As the annual legislative session gets underway tomorrow in Tallahassee, Florida, the availability and affordability of coastal property insurance continues to be a hot-button issue. So itÃ¢â‚¬â„¢s appropriate we check in with the latest poll of Florida voters for their take on the issue. The statewide poll, by the Property Casualty Insurers of America (PCI), surveyed and analyzed the views of 800 likely voters in the sunshine state. Its key findings:Ã‚
- Homeowners insurance ranked as the No. 2 overall priority among Floridians after property taxesÃ‚
- 91 percent agree that the state should focus on helping reduce losses through better storm-proofing, such as controlling how and where homes are builtÃ‚
- 75 percent of Floridians believe that the Legislature has not delivered on their promises to reduce the cost of homeowners insuranceÃ‚
- 75 percent of Floridians believe that the long-term stabilization of rates is more important than immediate rate relief
Check out the I.I.I.’s latest information on the Florida property insurance market.Ã‚
Speaking of capital markets solutions as an alternativeÃ¢â‚¬ ¦Mainstream, rather than alternative is how the catastrophe bond market can now be described, according to Guy Carpenter. Its sixth annual review of the market reveals a phenomenal level of transaction activity in 2007, even as rates softened for traditional reinsurance capacity. At year-end, cat bond risk capital outstanding reached $13.8 billion, a 63 percent increase over 2006Ã¢â‚¬â„¢s record-setting year-end total of $8.5 billion. Cat bond risk principal now accounts for 12 percent of property limits in the U.S., and 8 percent on a worldwide basis. A couple of other highlights: publicly disclosed cat bond issuances totaled $7 billion in 2007, a 49 percent increase over the record $4.7 billion in 2006; some 27 transactions were completed in 2007, up from 20 in 2006 and nearly tripling the 10 placed in 2005. Check out further I.I.I. facts.Ã‚
Ratings agency A.M. BestÃ¢â‚¬â„¢s continuing stable outlook for the global reinsurance sector is good news for the entire industry. It goes without saying the reinsurance sector plays a critical role by increasing capacity in the global insurance marketplace, and offering protection against catastrophic losses. In fact, despite facing enormous loss potential from natural and man-made catastrophes, the reinsurance market is remarkably robust. In affirming the sectorÃ¢â‚¬â„¢s outlook, A.M. Best cited generally strong balance sheets, continued improvements in enterprise risk management (ERM) and general earnings momentum through 2007. However, it added that price deterioration, competition and increased cedant retentions are drivers of concern relating to the sustainability of the sectorÃ¢â‚¬â„¢s long-term operating performance. Other challenges remain in light of the increased capacity of industry participants, new entrants and forms of capital. For example, A.M. Best noted that it is no longer easy to ignore the reality of the capital markets as an alternative. Check out further I.I.I. info on reinsurance.Ã‚
Numerous airborne contaminants, including heavy metals and pesticides have been detected at measurable levels in ecosystems at 20 western U.S. and Alaska national parks from the Arctic to the Mexican border. ThatÃ¢â‚¬â„¢s the upshot of a six-year federal study funded primarily by the National Park Service (NPS). Some 70 contaminants were found at detectable levels in snow, water, vegetation, lake sediment and fish, according to the study. The three contaminants of most concern for human and wildlife health were mercury, and the insecticides dieldrin and DDT. The eight core national park areas studied were: Glacier, Mount Rainier, Olympic, Rocky Mountain, Sequoia and Kings Canyon, Denali, Gates of the Arctic, and Noatak. Something to think about as we admire the views on our next visit to one of these national parks.Ã‚
U.S. hurricane losses will continue to increase unless action is taken to address the growing concentration of people and properties in coastal areas. ThatÃ¢â‚¬â„¢s the key finding of a study just published in Natural Hazards Review. It reports that while 2004 and 2005 were exceptional from the standpoint of the number of very damaging storms, there is no long-term trend of increasing damage from hurricanes in the period 1900 to 2005. Rather, societal factors such as the rising population and wealth on the nationÃ¢â‚¬â„¢s coasts are a major influence in shaping trends in damage related to hurricanes. It points out that on average hurricanes in the U.S. have caused annual damage of about $10 billion for the last 106 years. The current trend of doubling losses every 10 years suggests that a storm like the 1926 Great Miami hurricane could result in perhaps $500 billion in damage as soon as the 2020s. What do youÃ‚ make of this prognosis? I.I.I. has additional hurricane facts & stats available online.
