All posts by Claire

Counter-terrorism efforts key to estimating risk post-9/11

Today marks the 16-year anniversary of 9/11, and as we remember those who perished and honor first responders on that day, it’s worth noting that we have not had a large-scale terrorist attack on U.S. soil since then.

From a recent discussion by property underwriters Gedion Amesias and Jeri Xu at the Swiss Re Open Minds blog:

“Since 9/11, the U.S. government and four of its allies (Five Eyes alliance) have been spending tens of billions of dollars each year on counter-terrorism. Even though it’s hard to accurately estimate, there are experts that approximate the U.S. spends around $100 billion a year on counter-terrorism efforts. Successful attacks since 9/11 have been carried out by either a lone wolf or a duo, for example the 2016 cargo truck attack in Nice by one driver, and 2013 Boston Marathon bombing by a pair of brothers. Plots that involve more people are more likely to be discovered through the surveillance of their communications, so organized large-scale plots are less likely to occur.”

And:

“Terrorism insurance is effectively insurance against the failure of counter-terrorism. Because counter-terrorism efforts have increased so much post 9/11, a reasonable assumption to make is that the frequency and severity of loss from terrorism have decreased significantly.”

They conclude that underwriters need to think about how terrorists will behave going forward and how governments around the world will counteract terrorism in order to predict where and to what extent future losses may occur.

Willis Towers Watson offers insight into how insurers are responding to meet the evolving nature of terrorism.

The I.I.I. has resources on terrorism risk and insurance here.

Texas braces for Hurricane Harvey

As Texas prepares for the imminent arrival of intensifying Hurricane Harvey, already a Category 2 storm, latest analysis shows the enormous potential values at stake.

Just in from CoreLogic: More than 200,000 homes in Texas have the potential for storm surge damage with an estimated total reconstruction cost value (RCV) of almost $40 billion.

Houston, Texas ranks number 7 among the top 15 metropolitan areas for storm surge risk, with a potential 283,380 at-risk homes and an RCV of $53.4 billion.

But don’t forget the potential impact of strong hurricane-force winds.

Earlier from AIR Worldwide: The insured value of residential and commercial properties in coastal areas of Texas totaled $1.2 trillion in 2012, accounting for 26 percent of the state’s total insured property exposure.

The Texas Windstorm Insurance Association (TWIA), is the state’s insurer of last resort for wind and hail coverage for Texas Gulf Coast residential and commercial property owners in the event of catastrophic loss. TWIA covers wind and hail in 14 coastal counties and parts of Harris County. TWIA has initiated its catastrophe plan.

Insurers stand ready to assist all policyholders impacted by Harvey.

Why a higher percentage of first half CAT losses were insured

Some $23 billion of first-half 2017 global catastrophe losses were covered by insurance, according to preliminary estimates from Swiss Re sigma.

With total economic losses from disasters at $44 billion in the first-half, that means 52 percent was covered.

As Artemis blog reports, this is actually a relatively high percentage insured which makes for a smaller protection gap.

“The 10-year average economic loss of $120 billion and the average insured loss of $33 billion, show that a more typical percentage insured is just 28 percent.”

The reason?

Severe thunderstorms in the U.S. resulted in the largest losses in the first six months of this year—accounting for $16 billion of the $23 billion insured losses.

Kurt Karl, Swiss Re chief economist explains: “Fortunately, in the U.S., most households and businesses are insured against wind risk so they are financially protected when severe storms strike.”

Things to know before your eclipse viewing party

The first total solar eclipse to sweep across the entire country since 1918 will happen on Monday and understandably there are some insurance issues that arise:

Business Insurance, via today’s I.I.I. Daily, explains what a company needs to know about workers compensation issues that may arise if it is hosting a viewing party.

Amy K. Harper, a director at the National Safety Council, said, “An employer should provide ISO 12312-2 compliant viewing glasses if they are encouraging or hosting a viewing party.” Employers should also be familiar with NASA’s safety guidelines that suggest people not look directly at the sun. Employees injured using a camera, binoculars or telescope to look directly at the sun can cause eye injuries in which employees may be covered under workers compensation.

Erie Insurance brings us a solar eclipse safety check: 1. Don’t look directly at the sun; 2. Keep your eyes on the road; 3. Renting out your home? Check your liability coverage.

NASA’s excellent safety information here.

Proper protection is key in a sharing economy

Whether you’re sharing rides, homes, workspaces, driveways, food experiences, or even, as in China, umbrellas and basketballs, the sharing economy continues to expand into new areas.

And so do the associated risks and liability.

From today’s I.I.I. Daily, via The New York Times: “Airbnb, the peer-to-peer vacation rental and hospitality site, is facing a lawsuit in which a guest says that the company did not perform appropriate background checks on a host who allegedly sexually assaulted her. According to the plaintiff, a background check would have uncovered information that the owner had been arrested and charged with battery, preventing him from listing property on Airbnb according to the terms of service.”

Whether you’re looking to rent out your space to someone or rent a space from someone via a peer-to-peer network, it’s important to know whether you’re insured.

Some tips on peer-to-peer home rental from the I.I.I.

Note: Airbnb has a Host Protection Program that provides hosts and landlords up to $1 million coverage for property damage and liability claims that occur in a listing or on an Airbnb property, during a stay.

