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Archive for the ‘insurance and risk’ Category

Managing Retirement Risks

April 18, 2014 Comments off

Managing Retirement Risks (PDF)
Source: American College of Financial Services

This table was built for the Retirement Income Certified Professional® (RICP®) designation program for financial advisors. Building a retirement income plan starts by making sure that the client’s income needs and other financial objectives are met. But after that is the tough task of evaluating all the risks that retirees face, and developing a plan to address each one. This table identifies 18 risks in six different categories. With each risk, we define the risk, provide an example, identify facts that describe the magnitude and scope of the risk, and offer a wide range of possible solutions.

The solutions offered here are intended to provide ideas. Building a retirement income plan is a complex process and building solutions to retirement risks is much more than just checking the box. For example, solving longevity risk may include deferring Social Security, purchasing annuities with lifetime payouts, buying life insurance to provide an income stream to a surviving spouse, and carefully choosing a withdrawal strategy from a retirement portfolio. In other words, almost every risk described here requires a carefully crafted, balanced set of solutions that requires thought, knowledge, and experience.

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Internists release policy paper on medical liability crisis

April 16, 2014 Comments off

Internists release policy paper on medical liability crisis
Source: American College of Physicians

The American College of Physicians (ACP) today released a policy paper on the medical liability crisis, which continues to have a profound effect on the medical system. “Medical Liability Reform — Innovative Solutions for a New Health Care System” (PDF) provides an update of the medical liability landscape, state-based activity on medical liability reform, and summarizes traditional and newer reform proposals and their ability to affect system efficiency and encourage patient safety.

How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?

April 14, 2014 Comments off

How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?
Source: RAND Corporation

The Patient Protection and Affordable Care Act (ACA) will greatly expand private coverage and Medicaid while making major changes to payment rates and the health care delivery system. These changes will affect traditional health insurers, individuals, and government payers. In addition, a considerable amount of health care is paid for directly by or is indirectly paid for via legal settlements after the care occurs, by liability insurers. This report identifies potential mechanisms through which the ACA might affect claim costs for several major types of liability coverage, especially auto insurance, workers’ compensation coverage, and medical malpractice. The authors discuss the conceptual basis for each mechanism, review existing scholarly evidence regarding its importance, and, where possible, develop rough estimates of the size and direction of expected impacts as of 2016. They examine how each mechanism might operate across different liability lines and discuss how variation across states in legal rules, demographics, and other factors might moderate each mechanism’s operation. Overall, expected short-term effects of the ACA appear likely to be small relative to aggregate liability insurer payouts in the markets in question. However, under reasonable assumptions, some mechanisms can generate potential cost changes as high as 5 percent or more in particular states and insurance lines. The authors also discuss longer-run changes that could be fostered by the ACA that might exert more significant effects on insurance claim costs, including shifts in tort law, changes in physician supply, new pricing approaches under the accountable care organization model, and changes in population health.

AON 2014 Political Risk Map

April 11, 2014 Comments off

AON 2014 Political Risk Map
Source: AON

Political strains and focus on geopolitical issues have exacerbated an already weak operating environment for business and exchange transfer risks have increased following the risk of new capital controls. Russia’s economy continues to be dominated by the government, so economic policy deadlock has brought growth to a standstill and with it an increase in the risk of political violence.”

The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities

April 4, 2014 Comments off

The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities
Source: Federal Reserve Bank of Atlanta

This paper examines how the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the largest investors in subprime private-label mortgage-backed securities (PLS), influenced the risk characteristics and prices of the deals in which they participated. To identify the causal effect of the GSEs, we use the fact that PLS deals in which Fannie Mae and Freddie Mac purchased securities included separate mortgage pools: one specifically created for the GSEs and one or more others directed at other triple-A investors. Using within-deal variation, we find that the pools bought by Fannie Mae and Freddie Mac had similar ex-ante risk characteristics but performed much better ex-post relative to other mortgage pools in the same deals. These effects were concentrated in low-documentation loans and in issuers that were highly dependent on Fannie Mae and Freddie Mac. Our results extend the importance of disciplining effects of large claimholders beyond information-sensitive securities, such as equities and bank debt, to information-insensitive arm’s-length debt.

Growing Risk in the Insurance Sector

April 3, 2014 Comments off

Growing Risk in the Insurance Sector
Source: Federal Reserve Bank of Minneapolis

The financial crisis of 2008 exposed important vulnerabilities in the banking sector. In its aftermath, considerable academic effort has been devoted to better understanding banking risks, and policymakers around the world are developing new regulations to contain those risks.

