This October marks the 140th anniversary of the 1868 Hayward earthquake, dubbed the first great San Francisco earthquake and one of the most damaging quakes in U.S. history. If the 1868 earthquake were to reoccur today, catastrophe modeler Risk Management Solutions (RMS) estimates that total economic losses to residential and commercial properties would likely exceed $165 billion. Fire, damage to infrastructure and related disruption would substantially increase the loss. Interesting fact: more than 95 percent of projected Hayward Fault earthquake residential losses and 85 percent of commercial losses will be uninsured. This is in marked contrast to Hurricane Katrina, where uninsured losses accounted for some 60 to 70 percent of total economic losses. If ever there were a time to buy earthquake insurance, it appears to be now. Just 10-12 percent of California homeowners buy the coverage today. Check out the 1868 Hayward Earthquake Alliance for more information. Check out theÃ‚ I.I.I. issues update on earthquakes.Ã‚
The continuing population influx to high risk coastal areas is an ongoing issue for U.S. property insurers, as is the rise in coastal properties. Unfortunately, a new National Oceanic and Atmospheric Administration (NOAA) survey of land use along U.S. coasts indicates that the pace of development in coastal areas is increasing. The survey shows that 53 percent of the new development between 1996 and 2001 occurred along the Southeastern U.S. coast between Texas and North Carolina. The biggest areas of new development include Harris County (Houston), Texas; Palm Beach County, Florida; and Will County (Chicago), Illinois. NOAA also notes that the Mid-Atlantic three-state area of Maryland, Virginia and Delaware, including the District of Columbia, now has development covering over 10 percent of the total land area. An additional area approximating half the size of Washington, D.C., is estimated to be already cleared for development.
Today another example of the innovative and unusual side of our industry comes from across the pond at LloydÃ¢â‚¬â„¢s. Word has it that a Dutch wine maker has insured his nose for Ã¢”š ¬5 million ($7.8 million) to cover against any incident that could threaten his livelihood. The individual, owner of Chateau de La Garde in Bordeaux and producer of Tulipe Wines, recognized that his nose is the most important asset in his profession which relies on a good sense of smell to guarantee the constant quality of wines. The policy is co-insured by Watkins Syndicate and Allianz Nederland. LloydÃ¢â‚¬â„¢s notes that nose insurance is not just restricted to wine buffs. For example, Watkins Syndicate is currently working on a policy with a U.S. perfume consultant who develops new fragrances for perfume houses. As the lead underwriter himself commented, these insurance policies are not to be sniffed at…Ã‚
If you donÃ¢â‚¬â„¢t think of the southeastern U.S. as prime tornado country, this weekendÃ¢â‚¬â„¢s twisters that hit Atlanta and other parts of Georgia are a timely reminder of how deadly and destructive such events can be. In fact, tornadoesÃ‚ account forÃ‚ approximately 56 percent of all insured catastrophe losses in the U.S. in any given year. Tornadoes and related weather events caused more than $8 billion in insured losses in 2006, according to a recent A.M. Best study. A March 31, 1973 tornado in central and northern Georgia was the costliest tornado on record, with $5.21 billion in damage in 2007 dollars, according to the study. Although tornadoes can occur at any time of the year, the weather conditions that cause tornadoes are common in the southern states from March through May. Check out further I.I.I. facts & stats on tornadoes.Ã‚ Ã‚ Ã‚
Hindsight is a beautiful thing. Just as the current credit crisis and related economic issues began to emerge in the third quarter of 2007, senior executives felt very confident about their ability to manage risk and opportunity it appears. The striking findings come in a new study conducted by Towers Perrin, in conjunction with the Economist Intelligence Unit. Towers Perrin notes that with the benefit of hindsight, the study reveals that many organizations underestimated risks or completely missed emerging risks and that the levels of optimism and confidence revealed in the third quarter of 2007, when economic times were relatively good, were not justified. Survey respondents included CEOs, CFOs, board members, presidents, managing directors and other senior execs of midsize and large companies across a range of industries, including insurance. What are your thoughts?Ã‚
Climate change is the greatest strategic risk that insurance industry leaders must manage if they are to maintain dominant competitive positions. A new study from Ernst & Young and Oxford Analytica puts climate change at the top of the strategic risk list for insurers, followed by demographic shifts in core markets (a priority for life insurers) and catastrophic events. The studyÃ¢â‚¬â„¢s findings were based on interviews with more than 70 industry analysts around the world. The analysts also identified five emerging risks, just outside the top 10, with the potential to become as significant during the next five years. These are: over reliance on model-based risk management; threats to industry reputation; losing the war for talent; increasing exposure to global regulatory heterogeneity; and the possible emergence of entirely new risks. Are you surprised by the findings? Check out Insurance JournalÃ¢â‚¬â„¢s March 12 online article for more information on the study.
