Category Archives: Property/Casualty

Low Insurance Impact Expected from Haiyan

Posted on by

Damage in the Philippines from Typhoon Haiyan is widespread, with new information emerging daily. Insured losses, however, are expected to be low, with the greatest impact on smaller reinsurers, according to insurance industry reports.

online pharmacy zantac with best prices today in the USA

A.M. Best said in a briefing that it expects insured losses to be minimal, as non-life insurance is less than 1% of the country’s gross domestic product.

“Insured losses in the Philippines will be spread across many segments, including per­sonal lines, fire and property, and marine hull. Fire/property and marine hull will be well reinsured through the major global reinsurers and through Lloyd’s, which will also absorb some marine losses on a primary basis. Net losses to primary insurers will be limited, and some commercial losses also may be covered through captives or other forms of self-insurance,” the report said.

online pharmacy fluoxetine with best prices today in the USA

A.M. Best expects Haiyan to be an “earnings event for reinsurers” – more substantial for smaller, regional reinsurers. While it is expected to have minor impact on larger global companies, it is “yet another loss on top of recent catastrophes in Europe.”

In an update, Dr. Robert Hartwig of the Insurance Information Institute said that economic damages will be significant, with Haiyan having a “major negative impact on the Philippine economy.”

He noted two reasons why insured losses from Haiyan are likely to be low:

• The storm did not have a direct impact on Manila, the capital and largest city in the Philippines, well to the north of the track of Typhoon Haiyan.

• The Philippines is a small market for property/casualty insurance, with premiums of just $1.23 billion written in 2012. This amounts to $12.70 per person, compared to $1,223.90 per person in the U.S. “Even compared with the rest of Asia, the penetration of insurance in the Philippines is relatively low,” Hartwig said in the report, adding that per capita premiums in Asia were $91.90 in 2012.

In 2012 the Philippine’s GDP per capital was ranked 124th out of 184 countries by the International Monetary Fund, he said. The Philippine economy has grown steadily, however—at an annual rate of 7.

online pharmacy imuran with best prices today in the USA

5% as of the second-quarter of 2013—and should become better insured in the future.

Philippines Life and Nonlife Insurance Premiums, 2012

 

Direct premiums written
Nonlife premiums *

$1,231
Life premiums

$2,265
Total premiums

$3,496
Percent of total world premiums

0.08%

* Includes accident and health insurance.

Source: Swiss Re, sigma, No. 3/2013.

Climate Change Report Causes Alarm

Posted on by

New findings on climate change, establishing it as a manmade phenomenon, are garnering attention from the insurance industry, which recommends immediate action.

The Intergovernmental Panel on Climate Change’s (IPCC) newest report  “clarifies what businesses and investors already know, that climate change is happening now and human activity is the dominant reason why,” Mindy Lubber, president of CERES, a nonprofit organization that works with insurers and investors said recently on a conference call. “Climate change is disrupting all aspects of our global economy, including supply chains, commodity markets and the entire insurance industry, which is seeing exponentially large losses from extreme weather events.”

Lara Mowery, managing director, head of global property specialty practice with Guy Carpenter & Co., noted that the report should cause “significant concern” and impact how insurers and reinsurers shape their business going forward.

Insurers’ and reinsurers’ business plans “depend critically on understanding and assessing risk, which is likely to become even more challenging as weather variability increases,” she said. Identifying and understanding the causes and consequences of climate change is essential to “implementing workable risk management solutions.”

Global cat losses are increasing, she explained. In the 1980s, “the rolling 10-year annual average for the worldwide cat loss was less than $10 billion. In the last few years that average has jumped up to more than $50 billion average, based on that 10-year rolling time frame.” In addition, 2005, 2011 and 2012 represent the top three insured cat loss years on record, she noted.

Given the IPCC’s conclusion on flood, drought and changing weather patterns and evidence of this over the past 50 years, the industry needs to evaluate how these changes could impact future losses. As an example, she said, the most widespread hazard of global warming is coastal flooding. Impact of events such as Superstorm Sandy, which produced devastating storm surge, could have even worse consequences if sea levels continue to rise. “Insurers and reinsurers must continually assess the most up to date research and adjust their business plans according to increases in calculated loss.”

While this has meant more insurer capital is at risk, “that can’t be the only response, the only solution and the only answer. We can’t just keep putting more money in the path of what’s happening,” Mowery said.

She emphasized that the industry and insurance buyers can be taking steps now to address the risks.

A recent example of innovation in this area is the Metropolitan Transportation Authority’s (MTA) $200 million catastrophe bond that was issued in July, “the first of its kind to cover storm surge specifically,” she explained. The MTA commented in the aftermath of Sandy that their traditional avenues for insurance and reinsurance “constricted dramatically,” making it more difficult for them to obtain the kind of risk transfer they needed.

