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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.

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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.

Facts and Statistics: Wildfires

July 2, 2013 Comments off

Facts and Statistics: Wildfires
Source: Insurance Information Institute

The National Interagency Fire Center’s (NIFC) Predictive Services unit is forecasting above normal potential for significant fire activity in the West Coast states, the Southwest, and portions of Idaho and Montana in 2013. Over 22,000 wildfires destroyed 1.5 million acres from January 1, 2013 to July 1, 2013, according to the NIFC. On June 30, 19 firefighters were killed while working to contain the Yarnell Hill Fire in Arizona. This is the deadliest event for firefighters since 9/11 and the third highest firefighter death toll attributed to wildfires. The 1910 Devil’s Broom wildfire in Silverton, Idaho killed 86 firefighters and the 1933 Griffith Park wildfire in Los Angeles, California, killed 29.

Fire plays an important role in the life of a forest, clearing away dead wood and undergrowth to make way for younger trees. But for much of the last century, fire-suppression policies have sought to extinguish wildfires as quickly as possible to preserve timber and real estate. This approach has led to the accumulation of brush and other vegetation that is easily ignited and serves as fuel for wildfires. Most of the large fires with significant property damage have occurred in California, where some of the fastest developing counties are in forest areas.

Hurricanes: Facts and Statistics

June 7, 2013 Comments off

Hurricanes

Source: Insurance Information Institute

Over a dozen states were impacted by Hurricane Sandy in October 2012. Sandy caused $18.75 billion in insured property losses, excluding flood insurance claims covered by the federal flood insurance program, according to estimates from ISO’s PCS unit as of January 18, 2013. New York and New Jserey suffered the largest private insurance losses from Sandy, according to ISO.

September is the most common month for hurricanes making landfall in the U.S., followed by August and October, according to an analysis of 1851 to 2011 data by the National Oceanic and Atmospheric Administration. No hurricanes made a U.S.landfall before June and after November during the period studied.

Tornadoes and Thunderstorms: The 2012 and 2013 Tornado Season

May 22, 2013 Comments off

Tornadoes and Thunderstorms: The 2012 and 2013 Tornado Season

Source: Insurance Information Institute

The devastating tornadoes which hit Oklahoma this May bring to the mind a powerful string of tornadoes that hit Oklahoma, Kansas, Texas, Georgia and 13 other states in 1999. Those tornadoes resulted in $1.5 billion in insured losses ($2.0 billion in 2012 dollars) in all the affected states, according to ISO. The damage to Oklahoma was nearly $1.0 billion ($1.4 billion in 2012 dollars, according to ISO). The costliest U.S. tornado event, based on insured losses, was the 2011 Tuscaloosa, Alabama, tornadoes, which cost $7.5 billion in insured damages (in 2012 dollars). That was the 10th costliest U.S. catastrophe, based on insured losses, according to ISO. The second costliest tornado event, based on insured losses, was the 2011 tornadoes that hit Joplin, Missouri, and other locations. They cost $7.0 billion in insured losses in 2012 dollars. Updated information on 2013 tornadoes from the National Weather Services are posted at http://www.spc.ncep.noaa.gov/climo/online/monthly/newm.html

Severe U.S. thunderstorms, including tornado events, cost $14.9 billion in insured losses and $27.7 billion in economic losses in 2012, according to Munich Re. The U.S. experiences more tornadoes than any other country in the world, according to a 2013 report by Lloyd’s of London. (See Executive Summary, page 4 of Tornadoes a Rising Risk? for additional findings and statistics).

P/C Insurers’ Profits Rose in 2012, But Profitability Lagged Long-term Norm as Sandy Losses and Drop in Invest ment Gains Hit Results

April 29, 2013 Comments off

P/C Insurers’ Profits Rose in 2012, But Profitability Lagged Long-term Norm as Sandy Losses and Drop in Investment Gains Hit Results

Source: Insurance Information Institute

Despite the impact of Superstorm Sandy and smaller investment gains, private U.S. property/casualty insurers’ net income after taxes grew to $33.5 billion in 2012 from $19.5 billion in 2011, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus climbing to 5.9 percent from 3.5 percent. At 5.9 percent, insurers’ overall rate of return lagged their 8.9 percent average rate of return for the 54 years since the start of ISO’s annual data in 1959.

Insurers’ pretax operating income — the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income — rose to $33.3 billion in 2012 from $15.4 billion in 2011.

