All posts by Maria Sassian

Ebola outbreak in the Congo may be eligible for pandemic catastrophe bonds

The unfolding outbreak of the Ebola virus in the Democratic Republic of Congo may activate pandemic catastrophe bonds, said a recent Artemis blog post.

Last year, the World Bank launched a “pandemic bond” to support the Pandemic Emergency Financing Facility (PEF). The cat bonds are designed to payout when an outbreak gets to a stage where emergency aid financing would be required, enabling the mobilization of capital rapidly to help prevent further spread of any eligible disease outbreak.

Pandemic cat bond notes cover a range of pandemic perils including, Coronavirus, Crimean Congo Hemorrhagic Fever, Filovirus, Lassa Fever and Rift Valley Fever, with Ebola falling within the Filovirus category.

The current Ebola outbreak appears to be an eligible event under the terms of the transaction, although it’s probably too early for a formal announcement. The number of confirmed deaths remains well below the trigger point which can only begin to payout for a Filovirus like Ebola once the confirmed deaths pass 250.

Pandemics are one of the most certain uninsured risks in the world today, according to the World Bank site. There’s a high probability that the world will experience a severe outbreak in the next 10 to 15 years that could destabilize societies and economies. The annual global cost of moderately severe to severe pandemics is roughly $570 billion, or 0.7 percent of global income. The cost of a severe pandemic like the 1918 Spanish flu could total as much as 5 percent of global GDP.

From the I.I.I. Daily: Our most popular content, May 11 – May 17

 

Here are the 5 most clicked on items from the I.I.I. Daily newsletter.

 

 

To subscribe to the I.I.I. Daily email daily@iii.org.

Solar power and homeowners insurance

On May 9 California became the first state to mandate that all new homes have solar power. The rules go into effect in two years, and are part of the state’s efforts to cut greenhouse gas emissions.

Under the new rules, individual homes must have rooftop solar panels, or a shared solar-power system serving a group of homes. Rooftop panels can either be owned outright and rolled into the home price, or made available for lease. The requirement is expected to add $8,000 to $12,000 to the cost of a home, according to the New York Times. However, savings from heating and cooling could add up to $80 per month.

To help homeowners understand whether solar panels are covered by homeowners insurance, we’ve put together this Q&A.

Q: Are my solar panels covered by homeowners insurance?
A. Yes. Most solar panels are considered a permanent attachment (like a deck) and are therefore protected by a homeowners policy. You will want to call your insurance company and make sure your panels are covered.

Q: How much coverage do I have?
A. Your insurance policy’s coverage limit is the maximum amount that it will pay toward a covered loss. Since solar panels can be expensive, make sure your coverage limit is adequate.

Q. Will having solar panels increase my homeowners insurance premiums?
A: Most likely, yes. Some carriers allow owners with solar energy systems to purchase an optional endorsement to cover the panels. Others include the coverage in the dwelling coverage (Coverage A), if the panels are on the roof of the home, or under “Coverage B,” if they are on the ground or on the roof of a detached structure. Either way, there are replacement costs associated with the panels that would likely increase homeowners premiums.  Homeowners can expect to benefit from solar with increased energy efficiency in the home, but time will tell if the economic advantage of having solar panels outweighs the incremental, upfront costs.

Just like residential sprinkler systems increase water-damage claims, it’s reasonable to expect that solar panels, when attached to roofs, might also increase the chances of roof claims because of damage caused by a windblown panel or a leak at the point of contact, as examples.

Q. What are some of the risks of having solar panels?

A: If a home catches fire, solar panels can be challenging for firefighters. The PV arrays increase the risk of electrocutions, slips and falls and other serious injuries. If the fire is on the roof, the concealed spaces between the panels make it very difficult to get them extinguished. Solar panels are always live, and contact with them with them can cause shock or electrocution. Fire departments are implementing programs to learn how to handle solar panels.

 

From the I.I.I. Daily: Our most popular content, May 4 to May 10

Here are the 5 most clicked on articles from the I.I.I. Daily newsletter.

