Swiss Re's annual sigma report on natural catastrophes and man-made disasters showed that insured losses worldwide totaled a record-setting $144 billion in 2017. The series of Category 4-plus Hurricanes Harvey, Irma and Maria, that devastated islands in the Caribbean, particularly Puerto Rico, Texas and parts of Western Florida caused about $92 billion in insured losses. The hurricanes hit numerous locations in rapid succession and affected many lines of business. The report notes that 2017 will go on record as one of the costliest North American hurricane seasons with insured claims far larger than the $56 billion in 2016. The inflation-adjusted annual average for the previous 10 years was $58 billion. Wildfire losses also set a record in 2017 with $14 billion in insured losses. Claims stemming from natural catastrophes totaled nearly $138 billion, significantly higher than the $50 billion annual average for the previous 10 years. Insured losses from man-made disasters declined to $6 billion, compared with $8 billion in 2016. Total economic losses were $337 billion, making the 2017 all-peril global catastrophe protection gap $193 billion. Over 11,000 people lost their lives or went missing in disasters worldwide, and millions were left homeless. Full report
With major losses from a series of 2017 natural catastrophes in the public spotlight, Clearsurance conducted a study on the impact of natural disasters among 1,000 participants who at the time of the study were 18 years and older, and who own a home and have homeowners insurance. The survey found that despite the public awareness of the natural disaster risk, 42 percent of respondents did not review their policies (with or without assistance), update their existing coverage, or buy new policies. Of the respondents who did take action, most just reviewed their policies, according to the survey, and of those who expressed significant concern about their risk, 63 percent checked their policies. At the time of the survey, 44 percent of the participants had filed a claim due to a loss on or before 2017. The most common claims filed (covered or not) were for wind, flood, ice, earthquake and wildfire. The survey found that it was not uncommon for a policyholder to be frustrated for not having the right coverage or for misunderstanding their coverage. While some 65 percent of the survey participants reported that they are confident that their homeowners insurance would be adequate in the event of a natural disaster, more than one-third are not. Clearsurance recommends that consumer education is needed to ensure that coverage is adequate. Full report
The latest analysis of insurer mergers and acquisitions (M&A) from Conning found that M&A activity moderated in 2017, and that insurers were focused on tactical acquisitions and divestitures to better position for future profitability. “Insurer merger and acquisition activity in 2017 continued at the levels seen in 2016, which were itself a retreat from prior years’ levels,” said Jerry Theodorou, Vice President, Insurance Research at Conning. The lower activity levels were due in part to moderate economic growth and uncertainty regarding tax reform, which finally resolved in December with passage of the Tax Cuts and Jobs Act. “Insurer mergers and acquisitions in 2017 centered around bolt-on property/casualty specialty acquisitions, run-off dispositions in both the life and property/casualty sectors, and vertical integration in the health/managed care sector,” said Steve Webersen, head of insurance research at Conning. “Large-scale consolidations were conspicuously absent, and the recurring theme was tactically driven divestitures and acquisitions meant to reposition insurers to face the future. The repositioning was especially evident among life insurers exiting certain geographies, products and run-off businesses. Many of the buyers were newly formed firms, attracted to the asset management opportunities afforded by life insurer portfolios. Insurers actively exited underperforming lines and entered specialty segments offering healthier growth and margin prospects.” The study tracks and analyzes both global insurer M&A activity across property/casualty, life/annuity and health insurance sectors. Specific transactions are detailed, and trends are analyzed across all sectors. The study is available for purchase from Conning by calling (888) 707-1177 or by visiting www.conningresearch.com.
