Blog

How far has the insurance industry come since Hurricane Camille?

Category 5 hurricanes are one of the most powerful forces in nature. They produce winds of 157mph or greater and often lead to catastrophic storm surge. To this day, only four Atlantic hurricanes have made landfall in the continental US as a Category 5 – Labor Day Hurricane (1935), Hurricane Camille (1969), Hurricane Andrew (1992), and Hurricane Michael (2018).

Saturday (August 17) marked the 50th anniversary of Hurricane Camille, which made landfall as a Category 5 along the Mississippi Gulf Coast. Camille remains the second most intense hurricane to make landfall in the US, unleashing peak winds of approximately 175mph and storm surge of around 24.6 feet in certain coastal areas. The total cost of damages reaped by Camille reached an estimated $1.43 billion in 1969 dollars (closer to $10 billion in 2018 dollars).

Hurricane preparedness, response and recovery have all made huge strides over the past half century. Technological advances over time, such as better satellite imagery and forecasting capabilities, geospatial intelligence, aerial imagery, and drone capabilities, have all enabled us to better prepare and recover from serious storms.

Read next: Catastrophe losses hit $44 billion in first half

Reflecting on the progression, Jim Wucherpfennig, vice president – property claim at Travelers, said: “On a macro level, our response time to customers and claims today is 3X- 4X better and faster than it was at the time of Camille. There are a lot of people and process improvements I can go through, but from a pure technology perspective, there’s been so much progression.

“It all starts with how we plan for catastrophes. Back at the time of Camille, Travelers didn’t have a dedicated catastrophe response team, and we used to handle the majority of catastrophe claims using independent claim adjusters. Today, we do have a dedicated catastrophe team [headquartered at the Travelers National Catastrophe Center in Windsor Connecticut], and we use all Travelers employees to respond to catastrophe events.”

The Travelers National Catastrophe Center monitors weather 24-hours a day, seven days a week, using the Global Forecast System (GFS), a global numerical weather prediction system used by many of the top weather monitoring organizations. Unlike 50-years-ago, when Camille unleashed her terror, the Travelers team has meteorologists on staff, who can monitor weather data and can use that data to proactively communicate with customers, both before and after an event happens.

Read more: When a storm strikes, ‘you’re meant to act as though uninsured’

“We take that data and we have a lot of proprietary systems that help us plan for and manage catastrophes,” Wucherpfennig told Insurance Business. “We’re able to overlay where our customers are situated in relation to weather scenarios, meaning we can predict what resources will be needed to respond to events, as well as which customers are likely to have something significant happen to their home or business.

“We’re always monitoring weather events that could become a tropical storm or a hurricane – even when they’re way out in the Atlantic or down in the Gulf. As our models begin to tell us that a system is likely to develop, we have a catastrophe playbook, which contains actions that we will follow on each day leading up to, during or after an event. We provide a lot of communication to pre-event to our customers through our prepare and prevent process.”

Once the Travelers team has a good idea of where a hurricane or a tropical depression is likely to make landfall, they deploy resources to a safe area nearby so that they’re ready to handle claims and help customers as soon as the event has passed by. This is yet another example of technology-enabled preparedness that wasn’t possible on the same scale when Camille struck in 1969.

Up next: AGCS partners with the I.I.I. to safeguard businesses from wildfires

In catastrophe response, technology has “rapidly improved the cycle time of claims,” enabling adjusters to help customers get their lives back in order more quickly after an event, Wucherpfennig explained. For example, many insurers today use drone technology to inspect properties and survey damaged areas as soon as possible after a weather event. Among other things, Travelers also uses a virtual adjudication platform, which uses photographic imagery to create three-dimensional models of properties, enabling adjusters to provide faster and more accurate cost estimates to customers so that they can locate funds and begin repairs quicker.

Despite all the advances in technology, one thing hasn’t changed in the slightest when it comes to the insurance industry’s connection to hurricane risk. A couple of members in the Travelers property claims team are approaching or have just passed their 50th anniversaries with the insurer. They told Wucherpfennig that the end-goal of any hurricane preparedness or response strategy will always have the same thing at its core – people.