 

To subscribe to the I.I.I. Daily email daily@iii.org.

Are SUV’s causing the crisis of pedestrian fatalities?

The Insurance Institute for Highway Safety (IIHS) released a study yesterday examining the sudden and precipitous increase in pedestrian fatalities in the past seven years. Pedestrian fatalities in the U.S. have risen by 46 percent since 2009. Approximately 6,000 pedestrians were killed by motor vehicles on or along the nation’s roads in 2016, the latest year for which data is available. The rate of increase is far greater than those for all other traffic-related deaths.

The study looked at pedestrian crash trends to identify the circumstances under which the largest increases occurred. Roadway, environmental, personal and vehicle factors were examined to see how they changed over the study period.

One of the factors leading to more pedestrian deaths, is the increasing presence of SUVs on roads in the U.S. The number of SUVs involved in single-vehicle pedestrian deaths increased 81 percent between 2009 and 2016.

SUVs and other light trucks and vans provide more protection to their occupants, but increase the risk of severely injuring or killing pedestrians in an impact when compared with cars. Changes in the front-end design of these vehicles would help reduce the severity of pedestrian injuries in an impact.

Other improvements the report recommends include: adding safe and convenient crossing locations to roads, reducing speed limits, and improved headlights and street lights.

 

Hawaii’s Big Island Volcanic Eruption – What You Need to Know

By Michael Barry, Head of Media and Public Affairs, Insurance Information Institute

 

The number of structures destroyed by the eruption of the Kilauea volcano on Hawaii’s Big Island has climbed up to 35 today since the eruption first started on Thursday, May 3, sending sulfur dioxide into the air, and prompting the evacuation of at least 1,700 residents.

The issues impacting Hawaii’s Big Island:

  • The percentage of impacted property owners carrying either homeowners, business, or earthquake insurance is unknown at this time.
  • Moreover, no one knows how long the eruption will continue; in 1955, the Kilauea volcano erupted for about three months.
  • Lava Zones 1 and 2—deemed the most dangerous of the nine Lava Zones on the Big Island—are where the current crisis is occurring.
  • The U.S. Geological Survey (USGS) makes the Lava Zone designations and the federal governmental agency’s Zone ratings are considered when insurers assess their risks on Hawaii’s Big Island.
  • The Big Island was also the site of a 6.9-magnitude earthquake on Friday, May 4, the strongest quake to hit Hawaii in 40-plus years.  The earthquake was one of hundreds to be felt recently on the Big Island even though none of them caused any notable threat either to life or property.

 The insurance coverages which will come into play:

  • Lava-caused property damage is usually attributed to fire; fire-caused losses are covered under standard homeowners (h/o) and business insurance property policies.
  • Earthquake-caused property damage, or losses tied either to earth movement or land tremors, is covered only if the homeowner or business owner purchased an earthquake insurance policy in addition to a standard h/o or business insurance policy.
  • Few property owners in this part of the Big Island have earthquake insurance coverage.
  • Homeowners forced to evacuate their residences might have coverage through their h/o policy for additional living expenses (ALE) but ALE usually only kicks in when a home has been directly impacted by lava flow.
  • Lava and earthquake-caused (fire, falling objects) property damage to vehicles is generally covered under standard auto insurance policies so as long as the vehicle owner purchased optional comprehensive coverage.
  • More than 3 out of 4 drivers (78 percent) nationwide had comprehensive coverage on their vehicle as of 2015.

The insurers who cover these risks:

  • The top 10 writers of homeowners insurance in Hawaii appear below. (more here)
  • The Hawaii Property Insurance Association, the state’s not-for-profit property insurer of last resort, has since the 1990s sold property insurance to homeowners unable to purchase coverage due to the threat of an volcanic eruption in Lava Zones 1 and 2 on Hawaii’s Big Island.