Most specialty writers of cyber insurance responding to this global PwC survey reported that the product is profitable for them. About 80 percent of respondents reported combined ratios of lower than 80 percent for the most recent 12-month period. Respondents also reported a desire to grow their cyber books. Cyber-related business interruption/contingent business interruption is the scenario that most worries companies, but demand for this coverage is high, and strong growth is anticipated. Carriers are more and more worried about potential claims from non-affirmative policies (“silent cyber”) and how they may affect their current reserve levels. Another major finding is that more than 75 percent of insurers are using reinsurance to manage their cyber exposures. PwC cautions that it is still unclear whether cyberrisks are adequately priced given the increasingly frequent and severe nature of cyberattacks. "The inevitable market-turning event will separate carriers that have sufficient risk management, underwriting processes and capital in place from ones that do not," says the report. Full report
This report from Lloyd’s of London says that insurance has the potential to help unlock future growth in the emerging sharing economy. The report is based on a survey that Lloyd's undertook with Coleman Parkes Research Ltd of 5,000 consumers—2,000 each in the U.S and China, and 1,000 from the UK—and 30 sharing economy companies. About 71 percent of the consumers questioned said they would be more likely to use sharing economy services if insurance were offered, and nearly as many said they would be more likely to share or offer a service if insurance were offered. More than half of the respondents said that the risks outweigh the benefits of using sharing economy services. The report concludes that sharing economy companies might partner with insurers to enhance credibility, instill confidence and build trust to drive business growth and gain a competitive advantage. Full report
This report indicates that the risk management processes of businesses that use emerging technology to change their operations and interactions with customers are not keeping up with the risks associated with those new technologies. The report and survey shows that only a small percent of risk managers express confidence that their risk management processes can manage new technology risks. The report examines the role of risk managers in managing technology such as artificial intelligence (AI), blockchain, and Internet of Things (IoT). The survey shows that 59 percent of respondents said that their firms are currently using or considering the use of IoT systems; 47 percent are using or considering using AI; and 24 percent are using or considering the use of blockchain. However, only 14 percent of the respondents expressed strong conviction that their current processes were sufficient to handle the risk these technologies might bring, and nearly half acknowledged that their processes were not clear. Full report
Marsh, a global insurance broking and risk management organization presents its Political Risk Map 2018, based on BMI Research findings. Marsh’s study reviews the risk landscapes of North America, Latin America, Europe, the Middle East and Asia/Pacific and provides key risks for each of these regions. The interactive map shows changes in the political, economic, financial and social risks/exposures over the past 12 months. Under BMI Research’s method, a country’s score is ranked out of 100 — the higher the index, the less political risk. The United States has a country risk index of 78.7. This report considers the changes in the short-term political risk index (STPRI), a measure that considers a government’s ability to propose and implement policy, social stability, immediate threats to a government’s ability to rule, the risks of a coup, and more. Marsh notes that multinational organizations continue to face a complex political risk environment. They highlight that such organizations often address the exposure by the purchase political violence and/or terrorism insurance. Marsh concludes the report by suggesting that organizations are better served by having political risk insurance as part of their risk management programs. The interactive map is available here.
This study shows that claimed economic losses for bodily injury liability (BI) insurance claims increased 10 percent annualized from 2012 to 2017, well above the medical inflation rate of 3 percent for the same period. Claimed economic losses include reported expenses for medical care, lost wages and other out-of-pocket expenses. In 2017 medical expenses made up 79 percent of all claimed economic losses. Insurer payments for BI claims grew 6 percent annualized, a bit slower than the growth in claimed losses, but still double the rate of medical inflation. The study also found increased presence of attorneys in auto injury claims. In 2017, 52 percent of BI claimants hired attorneys, compared with 49 percent in 2007 and 50 percent in 2012. Among personal injury protection (PIP) claims, attorney involvement rose to 39 percent in 2017, up from 32 percent in 2007 and 36 percent in 2012. For more information on the study’s methodology and findings, contact David Corum at 484-831-9046, or at IRC@TheInstitutes.org. Visit the IRC’s website, Insurance-Research.org, for information on purchasing a copy of the report. News release