He summarized: “What hasn’t changed – and probably never will – is that our customers are turning to us in their time of need, and we have to help them recover and get back on their feet as quickly as possible. The end goal we had 50-years-ago was the same goal that the industry has today.”

Resource: https://www.insurancebusinessmag.com/us/news/catastrophe/how-far-has-the-insurance-industry-come-since-hurricane-camille-175789.aspx

5 Questions to Ask Your Insurance Rep About Renters Insurance

While renters insurance offers broad protection for tenants, it’s important for consumers to choose the policy that best suits their individual needs.

renters policy can cover your personal belongings and help cover legal costs in the event you are sued for accidental bodily injury or property damage of others. But not all policies are the same. Here are five questions to ask your insurance representative to help you make the right choice.

1. What’s Covered and What’s Not?

A renters policy generally covers your stuff against events like theft, lightning, fire, smoke, vandalism, explosions and windstorms.1 There’s also liability protection against claims and lawsuits alleging that you caused bodily injuries or property damage. There may be coverage for certain kinds of water damage, such as leaks from damaged pipes. Your insurance rep can tell you if the policy includes additional living expenses if you’re forced to move due to a covered loss.

A typical renters insurance policy does not generally provide coverage for damage from floods and earthquakes. Also, there will be limits on how much coverage is provided for your things. There could also be lower limits in the policy for different categories of your possessions. If you own expensive collectibles, such as jewelry or art, ask your insurance representative about buying additional coverage for these valuables.

2. Will a Renters Policy Cover my Roommate?

Renters insurance typically covers family members, but may not cover roommates. Travelers recommends that each occupant obtains his/her own policy to cover their individual stuff.

Some insurers allow roommates to be insured under a single policy.2 In these instances, roommates must agree to the level of coverage, based on the combined value of their stuff. If one roommate moves away, the remaining renter typically will need to obtain a new policy.

Protect the Things You Love with No Deductible

Traverse is a product by Travelers that offers low-cost insurance plans for cell phones, electronics, sporting goods, musical instruments and more. Traverse is currently only available in New York.

3. What’s the Difference Between Cash Value and Replacement Coverage?

There are two types of renters coverage, one that pays based on your property’s actual cash value and one that pays based on you property’s replacement cost.

For example, a computer you bought for $1,000 eight years ago has significantly depreciated in value, let’s say to $200. If you have a cash value policy, the maximum amount you would be paid would be the lesser of the cost to repair it, or $200. If you have a replacement cost policy, the amount you would be paid would be the lesser of the cost to repair or replace the item with a similar new computer.

4. Will Owning a Dog Affect my Renters Coverage?

Some policies provide coverage if your dog injures someone, and some insurers exclude or limit coverage for customers who own a dog. It’s best to discuss this with your insurance representative when purchasing your policy.

5. Am I Covered if my Laptop Computer is Stolen from my Car Parked Outside my Home?

Renters policies generally include coverage for items stolen off-premises. That means belongings outside your home have insurance protection similar to the things inside your home. However, off premises coverage may be limited to a percentage of your total coverage for personal items. For example, if you have $50,000 in personal items coverage, the amount available for off-premises losses may be 10 percent of that figure, or $5,000. Also, keep in mind, there is generally a deductible that applies.

Sources:
1 
http://www.iii.org/
2 http://www.investopedia.com/ask/answers/112015/can-roommates-share-renters-insurance.asp

Article resource: https://www.travelers.com/tools-resources/insurance-101/5-questions-to-ask-your-insurance-rep-about-renters-insurance

5 Tips to Protect Your Possessions with Valuable Items Insurance Coverage

You may think that a homeowners insurance policy provides adequate coverage for all your valuables, but policies may provide limited or no coverage for certain items — including generally expensive items — that are damaged or stolen.

For example, many homeowners policies generally have a $1,000 or $1,500 coverage amount for jewelry if the loss is due to theft. Such limits are in place to help keep homeowners policies affordable. However, if jewelry valued at $2,000 is stolen from your home and you have a $1,000 policy limit, you can only receive $1,000 from your insurer to replace the missing items.

That is when an insurance endorsement (sometimes called a rider) can provide increased coverage for your possessions. For an additional premium, this coverage can help protect you from the loss of high-end valuables such as jewelry, furs, antiques, artwork and collectibles.

