Gun Liability

While we’ve purposely stayed away from the topic of gun liability or risk management lessons to be learned from last month’s shootings at Virginia Tech, an article in the Chicago Sun-Times detailing how a father obtained a gun license for his 10-month-old son forces us to visit this contentious issue. According to the May 13 article, the infant’s father applied on his behalf for the license after his grandfather bought him a shotgun as an heirloom. The application for the license was approved on the third go, after being turned down twice due to technicalities. While the father fully expected the application for the license to be rejected due to his son’s age, it appears that in the state of Illinois there are no age restrictions on issuing a firearms owner’s identification card (FOID). At risk of stating the obvious, we note that 16 remains the age at which a teen, subject to successful completion of driver education, can apply for a driver’s license in Illinois.  As  many states have legislation in place that restricts or prevents lawsuits against the gun industry, the question is should we be concerned? Following the Virginia Tech tragedy and given the lawsuits targeting “Big Tobacco†, and more recent suits against the alcohol industry and fast food industry, could we be looking at a potential rise in claims under liability coverages? What are your thoughts? Check out further I.I.I. info on the liability system.

Road Rage Survey

So for the second year running Miami drivers have been found to be the least courteous in the country, followed by New York and Boston drivers, according to a survey by national auto club AutoVantage. The other two cities with the worst road rage were Los Angeles and Washington, D.C. Talking on cell phones, running red lights and slamming on the brakes were some of the frequent behaviors noted by commuters of their fellow drivers. The most frequent cause of road rage cited in the survey was impatient and/or speeding motorists. Drivers also cited poor driving in fast lanes, talking on the cell phone and driving while stressed, frustrated or angry. The most courteous city is Portland, OR, followed closely by Pittsburgh, Seattle/Tacoma, St. Louis and Dallas/Ft. Worth. The obvious link with  our business  is that drivers’ safety habits are just one of the factors that can affect the cost of auto insurance. The cost and crashworthiness of vehicles is another.  This survey also highlights the emerging risk posed by cell phone use while  driving. Check out further data from the I.I.I. on driver behavior and auto crashes  and cell phones and driving.

Workers Comp and 9/11

Late last week NCCI Holdings released its annual “State of the Line” workers compensation market analysis showing that the 2006 calendar year combined ratio was 96.5 percent, the best underwriting result in at least 30 years and the first underwriting profit for the line since 1995. Although the underwriting results are the best in decades, NCCI did flag some critical issues that continue to face the sector in the long-term. Among them, skyrocketing medical costs, low investment returns, a changing political landscape and the projection that the underwriting cycle is likely at its peak. On a day in which illnesses suffered by Ground Zero workers have again made the headlines, we’d like to flag another emerging issue — the latent illnesses and disease among first responders to the September 11, 2001 terrorist attack. New York City officials estimate the treatment costs for those suffering respiratory illnesses is already in the hundreds of millions of dollars and that other illnesses such as cancer may eventually be linked to the disaster. For more information on workers compensation check out I.I.I.’s update.

Charitable Update

A little known fact is that the insurance industry ranks among the top 15 contributors when it comes to charitable donations. Indeed, the charitable contributions to U.S. and international causes by 211 of the largest U.S. companies and U.S. corporate foundations amounted to $9.78 billion in 2005, according to a survey by the Conference Board. The survey included 209 firms which gave over $7.78 billion to U.S. causes in 2005. The insurance industry’s donations to U.S. beneficiaries totaled $181.3 million, placing it eleventh out of 19 industry groups. This brings us to the Insurance Industry Charitable Foundation. The Foundation’s New York division will hold its next Board of Directors meeting on Thursday, May 17 at 10:00am at AIG, 70 Pine Street. The IICF-New York division has also been busy planning its first annual dinner to be held at the Waldorf Astoria Hotel on December 5, 2007. New York City Mayor Michael Bloomberg has agreed to be honoree and the dinner will be chaired by Martin Sullivan, chairman and CEO of AIG. Visit the IICF site for more information.     Ã‚  

Twin Threat

As British Prime Minister Tony Blair announces his resignation and with U.S. President George Bush’s tenure soon coming to a close, today we turn to two reports that speak to the growing risks from political violence and terrorism. First, a RAND study finds that technology and knowledge-sharing among diverse terrorist groups is on the up and part of the complex threat posed by terrorism. Given concern about terrorist interest in unconventional weapons, individuals with skills involving chemical, biological, nuclear or radiological (CBNR) technology are frequently a central focus of analysts. But, the RAND study shows the importance of individuals with expertise in conventional explosive technologies as well. Threat assessments should monitor both these areas, it says. Then a report in from Lloyd’s and the Economist Intelligence Unit finds that despite growing awareness of terrorism and political risks, nearly one in four businesses do not have a business continuity plan in place. A further 14 percent of companies believe that their plan is insufficient in the light of political violence. These figures are even greater for smaller firms. Check out I.I.I.’s information on terrorism risk and risk management for small businesses online.  

