Beckham Arrives

Move over baseball, here comes David Beckham. In case you hadn’t heard, one of the world’s leading footballers (I mean soccer players) arrived in Los Angeles last night and will be officially introduced as an LA Galaxy player today. Beckham has his work cut out. The stats show that soccer, with an estimated 14 million participants, lags behind other sports in the U.S. in terms of participation rates. However, injury rates tell a different story. According to a CDC-sponsored study, boys’ (2.43 injuries per 1,000 athlete exposures) and girls’ (2.36) soccer had the third and fourth highest injury rates among nine high school sports in the 2005-2006 school year. In each sport, the injury rate was higher in competition than practice settings. For more on sports participation and injuries, check out I.I.I. facts & stats.

Solvency II

We’re blogging with a bit of an international bias this week, so apologies to those whose business is confined to the U.S. market. We’ll be moving on to other topics shortly. But Tuesday’s publication by the European Commission of its proposed framework directive on Solvency II, the new risk-based solvency regime for insurers operating in the European Union, is an important development. Essentially Solvency II is the European equivalent of the NAIC risk-based capital (RBC) formula introduced in the U.S. in the early 1990s. Solvency II regulation is expected to be implemented by 2010. The new approach will establish a common solvency system across Europe and result in greater capital efficiency. While Solvency II has been broadly welcomed by European insurers, the question is what are the impacts for U.S. insurers? Are you ready? Check out I.I.I.’s  background info  on U.S. RBC rules and solvency.

Immeasurable Challenge

Word on the street is that immeasurable risks are the biggest threat to the industry, according to a poll of executives at this week’s  International Insurance Society (IIS) annual  seminar in Berlin. Some 41 percent of attendees identified immeasurable risks as the biggest concern. Next up was inadequate human capital with 27 percent citing it as the biggest threat. New market opportunities were the top issue for 24 percent, while 21 percent cited competitive pricing and adequate profitability. Regulation challenges were identified as the biggest threat by 20 percent of those polled. The results are interesting given a recent survey of international risk managers by the Economist Intelligence Unit (EIU) (see May 3 posting). After climate change, respondents cited least confidence in how their organizations were handling terrorism risk and human capital risks. It strikes us that terrorism risk is a good example of an immeasurable risk, and human capital risks are clearly an ongoing concern for both insurers and their clients. How do we address these concerns going forward? What are your thoughts?  For more on international insurance,  check out  the  I.I.I.’s updated International Insurance Fact Book online.

Revised Hurricane Forecast

It’s surely the calm before the storm, but London-based forecaster Tropical Storm Risk has just downgraded its forecast for the 2007 Atlantic hurricane season. Earlier TSR had predicted there was an 86 percent chance that hurricane activity in 2007 would be in the top one-third of years historically. Now that probability is at 72 percent. However, it’s important to note that TSR’s July update still points to an above-average season in 2007, with a 73 percent above-average probability of a storm striking the U.S. Four tropical storms are forecast to strike the U.S., two of which are expected to be hurricanes. According to TSR, the main reason for the forecast reduction is the fact that trade winds will be stronger than previously thought in August and September. Our readers constantly remind us that forecasts and predictions are just that. The 2007 Atlantic hurricane season is barely a month old and the period from August through October is generally the most active, with a peak in early to mid-September. Check out I.I.I.’s disaster information site for more info.  

Demystifying Insurance

Insurance can be a complicated business, but an updated guide to the industry from the I.I.I. is designed to help. The Insurance Handbook for Reporters provides concise explanations of auto, home, life, disability and business insurance. Features include a comprehensive glossary, listings of hundreds of insurance organizations and a guide to insurance industry resources. This year’s glossary section includes more than 500 entries with over 100 life insurance definitions provided by LOMA, a worldwide association of life and financial services companies. So whether you’re trying to write about annuities, expense ratios or flood insurance, the Handbook — used in conjunction with the Institute’s Web site and other publications — should make life easier.  

CA Quake Exposure Update

California is the second leading state for earthquakes, with an average of over 160 earthquakes per year. The majority of the most costly earthquakes in U.S. history occurred in California. So a new study indicating that recent reforms to the state’s  workers comp  system would result in a substantial drop in the potential WC losses arising from earthquakes is welcome news. Based on the assumption of 15.6 million employees working statewide, the Workers’ Comp Insurance Rating Bureau of California study found that the expected annual loss for the state’s WC insurers would be slightly over $180 million, or $11.56 per employee, compared with $418.7 million, or $26.93 per employee, in a similar 2002 study. The updated study also projects the total statewide WC loss in a one-in-100 year quake would be $4.2 billion, and $6.3 billion for a one-in-200 year event. Looking at the 20 counties with the greatest exposure, the study puts Los Angeles County at the top of the list, with 4.25 million employees. While the drop in costs is a positive development, we note that WC is a compulsory  coverage for most businesses  in CA and that earthquake exposure continues to be significant. Check out I.I.I. earthquake facts & stats, workers comp info  and how insurers support the CA economy online. Further info is also available from the Insurance Information Network of California  (IINC).  

Red White and Blue

Tomorrow is July 4th, a holiday along with Thanksgiving when us Brits residing in the U.S. generally run for the woods and hide under a rock. After all, it’s not exactly a time to be proud to be British. Personal sensibilities aside, on the eve of the 2007 Independence Day celebrations and in light of the substantial fire risk posed by fireworks, we feel bound to bring you some red white and blue safety tips. The Alliance to Stop Consumer Fireworks, a group of 22 health and safety organizations coordinated by the National Fire Prevention Association (NFPA) urges families to think twice about home-grown fireworks shows, noting that even legal consumer fireworks pose significant risks. NFPA stats reveal that in 2005, some 10,800 people were treated at hospital emergency rooms for firework-related injuries. The NFPA also warns that this year’s severe nationwide drought raises the fire risk. Fireworks cause approximately 25,000 grass, brush, dumpster and other fires each year. In 2004, fireworks started an estimated 1,600 structure fires and 600 vehicle fires which were reported to local fire departments, costing $21 million in direct property damage, says the NFPA. Meanwhile, if you are planning on holding your own fireworks display, the National Council on Fireworks Safety recommends that you only buy fireworks from a licensed store or stand, never from an individual’s house or from someone on the street. It urges people to prepare a designated spectator area that is far enough away from the shooting area site. It’s also important to obey all local laws regarding fireworks. Five states (DE, MA, NJ, NY, and RI) ban the use of fireworks by consumers. Have a safe and happy holiday!

Global Trends

The decision whether to operate purely on a domestic basis or to expand globally is a key one for many companies. Cultural, economic, political and regulatory differences can make for a challenging global environment. For those considering a global presence, the good news is that world insurance premium growth in 2006 accelerated, with total premium volume growing by 5 percent, according to a study from Swiss Re sigma. However, the same study indicates the world insurance outlook for 2007 is mixed. While healthy growth is expected to continue in life insurance, boosted by solid development of savings and pensions products, Swiss Re notes that premiums in non-life are expected to stagnate. Overall profitability is set to remain robust. As always, the findings of this annual world insurance report reflect contrasting growth between life and non-life sectors. For example, 2006 saw the life insurance market grow by 7.7 percent, while global non-life business grew by just 1.5 percent. There was also a sharp divergence in performance between the industrialized world and the emerging markets. For non-life the industrialized world saw marginal growth of 0.6 percent, while the emerging markets saw robust growth of 11 percent. For life insurance, industrialized countries produced growth of 6.6 percent, while growth in emerging markets was 21.1 percent. For further info check out I.I.I.’s international insurance site.