Today marks the 16-year anniversary of 9/11, and as we remember those who perished and honor first responders on that day, it’s worth noting that we have not had a large-scale terrorist attack on U.S. soil since then.
From a recent discussion by property underwriters Gedion Amesias and Jeri Xu at the Swiss Re Open Minds blog:
“Since 9/11, the U.S. government and four of its allies (Five Eyes alliance) have been spending tens of billions of dollars each year on counter-terrorism. Even though it’s hard to accurately estimate, there are experts that approximate the U.S. spends around $100 billion a year on counter-terrorism efforts. Successful attacks since 9/11 have been carried out by either a lone wolf or a duo, for example the 2016 cargo truck attack in Nice by one driver, and 2013 Boston Marathon bombing by a pair of brothers. Plots that involve more people are more likely to be discovered through the surveillance of their communications, so organized large-scale plots are less likely to occur.”
“Terrorism insurance is effectively insurance against the failure of counter-terrorism. Because counter-terrorism efforts have increased so much post 9/11, a reasonable assumption to make is that the frequency and severity of loss from terrorism have decreased significantly.”
They conclude that underwriters need to think about how terrorists will behave going forward and how governments around the world will counteract terrorism in order to predict where and to what extent future losses may occur.
Willis Towers Watson offers insight into how insurers are responding to meet the evolving nature of terrorism.
The I.I.I. has resources on terrorism risk and insurance here.
As Texas prepares for the imminent arrival of intensifying Hurricane Harvey, already a Category 2 storm, latest analysis shows the enormous potential values at stake.
Just in from CoreLogic: More than 200,000 homes in Texas have the potential for storm surge damage with an estimated total reconstruction cost value (RCV) of almost $40 billion.
Houston, Texas ranks number 7 among the top 15 metropolitan areas for storm surge risk, with a potential 283,380 at-risk homes and an RCV of $53.4 billion.
But don’t forget the potential impact of strong hurricane-force winds.
Earlier from AIR Worldwide: The insured value of residential and commercial properties in coastal areas of Texas totaled $1.2 trillion in 2012, accounting for 26 percent of the state’s total insured property exposure.
The Texas Windstorm Insurance Association (TWIA), is the state’s insurer of last resort for wind and hail coverage for Texas Gulf Coast residential and commercial property owners in the event of catastrophic loss. TWIA covers wind and hail in 14 coastal counties and parts of Harris County. TWIA has initiated its catastrophe plan.
Insurers stand ready to assist all policyholders impacted by Harvey.
Some $23 billion of first-half 2017 global catastrophe losses were covered by insurance, according to preliminary estimates from Swiss Re sigma.
With total economic losses from disasters at $44 billion in the first-half, that means 52 percent was covered.
As Artemis blog reports, this is actually a relatively high percentage insured which makes for a smaller protection gap.
“The 10-year average economic loss of $120 billion and the average insured loss of $33 billion, show that a more typical percentage insured is just 28 percent.”
Severe thunderstorms in the U.S. resulted in the largest losses in the first six months of this year—accounting for $16 billion of the $23 billion insured losses.
Kurt Karl, Swiss Re chief economist explains: “Fortunately, in the U.S., most households and businesses are insured against wind risk so they are financially protected when severe storms strike.”
Whether you’re sharing rides, homes, workspaces, driveways, food experiences, or even, as in China, umbrellas and basketballs, the sharing economy continues to expand into new areas.
And so do the associated risks and liability.
From today’s I.I.I. Daily, via The New York Times: “Airbnb, the peer-to-peer vacation rental and hospitality site, is facing a lawsuit in which a guest says that the company did not perform appropriate background checks on a host who allegedly sexually assaulted her. According to the plaintiff, a background check would have uncovered information that the owner had been arrested and charged with battery, preventing him from listing property on Airbnb according to the terms of service.”
Whether you’re looking to rent out your space to someone or rent a space from someone via a peer-to-peer network, it’s important to know whether you’re insured.
Some tips on peer-to-peer home rental from the I.I.I.
Note: Airbnb has a Host Protection Program that provides hosts and landlords up to $1 million coverage for property damage and liability claims that occur in a listing or on an Airbnb property, during a stay.
But here are the risks that the Airbnb policy doesn’t cover:
“The Host Protection Insurance program does not apply to liability arising from (1) Intentional Acts including: (i) Assault and Battery or (ii) Sexual Abuse or Molestation – (by the host or any other insured party), (2) Loss of Earnings, (3) Personal and Advertising Injury, (4) Fungi or Bacteria, (5) Chinese Drywall, (6) Communicable Diseases (7) Acts of Terrorism, (8) Product Liability, (9) Pollution and (10) Asbestos, Lead or Silica.”
You’ve heard about self-driving cars, but what about autonomous ships?
Fortune Tech reports that the world’s first autonomous cargo ship, to be christened the Yara Birkeland is expected to start sailing in 2018, initially delivering fertilizer along a 37-mile route in southern Norway.
“The ship, according to the Wall Street Journal, will cost $25 million, about three times as much as a conventional ship of similar size, but will save up to 90% in annual operating costs by eliminating both fuel and crew.”
Analysis by Allianz Global Corporate & Specialty (AGCS) shows that human error accounts for approximately 75 percent of the value of almost 15,000 marine liability insurance claims studied over five years, equivalent to over $1.6 billion.
From the AGCS Safety & Shipping Review 2017:
“Autonomous vessels could improve maritime safety and revolutionize movement of cargo on a scale not seen since containerization.”
Check out Insurance Information Institute facts & statistics on marine accidents.
Severe weather across the United States in May resulted in combined public and private insured losses of at least $3 billion.