Here are five tips that may help you decide whether you need valuable items coverage.

1. Read Your Insurance Policy

Your insurance policy is a contract between you and your carrier. This document includes the limits of how much you will be compensated when certain valuable items are damaged or stolen. Note that certain items may not be covered, so be sure to carefully review your policy to determine whether you have insurance that meets your needs. If you have questions, contact your insurance agent.

2. Have Your Valuables Appraised

You may have possessions that are worth more than you think. To help you decide whether you need additional coverage, it may be helpful to have them appraised. An appraisal can help you determine if your homeowners insurance policy covers the full value of your property, as some items may not be covered.

The value of some items, such as collectibles or jewelry, may be difficult to determine without professional assistance. It may be necessary to have your valuables reappraised periodically. If they increase in value, you may need additional coverage.

Travelers Insurance allows you to customize your coverage to fit your unique needs. We’ll help you understand the risks you face and get the coverage to help prepare you for the unexpected.

girl sitting in front of car

3. Create a Home Inventory

You may not be able to make a decision about whether to buy additional coverage until you know exactly what you own. You may want to take stock of your possessions by creating an inventory. Do not forget to check your garage, basement or attic for stored valuables, such as antiques and coin collections.

Be sure to list all items of value and include copies of receipts or appraisals when possible. This may help you if you ever need to file a claim with your insurance carrier.

4. Check Your Neighborhood’s Crime Rate

If you live in a community where the crime rate is high, you may have a greater need for additional coverage to protect your valuables. Police departments may track crime statistics and share this information with the public. You can consider asking your police department about home burglary trends in your neighborhood. Also consider installing a security alarm system. An alarm system may qualify you for a homeowners insurance discount.

5. Take Stock of Your Electronic Equipment

In our increasingly high-tech world, people use their electronic equipment to perform their jobs and maintain social connections. In recent years, many new gadgets and devices have been developed that may enhance our lives. If you keep high-end computers and other electronics in your home, you may want to make sure your homeowners policy will cover their loss.

Safeguard Your Personal Valuables

Your need to insure valuable items is something you may want to discuss with your agent whenever you buy a homeowners policy. If you purchase additional coverage for high-cost items, it is a good idea to understand its limits and exclusions.

Protect your home the way it protects you by choosing the property insurance coverage that meets your needs.

Resource: https://www.travelers.com/tools-resources/home/insuring/5-tips-to-protect-your-possessions-with-a-valuable-items-insurance-rider

How to Choose Car Insurance in 4 Steps

Because there are so many companies selling car insurance, sorting through all the choices to find the right policy for you and your family can be a challenging task. With each carrier claiming to offer the best value, it’s easy to feel confused. At first glance, all of the policies may look the same, but there are important differences you may need to consider. Your goal should be to find one that includes all the benefits you need at a competitive price.

Follow these four steps for finding the best car insurance policy for you:

1. Determine the Level of Coverage You Need

The cheapest policy may not be the one you need. Inexpensive plans may not provide collision coverage, which pays to fix your own car following an accident. They may not offer comprehensive coverage, which covers damage to your car not caused by auto accidents, such as natural disasters, theft or vandalism.

The nonprofit Insurance Information Institute notes that all states except New Hampshire require property and bodily injury liability coverage.1 A policy that offers only the minimum amount of liability protection required by law may save you money, but it probably won’t cover the legal claims that can stem from serious accidents involving property damage or injuries.

Remember that not everyone’s insurance needs are the same. For example, if you’re leasing a car, you may need gap insurance. If the car is totaled, gap insurance covers the difference between the actual cash value of the vehicle and the outstanding balance on your lease.

2. Review the Financial Health of Car Insurers

Everyone wants a good deal on their auto insurance policy, but low rates won’t do you any good if the company you choose isn’t around to pay its claims. Online reports from independent ratings companies, such as A.M. Best, Fitch, Moody’s and Standard & Poor’s, can help you determine your insurer’s financial health, says Investopedia.2

Each ratings agency uses its own standards for evaluating insurance companies and their financial health.