The state government’s response to the crisis:

  • Governor David Ige (pronounced E-GAY) visited the Big Island on Friday, May 4, and met w/elected officials, first responders, and impacted residents.
  • The governor activated Hawaii’s National Guard to assist Hawaii County with monitoring sulfur dioxide gas emissions, facilitating evacuations, and providing neighborhood security.
  • Hawaii’s insurance regulator has posted a Lava Flow Insurance Information document aimed at consumers.

 

Thanks to Alison Ueoka, president, Hawaii Insurers Council (HIC) and Michael Onofrietti, senior VP, Island Insurance, and the HIC’s board president, for their help in developing this post.

The Kilauea volcano eruption – a primer on insurance coverage

Over two dozen homes have been destroyed so far when the Kilauea volcano on the island of Hawaii began erupting last week. Lava flowed into residential neighborhoods on the eastern side, as this Wall Street Journal video shows, and the island  has been shaken by hundreds of earthquakes, the largest one with a magnitude of 6.9 occurred on Friday.

The I.I.I. has a primer on volcanic eruption insurance coverage. Below are some highlights:

What’s covered

  • Most home, renters and business insurance policies provide coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.
  • Homeowners and business owners’ policies also provide coverage for property damage, vandalism or theft due to looting if the occupants are displaced.
  • There is typically a 72-hour waiting period before business interruption coverage kicks in.
  • Damage to vehicles caused by lava flow is covered under your auto insurance policy if you have comprehensive coverage, which is optional. Direct, sudden damage to engines from volcanic ash or dust is also covered under most policies.

What isn’t covered

  • Most home, renters and business insurance policies do not cover damage from earthquake, land tremors, landslide, mudflow or other earth movement regardless of whether the quake is caused by or causes a volcanic eruption. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy.
  • Damage to land, trees, shrubs, lawns, property in the open or open sheds (or the contents of those sheds) is typically not covered.
  • The cost to remove ash from personal property is generally not covered unless the ash first causes direct physical loss to personal property. There is also no coverage to remove ash from the surrounding land.
  • Damage that occurs to homes, businesses or vehicles over time due to volcanic dust is not covered under most policies.
  • Volcanic Effusion (i.e. volcanic water and mud) is not covered under a typical homeowners, renters or business insurance policy. However, it is covered by flood insurance, available through the National Flood Insurance Program.

 

 

The Week in a Minute, 05/03/18

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

  • The CBS Evening News and CBS This Morning broadcast stories on a Louisiana law firm which earned millions of dollars in FEMA-paid National Flood Insurance Program (NFIP) legal fees after 2012’s Superstorm Sandy.
  • I.I.I. chief actuary James Lynch had an op-ed published in the Spokane, WA, Spokesman-Review and the Reno, NV Gazette Journal which said the public underestimates the risks posed by cannabis-impaired drivers.
  • The Tinder Fire in Arizona’s Coconino County has consumed more than 11,000 acres of land and prompted the evacuation of 1,000-plus people since it started on Friday, April 27.

From the I.I.I. Daily: Our most popular content, April 27 – May 3

Here are the 5 most clicked on articles from the I.I.I. Daily newsletter.

To subscribe to the I.I.I. Daily email daily@iii.org.

 

The brown ocean effect – a trend to keep an eye on

Tropical cyclones usually weaken after they make landfall, but under certain conditions they may intensify or maintain their strength. This is called “the brown ocean effect,” a phenomenon when a large area of hot soil (usually a desert) is soaked by rain from a tropical storm, releasing heat into the atmosphere and fueling the storm. This phenomenon also requires that the lower level of atmosphere resembles a tropical one, and that there is minimal variation in temperature.

These conditions are most likely to occur in Australia, but can also happen in the U.S. and China, according to a recent AIR Worldwide blog post. A NASA-funded study that looked at 227 tropical storms between 1979 and 2008 found that after making landfall, 16 storms, including Tropical Storm Erin, maintained their tropical warm-core characteristics over land, and effectively became “brown ocean effect storms.”

NASA’s satellite image of Ex-Tropical Cyclone Kelvin, moving through Western Australia on Feb. 20, 2018