Aon Benfield’s latest Global Catastrophe Recap report reveals that central and eastern parts of the U.S. saw extensive damage from large hail, straight-line winds, tornadoes and isolated flash flooding during last month’s storms.
The most prolific event? A May 8 major storm in the greater Denver, Colorado metro region, where damage from softball-sized hail resulted in an insured loss of more than $1.4 billion in the state alone.
Check out I.I.I. facts and statistics on hail here. The National Weather Service has detailed information on severe storm events, including hail, tornadoes and wind. 2016 data on the number of hail events are posted online.
Total aggregated economic losses from U.S. severe weather in May were in excess of $4 billion, Aon Benfield said.
UK terrorism reinsurance mutual Pool Re stands ready to respond to any claims arising from last night’s horrific attack at a major concert venue in the city of Manchester.
At least 22 people were killed and more than 50 injured in the bombing as they left the Manchester Arena at the end of an Ariana Grande concert.
“Pool Re will work with its Members in resolving any claim arising from the attack as quickly as possible. We will make a further statement as more information becomes available.”
Most insurers providing commercial property and business interruption insurance in the UK (including many overseas companies and Lloyd’s syndicates) participate in Pool Re.
The government formed the mutual reinsurance pool for terrorist coverage in 1993, following acts of terrorism by the Irish Republican Army.
Last night’s attack comes 21 years after a bombing in Manchester’s main shopping district injured more than 200 people and caused an insured property loss of $966 million (in 2015 dollars). The 1996 Manchester bombing still ranks as the third costliest terrorist attack by insured property damage, according to the I.I.I.
Pool Re is one among a number of public/private risk-sharing schemes around the world that provide terrorism coverage, as discussed in a recent report by Marsh:
Here’s how the Pool Re scheme works:
- Member insurers pay premiums at rates set by the pool. There are two geographic zones, one for major cities, with an adjustment for a “target risk,” and the other for the remainder of the country.
- The primary insurer pays the entire claim for terrorist damage but is reimbursed by the pool for losses in excess of a certain amount per event and per year, based on its share of the total market.
- The maximum industry retention increases annually per event and per year.
- The government acts as the reinsurer of last resort, guaranteeing payments above the industry retention.
- Only terrorism losses arising from damage to commercial property are covered by the pool. Coverage does not extend to life or personal injury.
Demand for commercial insurance continued to follow a slight upward trend in the first three months of 2017, according to the latest Council of Insurance Agents & Brokers’ Commercial P/C Market Survey.
A large number of brokers reported an increase in demand for cyber coverage as clients became more familiar with the product and more interested in purchasing stand-alone policies.
The majority of brokers, 68.5 percent, reported that demand for commercial insurance products stayed the same in the first quarter of 2017, compared to the fourth quarter of 2016.
Nearly 30 percent of broker responses saw an increase in demand, while only 2.2 percent saw a decrease.
As for pricing, the soft market continued in Q1 2017, with the average rate decline across all commercial P/C accounts at 2.5 percent, compared to 3.3 percent in Q4 2016.
This is the ninth straight quarter that commercial rates have declined across small, medium and large accounts, The Council said.
Additional I.I.I. facts and statistics on the commercial lines insurance market are available here.
By now you’ll have read the headlines that the U.S. property/casualty (P/C) insurance industry’s $42.6 billion profit for the full year 2016 was 25 percent lower than its $56.8 billion profit for 2015.
Putting some context around the numbers is important.
I.I.I. commentary: “U.S. economic activity slowed somewhat in 2016 compared to 2015 — real GDP rose by 1.6 percent in 2016 vs. 2.6 percent in 2015—and the P/C insurance industry’s results followed suit.”
And: “this result should be viewed in the context of the last 20 years (adjusted for inflation), in which case the 2016 profit is the median result.”
Two other key takeaways:
—Despite the challenge of ongoing low interest rates, weak domestic and global economic growth and rising claims, the industry nevertheless posted a modest 2.7 percent net written premium growth (compared to 3.5 percent in 2015).
—Overall industry capacity (policyholder surplus) rose to $700.9 billion (up 4.0 percent) as of December 31, 2016. This is a new peak for industry surplus.
As I.I.I. chief economist Dr. Steven Weisbart notes:
“The industry’s performance in 2016 could be characterized as its “new normal,” neither as profitable as in 2013-15 nor as affected by catastrophes as in 2011-12.”
The industry results were released by ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America (PCI).
Tens of thousands of policyholders caught in a disaster in 2016 were better able to recover from the losses and hardships inflicted thanks to insurance.
Global insured losses from catastrophes totaled around $54 billion in 2016 – the highest level since 2012, according to the latest report from Swiss Re sigma.
North America accounted for more than half the global insured losses in 2016, with insured losses from disaster events reaching $30 billion, the highest of all regions.
This was due to a record number of severe convective storms in the United States and because the level of insurance penetration for such storm risks in the U.S. is high, sigma noted.
For example, a hailstorm that struck Texas in April 2016 resulted in an economic loss of $3.5 billion, of which $3 billion, or 86 percent, was covered by insurance.
“With insurance, many households and businesses benefited from insurance payouts for the heavy damage to their property caused by large hailstones.”
However, insurance cover is not universal. The shortfall in insurance relative to total economic losses from all disaster events—the protection gap—was $121 billion in 2016. See this chart:
“Under-insurance against catastrophe risk is a reality in both advanced and emerging markets, and there is still large opportunity for the industry to help strengthen worldwide resilience.”
For example, Swiss Re noted that the U.S. has been and continues to be critically underinsured for flood risk, with a flood protection gap of around $10 billion annually.
Additional Insurance Information Institute facts and statistics on global catastrophe losses are available here.