3. Compare Several Car Insurance Quotes

You can shop for insurance by going online, using the telephone or working directly with insurance agents. A report by Bankrate says getting multiple quotes is important because prices for the same level of coverage vary greatly.3 That happens because insurance prices are based on risk. Each carrier has its own formula for measuring the policyholder’s risk for filing claims.

Some insurers rely heavily on insurance scores to determine how likely policyholders are to file claims. Other companies may give more weight to the type of car you drive and how expensive it would be to repair following an accident.

Where you live also can be a factor in determining what you pay for car insurance. If your ZIP code has a higher-than-average rate of car accidents, your insurance costs could be higher.

4. Ask About Discounts

Many insurance companies offer discounts, notes MarketWatch.4 If you have a teen with good grades on your auto policy, he or she may qualify for a reduced insurance rate. Some insurers offer discounts to drivers who meet annual low-mileage thresholds or take driver education classes. If your car has an anti-theft device, that also could qualify you for a discount.

Be sure to ask to request a list of all available discounts. It could make a big difference in how much you pay for your policy.

Article: https://www.travelers.com/tools-resources/car/insuring/how-to-choose-car-insurance-in-4-steps

Florida expects higher insurance rates due to ‘riskier drivers’

By Kayla Elder Jul 27, 2019

TALLAHASSEE — The Florida Office of Insurance Regulation puts the responsibility of attaining lower automobile insurance in the hands of the drivers after the release of a national study by The Zebra shows Florida among the top three states with the highest rates.

“There are many factors that contribute to the higher than average car insurance rates in Florida, such as the larger percentage of riskier drivers,” said Karen Kees, a Florida Office of Insurance Regulation spokeswoman.

Kees points to students in the many universities in the state, older drivers due to a large number of retirement communities and drivers unfamiliar with the local roads due to high tourism as these “riskier drivers.”


Karen Kees, Florida Office of Insurance Regulation spokeswoman

The 2019 Zebra report shows that Florida has an average annual rate of $2,059. By comparison, the lowest in the nation, Maine, averages at $896.

The report ranks three Florida cities in the top 10 for paying the most for car insurance in the United States. Coming in third is Hialeah at $2,997, fourth Miami at $2,913 and sixth Tampa at $2,786.

Kees said insurance companies use a variety of factors to determine car insurance premiums including type of vehicle, driving history, vehicle usage, gender, age, marital status, credit history and a slew of geographical elements such as population density, road conditions, repair rates, medical and hospital costs and the number of accidents in a particular area.

“Distracted driving has played a major role in the increase in accidents and the subsequent increase in rates,” she said. “In addition the higher than average rate of uninsured drivers and a significant percentage of claims with attorney involvement also contribute to higher rates.”

The Zebra reports that using a phone while driving will raise insurance premiums 20 percent, and in some states more than 50 percent.

“Being a conscientious and careful driver is one sure way of getting better car insurance rates,” Kees said. “Consumers should contact their agent as many insurers provide discounts to those drivers with better driving habits.”

Resource: https://flarecord.com/stories/512758502-florida-expects-higher-insurance-rates-due-to-riskier-drivers

Florida company offering ‘alien abduction insurance’ has sold nearly 6,000 policies

Looking for a big insurance payout? Try getting abducted by aliens.

At least that’s what one Florida company is telling its customers. The St. Lawrence Agency, also known as the “UFO Abduction Insurance Company,” offers a very specific type of policy: For just $19.95, you can protect yourself against extraterrestrial encounters.

The insurance plan, which includes $10 million in coverage, was invented by Mike St. Lawrence, who describes himself as being in the “humor business,”according to Florida’s WFLA News.

Humor aside, the success behind St. Lawrence’s alien policy is very real. He says he’s sold nearly 6,000 plans since first launching his company in 1987.

The policy offers plenty of absurd benefits for any would-be abductees, including psychiatric care, “sarcasm coverage” and “double identity coverage.” For just $5 more, customers can also get a paper certificate as evidence of their purchase.

Policyholders should read the fine print before they buy, though. In the event of an abduction, the plan’s $10 million coverage pays out at a rate of $1 per year for 10 million years.