She also pointed out that “We can’t continue to let human and economic costs escalate. Building codes and standards and land use strategies are accepted adaptation measures to improve resilience against flood, wind and fire impacts that may worsen under global warming.”

Colorado Flood Damage Estimated at Over $2 Billion

Posted on by

Colorado River at Flood Level

Economic damages from the recent flooding in Colorado are expected to surpass $2 billion, according to a recent report from catastrophe risk modeler Eqecat. Most of that financial burden will fall on residents because very little flood risk is insured in the state.

Between 1,500 and 1,800 homes have been destroyed and thousands of homes have been damaged, leaving more than 10,000 people displaced. The estimated total cost to repair destroyed homes averages $300 million and early reviews of residential flood damage indicate an average of $20,000 to restore each of the 17,500 flooded homes that were not destroyed. But because of exclusions to the basic homeowners insurance policy, most of the losses will not be covered by insurance.

Historically, a very small portion of homeowners purchase flood insurance on homes outside of the 100-year flood zones outlined by the U.

S. National Flood Insurance Program, which provides insurance as part of a mortgage. Of the 17 counties impacted, most of the areas are not within defined flood zones.

President Obama declared a major disaster in nine of the hardest-hit counties, making residents eligible for direct federal grants to repair their flood-damaged homes, replace personal property and provide rental assistance, Reuters reported. This status also allows workers left jobless by the disaster to claim unemployment payments of up to 26 weeks and makes special low-interest loans available to farmers and small businesses to help cover their uninsured flood losses.

While these measures may help with immediate need, the extensive damage will require months of recovery and more rain is currently expected to cause rivers to crest another foot above flood stage today. With hundreds of miles of road flooded and many bridges and dams damaged or destroyed, Eqecat estimated losses to commercial and government properties and related expenses to total around $1 billion. Colorado officials announced a Dec.

1 target to complete temporary fixes to at least some of the heavily damaged roads, according to the Weather Channel. State highway crews and National Guard troops have already begun work to repair highways to mountain towns cut off by the flooding – roads that will only lead to more treacherous situations in remote areas as winter approaches.

Residents of one town have been told they will be displaced for up to six months, according to NBC News. Lyons town administrator Victoria Simonsen told a public meeting last week that E. coli bacteria had contaminated the drinking water system and the wastewater system incurred at least $1 million in damage, leaving the town unlivable for the foreseeable future.

This morning, authorities announced the eighth confirmed death from the flooding. Reuters reported that the search for hundreds of missing residents is winding down, with all but a half-dozen people now accounted for.

FEMA Releases Premium Guidelines for “High-Risk” Flood Zones

Posted on by

Anton Oparin / Shutterstock.com

Insurers have historically used FEMA’s Specific Rating Guidelines to calculate premiums for properties at high risk of flooding, particularly those built with the lowest floor elevation below the Base Flood Elevation (BFE). Prior to the National Flood Insurance Program’s extension in 2012 owners of these properties received subsidized rates well below the true flood risk. Many of these properties will now be rated using the Specific Rating Guidelines which FEMA released to the public last Wednesday.

The use of these new guidelines will undoubtedly result in significantly higher premium rates for many property owners in high risk zones. In its report FEMA stated that people whose properties are four feet below base flood elevation will see premiums totaling $95,000 over a 10-year period. These rates have many property owners and elected officials speaking out strongly against the reforms. Members of the Louisiana congressional delegation, including Senator Mary Landrieu (D), Rep. Bill Cassidy (R), and Rep. Cedric Richmond (D), have urged Congress to pass legislation that will delay or lower the rate increases. “I remain very concerned about the impacts these rate increases will have on homeowners and small businesses throughout our nation,” said Sen. Landrieu. Michael Hecht, president and CEO of Greater New Orleans, Inc., went every further stating that “flood insurance will be unaffordable for home and business owners across coastal and riverine America.”

In its guidelines FEMA did provide suggestions for property owners affected by the rate increases which include elevating the property above base flood level; however, this is often easier said than done. Flood insurance policies in the northeast offered an extra $30,000 to allow owners to elevate properties that had been damaged during Hurricane Sandy, but many property owners found that this amount would not cover all of the costs associated with elevating an entire property several feet above its original base. Other FEMA suggestions include adding flood vents to the property’s foundation, taking on higher deductibles, and working with local officials about community wide mitigation strategies.

The NFIP has become a major point of contention in light of the program’s fiscal crisis which was only exacerbated by Hurricane Sandy in 2012. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) went as far as to vow that his committee would take up legislation to privatize the flood insurance market. The program is sure to draw more and more attention as rate increases go into effect October 1, 2013.