Archive for October, 2013

Pictures are often more powerful than words and so it is as we mark the first anniversary of Hurricane Sandy.

This NASA image shows Hurricane Sandy approaching the U.S. East Coast at 1:35pm Eastern Daylight Time on October 29, 2012.

 

Remember that over a dozen states were impacted by Hurricane Sandy which caused $18.75 billion in insured property losses, excluding flood insurance claims covered by the National Flood Insurance Program (NFIP), according to estimates from ISO’s PCS unit as of January 18, 2013.

A report by Guy Carpenter titled Post Sandy: Damage Survey details observations and photos from Guy Carpenter’s 10-day on-site assessment of Sandy’s impacts for the most severely affected areas in Rhode Island, New York and New Jersey.

The photographs and findings document the scope and severity of damage and economic impact of Superstorm Sandy over affected regions across the Northeastern U.S., an area that produces approximately 10 percent of U.S. economic output.

And over at NOAA’s Ocean Service, you can compare aerial images of New Jersey captured shortly after Sandy passed over the Eastern Seaboard with new pictures of restored areas.

Mashable has also taken some of the most iconic photos from Hurricane Sandy and juxtaposed them with images of the same places today.

Meanwhile, the New York Times Lens blog tells of a photography exhibit and book showing the impact of the Hurricane Sandy on the city and its residents.

A survey of chief financial officers (CFOs) with leading North American property/casualty (P/C) insurers indicates that both property and casualty insurance markets are hardening, demonstrating a shift in perception from two years ago.

Some 75 percent of CFOs participating in the North American Property & Casualty CFO survey by Towers Watson characterized the property market as hardening, hard or at the top of the cycle – a nearly 30 percentage point increase compared to the survey results two years ago.

As for the casualty market, some 65 percent of CFOs said they see the casualty market as hardening, hard or at the top of the cycle – a 52 percentage point increase compared to the previous survey.

Towers Watson reports that a narrow majority of CFOs who consider both the property and casualty markets to be hardening also believe these markets will remain that way for the next one to two years (51% for property, 52% for casualty).

Those who see hardening in the casualty market think it will last longer than in the property market.

Only 15 percent of CFOs responding to the survey believe the property market is softening, while 10 percent said the casualty market is softening.

In a press release Bruce Fell, a managing director in Towers Watson’s Risk Consulting and Software business, says:

Insurers’ perceptions of the market have changed considerably, from a glimmer of hope for a turn in the insurance cycle, to the solidifying of firmer rates we’re experiencing today.

“The impact of the softer market the past several years, combined with low interest rates, has hurt insurers’ profitability. The state of today’s market should give insurers some breathing room and an opportunity to increase their bottom-line.”

Towers Watson also asked CFOs about top challenges facing their businesses. Some 81 percent listed interest rates as their biggest economic and market environment concern, with natural catastrophes (44 percent) and inadequate rate levels (34 percent) next.

Nearly half (46 percent) indicated they are responding to today’s economic and market challenges by realigning their investment portfolio, while 37 percent said they are expanding into new products or markets.

U.S. homeowners insurance offers significant growth opportunities for personal lines insurers, as positive rate momentum is improving the outlook for many states, according to the Aon Benfield Homeowners ROE Outlook 2013 update.

The study reveals strong growth in the homeowners line between 2009 and 2012, with direct written premiums increasing 15 percent countrywide. Only Nevada saw a decline in premium volumes, as written premiums decreased by 1.5 percent during the period.

By comparison, personal auto direct written premium growth was only 6.5 percent during the period.

The report concludes that insurers’ prospective after-tax return-on-equity (ROE) for homeowners insurance is 4.6 percent on a countrywide average, and 8.0 percent excluding Florida.

While the countrywide outlook is essentially flat relative to last year’s 4.7 percent estimate, at the state level, positive rate momentum is improving the outlook for many states, according to Aon Benfield.

Some 36 states have prospective ROE outlooks better than the 8 percent average, and 28 states have prospective ROE outlooks 12 percent or greater.

Positive rate momentum has been evident, as approved rate changes in homeowners lines have averaged a 7.7 percent increase across the U.S. over the past 18 months, the report finds.

Gulf states achieved some of the highest average rate increases, particularly Texas, where rates increased 12.6 percent, while the hurricane-exposed state of Florida average rate increase was 8.2 percent.

A press release cites Parr Schoolman, Aon Benfield Global Risk and Capital Strategy Team Leader:

Overall, the homeowners line of business is still not producing adequate returns for the industry, but given the recent rate and underwriting actions, for the first time we are seeing an improving outlook for many states, especially in non-coastal regions. Although more can still be done in terms of pricing segmentation, capturing the cost of catastrophe risk in rate filings is becoming a more widespread practice within the industry, which is a positive for the long term prospects in this line of business.”