Cat Models Innovate

Catastrophe models have come under a lot of scrutiny since the record hurricane seasons of 2004 and 2005. In recent weeks the use of five-year catastrophe models versus 100-year models in the underwriting process has attracted the attention of certain state regulators. Whatever your opinion, it’s important to recognize that catastrophe models are just one of the tools that help insurers, reinsurers and risk managers more accurately analyze, write and price for catastrophe risk. Over the years catastrophe models have been constantly updated and fine-tuned to incorporate the latest technologies, data, and research findings. Take yesterday’s announcement of a collaboration between AIR Worldwide Corp, the International Hurricane Research Center (IHRC) and the College of Engineering and Computing at Florida International University (FIU). This initiative will see a computer controlled, mechanical platform, known as the “AIR Turntable† be incorporated into a hurricane simulator that can test the effects of different wind loadings on different building types. The technology is expected to transform residential and commercial construction and retrofitting practices and lead to more effective methods of strengthening buildings against extreme wind events such as hurricanes. Mitigation technology research like this  will be  key to better managing catastrophe risk in the years ahead.

Tornado Loss

We’ve blogged before about tornado risk (see February 5 posting) and this weekend’s twisters in Kansas, South Dakota, Oklahoma, Nebraska and Iowa underline the oft forgotten point that tornadoes, though not generally as destructive as hurricanes, are more frequent and can also cause severe damage. The F5 tornado (the highest category on the scale) that struck Greensburg, Kansas, late Friday night is estimated to have destroyed as much as 95 percent of the town. It was part of a swathe of storms that killed at least 10 people over the weekend. According to A.M. Best, tornadoes and related weather events caused more than $8 billion in insured losses in 2006. Each year about 1,000 tornadoes with wind speeds as high as 300 mph touch down in the U.S., according to I.I.I. research. Check out further I.I.I. tornado statistics.  I.I.I. has activated a disaster response plan following the tornadoes. For more information, please email Mike Barry, I.I.I. Media Relations Director, at michaelb@iii.org.

Wildfire Education

California’s Wildfire Awareness Week gets underway Monday with a series of events planned across the state to educate residents on wildfire safety and preparedness. I.I.I. research shows that most of the large fires with significant property damage have occurred in California, where some of the fastest developing counties are in forest areas. Earlier this week the National Interagency Fire Center warned that the West and Southeast face an increased wildfire risk this year, due to ongoing drought conditions and a predicted warmer than average summer. In Florida, where over 90 percent of the state is experiencing drought, some 95 wildfires are reported to be active. Meanwhile, in Georgia, a state of emergency has been declared in 21 southeast counties that are facing extreme drought conditions. I.I.I.’s free home inventory software can help residents better protect their property ahead of disaster. Further information is also available from the Insurance Information Network of California  (IINC).

Mitigating Climate Change

Tomorrow the UN’s Intergovernmental Panel on Climate Change (IPCC) will release its latest report on climate change. This, the third and final IPCC volume for the year, will focus on mitigation of climate change. Among other things, it is expected to highlight how various economic steps and technologies could help limit the effects of global warming. Measures to reduce greenhouse gases and the costs associated with such action will also be weighed. Whatever its conclusions and recommendations, the report again indicates that climate change represents a key risk for countries, governments, businesses and individuals moving forward. Bear in mind a recent survey from the Economist Intelligence Unit (EIU), and sponsored by ACE, IBM and KPMG, revealed that international risk managers were least confident about how their organizations were managing climate change risk. Interestingly, survey respondents also felt that terrorism risks and human capital risks are not being handled so well.

Communication on Flood

Yesterday marked the official countdown to the start of the 2007 hurricane season. It’s now just 29 days away, but as we know there’s a 30-day wait before a flood insurance policy takes effect, so this is a good time to remind people of the importance of flood insurance. By the way, if you were wondering, Sacramento voters have agreed to pay a higher assessment tax to finance municipal flood protection initiatives that will eventually provide a 200-year level of protection to the region (see our  April 26 posting). All well and good, but we’re curious as to how this will affect the purchase of flood insurance? Communicating the risk  remains crucial, according to a new report from the Water Policy Collaborative at the University of Maryland. It makes clear that levees in urban areas should provide protection to at least a 500-year flood standard. In fact for homes outside of the 100-year floodplain but within the 500-year floodplain there is still a six percent chance of at least one 500-year flood event during a 30-year mortgage. The study recommends that FEMA seek legislative authority to require mandatory purchase of flood insurance by those living in the 500-year floodplain and those living behind levees. So let’s get the message out there.  

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