An analysis of 4.5 million drivers in the United States found that from December 2017 through February 2018, 69-million drivers used their phones behind the wheel every day, far higher than the 660,000 daily distracted drivers reported by government data. Overall, drivers use their phones for an average of 1-minute, 52-seconds of every hour behind the wheel (at 55 mph, it is the equivalent of driving 1.2-miles blindfolded, or the length of 21 football fields). Vermont is the only state that saw a reduction in driver phone use. Oregon was the least distracted state, but saw an increase in driver phone use. Phone bans have little impact on phone use by drivers: 16 states ban drivers from using handheld phones, but in nearly all these states, phone use is on the rise. The majority of driver phone use is in the first 5 percent of the drive, when drivers are transitioning to the vehicle operation. Full report
This report proposes that a combination of tactics can achieve zero roadway deaths in the United States by 2050. The tactics include increasing programs and policies that are already proven to be effective, including changes to roadway infrastructure designed to reduce traffic conflicts, reductions in speed where crashes are likely, improvements to emergency response and trauma care, and more safety education and outreach. The authors advocate accelerating advanced technology, beginning with advanced driver assistance systems (many of which are already on the market) and the progression to fully automated vehicles. Prioritizing safety is also an important tactic that would include embracing a new safety culture that encourages citizens to think differently about individual and collective choices. The report was sponsored by the National Safety Council and released at a conference of the Road to Zero Coalition, an alliance of more than 650 organizations working to end road fatalities. They include professional engineering and planning organizations, public-sector organizations, safety advocates, vehicle manufacturers and insurers. Full report
According to this new report from the National Oceanic and Atmospheric Administration (NOAA), by 2100, high-tide flooding could occur every other day or as often as every day in coastal areas, depending on how greenhouse gas emissions, which warm the climate and speed up sea-level rise, are curbed. High-tide flooding, which can wash water over roads and inundate homes and businesses, is an event that happens once in a great while in coastal areas but is happening more frequently. The report notes that the incidence of high-tide flooding in the Mid-Atlantic doubled, from an average of three days per year in 2000 to six in 2015. A similar acceleration in coastal flooding has been seen in other locations along the East Coast, including Florida, the Carolinas, and in the Northeast. Full report
This analysis by CoreLogic examines the potential damage and insured losses if the hypothetical HayWired earthquake scenario, as defined by the United States Geological Survey (USGS), were to occur. The USGS recently ran a simulation of a major earthquake followed by aftershocks along the Hayward fault, which passes under the densely populated and economically vital communities of the San Francisco East Bay area. CoreLogic's analysis includes the effects of such a quake on construction, property valuations, incremental damage resulting from aftershocks and hours clauses for insurance conditions. CoreLogic estimates that there would be 1.1 million homes damaged. The total damage to private property for the entire scenario is estimated to be $170 billion, insurance payments to property owners are estimated to be approximately $30 billion, less than 20 percent of the overall damage, primarily due to the low purchase rate of earthquake insurance. The $140 billion financing shortfall ($170 billion less $30 billion in insurance) presents a real risk to effective regional recovery. Full report
This report from the U.S. Geological Survey (USGS) provides details of the potential effects of a major earthquake along the Hayward fault, which passes under the heavily populated San Francisco East Bay area. The agency simulated a magnitude 7.0 earthquake on the fault centered under the city of Oakland and found that a quake of that magnitude occurring today would kill 800 people and injure another 18,000, but early warning systems currently being developed could reduce the number hurt in such a quake. In the simulation, the shaking from the quake displaced 77,000 households and rendered many high-rise offices and residential buildings in San Francisco unusable for up to 10 months. In the nearly 30 years since the Loma Prieta earthquake, the bay region has invested at least $25 billion, and possibly as much as $50 billion, in earthquake countermeasures including seismic upgrades, retrofits, and replacements of older buildings and infrastructure. The HayWired earthquake scenario shows that there is still more to be done. Full report
In the early 1990s, many states began taking steps to contain medical costs as the payouts for the medical portion of workers compensation benefits rose more rapidly than other claim costs. During the period of 1992 to 1997, a variety of cost containment strategies were adopted, but the seventh edition of the inventory of Workers Compensation Research Institute (WCRI) showed that this activity slowed after 1997. The latest inventory contains updated statutory provisions, administrative rules, and administrative procedures in use by the states as of January 1, 2018. Medical cost containment falls into two broad categories, price management and utilization management, and the containment initiatives usually represent efforts to balance the work of reducing inappropriate or unnecessary treatment with the need to maintain the quality of treatment and workers’ access to care. Twenty-two tables are presented. For more information, or to purchase a copy of this study, click here.