Improvement in underwriting results drove the increases in insurers’ pretax operating income, net income after taxes, and overall rate of return, with net losses on underwriting dropping to $16.7 billion in 2012 from $36.2 billion in 2011. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — improved to 103.2 percent for 2012 from 108.1 percent for 2011, according to ISO, a Verisk Analytics company (Nasdaq:VRSK), and the Property Casualty Insurers Association of America (PCI).

The decline in net losses on underwriting is attributable to premium growth and a drop in net losses and loss adjustment expenses (LLAE). Net written premiums climbed 4.3 percent in 2012 to $457 billion, and net earned premiums grew 3.4 percent to $449.4 billion. Conversely, net LLAE fell 2.8 percent in 2012 to $335 billion. The decline in net losses on underwriting would have been bigger if not for increases in underwriting expenses and dividends to policyholders, which both rose last year.

The improvement in underwriting results was partially offset by a drop in net investment gains, a decline in miscellaneous other income, and higher taxes. Net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — fell $2.3 billion to $53.9 billion in 2012 from $56.2 billion in 2011 as miscellaneous other income dropped $0.2 billion to $2.3 billion from $2.5 billion and insurers’ federal and foreign income taxes rose $3 billion to $6 billion from $3 billion.

International Insurance Fact Book 2013

April 29, 2013 Comments off

International Insurance Fact Book 2013

Source: Insurance Information Institute

Welcome to the International Insurance Fact Book

Country Profiles

Create your own book: Download insurance and economic data on some 90 insurance countries in PDF format online.

Or click the + sign next to Country Profiles on the left to access individual country information

World Overview – world data and tables comparing premiums, GDP and population in some by country

World Rankings – rankings of the world’s largest insurance companies

Download the full book

New crash tests: Underride guards on most big rigs leave passenger vehicle occupants at risk in certain crashes

March 14, 2013 Comments off

New crash tests: Underride guards on most big rigs leave passenger vehicle occupants at risk in certain crashes

Source: Insurance Information Institute

Modern semitrailers for the most part do a good job of keeping passenger vehicles from sliding underneath them, greatly increasing the chances of surviving a crash into the back of a large truck, recent tests by the Insurance Institute for Highway Safety (IIHS) show. But in crashes involving only a small portion of the truck’s rear, most trailers fail to prevent potentially deadly underride.

Most semitrailers are required to have underride guards. These are steel bars that hang from the backs of trailers to prevent the front of a passenger vehicle from moving underneath during a crash. Earlier research showed that the minimum strength and dimensions required for underride guards are inadequate, prompting the Institute to petition the National Highway Traffic Safety Administration (NHTSA) in 2011 for tougher standards. The Institute also asked the agency to consider applying the standards to other types of large trucks such as dump trucks that aren’t required to have any underride guards.

Although NHTSA hasn’t responded yet, trailer manufacturers already are installing guards that are much stronger than the agency requires. These guards generally work well to prevent underride, except in crashes occurring at the outer edges of trailers, the crash tests show.

One likely reason manufacturers are installing guards that are stronger than required is a tougher standard that trailers in Canada have had to meet since 2007. More recently, IIHS crash tests have drawn attention to the issue, and at least one manufacturer has started selling a trailer with an improved underride guard since the tests began.

Terrorism Risk: A Continuing Threat – 2012

September 12, 2012 Comments off

Terrorism Risk: A Continuing Threat – 2012

Source: Insurance Information Institute

This report, by Robert Hartwig, president of the Insurance Information Institute, and Claire Wilkinson, analyzes the evolving nature of international terrorism. For property/casualty insurers and reinsurers, the impact of the terrorist attack of September 11, 2001, was substantial, producing insured losses of about $32.5 billion, or $40.0 billion in 2011 dollars. Following the attack, insurers moved to exclude coverage. Only when the Terrorism Risk Insurance Act (TRIA) was enacted by Congress in November 2002 did coverage for terrorist attacks resume. Since its initial enactment in 2002 the terrorism risk insurance program has been revised and extended twice. The report, replete with charts, includes sections on: how insurers treat terrorism risk today; estimating potential terrorism losses; the cyber terrorism threat; the structure and coverage of the terrorism risk insurance program; aviation insurance for terrorism risks; and liability factors. The report concludes that over a decade later, 9/11 remains the worst terrorist act in terms of fatalities and insured property losses. A number of converging factors point to the fact that, while the risk is changing, terrorism is an evolving and ongoing threat for the foreseeable future. Failure to focus on and prepare for this threat will come at an enormous cost to the millions of individuals and businesses who rely on insurance contracts to offset the overall economic impact of a terrorist attack. For property/casualty insurers, the increasing share of losses that they would have to fund in the event of a major terrorist attack on U.S. soil suggests that now is the time to take stock of their terrorism exposures.

