Insurers – beyond their traditional role as financial first responders – are helping policyholders mitigate the risks posed by natural disasters and cyber threats, panelists at a Joint Industry Forum (JIF) panel said.
The JIF’s C-Suite on Resilience panel was moderated by John Huff, president and CEO of the Association of Bermuda Insurers and Reinsurers (ABIR). It included Richard Creedon, CEO, Utica Mutual Insurance Company; Paul Horgan, Head of U.S. National Accounts, Zurich North America; John Smith, CEO, Pennsylvania Lumbermens Mutual Insurance Company; and Rohit Verma, CEO, Crawford & Co.
“2021 has been a year of risk that has certainly challenged us,” ABIR’s Huff said. “Eighteen events in the U.S. alone, with over a billion dollars an event. Just a few years ago, those types of numbers would be unheard of, not to mention the 538 deaths and significant economic losses.”
Hurricane Ida, a Category 4 storm that made landfall in Louisiana in August, and the Dixie Fire, which burned 1 million acres in California over four months, were two of the most devastating national disasters this year.
“One recurring theme that we can talk about, especially with hurricanes and wildfires, is that we have growth in population in areas that are significantly impacted by these threats,” said Phil Klotzbach, PhD, a research scientist at Colorado State University’s Department of Atmospheric Science, and a Triple-I non-resident scholar, in introductory remarks.
Huff started the discussion by noting that the notion of resilience seems to have evolved from preparedness to meet and rebound from large, single events like hurricane, earthquake, or wildfire.
“It seems we may have entered a new period for leadership to think of resilience more broadly,” he said. “I’m thinking of the interconnectedness of businesses, individuals, and communities through technology and global commerce; the supply-chain and labor-force disruptions we’ve experienced due to the pandemic; cyber risks, which is such a growing market for our industry but also a growing risk for our global economy. Have risk and resilience fundamentally changed in recent years? Or are we just having to adjust to viewing them through a new lens?”
“There’s certainly a lot more to think about,” said Utica Mutual’s Creedon. “The opportunity moment for us is that there’s market need and expertise we have to expand beyond the traditional risk-transfer product.”
He noted that the industry has historically thought about risk and resilience “in balance-sheet terms, we’re building up large reservoirs of capital and surplus for that large capital- and surplus-draining event that’s going to happen. But nowadays capital is fairly cheap and abundant – it’s almost a renewable resource – and that kind of makes the risk-transfer product more commoditized and sort of a race to the bottom on pricing and product.”
The opportunity lies in insurers’ ability to augment their traditional capabilities with risk management, loss control, and other services to have an impact for consumers, he noted.
“It’s not, in my mind, a fundamental shift in what we define as risk,” said Pennsylvania Lumbermens’ Smith. “It’s that there are so many coming at us. As I think about risk, I do a lot of listening. That’s why I’m here today, why I’m part of [Triple-I] I want to hear different perspectives.”
Zurich’s Horgan drew a contrast between U.S. insurers and their European counterparts, which, he said, “have been focused on climate change for a much longer time. Zurich has been monitoring its environmental footprint since 2007, has been net neutral since 2014, has signed on to U.N. agreements. These are things that have been hotly debated in the U.S., but they’re buying in.”
“Our customers are craving for insights,” Horgan continued. “These are evolving risks. Some of them are insurable, some of them are not. [Our customers] are looking to us for data. They know where they’ve got to be, and they know they have this journey to get there.”
“I think about resilience as being able to recover from adversity, able to recover from a loss, or prevent that loss from having any impact on you,” Crawford’s Verma said. “It’s impressive to see what the industry has done. Where there’s a gap is, if the industry was a playing field, everyone is playing like a quarterback, and if everyone is playing like a quarterback you can’t win.”
Verma said his concern is whether the industry is coming together as a team to “rethink the ecosystem of insurance – the brokers, the claims providers, the carriers” to have a meaningful impact on resilience.
By Loretta Worters, Vice President, Media Relations, Triple-I
Insuretech Connect – the world’s largest gathering of insurance leaders and innovators – last week brought together insurance technology stakeholders to network, share insights, and learn about leading-edge technology across all insurance lines.
Conference participants included Pete Miller, president and CEO of The Institutes, who discussed risk mitigation through new technology.