The number and cost of natural and man-made disasters is increasing, according to Swiss Re, even though 2007 was not an exceptional year in terms of either fatalities or losses. Its latest annual sigma study found that economic losses from natural and man-made catastrophes around the world exceeded $70 billion in 2007 ($22 billion more than in 2006). More than 20,000 people lost their lives in the 335 natural catastrophes and man-made disasters occurring in 2007. In the aftermath, property insurers paid out claims totaling $28 billion ($10.7 billion more than in 2006). In terms of insured property losses, Europe was the worst hit (contributing 45 percent to the world total), while losses in the U.S. were minor in comparison to previous years. Winter storm Kyrill caused insured losses of $6.1 billion across Germany, the U.K., Belgium and the Netherlands when it struck in January 2007. Word of warning: Swiss Re says that natural catastrophe losses are rapidly on the rise, especially those related to storms and flooding. For example, it noted that insured flood losses have increased by 7 percent annually in real terms since 1970. Check out further I.I.I. information on flood insurance.Ã‚
Saturday marked International WomenÃ¢â‚¬â„¢sÃ¢â‚¬â„¢ Day (IWD) and March is WomenÃ¢â‚¬â„¢s History MonthÃ‚ in the U.S. With that in mind, weÃ¢â‚¬â„¢d like to highlight an event being held later this month and spearheaded by the Association of Professional Insurance Women (APIW). The first-ever WomenÃ¢â‚¬â„¢s Leadership Forum will be held at the Yale Club in New York City on March 27. Co-hosts include some of the most prestigious professional womenÃ¢â‚¬â„¢s organizations in the city, including 85 Broads (an independent network of women investment banking professionals), Financial WomenÃ¢â‚¬â„¢s Association (FWA), National Association of Insurance Women (NAIW) and National Association of Women Lawyers (NAWL). Keynote speaker will be Professor Linda Carli, Ph.D., a visiting associate professor at Wellesley College and co-author of Through the Labyrinth: The Truth About How Women Become Leaders. For registration information check out the APIW site.
ItÃ¢â‚¬â„¢s that time of year again. Forbes has just published its 2008 World Billionaires Survey and a scan of the list reveals a number of industry heavyweights. Top of the list? Berkshire Hathaway chairman Warren Buffett, who ended Microsoft co-founder Bill GatesÃ¢â‚¬â„¢ 13-year reign as the worldÃ¢â‚¬â„¢s richest person, claiming the number one spot with an impressive net worth of $62 billion. Still, Buffett is not included in this yearÃ¢â‚¬â„¢s list of 11 insurance industry billionaires who have a combined net worth of $26.3 billion. Maurice Greenberg remains the top U.S. insurance industry billionaire contender with a net worth of $1.9 billion. Check out I.I.I. facts on insurance careers and employment.Ã‚
Act now or the costs of addressing key environmental issues will increase significantly. ThatÃ¢â‚¬â„¢s the message from the Organization for Economic Cooperation and Development (OECD) in its Environmental Outlook to 2030. The report identifies four priority areas where urgent action is needed: climate change, biodiversity loss, water scarcity and the impacts on human health of pollution and toxic chemicals. It highlights a mix of policies that can address these challenges in a cost-effective way. By 2030, world GDP is projected to nearly double from todayÃ¢â‚¬â„¢s levels. The OECD analysis shows that it would cost just over 1 percent of that growth to implement policies that can cut key air pollutants by about one third, and contain greenhouse gas emissions to about 12 percent, instead of 37 percent growth under the scenario without new policies. OECD also recommends use of market-based instruments, such as green taxes, efficient water pricing, emissions trading and polluter-pay systems. However, more stringent regulations and standards, such as for transport and building construction, are also needed.