October Snowstorm

Who knew it would be a weekend for breaking  records? An unprecedented early  season snowstorm  slammed into  the Northeast U.S.  eclipsing records for October snowfall and leaving at least  11 dead and more than two million without power.

Over at Wunderblog, weather historian Christopher Burt tells us:

Not since the infamous snow hurricane of 1804 have such prodigious amounts of snow been recorded in New England and, to a lesser extent, in the mid-Atlantic states. In fact, the snowfall, in most cases, has exceeded that of even the great October snow of 1804.”

Further,  in a period of record that dates back to 1869:

Virtually every site north of Maryland to Maine, with the exception of coastal areas, recorded their greatest October snowfall on record.”

The latest storm summary from the National Weather Service has snowfall totals by state.

A combination of wet, heavy snow falling on trees that had yet to lose their leaves and were already weakened by Hurricane Irene, made for downed trees, branches and power lines, leaving many roads impassable and causing widespread power outages.

As we previously reported in the wake of Hurricane Irene, if a tree hits  your home or other insured structure, standard homeowners policies provide coverage for the damage the tree does to the structure and the contents in it.

It does not matter whether or not you own the tree. If it lands on your home, you should file a claim with your insurance company, the I.I.I. says.

If a tree hits an insured structure, such as your house or garage, there is also coverage for the cost of removing the tree, generally up to about $500 to $1,000, depending on the insurer and the type of policy purchased.

Winter storms are historically very expensive and are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes. From 1991 to 2010, winter storms resulted in about $26 billion in insured losses, according to ISO.

An October snowstorm might be rare, but it’s a reminder to us all that winter is just around the corner. Now is the time to winter-proof your home, according to the I.I.I.

Check out I.I.I. facts and stats on winter storms.

Happy Halloween!


Spooky Insurance

As the Lady Gagas and Harry Potters come out Monday night, your standard auto and homeowners policies should have you covered in case you receive more tricks than treats.

The I.I.I. gives several examples of how insurance can protect you from Halloween-related losses. For instance, if your home is damaged in a Halloween prank your homeowners or renters policy provides coverage for vandalism, after the deductible is met.

Similarly, if your car is damaged by mischievous trick-or-treaters, there is coverage under the optional comprehensive portion of your auto insurance policy.

If you expect to be handing out candy or throwing a Halloween party, again you would be covered if a trick-or-treater or guest is accidentally injured in your house or apartment, the I.I.I. says. The liability portion of your homeowners or renters insurance policy covers you in the event you are sued by the injured party.

While it’s reassuring to have these insurance policies in place, it’s also important to follow some basic safety steps, such as:

– Ensure there’s a clear path to your front door by removing all objects that could cause children to trip or fall.

– Turn your outside lights on if you welcome trick-or-treaters.

– Take caution when using candles, jack-o-lanterns, matches and lighters and keep them out of reach of children and away from flammable materials.

– Have a plan for your pet especially if they are easily spooked by guests or doorbells.

– Motorists need to be extra cautious and watch for children, especially after dark.

Turkey Earthquake

Earthquakes continue to make their mark on 2011 with the damaging 7.2 magnitude quake in eastern Turkey on Sunday that has left hundreds dead and more than 1,300 injured.

The cities of Van, where the quake was centered, and Ercis, 45km to the north, felt the brunt of the quake and hundreds of building collapses have been reported.

As PC360 reports, the insurance losses from this catastrophe should be minimal due to low insurance penetration and take-up in the impacted area.

A report from catastrophe modeling firm Eqecat puts the preliminary estimate of insured losses from this event is in the range of $100 million to $200 million. Total economic damage is estimated in the low single-digit billions of dollars.

Eqecat says:

Total economic damage is estimated at approximately one-tenth that from the 1999 M7.6 Izmit earthquake in western Turkey and 10 times the damage from the 2010 M6.1 earthquake in eastern Turkey.†

Eqecat goes on to note that insured losses will be incurred primarily by the Turkish Catastrophe Insurance Pool (TCIP), a national program of compulsory earthquake insurance for residential buildings.