“Capturing data about the things we do and then allowing us to mitigate risk before we even get to the insurance function, that’s really where I think this industry is going,” he said.
One panel, Climate Risk and Resilience, focused on the importance of Insurtech and innovation to the success and sustainability of the industry. Moderated by Triple-I CEO Sean Kevelighan, the panel included Sean Ringsted, chief digital officer at Chubb; Christie McNeill, associate partner with McKinsey & Company and leader of ESG and Climate Change for the Insurance Practice in North America; Alisa Valderrama, CEO and co-founder of FutureProof Technologies, a venture-backed financial analytics software company specializing in climate risk; and Susan Holliday, Triple-I nonresident scholar and senior advisor to the International Finance Corporation (IFC) and the World Bank, where she focuses on insurance and Insuretech.
“Insurers are no stranger to climate and extreme weather,” Kevelighan said. “They have had a financial stake in it for decades.”
He noted that insured losses caused by natural disasters have grown by nearly 700 percent since the 1980s and four of the five costliest natural disasters in U.S. history have occurred over the past decade.
U.S. insurers paid out $67 billion in 2020 due to natural disasters. The insured losses emerged in part as the result of 13 hurricanes, five of the six largest wildfires in California’s history, and a derecho that caused significant damage in Iowa.
This year’s Hurricane Ida is expected to cost insurers at least $31 billion and to push Hurricane Andrew out of the top five damaging storms. 2021 has been another record year for wildfires. January 1 to September 19, 2021 there were 45,118 wildfires, compared with 43,556 in the same period in 2020.
The panelists talked about how insurers have long been aware of climate risk and – to the extent that existing data-gathering and modeling technologies allowed – considered it in risk pricing and reserving. As information storage and processing have vastly improved, the industry has not only gotten better at underwriting and reserving for these risks – it has identified opportunities in areas it once could only view as problems.
Improved modeling, for example, has increased insurers’ comfort with and appetite for writing flood coverage and spurred the development of new products.
“Insurers are and always will be financial first responders, but there’s a growing realization that risk transfer alone isn’t enough,” Kevelighan said. “Insurance is one important step toward resilience. It’s well documented that better-insured communities recover faster from disasters. But more is required to address increasingly complex global risks.”
Insurance is essential for individuals, businesses, and communities to recover quickly from natural catastrophes – but perils have evolved to a point at which risk transfer, though necessary, isn’t enough to ensure resilience.
Triple-I CEO Sean Kevelighan said during a that better insured communities recover more quickly but “the long-term resilience of both the communities impacted by natural catastrophes and of the industry itself depend on preparedness and improved risk mitigation.” He was one of three panelists participating in the webinar.
“Something’s Got to Give”
Insured U.S. natural catastrophe losses totaled $67 billion in 2020 after an Atlantic hurricane season which included 30 named storms, record-setting wildfires in California, Colorado, and the Pacific Northwest, and a severe derecho in Iowa. This year’s hurricane season looks to be more severe; the Bootleg wildfire in Oregon – so large and intense it has begun to create its own weather and is affecting air quality as far east as New York City – isn’t expected to be fully contained until late November; and these disasters are taking place on the heels of devastating winter storms in the first quarter.
As Kevelighan put it in his panel remarks, pointing to a 700 percent increase in insurer loss costs since the 1980s, “Something’s got to give.”
“As the country’s financial first responders,” he said, “insurers are not just responsible for providing relief to the communities affected by natural disasters, but also planning for potential catastrophes to come.”
One of the ways insurers do this, he said, is by building the industry’s cumulative policyholders’ surplus—the amount of money remaining after insurers’ collective liabilities are subtracted from their assets. At year-end 2020, the U.S. policyholders’ surplus stood at a record-high $914.3 billion.
Mitigate and educate
The role of the insurance industry has grown beyond merely taking on risks to educating the public, regulators, and corporate decision makers on the changing nature of risk and driving a resilience mindset characterized by a focus on pre-emptive mitigation and rapid recovery. Triple-I and a host of other insurance industry organizations have played a key role in promoting public-private partnerships and using advanced data and analytics to understand and address hazards in advance.
For example, Triple-I’s online Resilience Accelerator provides access to data and risk maps that empowers the public to assess and prepare for risks specific to their own communities.