Our recent and ongoing work shows that there are also important risks in the insurance sector. Although these risks have been growing rapidly over the past 15 years, they have received relatively little attention from academics and regulators. If unaddressed, these risks could cause severe problems. Insurance is a large share of the financial sector. For example, U.S. life insurance liabilities amounted to $4.1 trillion in 2012, compared to $7 trillion in U.S. savings deposits. Moreover, as the largest institutional investors in the corporate bond market, insurance companies serve an important role in real investment and economic activity.

We begin this note by describing the growing risks and highlight some early symptoms, based on evidence during the financial crisis. We follow with a discussion of possible economic consequences of trouble in the insurance sector. Finally, we highlight points of attention for policymakers and discuss recent developments in global insurance markets.

Effects of Unconventional Monetary Policy on Financial Institutions

April 2, 2014 Comments off

Effects of Unconventional Monetary Policy on Financial Institutions
Source: Brookings Institution

The unconventional monetary policies that the Federal Reserve has pursued since 2008 – pushing short-term interest rates to zero, promising to keep them there for a long time and buying trillions of dollars in bonds in its quantitative easing – have not resulted in life insurers becoming riskier despite the widespread belief to the contrary.

Global insured losses from catastrophes were USD 45 billion in 2013, Swiss Re sigma says

April 1, 2014 Comments off

Global insured losses from catastrophes were USD 45 billion in 2013, Swiss Re sigma says
Source: Swiss Re

  • Total economic losses from natural catastrophes and man-made disasters were USD 140 billion in 2013
  • Global insured losses were around USD 45 billion in 2013, with large contributions from flooding and hail events
  • Around 26 000 lives were lost in natural catastrophes and man-made disasters in 2013
  • A special chapter on climate change in the sigma says rising global temperatures are expected to lead to shifts in the frequency, intensity and duration of extreme weather events

Cost-benefit analysis of airport security: Are airports too safe?

March 26, 2014 Comments off

Cost-benefit analysis of airport security: Are airports too safe? (PDF)
Source: Journal of Air Transport Management

This paper assesses the risks and cost-effectiveness of measures designed to further protect airport terminals and associated facilities such as car parks from terrorist attack in the U.S., Europe, and the Asia-Pacific area. The analysis considers threat likelihood, the cost of security measures, hazard likelihood, risk reduction and expected losses to compare the costs and bene fi ts of security measures to decide the optimal security measures to airports. Monte-Carlo simulation methods were used to propagate hazard likelihood, risk reduction and loss uncertainties in the calculation of net benefits that also allows probability of cost-effectiveness to be calculated. It is found that attack probabilities had to be much higher than currently observed to justify additional protective measures. Overall, then, it is questionable whether special efforts to further protect airports are sensible expenditures. Indeed, some relaxation of the measures already in place may well be justified.

CRS — Terrorism Risk Insurance: Issue Analysis and Overview of Current Program

March 10, 2014 Comments off

Terrorism Risk Insurance: Issue Analysis and Overview of Current Program (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Prior to the September 11, 2001, terrorist attacks, insurance coverage for losses from such attacks was normally included in general insurance policies without specific cost to the policyholders. Following the attacks, such coverage became very expensive if insurers offered it at all. Because insurance is required for a variety of economic transactions, it was feared that the absence of insurance against terrorism loss would have a wider economic impact. Terrorism insurance was largely unavailable for most of 2002, and some have argued that this adversely affected parts of the economy.

Congress responded to the disruption in the terrorism insurance market by passing the Terrorism Risk Insurance Act of 2002 (TRIA; P.L. 107-297, 116 Stat. 2322). TRIA created a temporary three-year Terrorism Insurance Program in which the government would share some of the losses with private insurers should a foreign terrorist attack occur. This program was extended in 2005 (P.L. 109-144, 119 Stat. 2660) and 2007 (P.L. 110-160, 121 Stat. 1839). The amount of government loss sharing depends on the size of the insured loss. In general terms, for a relatively small loss, private industry covers the entire loss. For a medium-sized loss, the federal role is to spread the loss over time and over the entire insurance industry; the government assists insurers initially but then recoups the payments through a broad levy on insurance policies afterwards. For a large loss, the federal government would cover most of the losses, although recoupment is possible in these circumstances as well. Insurers are required to make terrorism coverage available to commercial policyholders, but TRIA does not require policyholders to purchase the coverage. The prospective government share of losses has been reduced over time compared with the initial act, but the 2007 reauthorization expanded the program to cover losses from acts of domestic terrorism. The TRIA program is currently slated to expire at the end of 2014.