The TCIP, started in 2000, is intended to minimize the rebuilding cost to the central government, and is backed by international reinsurers. Limits per policy are around $30,000, with deductibles commonly 2 percent.

However, Eqecat adds that estimates of TCIP penetration hover around 20 percent, and take-up rates in the east are less than this national average.

Eqecat’s insured loss estimate is based on much of the damage having struck residential buildings.

Damaged buildings will number in their thousands, it adds, as aftershocks  cause further  damage or collapse. Buildings in the region are a mixture of vulnerable and resistant construction.

Check out I.I.I. facts and stats on earthquakes and tsunamis.

Study: Homeowers Rates Do Not Reflect Cost Of Insuring A Home

If you’re questioning the value of your homeowners insurance or how much it costs to insure your home, you might want to take a look at the  2011 Homeowners ROE Outlook report from Aon Benfield Analytics.

This updated annual report reveals that homeowners insurance consumers continue to benefit from rates that do not fully reflect the annual cost of insuring a home.

The study finds that insurers’ prospective after-tax return on equity (ROE) for homeowners insurance is 4.8 percent on average, a decrease from 6.9 percent in 2010, mainly due to forecast subdued investment returns and higher estimates of non-coastal losses.

Further, Aon Benfield estimates that investment returns will average 3.8 percent during the current annual period, a decline from the 5.0 percent returns seen in prior years. Even excluding this change, insurers’ prospective ROE would be 6.3 percent, down from 6.9 percent in 2010, and still well below the true cost of capital.

The report does show that homeowners insurers appear to have improved their recovery of the cost of reinsurance capital in recent years. However, they could still recover a great share of the annual cost of exposing capital to retained catastrophe losses, according to Aon Benfield’s analysis.

A press release cites Bryon Ehrhart, chairman of Aon Benfield Analytics:

The filings we reviewed show that the annual cost of exposing insurer capital to catastrophic risk is not being fully recovered. Homeowners insurance consumers therefore continue to benefit from rates that do not fully reflect the annual cost of insuring their homes.†

The annual report analyzes prospective returns on equity for homeowners business based on the July 2011 filings of insurers operating in the 25 largest U.S. states.

Check out I.I.I. facts and stats on homeowners insurance.

NOAA Winter Outlook

Even though the first day of winter is still two months away, it’s not too soon to prepare for the colder weather, at least  according to  the latest winter forecasts and outlooks.

I.I.I. facts and stats on winter storms tell us that melting snow can inflict significant damage to property, and winter storms are the third-largest cause of catastrophe losses.

The National Oceanic and Atmospheric Administration (NOAA) just released its annual winter outlook, while in early October Accuweather.com issued its winter 2011-2012 forecast.

According to NOAA:

The Southern Plains should prepare for continued drier and warmer than average weather, while the Pacific Northwest is likely to be colder and wetter than average from December through February.

For the second winter in a row, La Nià ±a will influence weather patterns across the country, but as usual, it’s not the only climate factor at play. The ‘wild card’ is the lesser-known and less predictable Arctic Oscillation that could produce dramatic short-term swings in temperatures this winter.†

For those of us living in the Northeast and Mid-Atlantic, NOAA gives us equal chances for above-, near-, or below-normal temperatures and precipitation.

Winter weather for these regions is often driven not by La Nià ±a but by the Arctic Oscillation. If enough cold air and moisture are in place, areas north of the Ohio Valley and into the Northeast could see above-average snow.†

Check out Dr. Jeff Masters’ Wunderblog for his take on the NOAA outlook.

Meanwhile, the Accuweather.com long range forecasting team is predicting another cold and snowy winter for a large part of the country, due mainly to La Nià ±a.