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2012

September 1, 2012 Comments off

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2012
Source: Insurance Information Institute

This report by Robert Hartwig, president of the Insurance Information Institute, and Claire Wilkinson analyzes the changes taking place within the residual property market, which consists of a myriad of different programs in place across the United States to provide insurance to high-risk policyholders who may have difficulty obtaining coverage from the standard market. So called residual, shared or involuntary market programs make basic insurance coverage more readily available. The report notes the still-burgeoning growth of the market, which now has a massive total exposure to loss that is approaching $900 billion. Despite attempts by certain states to reduce the size of their plans the fact of the matter is that this market of last resort remains the market of first choice for many vulnerable, high-risk coastal properties. The report focuses on the plans in Alabama, Florida, Louisiana, Massachusetts, Mississippi, New York, North and South Carolina, and Texas.

Hurricane Andrew and Insurance: The Enduring Impact of an Historic Storm

August 10, 2012 Comments off

Hurricane Andrew and Insurance: The Enduring Impact of an Historic Storm
Source: Insurance Information Institute

Hurricane Andrew struck Florida on August 24, 1992, and the tumult it created for the property insurance market in the state has not ceased in the 20 years since, according to an analysis by the Insurance Information Institute (.I.I.). The I.I.I. white paper outlines six key insurance market changes attributed to the costliest Florida disaster. Insurance claims payouts for Andrew totaled $15.5 billion at the time ($25 billion in 2011 dollars), and it remains the second costliest U.S. natural disaster, after Hurricane Katrina, which hit in 2005. Hurricane Andrew forced individuals, insurers, legislators, insurance regulators and state governments to come to grips with the necessity of preparing both financially and physically for unprecedented natural disaster.

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2012

July 11, 2012 Comments off

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2012
Source: Insurance Information Institute

This report by Robert Hartwig, president of the Insurance Information Institute, and Claire Wilkinson analyzes the changes taking place within the residual property market, which consists of a myriad of different programs in place across the United States to provide insurance to high-risk policyholders who may have difficulty obtaining coverage from the standard market. So called residual, shared or involuntary market programs make basic insurance coverage more readily available. The report notes the still-burgeoning growth of the market, which now has a massive total exposure to loss that is approaching $900 billion. Despite attempts by certain states to reduce the size of their plans the fact of the matter is that this market of last resort remains the market of first choice for many vulnerable, high-risk coastal properties. The report focuses on the plans in Alabama, Florida, Louisiana, Massachusetts, Mississippi, New York, North and South Carolina, and Texas.

Social Media, Liability and Insurance

April 2, 2012 Comments off

Social Media, Liability and Insurance
Source: Insurance Information Institute

Hundreds of millions of people interact on social networks like Facebook, Twitter, YouTube, MySpace and LinkedIn every day. Like any other new technology, social media brings enormous opportunities and benefits. The ability to communicate and interact instantaneously on a global scale 24/7 enables businesses to reach their customers directly and individuals to voice opinions on any topic they see fit.

Yet as the opportunity to tweet, message, share and “like” grows, so do the risks. As businesses and individuals navigate this shifting online risk landscape, they face a range of evolving social media related liabilities including privacy, security, intellectual property and employment practices liability.

Meanwhile, amid a rising number of high profile data breaches, 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, a majority of companies today still do not purchase cyber liability insurance. However, research indicates that this is changing. Insurance has a key role to play as companies and individuals look to better manage and reduce their potential financial losses from social media and cyber risks in future.

+ Full Document (PDF)

Flood Insurance (Updated)

January 2, 2012 Comments off

Flood Insurance
Source: Insurance Information Institute

Because of frequent flooding of the Mississippi River during the 1960s and the rising cost of taxpayer funded disaster relief for flood victims, in 1968 Congress created the National Flood Insurance Program (NFIP). It has three mandates: to provide residential and commercial insurance coverage for flood damage, to improve floodplain management and to develop maps of flood hazard zones. Flood damage to vehicles is covered under the comprehensive section of an auto insurance policy but there is no coverage for flooding in standard homeowners, renters or in most commercial property insurance policies. Coverage is available in a separate policy from the NFIP and from a few private insurers. Despite efforts to publicize this, many people exposed to the risk of floods still fail to purchase flood insurance.