CRS — Federal Crop Insurance: Background

February 19, 2014 Comments off

Federal Crop Insurance: Background
Source: Congressional Research Service (via National Agricultural Law Center)

As part of the ongoing farm bill debate, Congress continues to review the effectiveness and operations of the federal crop insurance program as part of the farm safety net. This report describes the current federal crop insurance program as background for crop insurance provisions in House and Senate versions of the farm bill proposed in the 113 th Congress (see CRS Report R42759, Farm Safety Net Provisions in a 2013 Farm Bill: S. 954 and H.R. 2642)

CRS — Agricultural Disaster Assistance

February 19, 2014 Comments off

Agricultural Disaster Assistance (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The U.S. Department of Agricult ure (USDA) offers several permanently authorized programs to help farmers recover financially from a natural disaster, including federal crop insurance, the Noninsured Crop Disaster Assistance Program (NAP ), and emergency disaster loans. The federal crop insurance program is designed to protect crop producers from unavoidable risks associated with adverse weather, and weather-related plant diseases and insect infestations. Producers who grow a crop that is currently ineligible for cr op insurance may be eligible for a payment under NAP. Under the emergency disaster (EM) loan program, when a county has been declared a disaster area by either the President or the Secret ary of Agriculture, agricultural producers in that county may become eligible for low-interest loans.

The Value Killers Revisited

February 6, 2014 Comments off

The Value Killers Revisited
Source: Deloitte

The last two decades have seen a number of events driving major value losses in individual companies, and collectively in the global economy.

Since Deloitte LLP’s first value killers study in 2005, risk management has grown in importance to corporations worldwide. We find boards, management, and regulators paying increasing attention to risk management and governance. New disclosure requirements seek to help shareholders become more aware of company-specific risks. Yet, many companies experience significant value losses in a short period of time.

“The value killers revisited” reexamines the 2005 study, in which we assessed the drivers of 20 percent or greater value losses in a company within a one-month period relative to a broad market index. Following up on our prior research, this latest study examines the drivers of major value losses from 2003 through 2012. The losses, while distinct, were often driven by similar underlying risks.

New From the GAO

February 4, 2014 Comments off

New From the GAO
Source: Government Accountability Office

Reports

1. Coal Leasing: BLM Could Enhance Appraisal Process, More Explicitly Consider Coal Exports, and Provide More Public Information. GAO-14-140, December 18.
http://www.gao.gov/products/GAO-14-140
Highlights - http://www.gao.gov/assets/660/659802.pdf

2. Federal Contracting: Commercial Item Test Program Beneficial, but Actions Needed to Mitigate Potential Risks. GAO-14-178, February 4.
http://www.gao.gov/products/GAO-14-178
Highlights - http://www.gao.gov/assets/670/660651.pdf

3. Private Health Insurance: The Range of Base Premiums for Individuals Age 19 and 64 in the Individual Market by State in January 2013. GAO-14-263R, January 31.
http://www.gao.gov/products/GAO-14-263R

Testimony

1. Commercial Space Launches: FAA’s Risk Assessment Process Is Not Yet Updated, by Alicia Puente Cackley, director, financial markets and community investment, before the Subcommittee on Space, House Committee on Science, Space, and Technology. GAO-14-328T, February 4.
http://www.gao.gov/products/GAO-14-328T
Highlights - http://www.gao.gov/assets/670/660634.pdf

Press Release

1. GAO Makes Appointment to Patient-Centered Outcomes Research Institute Governing Board, February 4.
http://www.gao.gov/press/pcori_2014feb.html

New From the GAO

January 30, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Child Welfare: Federal Agencies Can Better Support State Efforts to Prevent and Respond to Sexual Abuse by School Personnel. GAO-14-42, January 27.
http://www.gao.gov/products/GAO-14-42
Highlights – http://www.gao.gov/assets/670/660376.pdf
Podcast: http://www.gao.gov/multimedia/podcasts/660282

2. Homeowners Insurance: Multiple Challenges Make Expanding Private Coverage Difficult. GAO-14-179, January 30.
http://www.gao.gov/products/GAO-14-179
Highlights – http://www.gao.gov/assets/670/660530.pdf

3. Imminent Danger Pay: Actions Needed Regarding Pay Designations in the U.S. Central Command Area of Responsibility. GAO-14-230R, January 30.
http://www.gao.gov/products/GAO-14-230R

Northridge Anniversary: Surprising Poll Results 20 Years After Costliest Earthquake in U.S. History

January 27, 2014 Comments off

Northridge Anniversary: Surprising Poll Results 20 Years After Costliest Earthquake in U.S. History
Source: Insurance Information Institute

A recent poll by the Insurance Information Institute (I.I.I.) found that only one out of 10 American homeowners (10 percent) have earthquake insurance, compared with 13 percent in 2012. In western states, 22 percent of homeowners said they have earthquake insurance, down from 27 percent.