By Scott Holeman, Media Relations Director, Triple-I
California Insurance Commissioner Ricardo Lara made state history by becoming the first openly gay official elected to statewide office. During our Declarations of Pride series, he shared his unique journey with Triple-I, by discussing his entry into politics, views on how the insurance industry is supporting the LGBTQ+ community and what Pride Month means to him.
Lara says important steps are being made by the insurance industry to advance LGBTQ+ rights.
Lara says #Pridemonth is an important time to honor LGBTQ+ civil rights pioneers, but also for understanding obligations that remain in the fight for equality.
By Scott Holeman, Media Relations Director, Triple-I
David Glawe, President and CEO of the National Insurance Crime Bureau, has been fighting crime for nearly 30 years. His extensive background in national security, law enforcement and management provided distinguished credentials to lead NICB’s efforts in combatting insurance fraud and theft. Before taking on this position, Glawe served as Under Secretary of Intelligence for Analysis at the Department of Homeland Security, and was the highest ranking, openly gay official in the U.S. Government.
During our Declarations of Pride series, Glawe shares his personal life journey, which includes progress in LGBTQ+ issues and examples of why there’s ongoing need for meaningful dialogue about equality with friends, family and allies.
Glawe encourages asking questions for meaningful dialogue with LGBTQ+ friends and family.
Glawe says speaking OUT is important for LGBTQ+ people who may be struggling for acceptance.
By Scott Holeman, Media Relations Director, Triple-I
Michael McRaith is proud of the way insurance companies and Corporate America have helped advance LGBTQ+ rights. In this installment of Declarations of Pride, the Managing Director of Blackstone Insurance Solutions discusses the evolution of LGBTQ+ rights and the importance of diversity in the workplace.
McRaith’s distinguished insurance career includes being the first director of the Federal Insurance Office in the U.S. Treasury, Director of the Illinois Insurance Department, and an officer with the National Association of Insurance Commissioners. Prior to public service, he was a partner in the Chicago office of McGuireWoods LLP. In addition to his role at Blackstone, he also currently serves on the Board of Directors for Gryphon Mutual Insurance Company.
Among honors for public service, McRaith has received the Distinguished LGBTQ Alumnus Award from Indiana University, the Exceptional Service Award from the U.S. Department of the Treasury, and recognition as a Distinguished Fellow by the International Association of Insurance Supervisors.
By Scott Holeman, Media Relations Director, Triple-I
Triple-I’s Declarations of Pride series celebrates and features prominent LGBTQ+ insurance professionals. Meet Ken Ross, Vice President & Counsel at John Hancock Insurance, who says insurance companies are responding to the unique needs of the LGBTQ+ community.
Ken also says Diversity, Equity and Inclusion have never been more important in the workplace. Ken encourages the LGBTQ+ community to consider the insurance industry for rewarding career opportunities.
Ken has 30+ years of legislative and regulatory experience, specializing in state regulatory and legislative relations. Prior to joining John Hancock, he served as President and COO of the Michigan Credit Union League (MCUL), Assistant General Counsel for Citizens Republic Bancorp Holding Company (CRBHC), and Commissioner of the Michigan Office of Financial & Insurance Regulation.
He has degrees from the University of Michigan-Dearborn and Western Michigan University’s Thomas M. Cooley Law School.
Triple-I CEO Sean Kevelighan recently briefed regulators on the steps U.S. insurers are taking to reduce climate-related risks as weather-related catastrophes increase in frequency and severity.
Environmental, Social, and Governance (ESG) issues are in the insurance industry’s DNA, Sean said in a panel discussion hosted bythe National Association of Insurance Commissioners’ (NAIC) Climate and Resiliency Task Force. “While ESG priorities may seem new to many industries, insurers have long been involved in understanding and addressing these and other risk factors as a fundamental part of doing business.”
Speaking on the first day of the 2021 Atlantic hurricane season, Sean pointed out investment decisions made by leading insurers that he said will likely lead to carbon emission reductions.
To illustrate the point, he showed an inflation-adjusted chart showing an annual averageof$5 billion in natural disaster-caused insured losses incurred in the 1980s. That figure jumped to an annual average of $35 billion in the 2010s, the same Triple-I analysis found.
