October Hurricanes

There are just seven weeks left to the official end of the 2010 Atlantic hurricane season which runs from June 1 to November 30 and so far we have seen 16 named storms develop, of which nine have become hurricanes and five of those major hurricanes (Category 3 or higher).

The latest named storm is Paula, which intensified to a Category 1 hurricane early today and is heading to the Yucatan Peninsula as we write.

While this season still has a way to go, thus far the U.S. coastline has been spared a major storm, so what are the chances of a major hurricane making U.S. landfall in October?

According to Dr. Jeff Masters’ Wunderblog the odds of a major hurricane hitting the U.S. are rapidly dwindling.

Dr. Masters reports that in the past 50 years, the only Category 3 or stronger hurricanes to hit the U.S. after October 1 were Hilda (October 3, 1964), Opal (October 4, 1995), and Wilma (October 24, 2005):

Although we still need to keep a wary eye on developments in the Western Caribbean over the next few weeks, the odds are that 2010 will join 1951 as the only year to have five or more major hurricanes in the Atlantic, but no landfalling major hurricane in the U.S.”

This prognosis may well prove true. Still, history shows that October hurricanes can be costly.

I.I.I.  hurricane  facts and stats reveal that October hurricanes Wilma and Opal rank among the top 15 most costly hurricanes in the U.S.

Hurricane Wilma ranks as the fourth most costly hurricane in the U.S., producing insured losses of $10.3 billion, or $11.3 billion in 2009 dollars. Hurricane Opal ranks as the 12th most costly hurricane in the U.S., with insured losses of $2.1 billion, or $2.96 billion in 2009 dollars.

Not chump change.

Note: just two of 2010’s named storms – Bonnie and Hermine  Ã¢â‚¬“ have made U.S. landfall this season and neither caused catastrophic damage, as reported by Matthew Sturdevant at the Hartford Courant.

Market Remains Soft

A lengthy soft market coupled with the recession is creating a lot of pain for everyone: insurers, reinsurers, agents and brokers, according to Richard Kerr, CEO of online insurance exchange MarketScout.

His comments came as MarketScout’s latest analysis reveals the composite rate for U.S. property and casualty insurance was down four percent for September 2010, unchanged from a year ago.

By account size, rates were most competitive for accounts over $1 million in premium (down 5 percent), and by industry, service contractors are enjoying the largest rate decreases (minus 5 percent), according to MarketScout.

General liability was the most aggressively priced product with an average rate reduction of minus 5 percent, followed by commercial property and inland marine at minus four percent.

D&O liability, employment practices liability (EPL), fiduciary and crime were the coverage classes experiencing the smallest decreases (minus 1 percent).

Kerr added:

Everyone is fighting and scratching for market share. If rates don’t go up soon and the economy remains in the doldrums, the fighting will only get worse.†

In August, MarketScout predicted an overall  soft market for the balance of 2010, barring a major catastrophic event.

Check out I.I.I. information on the industry’s financial results and market conditions.

YouTube and Insurance

As many of you know, our mission at the Insurance Information Institute (I.I.I.) is to improve public understanding of insurance – what it does and how it works.

We’re constantly looking at new ways to demystify what can be a complex topic to a broad range of constituents. Social media tools can help us in that effort.

In addition to our two blogs (Terms + Conditions and Straight Talk), I.I.I. has a Facebook page and a YouTube channel, as well as numerous Twitter feeds  (@iiiorg @Bob_Hartwig @JeanneSalvatore @LWorters @III_Research).

But this week the actuarial profession took us to a new level by showing how a catchy theme song and YouTube can work to powerful effect.

As of this morning, there have been more than 3,200 views of the What is An Actuary Song below.

(Hat tip to @reinsurancegirl for spreading the news via @Actpub)

Just imagine what “An insurer is your hero† theme tune could do to show the important role the insurance industry plays in taking risk.


Industrial Accidents Highlight Insurance Need

You may have seen the video footage of the wave of toxic red sludge that flooded out of a failed reservoir at an alumina refining plant in Hungary on Monday, inundating villages and leaving at least four dead and 120 injured.

Today NPR reports that the sludge has reached the Danube River – Europe’s second longest river – though Hungarian officials are quoted as saying no immediate damage is evident.

The European Union earlier had warned that the spill could pose a serious environmental problem for 12 countries if it contaminates the Danube.

The flood, estimated at 700,000 cubic meters, or 185 million gallons, swept cars off roads, damaged bridges and houses and forced the evacuation of hundreds of residents, according to the New York Times. People who came into contact with the substance were burned through their clothes.

Authorities have ordered a criminal inquiry into the accident. It is still not known why part of the reservoir wall collapsed. The Ajkai Timfoldgyar plant is owned by Hungarian aluminum production and trade company MAL Rt.

The disaster underscores the point recently made by I.I.I. president Dr. Robert Hartwig that large-scale industrial accidents are not as rare as you might think and can result in losses in the hundreds of millions of dollars. Earlier this year, a power plant in Middletown, Connecticut exploded leaving five dead and 27 injured.

Insurers play a key role in insuring these facilities.

Man-made global disasters triggered insured losses of about $4 billion in 2009, according to Swiss Re.  Some 155 man-made disasters occurred  in 2009, including major industrial fires and explosions; aviation, maritime and rail disasters; mining accidents; building/bridge collapses; and losses related to terrorism and social unrest.

The April 2010 explosion at the BP Deepwater Horizon oil rig in the Gulf of Mexico will add to the insured loss tally from man-made disasters this year.

As for environmental liability arising from the disaster in Hungary, Europe’s Environmental Liability Directive (ELD), in effect since April 30, 2007, is based on the “polluter pays† principle.

