There are 45 days to go until the start of the 2007 hurricane season, but just so weÃ¢â‚¬â„¢re clear, norÃ¢â‚¬â„¢easters are not like hurricanes. This is not to say that norÃ¢â‚¬â„¢easters do not have the capacity to cause substantial damage to property and life. In fact, norÃ¢â‚¬â„¢easters get their names from the continuously strong northeasterly winds blowing in from the ocean ahead of the storm and over coastal areas. The National Weather Service defines a norÃ¢â‚¬â„¢easter as a strong low pressure system that affects the Mid Atlantic and New England states and can form over land or over coastal waters. It points out that these winter weather (mid-April?!) events are notorious for producing heavy snow, rain, and tremendous waves that crash onto Atlantic beaches, often causing beach erosion and structural damage. Interestingly, it also notes that wind gusts associated with these storms can exceed hurricane force intensity. After spending the last 24 hours mopping water, I for one, will be asking my agent about flood insurance at this yearÃ¢â‚¬â„¢s renewal. For more information see the I.I.I.Ã¢â‚¬â„¢s flood factsÃ‚ and catastrophe statistics.
In a week in which the availability and affordability of coverage offered by our industry was called into question once again, itÃ¢â‚¬â„¢s perhaps time to remind people of the major contribution made by insurers to state, local and national economies. The Insurance Information InstituteÃ¢â‚¬â„¢s online publication Ã¢â‚¬Å“A Firm FoundationÃ¢â‚¬ shows the myriad ways in which insurance supports the economy. State-specific editions also highlight the insurance industryÃ¢â‚¬â„¢s role as a key player in the Alabama, California, Florida, Maryland, New York, South Carolina, Texas and Wisconsin economies. From defraying the costs of catastrophes, to providing employment, to fueling the capital markets, the industryÃ¢â‚¬â„¢s contribution goes way beyond its core function of helping to manage risk. A story worth telling.Ã‚
Demystifying the world of annuities — what they are and how they work — remains an ongoing challenge for our industry if the findings of the Employee Benefit Research GroupÃ¢â‚¬â„¢s 2007 Retirement Confidence Survey (RCS) are anything to go by. According to the RCS, just 11 percent of workers said they are very likely to purchase a financial product or select a retirement plan option that will pay them guaranteed income for life when they retire, while another 39 percent said they will be somewhat likely to do so. However, if the word Ã¢â‚¬Å“annuityÃ¢â‚¬ is included in the question the likelihood of purchase drops to 7 percent andÃ‚ 32 percent respectively. As the RCS notes, the likelihood of purchase appears to be lower when the word Ã¢â‚¬Å“annuityÃ¢â‚¬ is included in the question, as opposed to the phrase Ã¢â‚¬Å“income each month for the rest of your lifeÃ¢â‚¬ Ã¢â‚¬“ which is exactly what an income annuity provides. Check out the I.I.I.Ã¢â‚¬â„¢s annuities information and other annuity-related facts & stats.Ã‚ Ã‚
Availability, affordability and oversight are the watchwords of two separate hearings on Capitol Hill today. Hearing No. 1. before the Senate Committee on Housing, Banking and Urban Affairs will examine the availability and affordability of property casualty insurance in the Gulf coast and other coastal regions. Dr. Robert Hartwig, I.I.I. president and chief economist, will deliver testimony noting how population growth, rising property values and continued development in vulnerable areas are increasing the cost of property damage inflicted by hurricanes. Current regulatory, legislative and litigation-related obstacles are also raising costs and reducing choices for insurance consumers in hurricane exposed areas. The second hearing before the Senate Committee on Commerce, Science and Transportation will focus on oversight of the property and casualty industry. The industryÃ¢â‚¬â„¢s limited federal antitrust exemption under the McCarran Ferguson Act is expected to be the topic du jour.Ã‚
By our count, five insurers have made it onto the Top 50 Companies for Diversity 2007 list published by DiversityInc magazine. They are: Allstate (40), Blue Cross and Blue Shield of Florida (15), Health Care Service Corp (33), Kaiser Permanente (27) and Prudential Financial (24). If we include banks offering insurance, the list expands by another six or so. A total of 317 companies participated in this yearÃ¢â‚¬â„¢s survey. Perhaps more compelling is that expressed as a stock index, DiversityIncÃ¢â‚¬â„¢s Top 50 outperformed the S&P 500, the Dow Jones Industrial Average and the NASDAQ for the fourth consecutive year on a 10-, five- and one-year basis. Noteworthy mention: Allstate, a top 50 mainstay, also ranked 10th on the Top 10 Companies for African Americans.Ã‚
Alternative Risk Transfer (ART) market mechanisms cover 30 percent of the U.S. commercial insurance market, yet general understanding of them is limited. For anyone grappling with the concept, an I.I.I.-penned chapter in the recently published Handbook of International Insurance hopefully will shed some light. The chapter Ã¢â‚¬Å“An Overview of the Alternative Risk Transfer MarketÃ¢â‚¬ explains that the concept of ART defies a precise definition in part because the broad range of risk products that can be defined as ART has expanded over time as product innovation continues. The chapter covers the major categories of ART solutions commonly found in the market today, including captives, self-insurance, risk retention groups, finite risk (re)insurance, catastrophe bonds and government programs. I.I.I. also has additional information on captives and other risk-financing options available online.