According to Paul Pastelok, expert long-range meteorologist and leader of the Accuweather.com long-range forecasting team, the North Central U.S. will bear the brunt of the 2011-2012 winter season.

In a blog post, Accuweather.com says:

The way the jet stream is expected to be positioned during this winter’s La Nià ±a will tend to drive storms through the Midwest and Great Lakes. Last year, the jet stream steered storms farther east along the Northeast coast, hammering the Interstate 95 corridor.

Therefore, instead of New York City enduring the worst of winter this year, it will likely be Chicago.”

Here’s the NOAA graphic of what to expect this winter season:


Stricter Regulation Driving Expected Increase In Litigation

Despite facing slightly less litigation in 2011 than in 2010, businesses in the United States and United Kingdom are seeing more regulatory actions and internal investigations, according to the Eighth Annual Litigation Trends Survey from international law firm Fulbright & Jaworski.

More than one-third of corporate counsel polled in the U.S. and U.K. by Fulbright report there has been an increase in external regulatory inquiries directed at their companies.

Further, more than one-quarter of respondents expect the year ahead will bring more litigation and regulation as companies attempt to grow in an economy that remains volatile.

In 2011, 40 percent of survey respondents reported that one or more regulatory proceeding commenced against their company, continuing an upward trend that began in 2009.

In both the U.S. and U.K., the rate of regulatory investigations is at a four-year high: 55 percent of U.S. companies (vs. 43 percent last year) and 27 percent of U.K. companies (vs. 26 percent last year) retained outside counsel for an investigation in the past year.

In a press release, Fulbright notes:

This year, our survey confirmed a heightened level of governmental investigations focused on the energy and insurance industries, with the health care, manufacturing and engineering sectors not far behind.†

Looking ahead, Fulbright reports that 91 percent of all respondents expect the number of internal investigations involving their companies to increase or stay the same, while 90 percent of those surveyed expect the number of regulatory proceedings will increase or remain the same.

Respondents in the health care industry (21 percent) were most likely to expect internal investigations to increase, while energy and insurance sectors (both at 35 percent) led the way in anticipating a rise in regulatory proceedings.

Check out I.I.I. facts and stats on litigiousness.

SEC Advice On Cyber Incidents and Corporate Disclosure

For companies hit with a cyber attack the impact can be costly, both in terms of financial and reputational damage.

New guidelines issued by the Securities and Exchange Commission (SEC) late last week urging publicly traded companies to disclose cyber incidents will give investors a greater appreciation of the nature of these risks going forward.

According to an article in the Washington Post, the SEC guidelines make clear that publicly traded companies must report significant instances of cybertheft or attack, or even when they are at material risk of such an event:

The SEC guidance clarifies a long-standing requirement that companies report “material† developments, or matters significant enough that an investor would want to know about them. The guidance spells out that cyberattacks are no exception.†

The SEC itself notes that its cybersecurity disclosure guidance was prepared to be consistent with the relevant disclosure considerations that arise in connection with any business risk. It adds:

We are mindful of potential concerns that detailed disclosures could compromise cybersecurity efforts – for example, by providing a “roadmap† for those who seek to infiltrate a registrant’s network security – and we emphasize that disclosures of that nature are not required under the federal securities laws.†

A recent study by Symantec and the Ponemon Institute put the average organizational cost of a data breach at $7.2 million in 2010, and cost companies an average of $214 per compromised record up from $204 in 2009.

The Identity Theft Resource Center (ITRC) notes that while many data breaches go unreported, more companies are revealing that they had a data breach, either due to laws or public pressure.

Check out I.I.I. facts and statistics on identity theft and cyber security.

P/C 2011 First Half: Cat Losses Dominate

The U.S. property/casualty (P/C) insurance industry turned in a weak performance during the first half of 2011, as profitability slumped amid high catastrophe losses, according to I.I.I. president Dr. Robert Hartwig.