The magnitude 6.0 earthquake that struck a rural area of northeast Nevada yesterday is a reminder of the fact that earthquakes can strike anywhere, even in areas where the probabilities are relatively low. In fact, since 1900, earthquakes have occurred in 39 states and caused damage in all 50. About 5,000 quakes can be felt each year. Standard homeowners and business insurance policies in the U.S. do not cover earthquakes, but coverage is available via an endorsement. Still, persuading people to buy the insurance remains a challenge. In California, the U.S. state most commonly associated with earthquakes, only about 12 percent of homeowners buy the coverage. What can be done to change this stat? Check out further I.I.I. info on earthquake risk.Ã‚
A happy development for the domestic captive insurance industry today, with the news that the Internal Revenue Service (IRS) has dropped a proposed regulation that likely would have driven more business offshore. Issued September 28, 2007, the proposed IRS regulation would have eliminated the right of U.S.-sponsored captives to claim reserve deductions against their domestic tax for future claims and losses on consolidated, or related, business (see our November 14, 2007 posting). Apparently the IRS decided to withdraw the planned rule change after considering all the written comments received. The Coalition for Fairness to Captive Insurers has welcomed the move, saying it removes the uncertainty that has hung over the captive industry since the IRS regulation was proposed last fall. Check out National UnderwriterÃ¢â‚¬â„¢s February 20 online article by Caroline McDonald for more information on the decision. As many of you know, captive insurers are the oldest form of alternative risk transfer vehicle, dating back to the 1950s. Use of captives by corporations has grown exponentially during the last 30 years in the U.S. In 2006, the U.S. was the largest captive domicile Ã¢â‚¬“ with 1,251 licensed captives Ã¢â‚¬“ followed by Bermuda with 989. Check out further I.I.I. info on captive insurers.Ã‚
Customer satisfaction with the property/casualty insurance industry reached its highest level in over a decade in the fourth quarter of 2007. According to the latest University of Michigan American Customer Satisfaction Index, the p/c sector improved 2.6 percent to record a score of 80. However, in the aggregate, customer satisfaction with the finance and insurance sector dropped 0.7 percent to 75.5, a retreat from the gains of the previous year that had put the sector at its highest level since 1994 (see our Feb 22, 2007 posting). The sector includes commercial banks and property and life and health insurance. Amid rising health care costs, customer satisfaction with health insurers also slipped 1.4 percent. The index measures customer expectations, perceived quality and perceived value of companies in various industries.Ã‚
Managing the cycle is the most important issue for the insurance industry in 2008, according to the latest annual underwriter survey from LloydÃ¢â‚¬â„¢s. Some 67 percent of LloydÃ¢â‚¬â„¢s underwriters believe the industry made insufficient progress on managing the cycle in 2007 and 93 percent believe the industry is currently in a softening stage of the cycle. Containing operating costs and recruiting and developing talent in the industry are the next most important issues for the industry, the survey reveals.
Meanwhile, the instability of global financial markets is seen as the most significant factor impacting the industry during 2008, followed by changing global dynamics and emerging markets, and the growth of corporate liability. Interestingly, some 62 percent of underwriters believe that insurance buyers need to do more to prepare for the impact of liability risk on their business, and over one-half believe that the growth of the compensation culture is out of control. Check out further I.I.I. info on the U.S. liability system.
Large areas of the east coast of North America and the Caribbean Sea are among the oceans in the world most heavily affected by human activities. ThatÃ¢â‚¬â„¢s the upshot of a global study from the University of California at Santa Barbara this week. According to its findings, more than 40 percent of the worldÃ¢â‚¬â„¢s oceans are heavily affected by human activities, such as fishing, climate change and pollution, and few if any areas remain untouched. By overlaying 17 different maps of human activities, researchers came up with a composite map of the toll exacted by humans on the seas. Other ocean areas most severely affected include the North Sea, the South and East China Seas, the Mediterranean Sea, the Red Sea, the Persian Gulf, the Bering Sea, and several regions in the western Pacific. The least affected areas are largely near the poles.