At least 25 percent of all businesses that shut down in a disaster never reopen their doors. But it’s not just about being prepared for disasters. For small businesses in particular, understanding their overall insurance needs can make the difference between long-term success or failure. Purchasing the appropriate amount and type of insurance coverage is critical. A new website launched by the Insurance Information Institute can help. Insuring Your Business: A Small Business OwnersÃ¢â‚¬â„¢ Guide to Insurance provides information on what coverages businesses should consider, as well as what business owners should know about risk management and loss control.
Tomorrow sees the release by the UNÃ¢â‚¬â„¢s Intergovernmental Panel on Climate Change (IPCC) of the second volume of a study that among other things is expected to highlight the human impact of climate change and how far adaptation and mitigation can reduce this impact. So itÃ¢â‚¬â„¢s perhaps timely that LloydÃ¢â‚¬â„¢s just issued its latest climate change report Ã¢â‚¬“ Rapid Climate Change. While the LloydÃ¢â‚¬â„¢s report acknowledges that the impact of climate change is far from certain and not completely understood, it urges insurers that now is the time to start planning and modeling for a higher level of losses across the world as both the severity and frequency of weather events increase. The report explores what climate change could mean in four areas of particular relevance to the insurance industry: sea level rise, melting icecaps, flood and drought. Wherever you stand on the climate change debate, these reports are worth a read.
Batten down the hatches! Today marks the official launch of the Insurance Information InstituteÃ¢â‚¬â„¢s industry blog. An inauspicious start some might say, particularly following the upgraded forecast for the 2007 hurricane season from Colorado State UniversityÃ¢â‚¬â„¢s Tropical Meteorology Project. So what do we have to look forward to? In a nutshell: 17 named storms, 9 hurricanes, 5 of which will be intense (Category 3-4-5). The forecasters also put the probability of a major hurricane hitting the U.S. coastline at 74 percent; the probability of a major storm hitting the East Coast, including the Florida Peninsula at 50 percent; and the probability of the same at 49 percent for the Gulf Coast. We may have been spared in 2006, but flashback to April 2005 when the CSU team upped its forecast to 13 named storms, 7 hurricanes, 3 of them intense. Sound familiar? The 2005 season actually saw a record 26 named storms, 14 hurricanes, of which seven were intense. Check out the I.I.I.Ã¢â‚¬â„¢s catastrophe facts for more information.Ã‚
A landmark environmental decision out of the Supreme Court today may have significant potential implications for our industry over the long-term. In a 5-4 decision, the court said that greenhouse gases fit well within the Clean Air ActÃ¢â‚¬â„¢s definition of air pollutant and that the Act gives the Environmental Protection Agency (EPA) the authority to regulate emissions of carbon dioxide and other greenhouse gases from cars. The upshot of all this is that the federal government will now have to reconsider its refusal to regulate greenhouse gas emissions. While itÃ¢â‚¬â„¢s too soon to draw any conclusions, clearly for insurers this opinion raises the threat of increasing environmental exposures and liability-related claims going forward.