In his commentary on the industry’s first-half 2011 results, Dr. Hartwig notes:

In the United States at least $30 billion in economic losses, $19.7 billion of which was insured, helped depress the P/C insurance industry annualized statutory rate of return on average surplus to 1.7 percent during the first half of 2011, down from 6.4 percent in the first half of 2010 and 6.5 percent for all of last year.”

Dr. Hartwig goes on to explain that Hurricane Irene, which caused an estimated $3 billion to $4 billion in insured losses during the third quarter, along with a slew of other catastrophes, will likely push the year-to-date tally above the $25 billion mark.

Despite the slump in P/C insurance profitability, there was some good news.

Premium growth remained positive (2.6 percent in first half), investment earnings were more robust than anticipated (net investment gains up 10 percent to $28.4 billion in first half) and policyholders’ surplus remained near its all-time record high ($559.1 billion as of June 30, 2011).

Still, Dr. Hartwig concludes:

The outlook for the remainder of the year is a cautious one given continued high third-quarter catastrophe losses, the prospect of high underwriting losses associated with non-cat losses and more uncertainty in the investment markets.†

The industry’s results were released Friday by ISO and the Property Casualty Insurers Association of America (PCI).

New Research On Texting Drivers Shows Greater Risk

Emailing or texting drivers are an even greater danger on the road than previously thought, according to a new study by the Texas Transportation Institute.

Researchers found that a driver’s reaction time is doubled when distracted by reading or sending a text message.

Reaction times with no texting activity were typically between one and two seconds. However, reaction times while texting were at least three to four seconds.

Worse yet, drivers were more than 11 times more likely to miss the flashing light altogether when they were texting.

Researchers also measured each driver’s ability to maintain proper lane position and a constant speed. They found texting drivers were less able to safely maintain their position in the driving lane or to maintain a constant speed while texting.

The study is the first published work in the U.S. to examine texting while driving in an actual driving environment.

Federal statistics suggest that distracted driving contributes to as much as 20 percent of all fatal crashes, and that cell phones constitute the primary source of driver distraction.

Researchers point to two numbers to illustrate the magnitude of the texting while driving problem: an estimated 5 billion text messages are sent each day in the United States, and at least 20 percent of all drivers have admitted to texting while driving.

Check out this Reuters report for more on the study findings.

This  I.I.I.  background paper  has more on this topic.

Deer Strikes Drop For Third Year Running

Oh deer, it’s that time of year again. State Farm has just released  its annual report on U.S. deer-vehicle collisions.

State Farm’s findings show that for the third consecutive year, the number of deer-vehicle collisions has dropped, and the downturn is accelerating.

Using its claims data, State Farm estimates that 1.09 million collisions between deer and vehicles occurred in the U.S. between July 1, 2010 and June 30, 2011. That’s 9 percent less than three years ago and 7 percent fewer than a year ago.

However, the average property damage cost of these incidents was $3,171, up 2.2 percent from the year before.

For the fifth year in a row, West Virginia tops the list of states where an individual driver is most likely to run into a deer. State Farm calculates the chances of a West Virginia motorist striking a deer over the next 12 months at 1 in 53, an improvement over last year’s odds of 1 in 42.

Iowa remains second on the list (1 in 77), followed by South Dakota (1 in 81) which moves up one place to third, Pennsylvania (1 in 86) which jumps two places to fourth, Michigan (1 in 90) which drops from third to fifth.

November, the heart of deer migration and mating season, is the month during which deer-vehicle encounters are most likely, with more than 18 percent of such mishaps occurring in this month.

So why are deer-vehicle collisions declining?

In a press release, State Farm notes:

While we can’t put our finger directly on what’s causing a decline in deer-vehicle collisions, we’d like to think media attention to our annual report on this subject has had at least a little bit to do with it.†

What do you think?

Check out I.I.I. tips on how to avoid deer/car collisions.

Check out  State Farm’s  map to see if you live in a high risk state: