All posts by Maria Sassian

Will cyber insurance cover the Meltdown and Specter bugs?

Last week news broke of two security flaws in computer processors that affect virtually all computers, smartphones and smart devices such as televisions and refrigerators.

The first flaw, nicknamed “Meltdown,” applies specifically to Intel chips. The second flaw called “Spectre,” is more difficult for an attacker to exploit but has no available patches yet and lets attackers access the memory of devices running Intel, AMD, and ARM chips.

This article from Woodruff Sawyer & Co., an insurance and risk management company, considers the cyber insurance underwriting implications of these flaws. The article states that once a bug becomes known and a patch or solution is available, the burden shifts to the device owner to download the patch and update their device. Cyber underwriters will want to know if business owners have patched all vulnerable devices, and how long it took to do that after the patches became available.

Another area of underwriting focus will be device obsolescence. Intel has stated that the patches released to address the vulnerability will focus on devices introduced in the last five years. Since manufacturers are not motivated to keep updating old equipment, and it may be difficult for companies to ensure that their entire network is free of the vulnerability if they don’t migrate to newer machines.

The article concludes that companies that are proactive in dealing with the chip vulnerabilities will improve their cyber security – and their ability to secure good cyber insurance.

Adapting to flooding with amphibious architecture

The New Yorker magazine reported recently on the work of the Buoyant Foundation Project, an organization that provides architectural flood mitigation solutions for vulnerable populations.

Amphibious architecture allows an otherwise-ordinary structure to float on the surface of rising floodwater. An amphibious foundation retains a home’s connection to the ground by resting firmly on the earth under usual circumstances, but allows a house to float when flooding occurs.

A buoyant foundation is specifically designed to be retrofitted to an existing house that is already slightly elevated off the ground and supported on short piers.  Under the house the foundation’s buoyancy blocks provide flotation, vertical guideposts prevent the house from floating away, and a frame ties everything together.  Any house that can be elevated can be made amphibious.

Amphibious retrofitting has not yet gained widespread acceptance, and buildings with amphibious foundations are not eligible for subsidized policies offered by the National Flood Insurance Program.

The week in a minute, 1/5/18

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

With a snowstorm headed up the Atlantic Seaboard, the Weather Channel offered details on the East Coast states to be impacted by this week’s extreme cold.

California’s Thomas Fire is now the largest in the state’s history, having burned an estimated 282,000 acres in Santa Barbara and Ventura counties since the blaze began on December 4, 2017.

Global insurers purchased more U.S. asset managers in 2017 than in any year in two-plus decades, The Wall Street Journal reported, in its December 30-31, 2017 Weekend print edition.

2017 sets record for highest insured disaster losses

Munich Re has released its 2017 catastrophe review, and disaster related insured losses for the year are the highest on record at $135 billion.

The record losses are driven by the costliest hurricane season ever in the United States and widespread flooding in South Asia. Overall losses, including uninsured damage, came to $330 billion.

The United States made up about 50 percent of global insured losses in 2017, compared with just over 30 percent on average. Hurricane Harvey, which made landfall in Texas in August, was the costliest natural disaster of 2017, causing losses of $85 billion. Together with Hurricanes Irma and Maria, the 2017 hurricane season caused the most damage ever, with losses reaching $215 billion.

The United States also suffered a devastating wildfire season and at least five severe thunderstorms across the country, accompanied by tornadoes and hail.

Mark Bove, a senior research meteorologist at Munich Re, said in a New York Times interview that losses jumped in the United States because so many of the disasters hit highly populated areas: the Houston bay area, South Florida, Puerto Rico. It’s a trend that he expects to continue.

The I.I.I. has data on natural disasters here.

Closing the flood insurance gap

Replacing the choice to opt-in with the choice to opt-out has proven to be one of the most successful policies to come out of applied behavioral economics. For example, in France citizens are automatically enrolled in the organ donor registry unless they choose to “opt-out.” Only 150,000 people, out of France’s approximately 66 million, have opted out of the program.

A recent McKinsey report suggests that making flood an insured risk on standard homeowners policies in high-risk states and giving homeowners the option to opt-out could generate as much as $50 billion annually in untapped revenue.

Policyholders could decide to opt out of flood insurance, but experience from several markets (terrorism insurance, voluntary retirement contribution, etc.) show many will not.

McKinsey analyzed take up rates for flood insurance in areas most affected by the three Category 4 hurricanes that recently made landfall in the United States — Harvey, Irma and Maria — and said as many as 80 percent of Texas, 60 percent of Florida and 99 percent of Puerto Rico homeowners lacked flood insurance.

“The current opt-in choice design clearly does not work… millions of residents and small business owners are unprotected. The default option—not doing anything—should be one that protects them.” Say the authors of the report.


Auto theft projected to rise for the third consecutive year

The steady decline in auto thefts which started in 1991 is largely attributable to the rise of modern keys, fobs and ignitions, and the ubiquity of statewide anti-theft taskforces. But insurers are keeping an eye on the increase in auto thefts that occurred in 2015 and 2016 and which is projected to continue in 2017, according to a recent Risk Information newsletter.