Check out I.I.I. facts and statistics on homeowners insurance.

Is this the real life? Is this just fantasy? Either way, we’re delighted to be taking our first turn at hosting Cavalcade of Risk #194. For those of you who, like us, are new to this, the CavRisk blog carnival is a round-up of risk and insurance-related posts from around the blogosphere.

Our debut as a Cav host kicks off with a post on fantasy insurance in which Hank Stern of InsureBlog poses the question: What if your Fantasy Footballer gets sidelined in real life? The good news is there’s an insurance policy for that. Game on.

Next up, at Workers’ Comp Insider, Julie Ferguson, brings us back to real life with a roundup of the impact that the government shutdown is having on workplace health & safety and various regulatory and employment-related matters. It’s her second, and hopefully last, roundup on the shutdown, Julie notes.

Another real world post comes from Jason Shafrin of Healthcare Economist about how the Affordable Care Act (ACA) mandates insurers to have a medical loss ratio (MLR) of at least 80 percent. In his post What’s up with the ACA’s Medical Loss Ratio rules? he considers whether capping MLR is a good way to reduce premiums.

Also keeping it real on the topic of the ACA, Louise Norris of Colorado Health Insurance Insider, dispels another ACA myth that just won’t die as she talks about part of the House amendment to “delay Obamacare” in House Republicans Want To Strip Congressional Staffers Of Their Health Insurance Benefits.

Last but certainly not least, in his post Patients should not be responsible for telling doctors to wash their hands David Williams of Health Business Blog ponders the absurd situation in which patients are being cast in the role of “hand washing police.”

Over and out from us. Jason Hull at http://www.hullfinancialplanning.com will host the next Cavalcade of Risk.

As mom to two young boys I’ve had to become familiar with construction vehicle terminology, such as backhoes, skid steers and excavators. So it’s with interest I read the latest heavy equipment theft report from the National Insurance Crime Bureau (NICB).

The report, co-produced with the National Equipment Register (NER), analyzes heavy equipment theft data submitted by law enforcement to the National Crime Information Center (NCIC) and breaks out the data by theft state, theft city, theft month, equipment manufacturer, equipment style (type) and year of manufacture.

Here are some of the key takeaways of the 2012 NICB Heavy Equipment Theft report:

– A total of 10,925 heavy equipment thefts were reported to law enforcement in 2012, down 7 percent from the 11,705 reported in 2011. Since 2008, there has been an overall 19 percent reduction in heavy equipment thefts.

– The three most stolen heavy equipment items in 2012 were: mowers (riding or garden tractor: 5,363); loaders (skid steer, wheeled: 1,943); tractors (wheeled or tracked: 1,459).

– Heavy equipment manufactured by John Deere was the number one theft target in 2012, followed by Kubota Tractor Corp, Bobcat, Caterpillar and Toro.

– The top three states for heavy equipment thefts in 2012? Texas ranked first with 1,401 reported thefts, followed by North Carolina with 1,037 thefts, and Florida with 890 thefts.

The report also looks into heavy equipment recoveries in 2012 and here comes the sticker shock for insurers.

According to the NICB, only 20 percent of heavy equipment stolen in 2012 was found, making it a costly crime for insurance companies, equipment owners and rental agencies.

Bear in mind that annual estimates of the cost of equipment theft vary from around $300 million to $1 billion, with most estimates in the range of $400 million.

But, these estimates do not include the theft of tools or building materials or damage to equipment and premises caused during a theft, or losses from business interruption, such as the cost of rentals, project-delay penalties, and wasted workforce and management time.

The NICB says the area that needs the most improvement is also the one that promises immediate results: making accurate information available to law enforcement 24 hours a day.

It notes:

At a minimum, equipment owners should keep accurate lists of equipment with PIN/serial numbers and submit them to law enforcement, their insurers, and NER as soon they discover a theft. When they purchase equipment, owners should register serial numbers in the NER database, so that the information is available to law enforcement 24 hours a day. In the event of a theft, law enforcement can identify the equipment, even during weekends or at night.”

The Insurance Industry Charitable Foundation’s (IICF) Week of Giving, an eight-day industry-wide volunteer event kicks off Saturday across the U.S.

During the week (October 12 – 19, 2013), teams of insurance industry volunteers will provide three or more hours of volunteer service at neighborhood and community nonprofit organizations.

Since 2001, the insurance industry has generated over 166,000 hours of volunteer service, serving over 150 nonprofits nationwide, and engaging thousands of volunteers in 36 states.

The IICF provides online signup for volunteer teams and coordinates contact with the charities for which volunteers work.