Given the millions of Americans who live in harm’s way, the Triple-I launched its Resilience Accelerator initiative to help people and communities better manage risk and become more resilient, Sean said. The goal of the Triple-I’s Resilience Accelerator is to demonstrate the power of insurance as a force for resilience by telling the story of how insurance coverage helps governments, businesses and individuals recover faster and more completely after natural disasters.
“The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” Sean continued.
A Triple-I Consumer Poll released in September 2020 found 42 percent of homeowners had made improvements to protect their homes from floods and 39 percent had done the same to protect their homes from hurricanes.
Three little letters – ESG – can strike business decision makers with anxiety as they strive to incorporate nonfinancial factors into their strategic analysis and planning.
Shorthand for “environmental, social, and governance” these factors, which seek to capture the environmental and social impacts of operations and investment practices, have become more pressing in recent years due to:
Concerns about climate and extreme weather, and
Inequity and injustice becoming more visible in real time, thanks to social media.
This visibility can affect purchasing choices, spur consumer and shareholder activism, and even spark civil unrest, leading to physical injuries, property damage, and business disruptions.
Fortunately, the insurance industry has ESG hardwired into its DNA. While ESG priorities may seem new to many industries, insurers have long been involved in understanding and addressing these and other risk factors as a fundamental part of doing business. As a result, they are well prepared to meet ESG-related demands and are ideal partners for businesses, communities, and nonprofits seeking to navigate this “new” area of risk and opportunity.
And, far from being an impediment to profitable performance, research increasingly demonstrates an ROI advantage for companies that include ESG in their business strategies and operational practices.
Click here to learn more about the role ESG plays in insurance and that insurance plays in ESG.
Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry. This month, we interviewed, Annette Martinez, senior vice president, State Farm, who discusses her 33-year career in insurance, growing diversity and inclusion at her company, and the significance of Jake from State Farm.
Tell us about your role at State Farm and the work that you do. What attracted you to work in the insurance industry?
I’m currently a senior vice president at State Farm and that includes oversight of what I call the “people areas” – human resources, learning and development, public affairs, and the executive succession and development team. I’ve been with State Farm for over 33 years.
My degree is in Biology and Chemistry, and I was working for an R&D facility early in my career. My husband started with State Farm as an auto underwriter, and he encouraged me to come over because of the opportunities.
I began my insurance career in health underwriting. Every two to three years, I was able to recreate myself into new roles. I spent five years in life/health operations before moving to human resources. Within human resources, I was able to work in early succession efforts and then move into leadership in human resources. In 2002, I started the diversity and inclusion initiative and the trajectory of being able to move the organization forward. Like many in the insurance industry, I came in thinking I’d get great experience for a couple of years and now here we are 33 years later, and it’s been an amazing journey.
You launched the first office of diversity and inclusion at State Farm, initiated its diversity council, and started its affinity group program. You’ve also been recognized and awarded on numerous occasions for your work in diversity and inclusion. What inspired you to become a champion of diversity and inclusion?
From the time that I was young, fairness was always important to me, which may be in part because I was raised in an environment where I didn’t see people like me. However, for a long time I have and still believe that everyone should be treated with respect and dignity and have the same opportunities. Opportunity should be open to anyone who has the desire and the capability.
When I began the diversity initiative, I was already conducting diversity training in the organization. State Farm is a fantastic company and has been progressive in programming over the years. We started one of the first minority summer intern programs, but I knew there was more that we could do. My focus was on improving opportunity and bringing people into the organization who had a different pattern of thinking and could positively impact the company. That’s what diversity does. It’s not only a social imperative – we all get to benefit from that – it’s a business imperative about how we treat and gain new customers and how we move forward.
You mentioned that not a lot of people looked like you throughout your career. As a Latinx woman, what obstacles have you faced and overcome?
That’s correct, early on in my career, very few people looked like me. It was isolating. I had to understand that my voice mattered and that I had the opportunity to speak on behalf of many others. There was a lot of pressure with that.
I’ve had some amazing mentors over the years of all genders and races. There was a retired senior vice president, Dave Gonzales, who was the first Hispanic executive that took me under his wing. Dave told me it was going to be a difficult road, but he was and has always been a great support system for me.
