Entries tagged with “Economy”.
Did you find what you wanted?
Friday, May 30, 2014
Posted by Claire under Auto Insurance, Insurers and the Economy
A report just released by the National Highway Transportation Safety Administration (NHTSA) puts a $277 billion price tag on the economic costs of traffic crashes in the United States in 2010, a 20 percent increase over its 2000 data.
The economic costs are equivalent to approximately $897 for every person living in the U.S. and 1.9 percent of U.S. Gross Domestic Product, the NHTSA says, and based on the 32,999 fatalities, 3.9 million non-fatal injuries, and 24 million damaged vehicles that took place in 2010.
Included in these economic costs are lost productivity, medical costs, legal and court costs, emergency service costs (EMS), insurance administration costs, congestion costs, property damage and workplace losses.
When you add in the $594 billion societal cost of crashes, such as harm from the loss of life and pain and decreased quality of life due to injuries, the total impact of crashes is $877 billion.
The following chart breaks out the economic costs:
Itâ€™s interesting to note that the most significant components were property damage and lost market productivity. In dollar terms, property damage losses were responsible for $76.1 billion and lost productivity (both market and household) for $93.1 billion.
The NHTSA explains that for lost productivity, these high costs are a function of the level of disability that has been documented for crashes involving injury and death. For property damage, costs are mainly a function of the very high incidence of minor crashes in which injury does not occur or is negligible.
Another takeaway from the survey is the impact of congestion, which accounts for some $28 billion, or 10 percent of total economic costs. This includes travel delay, added fuel consumption, and pollution impacts caused by congestion at the crash site.
Thereâ€™s a separate chapter of the NHTSA report devoted to congestion impacts that includes some fascinating data.
For additional dataÂ on motor vehicle crashes, check out I.I.I. facts and statistics on highway safety.
Global insurance markets are seeing stronger growth, thanks to the economic upswing in many industrialized countries, according to an annual study by Munich Re.
Munich Reâ€™s Insurance Market Outlook 2014 finds that rate increases in a number of high volume markets are also having a positive effect on premium growth.
At the global level, Munich Re expects real overall growth in primary insurance premiums at 2.8 percent this year and 3.2 percent in 2015, influenced mainly by stronger growth again in life insurance.
[In 2013, global insurance markets saw restrained growth of 2.1 percent in real terms, with primary insurance premiums in the life insurance segment growing by just 1.8 percent, due to a number of regulatory one-off effects.]
While in recent years dynamic growth in emerging countries has served as the decisive growth driver of global premium volumes, especially in property/casualty insurance, Munich Re notes that it is the industrial countries whose contribution to growth is currently increasing.
Many emerging countries are currently experiencing a cooling of their economies, and this is expected to have a dampening effect on premium growth in 2014 and 2015.
In the long-term however, Munich Re expects that emerging countries will continue to become more important for the global insurance markets.
The emerging Asian countries will see the highest increases, with their share of global premium volume expected to rise by 5 percentage points, from 9 percent in 2013 to 14 percent in 2020.
The Chinese market, already the fourth-largest primary insurance market with premium volume of over â‚¬210 billion in 2013, will more than double by 2020 to become the third-largest market worldwide, according to Munich Re.
Thursday, May 15, 2014
Posted by Claire under Insurers and the Economy, Wildfires
Images of wildfires burning in suburban neighborhoods in Southern California are a reminder of the risk faced by many homeowners.
NearlyÂ 2 million, orÂ 14.5 percent, of the 13.7 million homes in California face severe wildfire risk, according to the most recent FireLine State Risk Report by Verisk Underwriting Solutions.
Some 417,500 of these high-risk homes are located in Los Angeles County, while 239,400 are located in San Diego County.
Check out this snapshot from the Verisk report illustrating Californiaâ€™s wildfire risk:
For the latest information on the wildfires burning in the state go to the CAL FIRE (California Department of Forestry and Fire Protection) site.