Resource: https://www.aol.com/article/news/2019/07/22/florida-company-offering-alien-abduction-insurance-has-sold-nearly-6000-policies/23775658/

Congress Looks to Jump Start Stalled Driverless Vehicle Bill

Two key committees in the U.S. Congress on Tuesday said they will revive efforts to pass long-stalled legislation to speed the adoption of self-driving cars.

The House Energy and Commerce Committee and Senate Commerce Committee sent automakers, safety groups and others interested in the bill a request for input and said they were working on a “bipartisan and bicameral basis to develop a self-driving car bill.”

In December, Congress abandoned efforts to pass legislation on self-driving cars before it adjourned, in a blow to companies like General Motors Co and Alphabet Inc’s Waymo unit.

The Alliance of Automobile Manufacturers, representing General Motors, Volkswagen AG, Toyota Motor Corp and others, praised the announcement.

“Right now various countries are exploring regulations that will shape the future of autonomous vehicles, and the U.S. risks losing its leadership in this life-saving, life-changing technology, so we urge Congress to move forward now, this year,” spokeswoman Gloria Bergquist said.

The letter sought input by Aug. 23 on a variety of issues including federal rules – both current or new – testing, privacy, disability access, cybersecurity, consumer education and crash data.

The U.S. House unanimously passed legislation in September 2017 by voice vote to speed the adoption of self-driving cars, but it stalled in the Senate last year. Despite a series of concessions by automakers, the bill could not overcome objections of some Democrats who said it did not do enough to resolve safety concerns.

Under the prior legislation, automakers would have been able to win exemptions from safety rules that require human controls. States could set rules on registration, licensing, liability, insurance and safety inspections but not set performance standards.

In October, the National Highway Traffic Safety Administration (NHTSA) said it was considering a pilot program to allow real-world road testing for a limited number of vehicles without human controls.

Automakers must currently meet nearly 75 auto safety standards, many of them written under the assumption that a licensed driver would be able to control the vehicle using traditional controls.

In January 2017, GM filed a petition with NHTSA seeking an exemption to deploy fully automated vehicles without steering wheels before the end of 2019; that petition was still under review.

Last week, GM’s self-driving unit, Cruise, said it was delaying the commercial deployment of cars past its target of 2019 as more testing of the vehicles was required.

(Reporting by David Shepardson; Editing by Cynthia Osterman)

Challenges Facing the Florida Insurance Market: A Reinsurer’s Perspective

Hurricanes Irma and Michael served as a reminder that Florida, more than any other state, is at risk of one of the most intense natural perils, namely hurricanes. The existence of a stable insurance market providing its customers with a wide choice of affordable insurance is essential for the Florida economy to prosper.

Nonetheless, the Florida insurance market faces various challenges, the most critical from a reinsurance perspective being:

The litigious environment that is driving unprecedented social inflation threatening the affordability and availability of private insurance and impairing (re)insurers efforts to address existing insurance protection gaps with innovative products.

The need to enhance and consistently enforce building codes reflecting the latest scientific developments to create more resilient communities that will save lives and mitigate damage from catastrophes.

Social Inflation Impacts Private Insurance

A recent Insurance Information Institute report found that litigation related to assignment of benefits (AOB) increased by 70% from 2013 to 2018 – increasing even in years without a major hurricane. In fact, many homeowner AOB water claims are related to non-weather water damage. This, and other unfavorable litigation and loss adjustment cost trends, led to a strong rise in non-catastrophe loss ratios in the Florida homeowners’ insurance market and, consequently, approved rate increases to counter the exponential growth in social inflation costs associated with homeowner property losses.

Social inflation also drove the loss adjustment expenses from Hurricane Irma to unprecedented levels, thereby increasing the loss burden to reinsurers considerably beyond original projections. This reversed the trend of falling reinsurance costs since 2012 during the latest June 1 renewals with many catastrophe reinsurance programs having to pay significantly higher premiums to reflect the new levels of social inflation observed in the Florida homeowners’ insurance market.

Social inflation driven by excessive litigation resulting from AOB abuse, amongst other causes, threatens the affordability of homeowners insurance and, in the worst case, the availability of private insurance products. This has already been observed in the southeast of Florida where various private homeowners insurance carriers have ceased to write new homeowners insurance policies, thus reducing choice for customers.

