Archive for August, 2014

Natural catastrophe events in the United States accounted for three of the five most costly insured catastrophe losses in the first half of 2014, according to just-released Swiss Re sigma estimates.

In mid-May, a spate of severe storms and hail hit many parts of the U.S.  over a five-day period, generating insured losses of $2.6 billion. Harsh spring weather also triggered thunderstorms and tornadoes, some of which caused insured claims of $1.1 billion.

The Polar Vortex in the U.S. in January also led to a long period of heavy snowfall and very cold temperatures in the east and southern states such as Mississippi and Georgia, resulting in combined insured losses of $1.7 billion.

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These three events contributed $5.4 billion of the $19 billion in natural catastrophe-related insured losses covered by the global insurance industry in the first half of 2014, according to sigma estimates.

The $19 billion was 10 percent down from the $21 billion covered by insurers for natural catastrophe events in the first half of 2013. It was also below the average first-half year loss of the previous 10 years ($23 billion). Man-made disasters added $2 billion in insured losses in the first half of 2014, sigma reports.

The $21 billion in insured losses from disaster events in the first half of 2014 was 16 percent lower than the $25 billion generated in the first half of 2013, and lower than the average first-half year loss of the previous 10 years ($27 billion).

Total economic losses from natural catastrophes and man-made disasters reached $44 billion in the first half of 2014, according to sigma estimates.

More than 4,700 lives were lost as a result of natural catastrophes and man-made disasters in the first half of 2014.

One day after a magnitude 6.0 earthquake struck the San Francisco/Napa area of California, the Northern California Seismic System (NCSS) says there is a 29 percent probability of a strong and possibly damaging aftershock in the next seven days and a small chance (5 to 10 percent probability) of an earthquake of equal or larger magnitude.

The NCSS, operated by UC Berkeley and USGS, added that approximately 12 to 40 small aftershocks are expected in the same seven-day period and may be felt locally.

As a rule of thumb, a magnitude 6.0 quake may have aftershocks up to 10 to 20 miles away, the NCSS added.

According to Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.), this earthquake is the strongest to impact the area since the 1989 Loma Prieta quake which resulted in $1.8 billion in insured claims (in 2013 dollars) being paid to policyholders.

Initial reports suggest the greatest damage has been to historic buildings in the city of Napa, with the downtown area cordoned off to fully assess damage. There have also been reports of non-structural damage such as items falling off shelves, including wine bottles and barrels, and substantial sprinkler leakage to many buildings.

The Napa region is most known for its wine industry, but tourism draws visitors to the area year-round.

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A report by catastrophe modelers CoreLogic EQECAT gave an initial estimate of $500 million to $1 billion in insured losses. Residential losses would account for about one half to one quarter of this loss estimate.

If the loss exceeds $1 billion it will be from uncertainty in commercial losses, CoreLogic EQECAT said, and losses to the wine industry could increase this estimate:

Business interruption (BI) losses are a major concern. As this is a very popular tourist area, many businesses – including wineries and restaurants – have sustained damage, both non-structural and structural.”

CoreLogic EQECAT noted that the Napa Valley wine harvest was already underway. Losses would have been less if this event had occurred pre-harvest.

According to the Napa Valley Vintners Association, while there have been reports of damage at some Napa Valley wineries and production and storage facilities, particularly those in the Napa and south Napa areas, vintners are still assessing their individual situations. More information is expected in the next 24 to 72 hours.

Standard homeowners, renters and business insurance policies do not cover damage from earthquakes. Coverage is available either in the form of an endorsement or as a separate policy.

I.I.I. earthquake facts and stats show California had the largest amount of earthquake premiums in 2013, at $1.6 billion, accounting for 61 percent of U.S. earthquake insurance premiums written.

This figure includes the state-run California Earthquake Authority, the largest provider of residential earthquake insurance in California. Only about 10 percent of California residents currently have earthquake coverage, down from about 30 percent in 1996, two years after the Northridge, California, earthquake.

The percentage of homeowners and renters who have earthquake insurance in the affected area is very low – in Napa less than 6 percent, and in Sonoma less than 10 percent, according to the California Earthquake Authority.

Check out key facts from the I.I.I. on the insurance industry’s contribution to the California economy here.

Forecasters’ Twitter feeds are alight this morning as to the potential development of two systems in the tropical Atlantic.

Here’s the latest graphic of where they’re located, courtesy of the National Hurricane Center (NHC):

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The NHC gives the first disturbance currently located several hundred miles east of the southern Windward Islands a 50 percent chance of tropical cyclone formation in the next five days.