We’ve always had mentorship programs at State Farm, but several years ago we started a more formal matching program for people who want to mentor or be mentored. It’s blossomed into a way of life and become part of the culture. I’m active as a mentor and a mentee. I’ve had senior leaders throughout my career who have coached me on to the next level. I’ve also had people [early in their careers] who have guided me into what’s happening at all levels. As a senior leader, it gives me insight into how our actions impact every employee.
How can we foster an honest and open culture at the workplace that welcomes and encourages employees to have conversations around race, discrimination, and equity?
In 2019, we decided to get bold in our conversations. State Farm started working with CEO Act!on For Diversity & Inclusion and implemented a program called “Conversations Worth Having.” In February 2020, we had our first session on racism. We knew that it was going to be a difficult and honest conversation. We had a panel that shared their stories about their lives, their children, and what they experienced.
We had no idea that COVID-19 would happen a month later. The social unrest throughout 2020 was foundational for what we needed to address last year and will continue to address this year. These open conversation forums have continued and are important in allowing people to express their frustration and allowing us to be part of the solution.
We learn every session. Setting ground rules is also important – trust that people’s intentions are honest, listen before you react – some basics in conversations that we talk about each session. If someone responds negatively to a session, we take the time to speak with them one on one to have conversations on a personal level as well.
How has State Farm addressed the current social and racial climate of this past year? Are there any actions or initiatives that State Farm has taken to support Black and Asian American Pacific Islander (AAPI) communities inside and outside the workplace?
State Farm named a Chief Diversity Officer in 2020, which was an important step for us. We also realized that we needed to be quicker with our communications and the acknowledgment that we stand against racism. In the past, we may have addressed it internally at a more moderate level, but we took the stand that State Farm is against racism and the hatred that leads to racism. This is who we are. We respect people – everyone should be treated with respect and dignity, and there is no place for racism in our organization.
There is more work to go into this. It’s an ever-evolving journey, and I think we’re learning as we communicate. We are the Good Neighbor organization. We care about all our neighbors, and we aren’t exclusive to anyone.
Our CEO, Chief Administrative Officer, and Chief Diversity Officer have also been involved in listening sessions to allow employees the opportunity to talk about an experience that they have had, even at State Farm, to better understand the work ahead of us. We want to be an organization that’s part of the healing process.
Jake from State Farm was recently recast as an African American man, actor Kevin Miles. How do you think this change has made an impact on diversity and representation in insurance and has it helped State Farm reach out to more people of color?
The first Jake from State Farm was an actual employee. We pivoted away to some other campaigns for a while, but then we did some research and realized that Jake from State Farm was still very relevant. We knew the needs in a marketing and advertising world today would require more than what we could ask of an employee, so State Farm began an external talent search. We are typically very intentional about diversity in our marketing and advertisements, but ultimately what we did was pick the right actor for the right role.
The actor [Kevin Miles] is from Chicago. One of my favorite stories involves an event early on in his role as Jake from State Farm. We invited him to do a meet and greet at headquarters. It was a big deal, and he brought his parents to the event. The atrium was packed with employees waiting to meet him. He was humbled, kind, and genuine, he spent hours talking to and taking pictures with employees. His success is not only impressive externally – it’s impressive internally as well. The traits you can see and feel from Jake from State Farm are also traits Kevin embodies. And because of that, we intentionally let a lot of Kevin come through in his role as Jake from State Farm.
Can you speak about any upcoming or future diversity and inclusion initiatives for State Farm that you’re excited about? What are your goals for 2021 and beyond?
We’re proud of the intentionality that we put behind diversity and inclusion. State Farm just kicked off a governance council in January, which is a group of senior leaders in the organization who will drive the future strategy of diversity and inclusion.
One focus area that we are looking at is more transparency. How do we tell our story internally so that our associates feel comfortable? How do we tell the story greater from an external perspective? We’re working on deliberate performance goals for all associates around diversity and inclusion, which will be part of their performance assessment and how they actively engage in that work. We are continuing to define our metrics and tangible ways to measure the progress that we are making as an organization. The “Conversations Worth Having” sessions are scheduled throughout the year as well as the listening sessions with our executive leadership. We’re excited about the continuation of programming and leaning into the opportunities ahead of us.