Car owners have become complacent about theft, with 56 percent of Americans reporting that they rarely or never worry that their car will be stolen. In fact, car owners are getting so relaxed about theft that thousands of vehicles are stolen each year because keys or fobs are left in the vehicle, according to the National Insurance Crime Bureau.

Thieves are also constantly devising new and sophisticated means of stealing autos. Tactics include acquiring smart keys, switching vehicle identification numbers; and using stolen identities to secure loans for expensive vehicles.

Thieves also now have access to devices which search for signals from nearby wireless key fobs and use that signal to unlock and start cars. To counteract this trend a growing market has sprung up for boxes or pouches for key fobs especially designed to block radio transmissions. You can purchase one on Amazon.

The FBI estimates that the number of motor vehicle thefts increased 7.4 percent in 2016 over the prior year. Approximately $5.9 billion was lost nationwide to motor vehicle thefts in 2016 with the average dollar loss per stolen vehicle of $7,680.

The I.I.I. has Facts and Stats on auto theft here.

The Week in a Minute, 12/22/17

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

California’s Thomas Fire (Santa Barbara and Ventura counties) is now the second-largest in state history, having burned more than 270,000 acres.

Three people died when an Amtrak train derailed near DuPont, Washington (Pierce County) on Monday, December 18.

An 11-hour power outage at Atlanta’s Hartsfield-Jackson airport on Sunday, December 17, will likely cost airlines millions of dollars, and perhaps generate business interruption insurance claims.


Swiss Re’s preliminary insured catastrophe loss estimates for 2017 – $136 billion, third highest on record

Swiss Re sigma has released its preliminary 2017 catastrophe loss estimates today. Here are some of the findings:

  • Total global economic losses from natural disasters in 2017 came to $306 billion, up from $188 billion in 2016, according to Swiss Re sigma estimates.
  • Insured losses from catastrophes are estimated to be $136 billion, the third highest recorded by sigma.
  • Losses were heaviest in U.S. which was pummeled by hurricanes Harvey, Irma and Maria making 2017 the second costliest hurricane season after 2005.
  • Over 11,000 people died because of disaster events in 2017.

In addition to the intense hurricane season other major disasters of 2017 include:

  • Major wildfires in October through December in California, which led to significant losses which are still being tallied. Property Claims Services estimates combined insured property losses from the fires to be $7.3 billion.
  • In mid-September, two powerful earthquakes in Tehuantepec and Puebla, Mexico, which led to numerous building collapses, claiming many victims and resulting in insured losses of over $2 billion.
  • In late March, tropical Cyclone Debbie, which hit the northeastern coast of Australia as a category 4 storm. Wind gusts and widespread flooding in central and southeast Queensland and northeast New South Wales led to insured losses of $1.3 billion.
  • Europe suffered a cold snap at the end of April, followed by a summer of record temperatures.
  • Severe floods in Southeast Asia claimed many victims and caused large devastation.

Martin Bertogg, Head of Catastrophe Perils at Swiss Re:

“In recent years, annual insurance losses from disaster events have exceeded USD 100 billion a few times. The insurance industry has demonstrated that it can cope very well with such high losses. However, significant protection gaps remain and if the industry is able to extend its reach, many more people and businesses can become better equipped to withstand the fallout from disaster events.”

Determining the relative impact of winter snowstorms

It’s mid-December and some areas of the country have already had heavy snowfalls.  Winter storms can have a serious economic impact with disruption of business and travel, collapsed roofs and stresses on municipal governments. It’s useful to know the relative impact of winter storms, and in a recent blog post,  AIR Worldwide spotlights a rating scale called Northeast Snowfall Impact Scale (NESIS), developed by the  Weather Channel and the National Weather Service.

NESIS provides a relative measure of Northeast winter storm impact based on total snowfall amount, geographic distribution, and population density. The scale does not consider the replacement value of property, however.

NESIS has five categories: Extreme, Crippling, Major, Significant, and Notable. The Great Blizzard of 1993 holds the record for maximum NESIS value for a single storm at 13.20

The I.I.I. has a Facts & Stats about Winter Storms here.

The Week in a Minute, 12/15/17

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

More than 90,000 people have been evacuated in recent weeks as California’s Thomas Fire—the fourth largest in the state’s history in terms of acreage burned—migrated last weekend (December 9-10) into Santa Barbara County from Ventura County.

The total insured damage caused by 2017’s hurricanes Harvey, Irma, and Maria, coupled with two Mexican earthquakes, could rival 2011’s record catastrophe-related payouts from that year’s major earthquakes in Japan and New Zealand, according an analysis published in The Wall Street Journal’s Wednesday, December 13, print edition.

The I.I.I.’s Market Report webinar, “Protecting Small Business Against #cyberfail,’ was held on Monday, December 11.  It is archived online.