The second disturbance, a tropical wave located 1,000 miles east of the Lesser Antilles, has a low (20 percent) chance of tropical storm formation in the next five days.

Over at Weather Underground, Dr. Jeff Masters noted that if the first disturbance (designated Invest 96L by the NHC) does develop, it would likely be similar to Tropical Storm Bertha of early August while it is in the Caribbean—a weak and disorganized system that struggles against dry air.

Meanwhile @EricHolthaus tweets that Invest 96L could be a tropical threat to the U.S. next week, based on the first model runs.

It’s still too early to tell, but Hurricane Hunters are on call to investigate 96L Thursday afternoon if necessary.

Check out I.I.I. facts and statistics on hurricanes.

And a shout-out to  Paul Dzielinski of The Dec Page who hosts Calvalcade of Risk #215 Dog Days of Summer edition here.

Have you ever wondered how far people will go to stretch the truth in order to save a few bucks?

Research out of the United Kingdom by global insurer Zurich sheds light on this behavior.

In a poll of 2,000 adults in the UK, one-in-five (20 percent) admit to lying to their insurance company, despite a separate 82 percent knowing that wrong information registered on an insurance form can render the policy invalid.

Why do people lie to their insurer? The reasons are varied:

• 29.3 percent lie because they are unsure of the correct information or didn’t understand the process to begin with;
• 10 percent knowingly lie because they are scared of the consequences of being totally truthful;
• 8 percent even admit to lying as they don’t take the process seriously.

Despite these numbers, the poll also revealed 87 percent of people would not lie to an official body, such as the police or their accountant, in order to save money.

In the words of Zurich home insurance expert, Phil Ost:

It’s really encouraging that most people don’t feel it’s acceptable to lie to save money and honesty really is the best policy when it comes to things like jobs and insurance. The consequences of being found out can be severe and maybe invalidate a policy and potentially result in claims not being paid.”

Maybe insurers should take note that 32 percent of Brits are more comfortable lying online than over the phone, while 34 percent will lie to put a positive spin on a bad situation, and another 10 percent will lie about their weight.

Dr Patrick Fagan, Lecturer in Consumer Behavior, Goldsmiths University, sums it up best:

People lie about all sorts of things – from their weight to their employment experience – but the ‘white’ lie is still the most prevalent…it’s interesting to see that there are still a sizeable group of people who’d be dishonest in more serious and formal situations.”

More on this story from Post Magazine.

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

Construction workers, farmers and landscape workers take note: insect-related deaths are most likely in your line of work.

As reported by The Wall Street Journal’s The Numbers blog, a new report from the Bureau of Labor Statistics (BLS) finds that insects, arachnids, and mites were involved in 83 fatal occupational injuries from 2003 to 2010.

During the course of the eight-year period, farmers and farm workers (20 fatalities), construction occupations (19 fatalities) and landscaping workers (17 fatalities) accounted for two-thirds of the deaths.

Bees were responsible for 52 workplace deaths – more than spiders, wasps and ants combined (25), The Numbers blog reports.

Most of the deaths (72 of the 83 total) were directly caused by an insect, including cases in which the worker was bitten or stung.

Another 11 deaths were indirectly caused by insects. These include cases where an insect distracted the worker while driving or caused the worker to fall from a height.

Anaphylactic shock, often associated with insect-related injuries, occurred in close to half the deaths, the BLS said.

By state, Texas saw the greatest number (21) of insect-related workplace deaths during the 8-year period, followed by Florida (8).

However, when it comes to non-fatal insect-related workplace injuries and illnesses with days away from work, four states: California, Florida, New York and Texas had more than 250 cases reported in all three years between 2008 and 2010.

As a percentage of all days-away-from-work cases in those large population states, though, insect-related cases were less than 1 percent of the total cases in any year.

Not surprisingly, these incidents tended to occur in the warmer months. Almost 94 percent of the cases occurred between April 1 and October 31. The largest number of deaths (17) occurred in September.

Check out National Institute for Occupational Safety and Health (NIOSH) information on workplace safety and insects here.

Forecasters with NOAA’s Climate Prediction Center now say the chances of a below-normal Atlantic hurricane season have increased to 70 percent, up from 50 percent in May.

In its updated outlook, NOAA said overall atmospheric and oceanic conditions that are not favorable for storm development will persist through the season.

Check out the revised numbers in this NOAA graphic:

However, coastal residents may want to heed the words of NOAA lead forecaster Dr. Gerry Bell:

Tropical storms and hurricanes can strike the U.S. during below-normal seasons, as we have already seen this year when Arthur made landfall in North Carolina as a category-2 hurricane. We urge everyone to remain prepared and be on alert throughout the season.”