I.I.I. facts and statistics on wildfires are available here.
Tuesday, May 13, 2014
Posted by Claire under Insurers and the Economy, Theft
Good news for insurers. Latest data points to a promising decline in the national problem of metal theft, according to the National Insurance Crime Bureau (NICB).
In a new report, the NICB notes that in just three years the number of metal theft insurance claims has declined by over 26 percent from 14,676 in 2011 to 10,807 in 2013.
The report reviews metal theft claims from January 1, 2011, through December 31, 2013.
During this period, 41,138 insurance claims for the theft of copper, bronze, brass or aluminum were handled â€“ of which 39,976 (97 percent) were for copper alone.
The NICB notes that when the number of metal theft insurance claims per month and monthly average copper prices are compared, the number of claims filed is found to have a statistically significant correlation with the price of copper.
Tightening controls on the sale of scrap metal have had a positive impact in local communities, the NICB says.
Ohio still ranks first of all states generating 4,144 metal theft claims in 2013, followed by Texas (2,827), California (2,489), Pennsylvania (2,345) and Georgia (2,067).
New York-Newark-Jersey City, NY-NJ-PA (1,725 claims) was the leading statistical area generating the most metal theft claims.
More on the link between copper prices and incidents of metal theft in this NICB video.
Thursday, April 3, 2014
Posted by Claire under Earthquakes, Insurers and the Economy
The second earthquakeÂ to strike the Los Angeles area on March 28 is a wake-up call and reminder of the risk to commercial and residential properties in Southern California, according to catastrophe modeling firm EQECAT.
(The M5.1 quake located 1 mile south of La Habre follows the M4.4 earthquake near Beverley Hills (30 miles to the northwest) on March 17.)
In its report on the latest quake, EQECAT notes that most homeowners do not carry earthquake insurance (only about 12 percent of Californians have earthquake coverage, according to I.I.I. stats), and those that do typically carry deductibles ranging from 10 percent to 15 percent of the replacement value of the home, and commercial insurance often carries large deductibles and strict limits on insurance coverage.
The remainder of the risk which is not insured is retained by property owners and frequently, their lenders. EQECAT reports:
CoreLogic regional studies have noted that a major earthquake in the Los Angeles Basin could easily produce damages to residential and commercial property exceeding $200 billion (Source: the EQECAT Insured Loss Database, 2013). The general lack of insurance coverage and high deductibles have led to concerns over the likelihood of widespread residential mortgage defaults arising from a large basin earthquake.â€
This raises an important point.
Concerns have been raised before (here) about how the lack of mandatory earthquake insurance in California would result in high levels of mortgage defaults should a major earthquake occur, with widespread economic implications.
The post-quake scenario envisioned is one in which homeowners walk away from their damaged homes without repairing them, leaving many homes in foreclosure and forcing banks to bear the brunt of the loss in capital.
The potential knock-on effect for insurers and reinsurers? The loss of home ownership could severely diminish incoming capital on homeowner insurance policies.
According to an Aon Benfield report, the 1994 Northridge earthquake cost the mortgage industry up to $400 million in mortgage defaults due to foreclosure expenses, property repair costs, lost interest income, write-downs of existing loan balances and other administrative costs.
Check out an informative I.I.I. background paper on earthquake risk and insurance issues here.
Friday, March 28, 2014
Posted by Claire under Catastrophes, Insurers and the Economy
Swiss Reâ€™s final tally of 2013 global cat losses highlights the growing risk protection gap between economic losses and insured losses.
Total economic losses from natural catastrophes and man-made disasters amounted to $140 billion in 2013,Â of which almost one thirdÂ â€“Â around $45 billion â€“ were insured.
This means that in 2013 the global protection gap (the level of uninsured losses) was $95 billion.
