Author Archives: Jared Wade

About Jared Wade

Jared Wade is a freelance writer and former editor of the Risk Management Monitor and senior editor of Risk Management magazine. You can find more of his writing at JaredWade.com.
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Earthquake, Tsunami Reshape Japan’s Coastline

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In the wake of the devastating earthquake and tsunami that ravaged Japan, the world’s attention has rightfully turned to to ongoing nuclear crisis at Fukushima. Three reactors are at risk of meltdown while spent fuel rods at a fourth reactor are at risk of catching fire, which would spew radioactive gas into the atmosphere. More than 200,000 people have either been evacuated or told by authorities to shelter-in-place and all but 50 workers at the nuclear plant have been sent home as radiation levels continue to “soar.” By all accounts this is now a full-scale international crisis as Japan’s neighbors are at risk and with the nation’s prime minister reporting asking energy “what the hell is going on?” the incident is becoming more harrowing by the minute.

All we can do now is monitor the information being reported and hope for the best in an incident that may already have caused insured losses of up to $35 billion, according to risk modeling firm AIR Worldwide, and has triggered the biggest two-day stock market decline in Japan since 1987, according to comments by CNBC’s Erin Burnett today on Morning Joe.

Looking back at the initial disaster, however, more and more is becoming known about the gravity of the catastrophe. The video below from ABC shows how the quake and tsunami drastically reshaped parts of Japan’s coastline. The awesome power of nature will never cease to amaze. Truly heart-breaking imagery. (More images of destruction can be seen here and here.)

For more breaking news coming out of Japan, stay tuned to our Twitter feed, @RiskMgmt.

How Japan’s Building Codes Prevented Casualties

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The tragic juxtaposition between the death toll from the 7.0 magnitude earthquake that devastated Haiti in January 2010 and the 8.8 quake that hit Chile less than two months later was glaring. The former killed an estimated 250,000 while the later left less than 600 dead.

It is still far too early to have even a close guess on the number of casualties from this morning’s 8.9 magnitude quake and the resulting tsunami in Japan. But while even one life lost makes this a tragedy, it seems as though the final total could be far below the horrific worst-case scenario that I envisioned when first hearing of the disaster’s size.

And much like was the case in Chile, Japan’s building codes had a lot to do with it.

From seawalls that line stretches of Japan’s coastline, to skyscrapers that sway to absorb earthquakes, to building codes that are among the world’s most rigorous, no country may be better prepared to withstand earthquakes than Japan.

The Times’ piece goes into more detail about tsunami protection.

Over the years, Japan has spent billions of dollars developing the most advanced technology against earthquakes and tsunamis. The Japanese, who regularly experience smaller earthquakes and have lived through major ones, know how to react to quakes and tsunamis because of regular drills — unlike Southeast Asians, many of whom died in the 2004 Indian Ocean tsunami because they lingered near the coast.

Communities along Japan’s coastline, especially in areas that have been hit by tsunamis in the past, tend to be the best prepared. Local authorities can usually contact residents directly through warning systems set up in each home; footpaths and other escape routes leading to higher ground tend to be clearly marked.

In the country that gave the world the word tsunami, Japan, especially in the 1980’s and 1990’s, built concrete seawalls in many communities, some as high as 40 feet. In addition, some coastal towns have set up networks of sensors that can sound alarms in every residence and automatically closed floodgates when an earthquake strikes to prevent waves from surging up rivers. Ports are sometimes equipped with raised platforms.

Resiliency in action.

Recently, I profiled the Institute of Business and Home Safety Research Center, an organization that is striving to improve building standards and the resiliency of building materials by testing them. Hopefully, in tragedy, we can also get a lesson that shows the critical importance of enforcing building codes based upon good science.

UPDATE: Here’s an image that further shows the need for good science. The projected path of the tsunami resulting from the quake. (via Business Insider)

Europe Just Cost Women a Bunch of Money on Their Car Insurance By Switching to Gender Equality

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Males have by and large run this planet since Neanderthals were drawing on walls in caves. So when we talk about improving gender equality, we are generally talking about things that are immediately beneficial to women. A recent ruling by the European Court of Justice, however, is likely going to cost female drivers some money.

