Happy Groundhog Day

For those of us lucky enough to have seen snow this winter (i.e. Denver) the news that Punxsutawney Phil did not see his shadow and that there will be an early spring in 2007  will be gladly received. For the industry, however, the freeze looks likely to last a little longer. According to the I.I.I. 2007 Groundhog Day forecast, most insurance industry analysts predict slower P/C premium growth in 2007. Nevertheless, this year’s survey results indicate that the respite in catastrophe losses in 2006 will likely propel the industry to its best underwriting performance since 1936. Industry profitability is expected to continue in 2007, albeit with an underwriting performance that generates a much smaller underwriting profit. This apparent paradox—a peak in industry profits, but stalling premium growth—is a clear reminder of the cyclical nature of the property/casualty business, and the fact that our industry’s financial fortunes are influenced by a number of factors.  Ã‚  

  

Levee Risk

Some 127 levees across the U.S. are at risk of failing, according to a list released today by the Army Corp of Engineers. We note that the ill-maintained levees are spread across 26 states, the District of Columbia and Puerto Rico. From California, to Florida, to Massachusetts the listed levee projects have been  given an unacceptable maintenance rating meaning that one or more deficient conditions could prevent them from functioning as designed. Animal burrows, erosion, tree growth, movement of floodwalls or faulty culvert conditions are just some examples of the deficiencies. We have two words on this:  flood insurance. View I.I.I.’s latest statistics on the National Flood Insurance Program (NFIP) at http://www.iii.org/media/hottopics/insurance/xxx/  Ã‚  Ã‚  

  

Avian Flu Watch

New outbreaks of the H5N1 flu virus are reported to have infected and killed birds and poultry in Russia, Hong Kong, Hungary and Japan this week. Meanwhile, Australia, Singapore, and Japan announced they are stepping up their preparedness efforts. I.I.I.’s latest update from our resident bird flu expert and economist Dr. Steven Weisbart notes that at least 164 people have died and 270 have been confirmed infected since December 2003, the start of the current outbreak. In 2006 alone there were one-third more infections and nearly twice as many deaths as in 2005. Human infection is still believed to be mainly from birds to humans, basically from very close contact with infected chickens and similar birds in home environments.  There are still no cases of birds or people in the U.S. with this flu virus.  

Rebuilding is good for the Nation

As insurers, legislators and regulators grapple with how to maintain viable insurance markets in the post-Katrina and Rita era; we tip our hat to Illinois Sen. and presidential hopeful Barack Obama who addressed a Senate committee hearing on Gulf Coast rebuilding held in New Orleans Monday. Obama told the committee: “Rebuilding New Orleans is not just good for the Gulf or the state of Louisiana, it’s good for our nation.† Good point. Some 18 months since the most costly disaster in U.S. history and of the billions of dollars of government aid promised for Hurricane Katrina reconstruction, only a fraction has reached the hands of those affected. For our industry’s part, some 95 percent of the 1.2 million homeowners insurance claims in Louisiana and Mississippi had been settled by the storm’s one-year anniversary on August 2006. With an above-average hurricane season forecast for 2007, and landfall probabilities and intensities up across all regions, the importance of the rebuilding effort in the Gulf cannot be underestimated. Indeed,  insurers are  not alone in pushing for stronger building codes across the country. Check out I.I.I.’s Louisiana insurance market overview. for the latest catastrophe info.

Let the Game Begin

Less than a week to go until this year’s Super Bowl, and the likely winner is all in the numbers according to the sports statisticians. In his Stat of the Week, John Dewan, owner of Baseball Info Solutions, presents a system that has correctly predicted the Super Bowl winner 14 of 16 times. The system consists of 12 statistics based on the regular season for the two Super Bowl teams; broken into five defensive statistics, four offensive and three overall. Each of the 12 predictors successfully predicts the Super Bowl winner roughly 55 to 70 percent of the time. To see whether your money should be on the Bears or the Colts, go to: http://actasports.com/sows.php  Ã‚  

It’s Not Just About Paying Claims…

Our industry also has a powerful story to tell in terms of the major contribution it makes to state, local and national economies. The Insurance Information Institute’s online publication “A Firm Foundation† shows the myriad ways in which insurance supports the economy. The I.I.I. has also created state-specific editions which concentrate on the insurance industry’s role as a key player in the California, Florida, Maryland and Texas economies. Dozens of charts highlight the economic support provided by the insurance industry, from defraying the costs of catastrophes, to providing employment, to fueling the capital markets.

Satisfying, and Keeping, Your Customer

In today’s increasingly competitive marketplace, it’s not surprising to hear that  a satisfied  customer is not necessarily a loyal one  when it comes to insurance. How to attract new customers and retain existing ones is an ongoing challenge for this industry, as any other. In their inaugural World Insurance Report, consulting group Capgemini and the European Financial Management & Marketing Association (EFMA), offer insurers tips on how to better meet customer needs. The report throws out some interesting findings. For example, while price is the most important factor overall in choosing an insurance product, the degree of price-sensitivity varies substantially by insurance type and by country. American customers, in particular, also view product and brand/trust as key factors when purchasing insurance. Further, despite customers showing a strong preference for buying insurance via the Internet, the number actually buying online is low.

Varying Shades of Green

The potential link between global climate change and extreme weather continues to elicit a wide range of views.   But whatever your perspective, it is clear that our industry is becoming involved in green issues in an ever-growing number of ways.   From hybrid cars to green building technologies to how to manage corporate exposures to climate change, insurers are increasingly participating in the green debate.   For example, Travelers recently said it will offer owners of hybrid cars in California a 10 percent discount on their auto insurance, bringing to 42 the total number of states in which it offers such a discount.   Several other companies have introduced similar incentives to hybrid drivers.   Meanwhile, Fireman’s Fund has introduced a new coverage for green-certified buildings that will offer a discount to building owners due to the lower risk factors.   Another education-related green initiative will see broker Marsh offer a program with Yale University from January to teach corporate board members about their fiduciary responsibility to manage exposure to climate change.   Released earlier this year, III’s report “Global Climate Change and Extreme Weather: An Exploration of Scientific Uncertainty and the Economics of Insurance† by III economists L. James Valverde Jr. and Marcellus M. Andrews examines a range of issues related to global climate change and extreme weather and explores the potential implications for insurers and reinsurers going forward.   Expect more III research on green-related industry issues in future.

Latest research and analysis