The link between water-related losses and AOB-driven litigation has caused concerns in the marketplace as to how social inflation could adversely impact innovative flood options aimed at encouraging higher flood insurance take-up rates among Florida homeowners.

Currently, too many Florida homeowners who are at risk of flooding are uninsured. There are about 2.5 million homes in FEMA flood zones in the state of Florida, yet, FEMA says that as of February 2018, only 46% of the homes located in a 100-year floodplain are insured against the peril. For those homes outside the 100-year floodplain, the risk of damage from flood is still high, but as coverage is not required by federal-backed lenders, the take-up rate is even lower.

This leaves an “insurance gap” that can – in the worst case scenario – put a homeowner and an entire community at risk of financial ruin.

H.B. 7065 – A Much Needed Reform

The recently passed property insurance AOB reform bill, H.B. 7065, should bring much needed relief for the Florida insurance market. It addresses the abuse of post-loss AOBs by clarifying insureds’ rights related to the execution, validity and effect of AOB agreements, allowing insurers to include provisions in their insurance policies that prohibit or restrict the use of post-loss AOBs, and enables insurers to monitor and limit the cost of emergency repairs to reasonable amounts. It also introduces a more equitable method to establish which party, if any, will get attorney fees awarded, reducing the incentive for excessive use of litigation to resolve disputes.

The reform bill is an important first step to address the unsustainable levels of social inflation in the Florida homeowners insurance market. However, there is still a great deal of work ahead in terms of educating consumers about their new rights under H.B.7065 and for insurance companies to adapt their homeowner claims procedures to the new law while keeping their customers at the forefront of their mind.

We expect that AOB reform will result in stabilizing insurance costs and that, over time, Florida will be able to address the other factors that are driving social inflation. And only then will the legal reform unfold its full potential to curtail the exponential growth in social inflation thereby further stabilizing insurance costs, enhancing consumer choice and enabling innovation such as private flood solutions.

Building Resilient Communities to Thwart Flood and Wind

While homeowners insurance, including adequate wind and flood coverage, is critical to helping rebuild after a loss, it’s also important to try to minimize the loss before it occurs. Communities need to think about building resiliently to withstand today’s natural perils as well as the future impacts of climate change. Resilient communities may be able to rebound more quickly following a natural catastrophe, resulting in more lives saved and a quicker return to normal for the local economy.

Following Hurricane Andrew, Florida implemented statewide building codes needed to respond to a new level of storm devastation. In 2018, Hurricane Michael exemplified the value of resilient buildings post-storm as homes constructed to Florida’s building codes helped save assets and, more importantly, save lives. In contrast, the older buildings in the Florida Panhandle that were built prior to the 2002 building codes were not as able to withstand Hurricane Michael and, instead, experienced major structural damage or total loss.

Education is vital to help homeowners understand the ways they can fortify their homes. Non-profit organizations and many insurance agents and reinsurance companies have stepped up efforts to provide Floridians with the information they need to make resilient choices when it comes to repairing or (re)building a home.

From litigation reform to helping homeowners understand all the ways they can protect themselves, their homes and their financial wellbeing, the reinsurance industry will continue to work toward creating a strong and viable Florida insurance market.

Insurer Group Warns on Property Losses Due to Climate Change

Insurers are increasingly worried that rising temperatures will lead to a slump in property values that could spark broader financial turmoil.

Those were the conclusions a group run out of the University of Cambridge including some of the world’s biggest insurers. In a report published Friday, ClimateWise said that increasing catastrophes linked to climate change could triple losses on property investments over the next 30 years.

The warning adds to concerns raised by Munich Re AG last month, which said a string of floods, fires and violent storms had doubled the normal amount of insurable losses. Munich Re has said global climate-related losses may have topped a record $140 billion last year.

“A failure to take account of these risks could be damaging both for individual investors and lenders, but also for the financial system and economy as a whole,” according to the 74-page report, which was written on the behalf of ClimateWise members including Allianz SE, XL Group, Aviva Plc and Lloyds Bank Plc.

