a continued commitment to research, innovation and technology. What do you think of these proposed solutions?

Yesterday’s magnitude 5.4 earthquake that struck 35 miles east of downtown Los Angeles is a reminder of the heightened risk faced in California and the importance of having earthquake insurance. The majority of the most costly earthquakes in U.S. history have occurred in California. Standard homeowners and business insurance policies in the U.S. do not cover earthquakes, but coverage is available via an endorsement. In California, coverage is available from private insurers and from the privately financed, publicly managed California Earthquake Authority (CEA). The CEA is the largest residential earthquake insurer in the state, with $498.5 million in direct premiums written in 2007, accounting for 32 percent of the market. 

Persuading people to buy earthquake insurance remains a key challenge; only about 12 percent of homeowners in California buy it. Yet the risk is significant. Earlier this year scientists unveiled a scenario for a magnitude 7.8 earthquake along the San Andreas fault in southern California. The ShakeOut scenario estimates this earthquake would cause some 2,000 fatalities, 50,000 injuries, and $200 billion in damage and other losses. A preparedness week planned for mid-November will include the largest earthquake drill in U.S. history. Check out further I.I.I. facts and stats on earthquake coverage and the CEA. 

The first green homeowners policy in California will be available August 1, following approval by California’s Insurance Commissioner. Plaudits to Fireman’s Fund for developing this innovative policy. The product will enable California homeowners with conventional homes to rebuild to the latest environmental standards after a loss. Under the coverage a policyholder whose home has been partially damaged or completely destroyed will be able to repair it with green alternatives including: Energy Star-rated appliances, lighting, electronic equipment and roofing/insulation; an Energy Star upgrade of heating, ventilation and air-conditioning systems; Forest Stewardship Council certified wood for millwork, ceilings, siding and framing; non-toxic, low odor paints and carpeting; and water-saving plumbing fixtures. The green homeowners insurance is already approved for policyholders in around 25 other states. Most other states are expected to offer the coverage by year-end. 

The current regulatory structure and oversight of the industry will be the subject of a hearing tomorrow before the Senate Banking Committee. Testifying on the first panel are representatives of the National Association of Insurance Commissioners (NAIC), the American Insurance Association, the American Council of Life Insurers and the Consumer Federation of America. The second panel will feature representatives of the Council of Insurance Agents and Brokers, the Independent Insurance Agents and Brokers of America, the Reinsurance Association of America, and the National Association of Professional Surplus Lines Offices. The hearing begins at 10:00am at 538 Dirksen Senate Office Building. Check out further I.I.I. information on regulation modernization. 

Initial estimates of insured losses from Hurricane Dolly underscore the point that in the early hours after any catastrophic event it’s difficult to quantify the precise loss with accuracy. Yesterday catastrophe modeling firm AIR Worldwide put the insured losses from Dolly in a wide range from $300 million to $1.2 billion with an expected (mean) loss of $600 million. Meanwhile Eqecat had an early preliminary loss estimate of less than $800 million. The considerable uncertainty in the loss estimates, according to AIR Worldwide, is due to Dolly’s slow forward motion, its significant precipitation, the uncertainty in its future track as it makes its way inland and the rate at which Dolly will dissipate over land. As insurers begin to get to the affected areas and to assess Dolly’s damage, it’s important to note that each storm is different. Even a storm with a similar track to a previous one can produce a wide variation in loss. As AIR Worldwide acknowledges, in this part of the coast a 10 mile difference north or south has a considerable impact on losses. Check out further I.I.I. info on the Texas insurance market and catastrophes. 

Preparations are being made in Texas as Tropical Storm Dolly gets closer. As of early today, a hurricane warning is in effect for the coast of Texas from Brownsville to Port O’Connor. Dolly is expected to become a Category 1 hurricane before making landfall tomorrow. Just yesterday, we heard that U.S. property/casualty insurers are expected to pay homeowners and businesses an estimated $6.025 billion for second-quarter property losses resulting from a total of 16 catastrophes in 27 states – nearly double the number of catastrophes in the first quarter. Interestingly Texas topped the list of the five most severely affected states for the second quarter, with $1.08 billion in insured losses, according to ISO’s Property Claim Services (PCS) unit. An AIR Worldwide study puts the insured value of coastal properties in Texas at $895.1billion, or 26 percent of the insured value of properties in the entire state. 

Tropical Storm Dolly could become a hurricane by tomorrow, the National Hurricane Center has warned. The storm is expected to begin strengthening today as it moves off the northern coast of Mexico’s Yucatan Peninsula and into the Gulf of Mexico. Interests in the Western Gulf of Mexico should monitor the progress of Dolly, according to the NHC. On its current track, Dolly could make landfall on the Texas/Mexico border early Thursday morning. Dolly is the fourth tropical storm of the Atlantic season. Meanwhile, Tropical Storm Cristobal continues its northeastward path after passing near the coast of North Carolina yesterday. On its current track it should be well offshore of the mid-Atlantic Coast later today. Check out I.I.I. information on hurricane and windstorm deductibles and hurricane facts and stats. 

If you’re still avoiding raw tomatoes or spinach, you’re apparently in good company. A new Associated Press-Ipsos poll finds that 46 percent of Americans are worried they might get sick from eating contaminated food and are avoiding foods they would normally buy. The poll revealed that 86 percent would support labeling produce so its origin can be tracked should there be an outbreak of illness. Some 80 percent would also support establishing stricter federal safety standards for fresh produce. Despite the concerns, 75 percent of respondents remain confident the food they buy is safe to eat. Food for thought. 

The obesity epidemic among adults in the United States continues to rise. Latest data from the CDC’s Behavioral Risk Factor Surveillance System show that an estimated 25.6 percent of U.S. adults reported being obese in 2007, an increase of 1.7 percent from 23.9 percent in 2005. Alabama, Mississippi and Tennessee lead the way with all three states reporting an obesity prevalence of above 30 percent. Colorado had the lowest obesity prevalence at 18.7 percent. Obesity is defined as a body mass index (BMI) of 30 or above. BMI is calculated using height and weight. By region, the report also finds that obesity is more prominent in the South, where 27 percent of respondents were classified as obese, compared with 25.3 percent in the Midwest, 23.3 percent in the Northeast, and 22.1 percent in the West. Check out I.I.I. information on obesity liability.

Towers Perrin is calling for data submissions for its 2008 Directors and Officers (D&O) Liability Survey. The survey is best completed by the person responsible for buying an organization’s D&O coverage. To participate, request a secure link from caroline.webb@towersperrin.com, then visit Towers Perrin’s Web site, www.towersperrin.com, to complete the electronic questionnaire. Deadline for participation is Friday, August 29. Check out our June 18 posting to review key findings of Towers Perrin’s 2007 D&O Liability Survey.