For over two decades, Catastrophe (CAT) Models have served as tools for insurance companies to manage their exposures from an aggregation of risks in a catastrophic event. Since their launch in 1987, these models have gone through many updates to further reduce the uncertainty from the previous version’s modeling results. As a result, what was originally developed as an underwriting tool has now become a substantial rule critical to the rating process.
The subject of CAT Modeling has received a fair amount of attention in the world of property insurance, thanks to the release of RMS version 11 last year. The influence it has made to the market via increased rates and increased underwriting discipline has been substantial. Having an understanding of CAT modeling Read more…
Technology companies that have owned manufacturing operations or outsource their manufacturing to suppliers in Asia should get an early start on their 2012 Property Insurance Renewals. Outside of the insurance realm, companies should seek diversification in their supply chain whenever possible to help mitigate a concentration of risk in catastrophic prone countries.
The credit rating firm, Fitch Ratings, said in a new report that the “reinsurance industry will most likely try to raise catastrophe premiums across the world to try to absorb the steep losses from natural disasters in the Asia-Pacific region.” This will impact technology companies who rely on outsourced Asian manufacturing locations and purchase Property and Business Interruption coverages in order to protect their supply chain. Read more…
When a hurricane or tropical storm hits, it’s easy to determine whether your assets suffered physical loss or damage almost immediately, with tree limbs puncturing a roof, broken glass or water showing up inside a building. But what if your facility didn’t suffer physical damage but you still could not operate due to lost power? Or a large quantity of temperature-sensitive property spoiled due to a loss of power of a refrigeration system? If a loss of utility services was the result of a peril that occurred at the premises of the utility provider, and is otherwise covered by your property insurance policy, you may have coverage for your resulting property damage or business interruption loss.
This coverage, called Off Premises Utility Services or Service Interruption, is intended Read more…
With the snow finally melting, our attention shifts from ice dams to water dams. On the heels of a record breaking rain season last year, we offer some advice when it comes to the peril of flood, the most common and widespread of all disasters, as well as managing a crisis and damage prevention.
Before the storm:
- Before the first rain drop falls, make sure that you have proper coverage. This means accounting for not only property exposures but also any Business Interruption and Extra Expense exposure. Working with your insurance broker to assess every aspect of your exposure will help you rest easy as the storm clouds approach.
- Establish an emergency plan and discuss it with key employees. Refresh their memory with a meeting or email blast as the rainy season approaches.
- Maintain accurate inventory of onsite products and inventory, Read more…
In 2009 Congress appropriated $220 million to FEMA for a program called Risk Mapping, Assessment and Planning (Risk MAP), a comprehensive 5-year plan to vastly improve the accuracy and quality of National Flood Insurance Program maps. The plan is designed to bring wider risk mitigation while incorporating risk separation tools and techniques to flood prone areas with maximum focus and effect. The ultimate goal for Risk MAP is to reduce loss of persons and properties in the event of flood or storm surge, particularly in historically flood prone areas.
One other very important goal of this program is to lessen the negative financial impact of floods and storm surge on the U.S. Treasury. It will take time for the implications of these changes to manifest, but make no mistake, we will see limitation on severe flood destruction zone, like on barrier reefs, and increased pricing for homes Read more…
Every time there is a huge earthquake in one part of the world, it is common and certainly appropriate for other parts of the world to consider the risk of earthquakes closer to home. The Northeast is home to infrequent but not insignificant earthquakes. During 2010, an earthquake in Bernardsville, New Jersey along the Ramapo fault clocked in at 2.6 on the Richter scale. Later that year, a 3.9 quake was registered off the New York and New Jersey coastline.
Larger quakes have occurred in historical time. A 5.2 magnitude quake along a fault that runs roughly along 125th Street in Manhattan caused great damage in 1737. Similarly, a 6.2 quake near Gloucester, Massachusetts caused damage in Boston, Salem and other colonial cities. A quake of the same strength and in the same place today is predicted to cause about $1.6 billion in damage and result in 10 deaths Read more…
As the winter months and the bitter cold continues with no end in sight; many companies are inquiring about whether it is “okay” to have employees use portable/space heaters in the office. It depends on a few different factors. Space heaters can prove to be a hazardous to your employees and the company’s property. These units can increase the chance of a fire within the office and have the potential to burn employees.
Before agreeing to allow space heaters in the office, it is critical to check with your local fire department to ensure that having the space heater in a commercial environment is not breaching any municipal or state fire codes. If in fact the fire department has cleared the use of the space heater, every company should talk with their Building Manager to make sure the having a Read more…
The risks to ships transiting the pirate-infested waters off the coast of Somalia are on the rise. Last year, the average ransom paid to Somali pirates was $5.4 million compared with $150,000 in 2005. Just last week, Somali pirates captured a U.S.-bound tanker carrying around $200 million worth of crude oil in the Indian Ocean in one of the biggest hijackings in the area to date. The Irene SL, taken along with 25 crew members on board, was carrying 2 million barrels of oil which amounts to one-fifth of daily U.S. crude imports. The hijacking came a day after an Italian tanker carrying oil worth more than $60 million was also taken by Somali pirates.
A report today from Business Insurance outlined the latest hot spots in kidnap & ransom risks, saying that Somali piracy and Mexican kidnapping are on the upswing. Read more…
It has been reported that the Australian tropical cyclone Yasi could cause as much as $1.5 billion Australian ($1.49 billion) in insured damage, based on catastrophe modeling by AIR Worldwide Corp. Yasi made landfall last week just north of Mission Beach, causing floods and damaging buildings throughout Queensland.
The region had already been flood-ravaged prior to Yasi by an earlier storm named Anthony, leading experts to make comparisons to devastating the 2006 storm season.
Vineet Jain, principal engineer at Boston-based AIR Worldwide, said, “Losses from Yasi may well exceed those from Cyclone Larry in 2006.” Larry followed a similar path as Yasi, although it tracked slightly to the north and had less intense winds. Larry caused an estimated $540 million Australian ($536.2 million) in insured damage.
Insurers in Florida are requesting rate hikes, even though the state hasn’t seen a hurricane in more than five years, in part because of an increase in claims for sinkholes and other damage.
Homeowners insurance claims filing in Florida for damage caused by sinkholes have nearly quadrupled between 2006 and 2010 statewide, according to a report from the Senate Banking and Insurance Committee issued this week.
A survey of 211 private insurers by the Office of Insurance Regulation found that sinkhole claims increased from 2,360 in 2006 to 6,694 in 2010, at a total cost of $1.4 billion. State-run Citizens Property Insurance paid about $84 million for sinkhole claims in 2009 but only collected $19.6 million in sinkhole premiums. Read more…
For over two decades, Catastrophe (CAT) Models have served as tools for insurance companies to manage their exposures from an aggregation of risks in a catastrophic event. Since their launch in 1987, these models have gone through many updates to further reduce the uncertainty from the previous version’s modeling results. As a result, what was originally developed as an underwriting tool has now become a substantial rule critical to the rating process.