The warning is the latest from the financial sector of the physical and financial risks posed by rising temperatures. While some investment strategists think climate change will offer opportunities, others warn of physical damage to commercial and residential real estate.

While scientists are cautious to link any single weather event to global warming, they’ve built consensus around the probability that more powerful floods, fires, droughts and storms will occur with higher frequency as the Earth gets hotter.

“Massive wildfires appear to be occurring more frequently as a result of climate change,” Munich Re board member Torsten Jeworrek said, adding investors should look again at whether they’ve properly accounted for rising damages from weather catastrophes.

The German insurer reported $160 billion of losses from natural catastrophes last year, some $20 billion above inflation-adjusted averages in the previous three decades.

The ClimateWise report recommends investors take more thorough inventories of housing and business real estate, making logs of flood risks and construction materials used. They should also incorporate scientists’ climate projections into their own catastrophe models.

Under one scenario tested by ClimateWise, losses on U.K. mortgage could double if temperatures increase by 2 degrees Celsius (3.6 Fahrenheit) and triple if warming spikes 4 degrees Celsius. The United Nations wants to hold average temperature increase to well below 2 degrees Celsius, which would still represent the quickest shift in the climate since the last ice age ended some 10,000 years ago.

“Financial institutions with long-term investments, including banks and building societies providing new 35-year mortgages today, will have exposures to risks in this time period,” the report said.

The predictions come amid signs that global warming is causing noticeable dents in some of the world’s largest and most sophisticated economies.

A protracted drought in Germany that made crucial waterways impassable to ships shaved around 2 percentage points off growth in Europe’s largest economy in the fourth quarter of 2018. Wildfires in California caused the first major corporate casualty of climate change, with utility PG&E collapsing due to a $30 billion liability from two years of fires.

Extreme weather events are the most threatening global risks this year, the World Economic Forum said in a report published January.

The U.S Defense Department last month warned climate change could compromise U.S. security, with rising seas increasing flood risk to military bases and drought-fueled wildfires endangering those inland. In December, the Bank of England said it would force banks to make better preparations for climate change after finding only a few had done so.

Warnings from the financial sector on climate change are “very important” in shaping broader public understanding of global-warming risks, according to Joanna Haigh, co-director of the London-based Grantham Institute for Climate Change and the Environment.

“If it concerns those who understand finance and the economy it should worry everyone,” she said.

Editor’s Note: Current members of ClimateWise include ABI, Allianz, Aon, Argo International, Aviva, Beazley, CII, Chubb, Ecclesiastical, Hiscox, Lloyd’s, MS Amlin, Navigators, Prudential, QBE, Renaissance Re, RSA, Sanlam, Santam, Swiss Re, Tokio Marine Kiln, Tokio Marine & Nichido, Willis Tower Watson, XL Catlin and ZurichThe analysis carried out for this report uses ETH Zurich’s CLIMADA model and The Future Flood Explorer developed by Sayers and Partners.

Lyft, Uber Shift Some Risk to Own Captive Insurers

On Friday, Lyft told potential investors in its initial public offering about its insurance unit, Pacific Valley Insurance Co. Hawaiian public records show another captive company called Aleka Insurance Inc., whose directors include Uber executive Gus Fuldner and former chief legal officer Salle Yoo.

Captives are a large but murky part of the insurance world. Hawaii pitches itself to the captive industry on its website, boasting about low taxes and corporate-friendly laws. Lyft has tapped Marsh & McLennan Cos. to help manage Pacific Valley, while Aon Plc oversees Aleka, the filings show.

Lyft, which had about $810 million in insurance reserves, uses its unit to help bear the cost of auto incidents. Even though it also turns to outside insurers for some coverage, that subsidiary introduces volatility.

Higher costs from insurance claims dragged down a measure of Lyft’s profitability during the first few months of 2018. Lyft says it’s investing in its insurance program to help eke out more cost savings.

An Uber spokesman declined to comment.

Ride-sharing companies have caught the eye of other insurers. Travelers Cos. helps Lyft handle auto claim services and Allstate Corp. said last year that it partners with Uber to provide commercial auto insurance in some states.

View this article online:
https://www.insurancejournal.com/news/national/2019/03/04/519371.htm