A bulletin released by Aon and reported at Insurance Journal, warns companies with industrial operations in Europe that the ELD leaves no place to hide:

Under the ELD, all companies have a liability and many, because of the nature of their operations, do not even have to be at fault if the environment is damaged due to the actions of a company.”

Aon goes on to warn that events such as this could ultimately lead to the total collapse of a company at fault if they do not have suitable insurance coverage in place.

Comprehensive environmental insurance programs can be put in place and the market can provide coverage for up to ┚ ¬150 million ($210 million) for an individual risk, Aon adds.

School Bullying: Managing the Risk

The problem of school bullying has become a hot topic in recent weeks after a number of high profile cases of young people committing suicide after bullying incidents.

In 2007, about 32 percent of students ages 12-18 reported having been bullied at school during the school year, according to a school crime survey from the National Center for Education Statistics.

Bullying generally is defined as an attack or intimidation with the intention to cause fear, distress or harm by an individual or group usually repeated over time that involves an imbalance of power. The act of bullying can take various forms, including physical, verbal and psychological acts.

With increased access to and use of technology, cyberbullying  is a growing concern. Cyberbullying has been defined as an aggressive, intentional act by an individual or group using electronic forms of contact, repeatedly over time against a victim who cannot easily defend him or herself.

The beginning of a new school year reminds us of the everyday risks that school-age children face and in turn the growing liability exposure facing parents and schools.

For example, a recent Chubb survey of parents of school-age children found that more than two-thirds (67 percent) agreed that today’s kids are exposed to more risks than they encountered during their own childhoods.

However, the same study revealed that parents tend to focus on severe but rare incidents, rather than everyday risks like bullying.

Some 38 percent ranked kidnapping/abduction as the “traditional† risk that concerns them the most, above car accidents (30 percent) and harassment/bullying (22 percent).

For technology-related hazards, parents listed online predators as the top threat (38 percent), followed by identity theft (25 percent), cyberbullying (18 percent) and sexting (14 percent).

It’s not just parents that are dealing with how to manage this risk. School districts increasingly are facing lawsuits due to their alleged failure to take action when notified of bullying incidents.

The National Conference of State Legislatures (NCSL) notes that since 2001, more than half the states have enacted legislation to combat bullying. But NCSL also observes that state policies vary widely in how they address bullying.

A new student risk guide by Chubb offers tips on back-to-school safety and helps parents protect their kids against these risks.

The Public Entity Risk Institute (PERI) lists the numerous Web resources available for training and information on combating bullying and school violence.

Insurers and Corporate Equality Index

Corporate America continues to break new ground in its workplace protections and benefits for lesbian, gay, bisexual and transgender (LGBT) people, according to the Human Rights Campaign Foundation’s 2011 Corporate Equality Index (CEI).

Insurers are among a record 844 U.S. companies and law firms that have been rated as part of this year’s survey, including for the first time the entire Fortune 500.

The CEI rates employers on a scale from 0 to 100 percent based on their LGBT workplace policies, benefits and practices, including non-discrimination policies and training, partner benefits, gender transition guidelines and LGBT employee resource groups.

As an industry, insurance scored an average 91 percent rating this year, up from 88 percent last year.

We tip our hat to AIG and John Hancock Financial Services for receiving the 100 percent rating for the first time.

Other insurers receiving the 100 percent rating are: AAA Northern California, Nevada and Utah, Allianz Life, Allstate Corp, Chubb Corp, CNA, Esurance, The Hartford, ING North America, Massachusetts Mutual Life, MetLife, Nationwide, New York Life Insurance Co, Pacific Life Insurance Co, Progressive Corp, Prudential Financial, and Sun Life Financial.

Aon, Deloitte and Marsh & McLennan were among other insurance-related businesses to earn the top rating. A special mention to Travelers Cos which improved its rating by 35 points this year.

An unprecedented 337 major U.S. businesses earned the top rating of 100 percent this year, up from 305 with top ratings last year. Collectively, these businesses employ over 8.3 million full-time workers.

When the survey was launched in 2002, only 13 companies received 100 percent.

Rising Danger of Deer-Vehicle Collisions

If you’re planning on taking a drive to enjoy the beautiful fall foliage, bear in mind that‚  this is peak season for deer-vehicle collisions.

A just-released report from State Farm‚  reveals that while the number of miles driven by U.S. motorists over the past five years has increased just 2 percent, the number of deer-vehicle collisions in this country during that time has grown by ten times that amount.

State Farm estimates some 2.3 million collisions between deer and vehicles occurred in the U.S. during the two-year period between July 1, 2008 and June 30, 2010‚ an increase of 21 percent in five years.

The average property damage cost of these incidents was $3,103, up 1.7 percent from a year ago. Furthermore,  about 200 fatalities each year are caused by deer-vehicle collisions, according to the Insurance Institute for Highway Safety (IIHS).

These collisions are more frequent during the deer migration and mating season which runs from October through December. The combination of growing deer populations and the displacement of deer habitat caused by urban sprawl are producing increasingly hazardous conditions for motorists and deer.

So in  which states are drivers and deer most at risk?

For the fourth year in a row, West Virginia tops the list of those states where a driver is most likely to collide with a deer. State Farm calculates the chances of a West Virginia driver striking a deer over the next 12 months at 1 in 42.

Iowa (1 in 67) is second on the list, followed by Michigan (1 in 70), South Dakota (1 in 76) and Montana (1 in 82). The state in which deer-vehicle collisions are least likely is still Hawaii (1 in 13,011).

Note: State Farm now calculates the likelihood of deer-vehicle collisions using the number of licensed drivers instead of number of registered vehicles against its claims data.

Check out this map to see if you live in a high risk state:


Our  Terms+Conditions vlog has more on the dangers of deer-vehicle collisions. Also check out I.I.I. tips on how to avoid deer/car collisions.