Season Opening

On the eve of the official start to the 2008 hurricane season (Sunday June 1) we thought we’d highlight a few handy I.I.I. resources. As the season gets underway, check out I.I.I.’s catastrophe issues update for storm developments. Visit I.I.I. facts & stats on  hurricanes for the numbers behind the storms, including: the 15 most costly hurricanes, U.S.; leading states in coastal population growth; and the value of insured coastal properties vulnerable to hurricanes by state. By all accounts this year’s season is expected to see above average activity. Colorado State University’s Tropical Meteorology Project team recently estimated the season will see 15 named storms, including eight hurricanes and four intense hurricanes (see our April 10 posting). The probability for at least one major (Category 3-4-5) hurricane making landfall in the U.S. is put at 69 percent. The team will issue an update of  its seasonal forecast next Tuesday June 3.  

Carbon Footprint Challenge

New federal policies that promote greater transportation choices, introduce more energy efficient freight operations and encourage energy- and location-efficient housing decisions are key to shrinking the nation’s carbon footprint, according to a report from the Brookings Institution. The report  ranks transportation and residential carbon emissions for the 100 largest U.S. metropolitan areas. Interestingly it finds that metro area residents have smaller carbon footprints than the average American, though metro footprints vary widely. It notes that residential and commercial buildings alone account for 39 percent of the carbon emissions in the U.S. Transportation accounts for one-third of U.S. emissions, and industry for 28 percent.  It suggests an effective climate strategy must focus on reducing carbon emissions from all three sectors.  

Guarding Against Complacency

Ratings agency Fitch has warned the industry and its policyholders against complacency, after two consecutive years in which high levels of hurricane activity were predicted and insured losses were minimal. Fitch says this situation has negative implications for insurer solvency and profits because it fosters complacency on the part of both policyholders and insurers. It also provides political ammunition to those who would weaken long-term industry solvency for near-term insurance price reductions, according to Fitch. The words of wisdom came as Fitch released the third installment of its annual hurricane season desk reference guide. The guide includes the most recent forecasts for the upcoming hurricane season from leading forecasters as well as an analysis of the top 10 insurers by market share for each of the 18 coastal U.S. states. Check out further I.I.I. Fact Book info on high risk markets.

Hurricane Season Countdown

With just a week to go before the start of the 2008 hurricane season, the headlines point to the potentially deadly combination of an active season and a lack of preparedness. First, the National Oceanic and Atmospheric Administration (NOAA) yesterday predicted an active season, with 12 to 16 named storms, six to nine of which are expected to become hurricanes. Two to five of the storms are also likely to be major hurricanes of Category 3,  4 or 5 on the Saffir-Simpson Scale,  according to NOAA. Meanwhile, a new survey from Allstate reveals that while more than half of coastal residents (55 percent) declare they are prepared for a hurricane right now, the majority admit to not having an evacuation plan in place for their family, or a meeting place away from the coast. The exception to this rule was in New Orleans, where 78 percent have an evacuation plan. According to the survey, seven in 10 of those who recently experienced a hurricane declared it a frightening event, but only two-thirds of coastal residents said they were likely to evacuate if a major storm like hurricane Katrina headed their way. The following reasons were given by the one-third not willing to evacuate: feeling safe at home, protecting their home from looters or traffic concerns. For hurricane preparedness tips check out the I.I.I. disaster information site.  

ID Theft Legal Action

You may well have read the fascinating tale  of the CEO of identity theft protection company LifeLock, himself a victim of ID theft, who is now facing legal action from customers claiming that the company’s services did not work as advertised. According to a May 22 Associated Press article, LifeLock CEO Todd Davis had dared criminals for two years to steal his identity, even giving out his social security number in advertisements for the company. Apparently this led to at least 87 instances in which people tried to steal his identity, and one worked. Now attorneys are suing on behalf of LifeLock customers in Maryland, New Jersey and West Virginia, claiming that because Davis’ records were compromised, the company doesn’t provide the comprehensive protection promised in its ads. We note that ID theft remains the number one consumer complaint received by the Federal Trade Commission (FTC), accounting for 32 percent of all fraud complaints in 2007. Some 258,427 identity theft complaints were reported to the FTC in 2007, up 5 percent on the previous year. ID theft may be covered by insurance. Check out further I.I.I. info on this topic.