The widespread flooding associated with Hurricane Katrina in 2005 set in motion a debate about how to improve the federal program. Likewise, the Mississippi floods of 2011 and Hurricane Irene, both of which caused widespread physical and economic damage, much of it uninsured, are prompting a reexamination of how the risk of flooding is handled, from the building of levees and other artificial barriers to the federal flood insurance program, including the possibility of some form of privatization. Meanwhile, the last Congress balked at significant change, choosing instead frequent short-term reauthorizations in lieu of long-term reform. Efforts to revamp the program are continuing.

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2011

July 16, 2011 Comments off

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice – 2011
Source: Insurance Information Institute

A myriad of different programs in place across the United States provide insurance to high-risk policyholders who may have difficulty obtaining coverage from the standard market. So called residual, shared or involuntary market programs make basic insurance coverage more readily available. This updated report examines the property insurance coverage provided by Fair Access to Insurance Requirements (FAIR) Plans, Beach and Windstorm Plans and two state run insurance companies in Florida and Louisiana: Florida Citizens Property Insurance Company (CPIC) and Louisiana Citizens Property Insurance Corporation (Louisiana Citizens). Also discussed in detail are the plans in Alabama, Massachusetts, Mississippi, North Carolina, South Carolina and Texas. This year’s report, like the reports of the last four years, records the ongoing growth in the exposure base of the residual market property insurers along with the still-precarious financial condition of some plans. In the course of the last four decades FAIR and Beach Plans have experienced explosive growth both in terms of policy count and exposure value. Total policies in force (both habitational and commercial) in the nation’s FAIR and Beach and Windstorm Plans combined practically tripled from 931,550 in 1990 to 2.8 million in 2010 – a record high. Total exposure to loss in the plans surged from $54.7 billion in 1990 to $757.9 billion in 2010—an increase of 1,286 percent.

+ Full Report (PDF)

Terrorism Risk: A Reemergent Threat – 2011

April 25, 2011 Comments off

Terrorism Risk: A Reemergent Threat – 2011
Source: Insurance Information Institute

This updated paper notes that in the countdown to the 10-year anniversary of September 11 the threat of terrorism continues to evolve. Recent incidents such as the January 24, 2011 suicide bombing at Moscow’s Domodevo airport, last year’s attempted car bomb attack in New York City’s Times Square and the thwarted plan by Najibullah Zazi to bomb the New York subway system are propelling terrorism into the headlines once more. Unrest in more than a dozen countries across the Middle East and North Africa, triggered by an uprising in Tunisia that began in December 2010, has also increased political and social tensions in a potentially volatile region in recent months. The paper includes sections focusing on how insurers treat terrorism risk today; estimating potential terrorism losses; the nuclear, biological, chemical and radiological (NBCR) threat; aviation insurance for terrorism risks; and liability issues. The report also provides an explanation of the structure and coverages of the Terrorism Risk Insurance Act of 2002 (TRIA), which was extended through December 2014 under the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA).

+ Full Paper (PDF)

Property and Casualty Insurance — 2010 Year End Results

April 25, 2011 Comments off

Property and Casualty Insurance — 2010 Year End Results
Source: Insurance Information Institute

The property/casualty (P/C) insurance industry reported an annualized statutory rate of return on average surplus of 6.5 percent for 2010. The year’s result compares favorably with 2009’s rate of return of 5.8 percent and the recession battered 0.6 percent rate of return in 2008. Overall net income after taxes (profits) for the year increased by $6.0 billion to $34.7 billion from $28.7 billion in 2009. Positive premium growth for the year—at 0.9 percent—is the first since 2006 and confirms that the era of mass exposure destruction in the property/casualty insurance industry is finally over, with demand for insurance now beginning to stabilize and recover in the aftermath of the “Great Recession.” While underwriting losses deteriorated marginally, the industry is still operating on a close to “breakeven” basis with a combined ratio of 100.8, after excluding mortgage and financial guaranty insurers. As has been the case since mid-2009, virtually all of the improvement in the industry’s financial performance came from a massive reversal in asset values, which allowed the industry to realize $5.7 billion in capital gains during 2010 compared to a $7.9 billion realized capital loss a year earlier. Looking ahead to 2011, the U.S. P/C insurance industry will remain very strong financially despite enormous catastrophe losses abroad, the vast majority of which will be borne by foreign insurers and international reinsurers. The industry results were released by ISO and the Property Casualty Insurers Association of America (PCI).

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