Swiss Re notes:
Economic development, population growth, urbanization and a higher concentration of assets in exposed areas are increasing the economic cost of natural disasters. In addition, climate change is expected to increase weather-related losses in the future. All of the above, if not accompanied by a commensurate increase in insurance penetration, results in a widening protection gap.â€
Thatâ€™s not to say that there hasnâ€™t been any progress over the yearsÂ in the area of risk prevention and mitigation measures.
Swiss Re makes the point that a very effective pre-designed evacuation drive saved thousands of lives when Cyclone Phailin made landfall in Odisha, India in October 2013, with winds up to 260km per hour.
However, the cyclone destroyed around 100,000 homes and more than 1.3 million hectares of cropland.
Kurt Karl, chief economist at Swiss Re, says:
The total economic loss of Cyclone Phailin is estimated to be $4.5 billion, with just a tiny portion covered by insurance. The insurance industry can play a much larger role in helping societies deal with the fallout of disaster events, such as this and Typhoon Haiyan.â€
Meanwhile, a post at Artemis blogÂ suggests that sustaining local markets is the key to increasing insurance penetration and ultimately narrowing the gap between economic and insured losses:
In order to narrow this gap reinsurers and insurers need to work together with development organisations and the capital markets to create risk transfer facilities that truly meet the goal of growing insurance penetration. Sustaining local markets is key here. Initiatives which seek to create new capacity for a single, often reinsurer, backer just donâ€™t seem to be having the desired effect so far and at the moment seem less likely to be sustainable over the longer-term.â€
Hereâ€™s the Swiss Re chart showing the difference between total losses and insured losses from 1970 to 2013, highlighting the widening protection gap over the last 40 years:
Check out our prior post on the widening gap between economic and insured cat losses here.
Monday, March 24, 2014
Posted by Claire under Insurers and the Economy, Terrorism Risk
The Terrorism Risk Insurance Program, a public/private risk-sharing partnership which is set to expire at the end of 2014, is absolutely critical to maintaining the health of the American economy, according to an updated white paper just released by the Insurance Information Institute (I.I.I.).
The I.I.I.â€™s Terrorism Risk: A Constant Threat, Impacts for Property/Casualty Insurers explains that should the federal Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) be allowed to expire at year-end 2014, this would have a detrimental impact on the availability and affordability of terrorism insurance for businesses.
Introducing the paper, Dr. Robert Hartwig, I.I.I. president and an economist says:
The war on terror is far from over, as last yearâ€™s Boston Marathon bombings and other events around the world attest, but TRIA by all objective measures is now a proven and unqualified success. The program not only succeeded in restoring stability to the countryâ€™s vital insurance and reinsurance markets in the years immediately following 9/11, but it continues more than a decade later to deliver substantive, direct benefits to millions of businesses, workers, consumers and the overall economyâ€”all at essentially no cost to taxpayers.â€
Industry data shows that the proportion of businesses buying property terrorism insurance (the take-up rate for terrorism coverage) has increased since the enactment of TRIA in 2002. In fact for the last five years, some 60 percent of businesses nationally have purchased terrorism coverage, usually at a reasonable cost.
Dr. Hartwig notes that industries responsible for much of the countryâ€™s critical infrastructure such as power and utilities, telecommunications and health care, along with financial institutions and local government have take-up rates that approach or exceed 70 percent.
Moreover, the take-up rate for workers compensation is effectively 100 percent, meaning that every worker in America is protected against injuries suffered as the result of a terrorist attack, he adds.
Warren Buffettâ€™s annual letter to Berkshire Hathaway shareholders released Saturday notes that Berkshireâ€™s attractive insurance economics exist only because it has â€œsome terrific managers running disciplined operations that possess strong, hard-to-replicate business models.â€
As he goes on to extol the virtues of the major units, Buffett comments that Berkshire is far more conservative in avoiding risk than most large insurers.