Time Ripe for M&As

Contrary to conventional wisdom, 2008 may be the best time to complete a merger and acquisition (M&A) deal. That’s the latest finding from ongoing research by Towers Perrin/Cass Business School looking at the value created in the last three global M&A cycles. The study found that over the last two merger waves, deals done in the post-peak years (1990 and 2000) delivered higher shareholder value, compared with deals completed in the frenzy of M&A booms. This was true for all deals, although the research focused on those between $400 million and $1.5 billion in size (adjusted for inflation). Towers Perrin  says that as it appears that 2007 was the peak year of the current merger wave, 2008 remains a good time to proceed with a deal. Check out further I.I.I. facts & stats on M&As in financial services.  

Data Security

A glance at the list of data breaches maintained by the Privacy Rights Clearinghouse includes a variety of security breaches at health-related facilities where personal information such as medical records or prescription drug information was compromised. With this in mind, it’s interesting to read that Google has begun offering online personal health records to the public. According to the May 20 online article by Steve Lohr at the New York Times, Google joins a growing list of companies offering personal health records on the Web. Apparently participants in a pilot project were not put off by any concerns about security. Yet from a business standpoint, companies face growing liability when a breach in data security occurs. Luckily, insurance can help corporations prepare and recover in such an event. Check out further I.I.I. info on this topic.  


Driving While Distracted (DWD)

Even though 98 percent of Americans claim to be safe drivers, nearly three-quarters (72 percent) admit to engaging in some kind of distracting behavior while driving, from cell phone use to eating. The apparently contradictory finding comes in the second annual DWD study from Nationwide Insurance. While technological advances have improved driving safety in many areas, this is one where too much technology can be a bad thing. According to Nationwide, nearly half (48 percent) of drivers consider cell phone use and other technology to be the most dangerous distraction. Availability of technology was cited by 35 percent as the reason DWD is so common today. Texting while driving is also a growing problem. It’s also a question of mindset, according to Nationwide. Almost two-thirds of drivers who own cell phones said their colleagues, friends and families expect them to be available by cell or other electronic communication devices at all times. Check out further I.I.I. info on auto crashes.  

Managing Emerging Risks

A new report from Lloyd’s and the Economist Intelligence Unit titled Directors in the Dock: Is Business Facing a Liability Crisis? reveals that boards could make better use of the time they spend on liability and litigation issues by switching their focus to emerging risks. Many executives interviewed for the report admit that there has not yet been board-level discussion on a range of emerging threats, even though they recognize the need to tackle the issue. For example, nearly four in 10 said that they should discuss work-related stress, but have not yet raised this issue formally, while 29 percent believe technology security should be discussed. Indeed, technology risks – such as data and system security and nanotechnology – are among the top three emerging risks that executives are most concerned about. Environmental liabilities and the liabilities arising from poor corporate governance are also top board concerns. Check out further I.I.I. info on the U.S. liability system.  

RI Lead Paint Hearing

Keep your eyes peeled on the Rhode Island Supreme Court today where a case involving three former lead paint manufacturers is due to be heard. It comes two years after the landmark February 2006 RI lawsuit against the three companies. Last September the state released a proposal detailing cleanup and related costs, requiring the paint manufacturers to pay out $2.4 billion to clean up 240,000 housing units (see our Monday Sept 17, 2007 posting). A decision in the case is expected this summer. We note that recent court decisions in other states, including New Jersey, Missouri, and Ohio have rejected the public nuisance legal theory on which the RI lead paint suit was based. Check out further I.I.I. info on products liability emerging exposures.