Whoever says insurance is a dull business that has trouble attracting talented human capital to its ranks may want to turn to the Forbes 2007 World Billionaires Survey as part of its marketing and recruitment campaign. By our count, this yearÃ¢â‚¬â„¢s list includes seven insurance industry billionaires with a combined net worth of $18.2 billion. The Ã¢â‚¬Å“magnificent sevenÃ¢â‚¬ include such well-known names as Maurice Greenberg and Rolf Gerling. Oh, and not included in the seven is Berkshire Hathaway chairman Warren Buffett, who again claims the number two spot with an impressive net worth of $52 billion. For more on employment in the industry, check out the Insurance Information InstituteÃ¢â‚¬â„¢s online publication Ã¢â‚¬Å“A Firm FoundationÃ¢â‚¬ .Ã‚
Over the years catastrophe models have been constantly updated and fine-tuned to incorporate the latest technologies, data, and research findings. Following the unprecedented frequency and severity of storms during the 2004 and 2005 hurricane seasons, the output of such models came under close scrutiny. In a recent innovation we can report that underwriters in the LloydÃ¢â‚¬â„¢s market are now using Google Earth to plot their exposure to hurricanes, earthquakes, terrorist attacks and other catastrophes on a 3D map. This is just the latest evidence that catastrophe models and theirÃ‚ application will continue to evolve amid the ever-changing risk landscape.Ã‚ Ã‚
Today is International WomenÃ¢â‚¬â„¢s Day (IWD), a day aimed at connecting women around the world and inspiring them to achieve their full potential. AÃ‚ review of the IWD siteÃ‚ reveals that among the top companies supporting women and IWD is insurer Aviva. Apparently, more than 50 percent of Aviva staff worldwide and approximately 17 percent of its senior management are women. This is encouraging news, particularly in light of a recent study by research and advisory group Catalyst that reveals a persistent shortage of women in corporate leadership positions. According to its findings, women held just 15.6 percent of Fortune 500 corporate officer positions in 2006, down from 16.4 percent in 2005. At the current rate of change, Catalyst estimates it could take women 47 years to reach parity with men as corporate officers of Fortune 500 companies. Food for thought.Ã‚
Industry eyes turn to Capitol Hill today, as a hearing before the House Financial Services Subcommittee on Oversight and Investigations gets underway to discuss the insurance claims payment processes in the Gulf coast after the 2005 hurricanes. Dr. Robert Hartwig, I.I.I. president and chief economist, will deliver testimony noting that insurance companies have settled, without dispute, nearly all of the 1.7 million claims totaling $40.6 billion from Hurricane Katrina, the most expensive disaster in the history of insurance. Insurers have also strengthened their catastrophe response capabilities to more quickly reach their customers following mega-catastrophes.Ã‚
ItÃ¢â‚¬â„¢s interesting to see that customer satisfaction in the finance and insurance sector apparently reached an all-time high in the fourth quarter of 2006. According to the latest University of Michigan American Customer Satisfaction Index, every industry except one in this sector improved its customer satisfaction ranking. The sector includes commercial banks and property and life and health insurance. In the aggregate, finance and insurance jumped 2.7 percent to 76, its highest score since 1994 (78.5). Improvements in quality and value drove customer satisfaction gains for life and health insurance. However, we note that property and casualty insurance was the odd one out with a customer satisfaction ranking of 78 — unchanged from the previous yearÃ¢â‚¬â„¢s ranking. The index measures customer expectations, perceived quality and perceived value of companies in various industries.Ã‚
As the issue of flood insurance continues to be in the news, we note that flood risk is also a hot topic across the pond in the U.K. The Association of British Insurers (ABI) has just announced that government spending on flood defenses needs to increase by 10 percent annually to approximately $1.5 billion by 2011 to counter an increased risk of flood. Nearly 600,000 U.K. homes are now estimated to be at risk of flood, compared to an estimated 220,000 homes back in 2002. One key difference: while standard homeowners policies in the U.S. do not cover flood damage, U.K. homeowners policies do. However, the ABI notes that U.K. insurers will only continue to be able to offer flood insurance if defenses are kept up to an adequate standard. Maintenance of levees and barriers is obviously important, but flood defenses can take many forms. Preservation of wetlands and saltmarshes is just as important a part of any flood risk management plan. Check out I.I.I.’s flood statistics for more information.
Surveys of current policy renewal prices as reported by agents and brokers, and corporate risk managers, have confirmed a further softening in the commercial insurance market. With the sole exception of hurricane-exposed coastal property coverages, insurers appear willing to lower prices and place fewer restrictions on coverage to get new business, according to the latest market survey from the Council of Insurance Agents & Brokers (CIAB). Ditto the RIMS Benchmark Survey, where the largest decreases in premium rates in the fourth quarter of 2006 were reported in Directors and Officers (D&O) and workersÃ¢â‚¬â„¢ compensation lines. D&O, in particular, continues to be a very competitive line of business with rate decreases further stimulated by the sharp drop in the number of securities class action suits filed in 2006, according to analysis from Advisen. Meanwhile, online insurance exchange MarketScout puts the average P/C rate decrease at -9 percent in January 2007.Ã‚
We all know cars and deer can be a lethal combination, particularly during deer season which generally runs from October through December. But moose, weighing up to 1,000 lbs, can present even greater risks for drivers and their insurers. For example, reports out of Anchorage warn that moose collisions could be double or even triple the average this winter as heavy snow has led more moose than ever to wander into city limits. The Alaska Moose Federation notes that in 2006 some 236 moose were killed on Alaskan highways, with an average cost per accident of $8,356. Vigilant driving is part of the answer, but new high-tech solutions may also help to better manage this risk. Take Connecticut, where state wildlife officials have just announced they will use GPS collars to track and collect data on the stateÃ¢â‚¬â„¢s moose population. Now just imagine that regulators allowed auto insurers to use a similar system to monitor the habits of their policyholders.
ItÃ¢â‚¬â„¢s easy to forget that tornadoes, though not generally as destructive as hurricanes, are more frequent and can also cause severe damage. We got a stark reminder of this at the end of last week, when tornadoes and storms in Florida left 20 people dead and hundreds of homes and businesses damaged or destroyed. Each year about 1,000 tornadoes with wind speeds as high as 300 mph touch down in the U.S., according to I.I.I. research. Check out ourÃ‚ tornado statistics.Ã‚ Ã‚ Ã‚
For those of us lucky enough to have seen snow this winter (i.e. Denver) the news that Punxsutawney Phil did not see his shadow and that there will be an early spring in 2007Ã‚ will be gladly received. For the industry, however, the freeze looks likely to last a little longer. According to the I.I.I. 2007 Groundhog Day forecast, most insurance industry analysts predict slower P/C premium growth in 2007. Nevertheless, this yearÃ¢â‚¬â„¢s survey results indicate that the respite in catastrophe losses in 2006 will likely propel the industry to its best underwriting performance since 1936. Industry profitability is expected to continue in 2007, albeit with an underwriting performance that generates a much smaller underwriting profit. This apparent paradoxÃ¢â‚¬”a peak in industry profits, but stalling premium growthÃ¢â‚¬”is a clear reminder of the cyclical nature of the property/casualty business, and the fact that our industryÃ¢â‚¬â„¢s financial fortunes are influenced by a number of factors.Ã‚ Ã‚