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Winter Weather Third-Largest Cause of Cat Losses

Winter Snow Storm

Weather damage never goes out of season. According to a new report from the Insurance Information Institute (I.I.I.), winter storms are historically the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes.

“Winter storms accounted for 7.

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1 percent of all insured catastrophe losses between 1993 and 2012, placing it third behind hurricanes and tropical storms (40 percent) and tornadoes (36 percent) as the costliest natural disasters,” said I.I.I. President Robert Hartwig.

Insured Catastrophe Losses

Between 1993 and 2012, winter storms resulted in about $27.8 billion in insured losses—or $1.4 billion per year, on average, according to Property Claims Service for Verisk Insurance Solutions.

A December ice storm in North Texas left at least $30 million in residential insured losses in its wake, the Insurance Council of Texas reported. This figure does not include estimated damage to vehicles or government property, nor does it take into account the significant municipal expense of safety or cleanup measures. Dallas County alone spent 0,000 to 0,000 just to battle slick roads, according to conservative estimates from County Judge Clay Jenkins.

He told Insurance Journal that, while sanding and salting roads constituted some of the county’s greatest efforts, the biggest cost came from closing offices, including the court system. Weather-related shutdown resulted in lost productivity of about .

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5 million, he said.

Nation-wide, December weather caused total economic and insured losses estimated in the hundreds of millions of dollars and claimed 29 lives, Aon Benfield reported.

But 2013 should have made some fair-weather friends in the insurance industry. Last year, according to Munich Re, direct overall losses caused by global disasters amounted to around $125 billion and insured losses of around $31 billion. While exceptionally costly, these were below the 10-year averages of $184 billion and $56 billion, respectively.

Jan. 1 Reinsurance Renewal Rates Drop

New capacity, rate reductions and competition are a few factors contributing to a softer market and an 11% drop in reinsurance rate on line—a calculation of reinsurance premium divided by reinsurance limit—almost across the board, according to Guy Carpenter.

Much of this was driven by a decline of 15% in the United States, while property catastrophe pricing in Continental Europe and the United Kingdom fell by 10% and 15%, respectively, Guy Carpenter said.

Willis Re said in its “1st View” report that soft market conditions are not unique to the property catastrophe market. The report found that “with few exceptions rates are down on most lines at Jan. 1.”

Key influences on the Jan. 1 renewals were over-capacity and a number of other converging factors. “Rate reductions, new capacity, new market entrants, low interest rates, greater retention of reinsurance premiums by large buyers, diminishing reserve releases, expansion in terms and conditions and the increasing tempo of regulatory oversight” were issues facing reinsurers entering 2014.

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New capital from non-traditional capital market sources has grown to reach $50 billion. Compounding the situation, reinsurers are seeing lower demand from buyers, the report said.

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Peter Hearn, Willis Re chairman said in a statement, “Faced with these market headwinds, reinsurers are adopting a variety of strategies. Larger reinsurers are using their balance sheet strength and technical ability to offer more capacity and more complex, multi-class, multi-year deals. Others are expanding into specialty lines and many have developed multi-channel capacity offerings seeking to use their underwriting expertise to deploy capacity on behalf of capital markets. Additionally, we have seen the rise of pooling arrangements that give smaller reinsurers the opportunity to access business they might not otherwise see in their local markets.

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The United States is seeing a softening market as increased capacity from non-traditional capital providers and retained earnings from a benign catastrophe year pressures traditional reinsurers to offer significant price reductions to compete for business.

Also in the U.S.:

• Risk-adjusted price reductions are being seen in all sectors

• There are wide variations for regional and state specific programs, depending on loss experience and reliability of vendor models

• Multi-year contracts and market facilities are becoming more routine for reinsurers wishing to lock in business

Plan Ahead for Holiday Party Risks

Holiday office parties are a good opportunity to bring employees together, but they present potential risks for organizations. With social media added to the mix, even slight misconducts can be amplified if they go viral. What might have been an embarrassment handled quietly by a company can quickly become a reputation issue.

According to an article by Lloyd’s, the addition of social media “can seriously impair a company’s ability to manage a crisis,” said Eric Alter, Risk Consultant at Marsh Ltd.

“Social media and business entertainment can be a challenging mix—whether it is a sales conference, awards dinner or a Christmas party—the use of social media in the work environment has to be carefully considered,” he said, adding that websites like Twitter, Facebook and Instagram enable almost instant sharing of information, but even email can cause problems. An employee intending to send a funny email to a coworker, for example, could accidentally send it to clients.

