All posts by Claire

Swiss Re forecasts growth in insurance markets

This in from Swiss Re Institute’s Global Insurance Review 2017 and Outlook 2018/2019 report:

The cyclical upswing in the global economy is set to continue in 2018 and 2019, supporting insurance premium volume growth.

Global non-life premiums are forecast to grow by at least 3 percent annually in real terms in the next two years and life premiums by 4 percent.

Emerging markets, particularly in Asia, will remain the driver of global non-life and life premium growth, according to Swiss Re.

Americans view cyberattacks, climate change as major threats

Cyberattacks from other countries are now seen as a major threat to the U.S. by 72 percent of Americans, according to a national survey from the Pew Research Center.

This view has changed little in recent years, apparently. But what has changed is public opinions about other global threats.

Take climate change—now viewed as a major threat by 58 percent of Americans, up 7 points since January, and the highest share since 2009.

The survey was conducted October 25-30 among 1,504 adults.

Commercial insurance rates variable: IVANS Index

Nearly all major commercial insurance lines experienced premium renewal rate increases in October, according to the IVANS Index.

In its analysis, only workers’ compensation remained in negative premium renewal rate territory, IVANS said. Business Owners Policy remains as the line of business with the highest premium renewal rate change, despite continuing its downward trend.

October rate changes include:

  •     Commercial Auto: 3.10%, up from 2.55% at the end of September.
  •     BOP: 3.57%, down from 3.87% the month prior.
  •     General Liability: 1.79%, up from 1.70% at the end of June.
  •     Commercial Property: 2.83%, up from 2.40% the month prior.
  •     Umbrella: 1.34%, down from 1.45% at the end of June.
  •     Workers’ Compensation: -2.24%, down from -1.31% the month prior.

Analyzing more than 120 million data transactions, the IVANS Index measures the premium difference year over year.

Small business and cyber insurance

Risk management services are an important way cyber insurance adds value for small businesses, according to a new I.I.I. paper.

In Protecting Against #Cyberfail: Small Business and Cyber Insurance, I.I.I. co-authors James Lynch and Claire Wilkinson say:

“The provision of these types of services is considered a growth area in the cyber market for SMBs, where price may be a barrier to insurance coverage in the first place. For larger companies, cyber-related risk management services may be offered at a discount or for free.

“For SMBs in particular, offering a risk management or training solution where they can learn more and keep themselves up-to-date on current threats is perhaps most valuable.”

Also heard at the Advisen Cyber Risk Insights Conference in NYC last week: part of the value proposition for SMBs is that cyber policies offer solutions, not just coverage.

Andy Lea, vice president underwriting for E&O, Cyber and Media, CNA, told the conference: “The value proposition is more prominent with SME and middle market companies that just don’t have resources available in-house to manage risks. This is an opportunity for brokers and carriers to add value.”

When a fire becomes a liability accumulation event

Accumulation risk, where a single event triggers losses under multiple policies in one or more lines of insurance, is emerging in new and unforeseen ways in today’s interconnected world, says a post at Swiss Re Open Minds blog.

From Ruta Mikiskaite, casualty treaty underwriter, and Catriona Barker, claims expert UK&International Claims at Swiss Re:

“Accumulation scenarios have always been familiar in property insurance but for casualty lines of business, they have been perhaps less of an issue. However, large losses in recent years show how traditional physical perils should not be underestimated for their casualty clash potential.”

For example, Kilmore East-Kinglake bushfire, the most severe of a series of deadly wildfires in the Australian state of Victoria on Black Saturday, 7 February 2009, led to a settlement of A$500 million—the biggest class action settlement in Australian legal history.

Per Swiss Re’s post, the Royal Commission found that the fire was caused by poorly maintained power lines owned by power company SP AusNet and maintained by asset manager Utility Services Group. The Victoria State government was also held liable for its failure to provide sufficient prevention measures and inadequate warnings during the fires.

“With improved technology and scientific tools available to analyze and simulate scenarios following storms, fires and floods to predict their likely or alternative courses, any action by an individual, corporate body or government now attracts far greater scrutiny. As a result, there can be a greater readiness to sue for alleged nuisance or negligence leading to more casualty claims out of natural perils.”

The upshot: insurers need to look at their reinsurance programs to see how they would respond to liability clash events.


What cybersecurity measures do businesses have in place?

In the third week of National Cyber Security Awareness Month, Insurtech Insights newsletter by CB Insights gives a timely update on the cyber insurance market, and where startups are playing in this growing industry.

