Southern California Wildfires

As three major wildfires (known as the Triangle Complex fire, the Sayre fire and the Tea fire) continue to burn in Southern California, homeowners and businesses that need evacuation preparation or claims filing tips should check out information from the Insurance Information Network of California. I.I.I. research shows that most of the large fires with significant property damage have occurred in California where some of the fastest developing counties are in forest areas.  In fact eight of the 10 most costly wildfires in United States  history  occurred in California. Check out I.I.I. wildfire statistics.  Ã‚  


The Case of Nanotechnology

We look across the Pond today  to a posting on the Lloyd’s risk blog by Trevor Maynard, head of the emerging risks team. It highlights the findings of a new report by the UK’s Royal Commission on the challenges and benefits arising from nanotechnology. The report points to areas of concern about governance and regulation of nanomaterials, such as “the profound ignorance and uncertainty about the behavior of some types of nanomaterial in the environment or the risks they pose for human health.† The Commission suggests that existing regulatory frameworks will need to be adapted to deal with nanomaterials. Here in the United States, the FDA’s Nanotechnology TaskForce report last year recommended the agency consider developing guidance to address the benefits and risks of drugs and medical devices using nanotechnology. As we’ve noted before, new technologies bring with them inherent benefits as well as risks. More than $1.1 trillion of products across a broad range of sectors incorporated nanotechnology in 2007, and this impact could extend to nearly $4 trillion by 2015, according to market research firm Lux Research. Food, drugs, medical devices and cosmetics are just some of the products that may incorporate nanomaterials. On both sides of the Atlantic, the regulation of nanotechnology is an evolving area that insurers will be monitoring.  

Google Tracks Flu

We all recognize what a valuable source of data the Internet can be. Whether it’s a Web site or social media such as message boards and blogs, there’s an infinite wealth of data that can be extracted online. A new Web tool from Google written about in the New York Times yesterday is one with potentially useful applications for our industry. According to the article, the tool — known as Google Flu Trends — may be able to detect regional outbreaks of the flu up to 10 days before they are reported by the Centers for Disease Control and Prevention (CDC). How? Well, Google has found a correlation between how many people search for flu-related topics and how many people actually have flu symptoms. It says a pattern emerges when all the flu-related search queries from each state and region are added together. When compared with data from a surveillance system managed by the CDC, Google discovered that some search queries tend to be popular exactly when flu season is happening. By counting how often it sees these search queries, it can estimate how much flu is circulating in various regions of the United States. What this amounts to is an early warning system for  influenza outbreaks. We’re wondering what other applications this tool might have for insurers managing pandemic risks†¦Ã‚  

Green Investments

Mercer, the consulting arm of Marsh & McLennan Cos (MMC), has introduced a new service to provide its clients with a carbon footprint analysis of their investment portfolios. The initiative is in response to the growing interest institutional investors have expressed in assessing and better managing the risks and opportunities associated with the impact of their investments on the environment and climate change. According to Mercer, the new tool will enable clients to better understand the carbon exposure of their equity investments. A portfolio’s carbon footprint is a measure of the impact that a company has on the environment in terms of the amount of greenhouse gas emissions produced. Mercer is working in partnership with environmental research organization Trucost. Check out the I.I.I. issues update on climate change.  

Marketplace Realities

The non-life insurance sector as a whole appears to have remained relatively isolated from the direct impact of the credit crisis so far, but in the longer-term there are still several uncertainties. The latest outlook on the impact of the credit crisis on insurers comes in the first of a two-part report by Willis. In the 2009 Marketplace Realties & Risk Management Solutions: A Different Kind of Cat, Willis notes that the evidence to date suggests that non-life insurance operations have incurred relatively low exposure to the direct impacts of this credit crunch, despite the impact on some of the less traditional activities of certain insurance groups. Looking ahead, Willis says there will inevitably be some wider impact on the investment portfolios and investment returns of non-life insurers in the coming reporting seasons. In the longer-term, however, several uncertainties remain, including: the impact of current and future government intervention on the financial markets; how the insurance industry would respond to and recapitalize from a mega catastrophe or series of major losses; the extent to which the housing sector continues to deteriorate. Check out an I.I.I. report on the impact of the current financial crisis by Dr. Robert Hartwig, president of the I.I.I.  