But here are the risks that the Airbnb policy doesn’t cover:

“The Host Protection Insurance program does not apply to liability arising from (1) Intentional Acts including: (i) Assault and Battery or (ii) Sexual Abuse or Molestation – (by the host or any other insured party), (2) Loss of Earnings, (3) Personal and Advertising Injury, (4) Fungi or Bacteria, (5) Chinese Drywall, (6) Communicable Diseases (7) Acts of Terrorism, (8) Product Liability, (9) Pollution and (10) Asbestos, Lead or Silica.”

 

InsurTech disruption: threat or opportunity?

Whether you’re an InsurTech startup with new ideas or an incumbent concerned about protecting your book of business, the greatest risk you can take may be to resist collaboration, according to a post on Willis Towers Watson Wire.

In Threat vs Opportunity? InsurTech is largely a matter of perspective, Andrew Newman, president and global head of casualty at Willis Re, says while it’s understandable that many insurers have perceived InsurTech as a threat to the value chain, the biggest threat lies not in technology itself, but in competitors of any description leveraging these innovations to gain advantage by reducing risk and lowering costs.

“The plain fact is that the vast majority of InsurTech companies aren’t interested in going to war with incumbents. Their focus is on creating value within the insurance value chain – not collapsing it. So if incumbents embrace ‘disruption’, rather than concentrating on defending themselves by keeping these opportunities at arm’s length, then they will find that the available technology is largely complementary to most of the current processes in the industry.”

Download the presentation Insurance: Leading Through Disruption by Insurance Information Institute president and CEO Sean Kevelighan to find out more about how the industry is poised to lead through disruption.

Back-To-School flood safety

From Buzzfeed, a back-to-school headline you may not have considered: Is Your School In A Flood Zone?

For example, a Salt Lake City rainstorm just caused a flash flood that damaged many properties, including East High School where Disney’s High School Musical was filmed.

According to a report from the Pew Charitable Trusts and consulting firm ICF, some 6,444 public schools across the United States that serve nearly 4 million students are located in the 100 counties with the highest composite flood scores.

The risk of school flooding is distributed widely across the U.S. Schools in both inland and coastal areas have the highest composite flood risk scores, the report says.

Think Atlantic Coast, Gulf Coast, Mississippi River corridor, and southwestern Arizona.

Even when a school is not located in a flood zone, students who attend it often live within areas of flood risk.

“Of more than 5,000 schools, half or more of the ZIP code is located in a designated 1 percent annual chance flood zone.”

Here’s the map:

The composite flood risk score calculated by ICF is based on three indicators: a school’s location within a designated flood zone, the percentage of a school’s neighborhood (as represented by ZIP code) located within a flood zone, and the number of historical flood-related federal disaster declarations in that county.

Taking proactive steps to reduce risks and improve flood safety is a growing priority for some schools.

Insurance Information Institute facts and statistics on flood insurance here.

Behavioral economics and the claims management process

How might behavioral economics apply to the claims management process? Maria Sassian, research manager at the I.I.I., investigates:

A recent edition of Gen Re’s Claims Focus contains a fascinating article that explains some of the key principles of behavioral economics (BE) and demonstrates their application to claims management.

BE theory asserts that individuals make irrational decisions due to cognitive biases they are not aware of. These biases are so common that Dan Ariely coined the term ‘predictably irrational.’  BE has been a hot topic in insurance for some time and interest in it is not fading.

Clio Lawrence, the author of the article, studied a group of self-employed income protection insurance policyholders in the UK. Several BE principles were applied throughout the claims process. She concludes: “While our observations and investigations are ongoing, the anecdotal evidence and feedback has so far supported a link between the application of BE principles and claims outcomes. “

Why year-round storm preparations are key

From Dr. Jeff Masters at Wunderground’s Cat 6 blog:

“Tropical Storm Emily was making landfall just south of Tampa Bay, Florida late Monday morning after spinning into life on Monday morning at 8 am EDT just off the Gulf Coast of Florida.”

And:

“Emily formed so quickly and unexpectedly that the Hurricane Hunters never flew into the storm. It is very unusual for a named storm to make landfall in the U.S. without the Hurricane Hunters ever sampling the storm.”

Emily is expected to move inland this afternoon and across central Florida tonight.

A good example of why preparation for tropical storms, hurricanes and other severe weather needs to be a year-round priority.

Check out FEMA’s https://www.ready.gov

At 11:45 a.m. EDT (1545 UTC) NOAA’s GOES-East satellite captured a visible image of Emily:

Why are securities class action filings at record high?

Federal class action securities fraud filings hit a record pace in the first half of 2017 and are on track for a year-end total that hasn’t been seen since 2001.

From Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse:

“Over the past six months, plaintiffs initiated 226 securities fraud class actions in federal court, more than in any equivalent period since enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA).”

The first half of 2017 saw 4.7 percent of U.S. exchange-listed companies sued in federal securities class actions:

“If activity continues at the same pace, 9.5 percent of exchange-listed companies will be the subject of filings in 2017—the highest annual rate since 1997.”

Pharmaceutical firms were the most common targets of filings, according to the report.

A significant factor in the record number of filings? The continued upsurge in merger objection lawsuit filings. The D&O Diary has more on this trend.

Both traditional and M&A-related filings were at record levels. Traditional filings increased from 95 in the second half of 2016 to 131 in the first half of 2017. At the same time, M&A-related filings rose from 57 to 95.