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Insurance and Climate Change: Do Governments Have a Duty to Protect Property Owners?, CRS Legal Sidebar (October 16, 2014)

October 20, 2014 Comments off

Insurance and Climate Change: Do Governments Have a Duty to Protect Property Owners?, CRS Legal Sidebar (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Federal and private insurers are well aware that if the scientific consensus is correct that climate change will cause more frequent extreme weather events, they may be making substantially increased payments in the future. Commentary on the link between climate change and insurance has become voluminous.

One of the many insurance company concerns was recently in the news: whether government can be held liable for not putting in place adequate infrastructure—or maintaining existing infrastructure—to protect against property damage from climate-change-related extreme weather.

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Evolution and Revolution: How Insurers Stay Relevant in a Digital Future

October 14, 2014 Comments off

Evolution and Revolution: How Insurers Stay Relevant in a Digital Future
Source: Boston Consulting Group

The insurance industry is on the brink of major technology-driven changes, according to “Evolution and Revolution: How Insurers Stay Relevant in a Digital Future,” a new report by The Boston Consulting Group and Morgan Stanley Research. To better understand both the changes and the opportunities they will create for insurers that embrace them, we jointly conducted a global study that included 50 interviews with senior executives of insurers and technology providers and a proprietary survey of insurance consumers in 12 countries.

The survey findings point to the need for insurers to completely rethink their customer engagement model. Consumers’ overall digital experience with insurers lags that of other industries—particularly when it comes to “moments of truth” such as paying claims. As consumers continue to integrate digital experiences into their everyday lives, they expect these experiences, as well as their relationship with insurers, to become more direct, simple, seamless, and intuitive. Consumers also expressed strong interest in seeing insurers develop innovative products that apply technology-driven capabilities and are deployed close to the source of their needs. Because “digital native” insurers are well positioned to address these consumer expectations and can operate much more efficiently, they present a significant threat to incumbents.

New From the GAO

October 14, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Ocean Acidification: Federal Response Under Way, but Actions Needed to Understand and Address Potential Impacts. GAO-14-736, September 12.
http://www.gao.gov/products/GAO-14-736
Highlights – http://www.gao.gov/assets/670/665778.pdf

2. Combating Nuclear Smuggling: Risk-Informed Covert Assessments and Oversight of Corrective Actions Could Strengthen Capabilities at the Border. GAO-14-826, September 22.
http://www.gao.gov/products/GAO-14-826
Highlights – http://www.gao.gov/assets/670/665997.pdf

3. Consumer Product Safety Commission: Challenges and Options for Responding to New and Emerging Risks. GAO-15-17, October 14.
http://www.gao.gov/products/GAO-15-17
Highlights – http://www.gao.gov/assets/670/666487.pdf

CBO — Understanding FEMA’s Rate-Setting Methods for the National Flood Insurance Program (presentation)

October 10, 2014 Comments off

Understanding FEMA’s Rate-Setting Methods for the National Flood Insurance Program
Source: Congressional Budget Office

Program Goals

  • Help property owners recover from floods
  • Limit federal costs
  • Reduce flood losses – Better incentives for property owners – Better floodplain management
  • Allow floodplains to play their natural beneficial roles

2014 Deloitte-NASCIO Cybersecurity Study

October 9, 2014 Comments off

2014 Deloitte-NASCIO Cybersecurity Study
Source: Deloitte/NASCIO

The third biennial Deloitte-National Association of State Chief Information Officers (NASCIO) Cybersecurity Study, conducted in the spring of 2014, assessed the state of cybersecurity initiatives administered by state chief information security officers (CISOs). CISOs from 49 states participated in the survey and 186 business leaders from a broad cross-section of states responded to a parallel survey. The study highlights the challenges that states and chief information officers (CIOs)/CISOs face in protecting states’ critically important systems and data. The survey results call for greater communication and collaboration with business leaders.

The following key themes emerged from the report:

  • Maturing role of the CISO: State CISO role continues to gain legitimacy in authority and reporting relationships. In 2014, 98% of respondents state they have a CISO role, and 90% of these roles report to the CIO. The responsibilities of the position are becoming more consistent across states, yet expanding. CISOs today are responsible for establishing a strategy, execution of that strategy, risk management, communicating effectively with senior executives and business leaders, complying with regulators, and leading the charge against escalating cyber threats using various security technologies.
  • Continuing budget-strategy disconnect: The improving economy and states’ growing commitment to cybersecurity have led to an increase – albeit small, in budgets. 48% of respondents noted an increase in budget; however, budget is still the #1 barrier. CISOs have also been successful at tapping supplemental resources, whether from other state agencies, federal funding, or various agency and business leaders. Nevertheless, budgets are still not sufficient to fully implement effective cybersecurity programs.
  • Cyber complexity challenge: CISOs are concerned about the intensity, volume and complexity of cyber threats that run the gamut from malicious code to zero-day attacks. Sophistication of cyber threats is the #2 top barrier. 74.5% of respondents cited malicious code as the top external threat. CISOs need to stay abreast of existing and developing threats and increasing regulations to establish and maintain the security of an information environment that now increasingly extends from internal networks to cloud and mobile devices.
  • Talent Crisis: The skill sets needed for effective cybersecurity protection and monitoring are in heavy demand across all sectors. 59% of CISO respondents choose Talent as one of the top barriers. State CISOs are struggling to recruit and retain people with the right skills, and they will need to establish career growth paths and find creative ways to build their cybersecurity teams.

Liability claims trends: emerging risks and rebounding economic drivers

October 3, 2014 Comments off

Liability claims trends: emerging risks and rebounding economic drivers (PDF)
Source: Swiss Re
From press release:

Liability claims have been lower-than-expected in recent years. This has boosted insurers’ profitability despite declining liability prices, says Swiss Re’s latest sigma study “Liability claims trends: emerging risks and rebounding drivers”. The weak economic growth environment has been a key reason for benign claims. However, new risks and stronger economic growth will increase claims severity and generate more demand for liability insurance.

CRS — Insurance Regulation: Issues, Background, and Legislation in the 113th Congress (September 17, 2014)

October 1, 2014 Comments off

Insurance Regulation: Issues, Background, and Legislation in the 113th Congress (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The individual states have been the primary regulators of insurance since 1868. Following the 1945 McCarran-Ferguson Act, this system has operated with the explicit blessing of Congress, but has also been subject to periodic scrutiny and suggestions that the time may have come for Congress to reclaim the regulatory authority that it granted to the states. In the late 1980s and early 1990s, congressional scrutiny was largely driven by the increasing complexities of the insurance business and concern over whether the states were up to the task of ensuring consumer protections, particularly insurer solvency.

The recent financial crisis refocused the debate surrounding insurance regulatory reform. Unlike many financial crises in the past, insurers played a large role in this crisis. In particular, the failure of the large insurer American International Group (AIG) spotlighted sources of risk that had gone unrecognized. The need for a systemic risk regulator for the entire financial system was a common thread in many of the post-crisis financial regulatory reform proposals. The Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), enacted following the crisis, gave enhanced systemic risk regulatory authority to the Federal Reserve and to a new Financial Services Oversight Council (FSOC), including some oversight authority over insurers. The Dodd- Frank Act also included measures affecting the states’ oversight of surplus lines insurance and reinsurance and the creation of a new Federal Insurance Office (FIO) within the Treasury Department.

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