To put this in perspective, the Oracle of Omaha notes:
For example, if the insurance industry should experience a $250 billion loss from some megacatastrophe â€“ a loss about triple anything it has ever experienced â€“ Berkshire as a whole would likely record a significant profit for the year because of its many streams of earnings. And we would remain awash in cash, looking for large opportunities if the catastrophe caused markets to go into shock. All other major insurers and reinsurers would meanwhile be far in the red, with some facing insolvency.â€
As Artemis blog reports, being diversified and cash-rich Berkshire Hathawayâ€™s insurance and reinsurance businesses continue to pay claims and liabilities while the insurance and reinsurance premium float builds and generates significant upside on the investment side of Buffettâ€™s businesses.
Indeed, Berkshire’s attractive insurance economics are due in no small part toÂ the successful growth of that premium float over the course of years.
Buffett’sÂ letterÂ tells usÂ that Berkshireâ€™s insurance operations again operated at an underwriting profit in 2013 â€“ for the 11th consecutive year â€“ and increased its float.
During that 11-year stretch, our float â€“ money that doesnâ€™t belong to us but that we can invest for Berkshireâ€™s benefit â€“ has grown from $41 billion to $77 billion.â€
Buffett adds that further gains in float will be tough to achieve, but that ifÂ it does experience a decline in float at some future time, it will be very gradual — at the outside no more than 3 percent in any year.
Wednesday, February 12, 2014
Posted by Claire under Insurers and the Economy, Tornadoes
Today’s post by fellow blogger Lynne McChristian, Florida representative for the Insurance Information Institute (I.I.I.), comes to us live from the National Tornado Summit in Oklahoma:
Hurricanes get the headlines, but tornadoes are stealing their thunder. The economic toll of tornadoes and severe thunderstorms is adding up – to the tune of an average $9.6 billion per year payout in insurance claims. I.I.I.’s CEO/President Dr. Robert Hartwig made that point clear at the National Tornado Summit held this week in Oklahoma City.
Dr. Hartwig’s presentation on tornadoes and the insurance trends for severe convective events noted that tornadoes account for 36 percent of all insured losses since 1993; hurricanes losses over that time period were a just over 40 percent. He pointed out that areas in the heart of “Tornado Alley” may have 20-25 severe weather days each year. But, it’s not the number of storms that matters most. It’s all about where they hit.
Tornadoes are part of the landscape in many areas of the U.S., and the landscape has changed. If a tornado touches down on farmland, there may be little to no structural damage, and no witnesses to record the event. Today, what was once farmland is dense suburban development, putting more people and more property in a twister’s path — and bringing more devastation.
Average insured losses from thunderstorms are up seven fold since the 1980s. Historically, Oklahoma is second to Texas in terms of losses from tornadoes, thunderstorms and hail. The tornado that hit Moore, Oklahoma in May 2013 was the costliest storm of the year. At the Tornado Summit, Moore’s Mayor said he expects 85 percent of Moore residents will rebuild. That’s insurance at work!
To help spearhead the rebuilding of schools in Moore, Dr. Hartwig presented the Moore Public Schools with a check for $10,000 following his presentation at the Summit. He reminded the audience that knowing the numbers associated with natural disasters is a small part of the story. It’s helping the people impacted that matters most to the insurance industry. The I.I.I.’s contribution on behalf of the insurance industry underscored the human factor of disaster recovery, and that reminder earned a standing ovation.
An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the stateâ€™s water supply.
As farmers, ranchers and homeowners brace for what could be the stateâ€™s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.
The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:
We are talking historical drought conditions, no supplies of water in many parts of the state. My industryâ€™s job is to try to make sure that these kind of things never happen. And they are happening.â€
The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into â€œExceptional Droughtâ€ â€“ the worst possible category of drought. According to Dr. Jeff Mastersâ€™ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into â€œExceptional Drought.â€
Meanwhile, parts of the state experiencing â€œExtreme Drought,â€ the second worst category of drought, increased to 67 percent.
The U.S. Drought Monitor notes that a few of the impacts within the â€œExceptional Droughtâ€ areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.
Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.
For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.
Check out I.I.I. information on crop insurance.