The court has found that tying insurance rates to gender goes against Europe’s Fundamental Charter of Rights. So come December 2012, insurers will no longer be able to do it. The actuarial science regarding male and female drivers, particularly those under 25 years old, couldn’t be clearer. Young men get into more and more expensive accidents than your women. Still, while the numbers don’t lie, I have always wondered why that fact makes it OK to discriminate.

Apparently the court agreed.

Claire Wilkinson of III’s Terms + Conditions blog explains the likely fallout.

In the past, insurers relied on a 2004 directive that recognized the strength of the evidence for gender-based rates. The average claim for an 18-year-old male in the U.K. totals £4,400 ($7,160), vs. £2,700 ($4,390) for an 18-year-old female.

The net effect: Women will be subsidizing men for auto insurance. One British insurer estimated that women under 25 years could pay 25% more per year – perhaps £400 ($650).

The ruling affects other types of insurance, too. Women live longer, so they traditionally paid lower rates for life insurance. (The insurer could earn more investment income off the premium while waiting for the woman’s demise.) So women will see life insurance rates rise, perhaps by 20%.

This issue is obviously a thorny one.

On the one hand, equality is good. On the other, the insurance industry just lost a major, effective way to underwrite risks and properly price rates. Claire brings up the notion of credit ratings being used as a rate-setting metric as well, another thing that always struck me as irrelevant to car-driving ability. Again, the numbers there show some pretty definitive trends but, logically, the connection seems like one inappropriate to the policies that drivers are purchasing.

But what do I know?

I take the subway to work and have never even owned a car.

UPDATE: Canadian Underwriter ran a good piece on this development that includes the following insights about the marketplace uncertainty the decision has created.

The court’s decision will create some uncertainty in the market during the transitional period, says Noleen John, a legal consultant for international legal practice Norton Rose LLP.

“Insurers will from December 2012 need to apply unisex rates,” said John. “This transitional period is less than that recommended by the Advocate General and means that insurers will need to review their policies and practices as soon as possible.

“It also seems likely, in view of the length of the transitional period, that insurers may need to use uncertainty premiums until they have sufficient data in relation to the carrying on of business on this new basis. This could result in higher premiums or lower benefits for certain policyholders (female motorists and male annuitants).”

The decision also may create some uncertainty about the future of other established actuarial factors used to establish insurance premiums.

“There is going to be uncertainty in the insurance market for some time as a result of this decision,” says Ashley Prebble, insurance partner at Norton Rose LLP. “It is likely that the decision will require the European Commission to clarify the position with regards to other potential areas of discrimination, particularly age and disability.”

We shall see.

Insuring Charlie Sheen

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By now, you have probably heard that, most of the time — and this includes naps — Charlie Sheen is an F-18, bro, that will destroy you in the air and deploy his ordinances to the ground. In common English, what this means is that the star of the top-rated U.S. television show has increasingly appeared unhinged of late, following up a long, decadent stint of heavy drug use and extravagant partying with a series of interviews in which his barrage of non-sequiturs and eccentric philosophizing has led many to think he has lost his mind.

So, as with some other troubled celebrities we have profiled in the past, the insurance-related question becomes: is Charlie Sheen insurable?

The antics of major Hollywood actor Charlie Sheen have resulted in the cancellation of a multimillion-dollar production and put an entire cast and crew out of work, begging the question: Can this actor still be insured?

Broker to the stars Lorrie McNaught, vice president with Aon/Albert G.

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Ruben, the retail entertainment division of Aon Corporation, located in Sherman Oaks, Calif., responded.

“The short answer is yes, absolutely.

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Everything is insurable and it usually comes down to two things: price and the experience of the broker helping to underwrite the exposure.”

All a carrier need do, then, is find a broker capable of underwriting Vatican assassin warlocks with battle-tested bayonets. Good luck with that.