The 6.7 magnitude quake, which hit Los Angeles on January 17, 1994, also still ranks as the fourth-costliest U.S. disaster, based on insured property losses (in 2013 dollars), topped only by Hurricane Katrina, the attacks on the World Trade Center and Hurricane Andrew.

On the global scale, the Northridge earthquake still ranks as the second costliest earthquake for insurers, after Japan’s earthquake and tsunami of 2011, according to Munich Re.

New From the GAO

January 22, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Army Corps of Engineers: Cost Increases in Flood Control Projects and Improving Communication with Nonfederal Sponsors. GAO-14-35, December 20.
http://www.gao.gov/products/GAO-14-35
Highlights – http://www.gao.gov/assets/660/659888.pdf

2. Medicaid Prescription Drugs: CMS Should Implement Revised Federal Upper Limits and Monitor Their Relationship to Retail Pharmacy Acquisition Costs. GAO-14-68, December 19.
http://www.gao.gov/products/GAO-14-68
Highlights – http://www.gao.gov/assets/660/659834.pdf

3. Flood Insurance: Strategies for Increasing Private Sector Involvement. GAO-14-127, January 22.
http://www.gao.gov/products/GAO-14-127
Highlights – http://www.gao.gov/assets/670/660310.pdf

4. Medicare Advantage: 2011 Profits Similar to Projections for Most Plans, but Higher for Plans with Specific Eligibility Requirements. GAO-14-148, December 19.
http://www.gao.gov/products/GAO-14-148
Highlights – http://www.gao.gov/assets/660/659837.pdf

5. Medicare Advantage: Special Needs Plans Were More Profitable, on Average, than Plans Available to All Beneficiaries in 2011. GAO-14-210R, December 19.
http://www.gao.gov/products/GAO-14-210R

Spear Phishing

January 17, 2014 Comments off

Spear Phishing
Source: Centre for the Protection of National Infrastructure (UK)

Overview
Spear Phishing is a type of cyber-attack used by a range of adversaries to steal information or cause disruption to an organisation’s business. This CPNI guidance introduces how these attacks work, their success rate, whether you are likely to be targeted and the steps an organisation can take to manage the business risks.

Who is this aimed at?
The document is aimed at IT Security managers and employees looking to understand more around the threat from Spear Phishing and ways they can protect their organisation.

Key messages

  • How does Spear Phishing work?
  • Online Reconnaissance
  • Construction of Spear Phishing emails
  • Spear Phishing via web browsers
  • The business impact of Spear Phishing
  • How to defend against Spear Phishing

New From the GAO

January 17, 2014 Comments off

New GAO Reports and Testimony
Source: Government Accountability Office

Reports

1. Medicare: Continuous Insurance before Enrollment Associated with Better Health and Lower Program Spending. GAO-14-53, December 17.
http://www.gao.gov/products/GAO-14-53
Highlights - http://www.gao.gov/assets/660/659754.pdf

2. Federal-Aid Highways: Federal Highway Administration Could Further Mitigate Locally Administered Project Risks. GAO-14-113, January 16.
http://www.gao.gov/products/GAO-14-113
Highlights - http://www.gao.gov/assets/670/660237.pdf

3. Property and Casualty Insurance: Effects of the Nonadmitted and Reinsurance Reform Act of 2010. GAO-14-136, January 16.
http://www.gao.gov/products/GAO-14-136
Highlights - http://www.gao.gov/assets/670/660244.pdf

Testimony

1. Public Transit: Challenges Funding, Investing in Systems, and Coordinating Services, by Dave Wise, director, physical infrastructure issues, before the Senate Committee on Banking, Housing and Urban Affairs. GAO-14-278T, January 16.
http://www.gao.gov/products/GAO-14-278T
Highlights - http://www.gao.gov/assets/670/660248.pdf

New From the GAO

January 15, 2014 Comments off

New GAO Report and Testimony
Source: Government Accountability Office

Report

1. National Flood Insurance Program: Progress Made on Contract Management but Monitoring and Reporting Could Be Improved. GAO-14-160, January 15.
http://www.gao.gov/products/GAO-14-160
Highlights - http://www.gao.gov/assets/670/660214.pdf

Testimony

1. VA Surgical Implants: Shortcomings in Implant Purchasing and Tracking, by Randall B. Williamson, director, health care, before the Subcommittee on Oversight and Investigations, House Committee on Veterans’ Affairs. GAO-14-271T, January 15.
http://www.gao.gov/products/GAO-14-271T

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