For a glimpse into last year’s IICF Week of Giving check out this video:

September brought a slight rate increase for U.S. companies buying property/casualty insurance, according to online insurance exchange MarketScout.

MarketScout reported that the composite rate for commercial lines rose 5 percent in September 2013, up from plus 4 percent in August.

Commercial property and general liability coverages led the way with rate increases of 6 percent, followed by commercial auto and business owners policies (BOP) with increases of 5 percent.

Meanwhile Richard Kerr, CEO of MarketScout noted that several medium sized publicly traded insurance companies are encountering challenges in their ongoing business operations:

These companies may be sold, restructured, or placed into run off unless they structure some creative solutions to get them past their current financial crisis. Very capable, smart insurance executives lead each of these firms. It just goes to show how quickly things can go wrong if an insurer experiences adverse loss development. Rates will increase if a few more companies experience similar deterioration.”

By account size, the larger accounts paid less premium than smaller accounts in September, according to MarketScout.

Small accounts (up to $25,000 premium) incurred average rate increases of 6 percent, medium accounts ($25,001 to $250,000) increases of 5 percent, while large accounts ($250,001 to $1 million) and jumbo accounts (over $1 million) saw increases of 3 percent and 2 percent respectively.

PC360 has more on this story.

Check out latest I.I.I. information on financial and market conditions.

The federal government shutdown that began on October 1 will have no impact on property/casualty insurer claims or sales operations, according to I.I.I. president and economist Dr. Robert Hartwig.

In his commentary on the industry’s 2013 first half results, Dr. Hartwig also noted that P/C insurers are well positioned to ride out increased financial market volatility attributable to the shutdown as well as the looming debt ceiling debate in mid-October.

Profitability in the P/C insurance industry rebounded sharply in the first half of 2013.

Dr. Hartwig noted that the improvement was propelled chiefly by growth in premiums, a reduction in catastrophe losses and favorable prior year reserve development.

As a result the industry combined ratio fell to 97.9 in the first half of 2013 from 101.9 in the first half of 2012—leading to an underwriting profit of $2.3 billion.

Dr. Hartwig noted:

The industry’s bottom line benefited commensurately as overall net income after taxes (profits) surged by 42.4 percent during the half to $24.5 billion from $17.2 billion in the year earlier period, pushing the industry’s return on average surplus up to 8.2 percent, up from 6.2 percent in the first half of 2012 and well above the 5.9 percent and 3.5 percent returns recorded for full-year 2012 and 2011, respectively.”

Continued and steady premium growth also contributed to the improved underwriting performance, as net written premiums were up 4.5 percent during the half, up from 3.7 percent gain recorded in the first half of 2012 and 4.7 percent in the second quarter.

This marked the thirteenth consecutive quarter of growth and the longest continued period of growth in nearly a decade, Dr. Hartwig said.

Another positive was that policyholders’ surplus reached a new all-time high of $614.0 billion as of June 30, 2013—up $34.7 billion, or 6.0 percent, from $579.3 billion as of year-end 2012.

Despite the surge in industry profitability, overall investment gains were flat. Dr. Hartwig commented:

Persistently low interest rates, of course, remain a challenge for the industry, with net investment income during the half slipping by $0.7 billion or 2.8 percent compared to the first half of 2012.”

The industry results were released by ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America (PCI).

While a number of U.S. websites and Twitter feeds are unavailable because of the government shutdown, it’s important to remember that the Atlantic hurricane season is still in progress.

Even more important when you consider that last year’s season looked like it was wrapping up when Hurricane Sandy, struck the East Coast October 28-31. Note: Sandy was the third costliest hurricane in U.S. history.

A tweet by FEMA administrator Craig Fugate late Wednesday directed us to the latest Atlantic Graphical Tropical Weather Outlook from the National Hurricane Center (NHC). See graphic below:

 

According to the NHC, showers and thunderstorms associated with an area of low pressure over the northwestern Caribbean Sea have become better organized and the system has a high chance – 70 percent – of becoming a tropical cyclone during the next 48 hours.

Over at Wunderblog, Dr. Jeff Masters says of the disturbance:

I give a 30% chance 97L will be Tropical Storm Karen with top winds of 40 – 60 mph at landfall between Louisiana and the Florida Panhandle on Saturday, a 5% chance it will be stronger, and a 65% chance it will be a tropical depression or mere tropical disturbance. Heavy rains of 3 – 6″ can be expected falling the coast from Louisiana to the Florida Panhandle on Saturday, even if 97L does not develop into a tropical depression.”

Meanwhile, the NHC has been issuing advisories for Tropical Storm Jerry, though at this time it is nearly stationary over the central Atlantic and far from land.

Read up on hurricane facts and statistics over at the I.I.I.