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Terrorism Risk Insurance — Economic and Insurance Implications of TRIPRA’s Non-Renewal

November 5, 2014 Comments off

Economic and Insurance Implications of TRIPRA’s Non-Renewal
Source: Insurance Information Institute

The question of what happens if the federal Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is not renewed by Congress is no longer a theoretical one.

Since insurance policies negotiated during 2014 extend beyond the imminent December 31 expiration date of the program, the negative consequences of non-renewal are already being experienced by businesses across America and their insurers.

The private sector simply does not have the capacity to provide insurance or reinsurance for terrorism risk to the extent currently provided by TRIPRA (Figure 1). As a result, in the absence of the act, terrorism risk insurance would be less available and less affordable.

Coverage for terrorist-caused economic damages also would likely be more costly or limited in scope if the federal government played no role in this market.

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Insurance — Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2014

November 3, 2014 Comments off

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2014
Source: Insurance Information Institute

Executive Summary

  • The exposure value of the residual property market in hurricane-exposed states has declined significantly from the peak levels seen in 2011. In fact between 2011 and 2013, total exposure to loss in the plans fell by almost 30 percent to $639 billion. Policy counts in 2013—at around 3.2 million—are also down from their 2011 highs.
  • While attempts by certain states to reduce the size of their plans appear to be paying off, the fact that many of the plans charge rates that are not actuarially sound and do not accurately reflect the risk of loss means that a major hurricane could expose residents in certain states to billions of dollars in post-storm assessments.
  • Increased appetite for these risks from the capital markets—highlighted by Florida Citizens Property Insurance Corp’s record-setting $1.5 billion catastrophe bond issued in 2014 (the largest single catastrophe bond issuance in history)—should not detract from the core concerns that this concentration of risk represents.
  • As long as the plans continue to grow and their coverage remains underpriced, state finances will remain under threat, while policyholders and ultimately taxpayers, many of whom live nowhere near the coast, will continue to face the prospect of increased assessments in the years ahead.

Cyber Risks: The Growing Threat (III – updated)

July 21, 2014 Comments off

Cyber Risks: The Growing Threat
Source: Insurance Information Institute

Amid a rising number of high profile mega data breaches—most recently at eBay, Target and Neiman Marcus—government is stepping up its scrutiny of cyber security. This is leading to increased calls for legislation and regulation, placing the burden on companies to demonstrate that the information provided by customers and clients is properly safeguarded online.

Despite the fact that cyber risks and cyber security are widely acknowledged to be a serious threat, many companies today still do not purchase cyber risk insurance. However, this is changing. Recent legal developments underscore the fact that reliance on traditional insurance policies is not enough, as companies face growing liabilities in this fast-evolving area.

Specialist cyber insurance policies have been developed by insurers to help businesses and individuals protect themselves from the cyber threat. Market intelligence suggests that the types of specialized cyber coverage being offered by insurers are expanding in response to this fast-growing market need.

There is also growing evidence that in the wake of the Target data breach and other high profile breaches, the number of policies is increasing, and that insurance has a key role to play as companies and individuals look to better manage and reduce their potential financial losses from cyber risks in future.

III — Sports Injuries

July 9, 2014 Comments off

Sports Injuries
Source: Insurance Information Institute
Includes statistics/charts for injuries related to school sports, winter sports, bicycle and motorcycle crashes, recreational boating, ATVs, sports injuries by age/sport.

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.

Winter Storms

January 8, 2014 Comments off

Winter Storms
Source: Insurance Information Institute

Winter storms caused $1.9 billion in insured losses in 2013, up dramatically from $38 million in 2012, according to reports from Munich Re. From 1993 to 2012 winter storms resulted in about $28 billion in insured catastrophe losses (in 2012 dollars), or more than $1 billion a year on average, according to Property Claim Services (PCS).

Terrorism Risk: A Constant Threat – Impacts for Property/Casualty Insurers

August 6, 2013 Comments off

Terrorism Risk: A Constant Threat – Impacts for Property/Casualty Insurers
Source: Insurance Information Institute

The April 15, 2013 bombing near the finish line at the Boston Marathon marked the first successful terrorist attack on U.S. soil in more than a decade. The attack left three dead and 264 injured—and adds to a growing list of international terrorism incidents that have occurred since the terrorist attack of September 11, 2001.

The 2002 Bali bombings, the 2004 Russian aircraft and Madrid train bombings, the London transportation bombings of 2005 and the Mumbai attacks of 2008 all had a profound influence on the 2001 to 2010 decade. Then came 2011, a landmark year, which simultaneously saw the death of al-Qaida founder Osama bin Laden and the 10-year anniversary of September 11.

While the loss of bin Laden and other key al-Qaida figures put the network on a path of decline that is difficult to reverse, the State Department warned that al-Qaida, its affiliates and adherents remained adaptable and resilient, and constitute “an enduring and serious threat to our national security.”

The Boston bombing serves as an important reminder that countries also face homegrown terrorist threats from radical individuals who may be inspired by al-Qaida and others, but may have little or no actual connection to militant groups.

Various factors suggest that terrorism risk will be a constant, evolving and potentially expanding threat for the foreseeable future. And the looming expiration at the end of 2014 of the government-backed Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is prompting increased dialogue between industry and government about terrorism risk, a discussion that has gained critical importance in the wake of the Boston bombing.

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