This echoes the warning of others. After all, it only takes one landfalling hurricane for a season to go from below-active to active for coastal residents.

In a recent post Weather.com gave the classic examples of 1992 and 1983:

The 1992 season produced only six named storms and one subtropical storm. However, one of those named storms was Hurricane Andrew, which devastated South Florida as a Category 5 hurricane. In 1983 there were only four named storms, but one of them was Alicia. The Category 3 hurricane hit the Houston-Galveston area and caused almost as many direct fatalities there as Andrew did in South Florida.”

The $15.5 billion in estimated property losses ($23.4 billion in 2013 dollars) paid out by insurers for Hurricane Andrew ranks second in a PCS chart via the I.I.I. of the 10 most costly hurricanes in U.S. history, after Hurricane Katrina in 2005.

If Hurricane Andrew were to occur today, Karen Clark & Company estimates insured property losses would total $57 billion, based on current exposures.

Companies large and small appear to have been targeted in what is being described as the largest known data breach to date.

As first reported by The New York Times, a Russian crime ring amassed billions of stolen Internet credentials, including 1.2 billion user name and password combinations and more than 500 million email addresses.

The NYT said it had a security expert not affiliated with Hold Security analyze the database of stolen credentials and confirm its authenticity.

The records, discovered by security experts Hold Security, include confidential material gathered from 420,000 websites, ranging from household names to small Internet sites.

According to Hold Security’s own report, the hackers didn’t just target large companies. They targeted every site that their victims visited:

With hundreds of thousands of sites affected, the list includes many leaders in virtually all industries across the world, as well as a multitude of small or even personal websites.”

The NYT said so far the criminals have not sold many of the records online, but appear to be using it to send spam on social networks.

If ever there was a reason to research – and buy – cyber insurance, this would be it.

In its recently published paper Cyber Risks: The Growing Threat, the Insurance Information Institute (I.I.I.) notes that reliance on traditional insurance policies is not enough, as companies face growing liabilities in this fast-evolving area.

Following the Target data breach and other high profile breaches, the I.I.I. said the number of specialist cyber insurance policies is increasing, and that insurance has a key role to play as companies and individuals look to better manage and reduce their potential financial losses from cyber risks.

It cited data from broker Marsh showing a 21 percent increase in the number of clients purchasing cyber insurance from 2012 to 2013. That growth is accelerating in 2014.

Meanwhile, a new report from PwC US and the Investor Responsibility Research Center Institute (IRRCi) indicates that while companies must disclose significant cyber risks, those disclosures rarely provide differentiated or actionable information.

According to the report’s authors:

The consequences of poor security include lost revenue, compromised intellectual property, increases in costs, impact to customer retention, and can even contribute to C-level executives leaving companies.”

It suggests that investors focus on corporate preparedness for cyber attacks, and then engage with highly-likely targets to better understand corporate preparedness and to demand better and more actionable disclosures (though not at a level that would provide a cyber-attacker a roadmap to make those attacks).

As we head into August and the weekend, here are some of the stories from around the insurance blogosphere that piqued our interest:

Bertha: Tropical storm warnings have been issued for Puerto Rico, the U.S. and British Virgin Islands and other nearby islands as Tropical Storm Bertha – the second named storm of the 2014 Atlantic hurricane season – approaches the Caribbean. Early Friday, the National Hurricane Center (NHC) reports that Bertha’s winds are near 45 mph with no significant change in strength expected in the next few days. The latest 5-day forecast track for Bertha via the NHC has it staying well off the U.S. East Coast – let’s hope it stays that way.

Commercial Rate Increases Slow: Prices for commercial property/casualty insurance continued to slide in the second quarter of 2014, according to the latest quarterly survey from the Council of Insurance Agents & Brokers. On average, prices for small, medium and large accounts eased by a modest -0.5 percent during the second quarter, compared with 1.5 percent in the first quarter. Competition continued to drive the market, the Council said. Of note, pricing for property fell into negative territory with a -2.6 percent drop last quarter compared with flat pricing in the first quarter.

CAT Bond, ILS Market Dashboard: Looking for real-time metrics of the growing insurance-linked securities (ILS) and catastrophe bond market? Look no further than the just-launched Artemis Dashboard, an easy-to-use tool that allows you to access the data behind the transactions. You can view the current size of the market, issuance for the current year, top sponsors in the market as well as analyze outstanding cat bond and ILS market by key metrics such as the mix of perils, triggers, expected loss levels and pricing, and also data about the development of the market over time.

The I.I.I. has additional resources on these topics. Check out I.I.I. facts + statistics on hurricanes and catastrophe bonds.