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The Rise of Alternative Capital

May 24, 2015 Comments off

The Rise of Alternative Capital
Source: Insurance Information Institute

A new Insurance Information Institute white paper examines the impact of alternative capital on reinsurance, says I.I.I. chief actuary and paper co-author Jim Lynch.

What sounds like a dry topic actually may in the long run significantly affect the entire insurance industry, right down to the humble buyer of a homeowners policy.

It’s a dry phrase, so let’s parse the phrase alternative capital on reinsurance by starting at its back end. Reinsurance is the insurance that insurance companies buy. Insurance companies accept risk with every policy. They work hard to ensure they don’t have too much risk in one area, like too many homes along Florida’s Atlantic coast.

When they do, they protect themselves by buying reinsurance. Instead of buying a policy that covers one risk, the insurance company enters into a treaty that can cover thousands in case of a catastrophe like a hurricane.

Terrorism Risk Insurance Program: Renewed and Restructured

April 6, 2015 Comments off

Terrorism Risk Insurance Program: Renewed and Restructured
Source: Insurance Information Institute
From blog post:

The April 2013 Boston bombing may have marked the first successful terrorist attack on U.S. soil since the September 11, 2001 tragedy, but terrorism on a global scale is increasing.

Yesterday’s attack by the Al-Shabaab terror group at a university in Kenya and a recent attack by gunmen targeting foreign tourists at the Bardo museum in Tunisia point to the persistent nature of the terrorist threat.

Groups connected with Al Qaeda and the Islamic State committed close to 200 attacks per year between 2007 and 2010, a number that grew by more than 200 percent, to about 600 attacks in 2013, according to the Global Terrorism Database at the University of Maryland.

Latest threats to U.S. targets include calls by Al-Shabaab for attacks on shopping malls.

And a recent intelligence assessment circulated by the Department of Homeland Security focused on the domestic terror threat from right-wing sovereign citizen extremists.

On January 12, 2015, President Obama signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2015.

A new I.I.I. white paper, Terrorism Risk Insurance Program: Renewed and Restructured, takes us through each of more than eight distinct layers of taxpayer protection provided under TRIA’s renewed structure.

Mortality Risk

February 18, 2015 Comments off

Mortality Risk
Source: Insurance Information Institute

The chart below shows the likelihood, or odds, of dying as a result of a specific type of accident. The odds of dying over a one-year period are based on the U.S. population as a whole, not on participants in any particular activity or on how dangerous that activity may be. For example, more people are killed in auto accidents than in motorcycle accidents or airplane crashes, not because riding a motorcycle or traveling in an airplane is more or less dangerous, but because far more people travel by car. The lifetime chances of dying in a car accident are about 1 in 491, compared with 1 in 135,666 for fatal injuries caused by lightning.

Heart disease is the leading cause of death in the U.S., accounting for nearly 600,000 fatalities in 2010, according to the Centers for Disease Control. Influenza and pneumonia ranked ninth in 2010, accounting for some 50,000 fatalities. However, pandemic influenza viruses have the potential to be far more deadly. An estimated 675,000 Americans died during the 1918 Spanish influenza pandemic, the deadliest and most infectious known influenza strain to date.

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.

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.

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