Steve Adcock, Underwriting Manager at QBE Europe observed that alcohol can lead to a heightened risk of inappropriate comments, behavior or even assault. “People can lose their inhibitions and may not think about what they say or do,” he said. “Employees will not always get along at the Christmas party. Disagreements can lead to hurt feelings through to a potential assault.”

Paul Griffin, Head of Employment and Labor at international law firm, Norton Fulbright cautioned that an employer is liable for the wrong doings or injuries of their employees, unless they can show they have taken all reasonable steps to prevent them.

To protect themselves and their employees, organizations need to advise staff attending a party that the usual company rules still apply, Alter advised. “A company policy should make it clear that any event that is associated with work should be treated as work, and that the social media policy continues to apply.”

OneBeacon Professional Insurance noted in “A Guide to Minimizing Risk at Company Holiday Parties,” that because of the infrequency of company-sponsored holiday events, liability risks are often overlooked. Concerns such as liquor consumption, premises safety and security, discrimination and food borne illness are just a few of the issues that need to be addressed to help prevent injuries or even harassment.

According to the report, any accidents or injuries occurring at company events may be considered work-related and could possibly be subject to workers compensation.

To help avoid safety mishaps OneBeacon advises:

• When using a venue away from the office, inspect it to ensure it meets safety standards. Note exits, emergency lighting and whether there is flooring to prevent slips and falls, particularly if there is a chance of bad weather.

• Consider the effects that weather may have on safe travel to and from the party. Special considerations may be needed to keep sidewalks and parking lots clear if the event is outside of normal business hours.

• Think about potential security needs, especially if the event is in an unfamiliar neighborhood or of the venue is closed to the general public.

• Keep an eye on party-goers to ensure that no one wanders off or goes to a car or parking garage alone after dark.

• Have an emergency plan in place in case someone is injured or needs medical assistance. Find out the location of the closest hospital and whether anyone can perform CPR or use a defibrillator.

• Review situations for employees with disabilities who may require special attention. For example, if a disabled employee must use a wheelchair, check that there is a safe entrance, navigate the event and know how to deal with a possible emergency.

Disaster Losses Down From 2012

Windstorm Xaver: Model shows a large area of high winds in the lower atmosphere pushing waters of the North Sea into the coasts around western Europe.

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Courtesy WeatherBELL Analytics.

Natural catastrophes and man-made disasters worldwide reached $44 billion in insured losses in 2013—down from $81 billion in 2012, according to a Sigma preliminary report by Swiss Re.

The study found that total economic losses from disasters in 2013 totaled $130 billion and 25,000 lives were lost. Hurricane Haiyan alone, which hit the Philippines in November with record-breaking winds, claimed more than 7,000 lives. In 2012 total economic losses were $196 billion and 14,000 lives were lost.

Flooding in central and Eastern Europe in June 2013 created overall losses of $18 billion, with insured losses estimated at $4 billion, according to the report.

In the United States, severe spring and autumn weather spawned thunderstorms and deadly tornadoes.

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While this caused devastation of personal and commercial properties and heavy losses to the insurance industry, the 2013 North Atlantic hurricane season proved to be benign, the report found.

Alberta, Canada in June experienced flooding caused by heavy rains. Insured losses were about $2 billion—the highest ever recorded in the country for any disaster.

The most costly insured catastrophe losses in 2013

Date Insured losses
(US $B)
Economic losses
(US $B)
Event Country
1 June 4.1 18.0 Floods Germany, Czech Republic
2 July 3.4 3.8 Hailstorm Andreas Germany, France
3 June 1.9 4.8 Floods Canada
4 May 1.8 3.2 Severe thunderstorms, tornadoes US
5 March 1.6 2.2 Thunderstorms, tornadoes, hail US
6 May 1.4 2.0 Severe thunderstorms, tornadoes, large hail US
7 October 1.4 2.7 Windstorm Christian Germany, Denmark
8 April 1.1 1.6 Snow storm, ice, tornadoes, heavy rains US
9 December 1.0 1.4 Windstorm Xaver UK, Denmark
10 January 1.0 1.5 Floods caused by Cyclone Oswald Australia

Swiss Re Sigma preliminary estimates