Employee Retention and Recruitment

In tough economic times there’s always a concern that cost-efficiencies may come at the expense of a company’s customers and employees. A new Web-based survey of claim officers by Towers Perrin conducted immediately prior to the global financial crisis appears to underscore insurers’ focus on strategic, growth-related actions – including the retention of key talent and expansion into new product or service lines – rather than across-the-board staffing cuts. According to its findings, claim officer respondents identified roles such as frontline technical resources (64 percent) and middle management personnel (51 percent) as among the most difficult to staff over the next three to five years. In filling vacant positions, claim officers look for different skills and competencies – problem solving (58 percent) was seen as the top core claim operations skill for those conducting adjusting operations. In contrast, the top skill for call center operators was soft people skills (92 percent). When it comes to retaining their current employees, claim respondents said it is the mix of pay, work/life balance and career advancement/growth opportunities that will keep those employees on board. As for recruiting top-notch candidates, nearly 70 percent said employee referrals are the most effective way to secure top talent. Check out I.I.I. stats on insurance careers and employment.  

Soft Market Winding Down

The average property/casualty rate decrease hit single digits in October for the first time in more than 20 months according to online insurance exchange MarketScout. It put the average p/c rate decrease at 9 percent in October, compared to a decline of 15 percent a year ago. Not since January 2007 has the average p/c rate decrease been in the single digits. Richard Kerr, founder and CEO of MarketScout said the soft market is winding down as a result of several factors including the meltdown in the financial markets, slipping underwriting results and anemic investment income. BOP (down 12 percent), commercial property and general liability (each down 11 percent) experienced the largest rate decreases. The lines experiencing the smallest rate decreases were surety (down 5 percent), D&O liability, fiduciary, crime and workers’ compensation (down 6 percent).  

Credit Crisis and Liability Lines

On the road here at the annual Professional Liability Underwriting Society (PLUS) International conference in San Francisco, this morning’s sessions include a very topical one on the credit crisis and its impact on financial institutions (FIs) and their directors and officers (D&O) insurers. Ahead of the discussion Advisen today estimated the insured loss from the subprime meltdown and the ensuing global credit crisis will add 229 points to the 2008 loss ratio for the FI segment of the D&O market and approximately 149 points to the aggregate 2007-2009 financial institution errors and omissions (E&O) loss ratio. In dollar terms, this translates to an overall  insured liability loss of $9.6 billion ($3.7 billion in E&O and $5.9 billion in D&O insured losses). According to Advisen the upshot is that commercial lines rates, including D&O and E&O, are likely to increase in 2009.  

Election Round-Up

In addition to deciding America’s next President, the 2008 election included several races at the state level of importance for the insurance industry. State insurance commissioner races were decided in five states – Delaware, Montana, North Carolina, North Dakota and Washington. Other decisions closely watched were the governors’ races in six states with appointed insurance commissioners – Indiana, Missouri, New Hampshire, Utah, Vermont and West Virginia. At the Congressional level, Rep. Paul Kanjorski (D-PA), chairman of the Capital Markets and Insurance Subcommittee of the House Financial Services Committee was re-elected in Pennsylvania. For complete election results, check out Best’s Election News Web site.  

Supreme Court on Wyeth

A case before the U.S. Supreme Court will decide whether pharmaceutical companies should be liable for harm from medicines that carry warnings approved by federal regulators. Arguments in Wyeth v. Levine got underway yesterday. At the core of this case is whether federal law preempts state product liability laws, thereby limiting liability claims against drug companies. The case concerns a guitarist who lost part of her arm after being improperly injected with a drug made by Wyeth. We note that recent rulings of the U.S. Supreme Court limiting shareholder lawsuits have given federal agencies the authority to preempt state regulations. A recent example was the January 2008 Stoneridge decision which limited the liability of third parties (such as accountants and lawyers) charged with aiding a corporation that has defrauded its investors. A decision in the Wyeth case is expected early next year. For more on this case check out the Wall Street Journal’s law blog. Check out additional I.I.I. information on the liability system.  

Latest research and analysis