It notes the “tremendous opportunity” to sell cyber insurance to small businesses.

A recent Better Business Bureau study estimates that 15 percent of small businesses have cyber insurance. BBB Accredited Businesses are almost three times as likely to include cybersecurity insurance.

Fortunately, about nine out of 10 businesses reported to the BBB they have some cybersecurity measures in place, with the most common ones: antivirus; firewall; and employee education:

How to protect employees against harassment

What are companies doing to protect employees against harassment? This question has added weight after the October 8 firing of Harvey Weinstein by the board of Weinstein Co. following reports of sexual harassment complaints against him. Earlier firings at Fox News and Uber have also brought the issue into focus.

From MarketWatch: “Companies are increasingly buying insurance, including employment practices insurance to cover costs associated with employment lawsuits,” said David Yamada, a professor of law and the director of the New Workplace Institute at Suffolk University.”

Some insurers are also providing training materials for companies to teach their employees about sexual harassment in hope of avoiding it, Yamada added.

Per this 2016 Betterley report, more insurers are partnering with vendors to offer risk management services, such as training and education, consultation and outreach to insureds:

“EPLI value-added services remain an important part of the product when done right, offering employers access to tools that can truly make a difference in the frequency and the severity of claims—as well as the bad feelings that accompany employee/ employer disputes.”

Gross written premium for employment practices liability insurance (EPLI) increased to $2.1 billion in 2015, according to MarketStance data.

I.I.I. information on EPLI coverage is available here.

A first look at the Equifax cyber loss

$125 million. That’s the first estimate of the insurance industry loss due to the Equifax cyber breach published by Property Claim Services (PCS).

Per Artemis blog:

“PCS’ initial estimate of the insurance market impact due to the Equifax hack attack is $125 million, however the firm said that the economic impact to the credit giant is expected to be much larger.

“PCS noted that there are outstanding coverage issues which could reduce the likelihood of the Equifax cyber insurance loss reaching the $125 million estimate, so it could be revised down it would appear.”

Equifax’s specific cyber insurance policy could provide as much as $150 million of coverage, according to Artemis.

Launched in early September, the PCS Global Cyber service provides industry loss estimates for cyber risk loss events of at least $20 million worldwide. The Equifax hack was its first designated event and PCS has since designated its second global cyber loss event, the impact of the Petya/non-Petya malware attack on pharmaceutical giant Merck & Co in June.

NFIP reinsurance protection a good thing

From January 1, 2017, FEMA – the Federal Emergency Management Agency – secured increased reinsurance protection to share a meaningful portion of the risk of large and unexpected flooding with private reinsurance markets.

This placement of reinsurance transferred $1.042 billion in risk above a $4 billion deductible to 25 reinsurance companies.

Under this agreement, the reinsurers can cover 26 percent of losses between $4 billion and $8 billion arising from a single flooding event.

As Artemis blog reports here, with flood losses from Hurricanes Harvey and Irma on the rise, estimates suggest that the NFIP reinsurance program will pay out in full with losses from Hurricane Harvey alone.

Per Artemis: “The NFIP reinsurance program is a per-occurrence arrangement, meaning it covers a single loss event.”

Also noted by Artemis at the very end of its blog post, the NFIP reinsurance layer does not have a reinstatement provision.

This means that the NFIP cannot also claim on the program for its losses from Hurricane Irma as a second and separate event.

Nevertheless, it’s a good thing that NFIP secured first event coverage. A reinsurance payment for Hurricane Harvey flood losses will be welcome.

Concurrent Causation and Hurricane Irma claims

The issue of causation, especially when there may be multiple causes of loss, can be a tricky one for both insureds and insurers. It comes down to what caused the loss – and in what order.

Take the example of a major catastrophe, like a hurricane, where there may be property claims arising from both wind and water. Determining the cause of loss is key to determining whether there is coverage under the terms of an insurance policy because there are two policies in play, one for wind damage and one for flood damage.

Some jurisdictions subscribe to the “efficient proximate cause doctrine” while others subscribe to the “concurrent causation doctrine”.

What’s that?

The efficient proximate cause doctrine finds that where there is a concurrence of different perils, the efficient cause – the one that set the other in motion – is the cause to which the loss should be attributed.

Under the concurrent causation doctrine, when multiple perils contribute to a loss, coverage is allowed if at least one cause of the loss is covered by the policy.

In the case of Florida, a recent court decision adopted the concurrent causation doctrine, which will impact Hurricane Irma claims.