Latest Studies

Business interruption ranked as the top global business risk for the sixth year in a row, according to Allianz's annual survey of risk experts from around the world. Cyberrisk ranked at number 2 globally, and at number 1 in the U.S. Five years ago, cyberrisk ranked 15^th globally. Cyberrisk's ascent is likely due to recent attacks such as WannaCry and Petya/NotPetya, which caused significant financial losses to numerous businesses. Business Interruption (BI) which ranked at number 2 in the U.S., is also the main cause of economic loss for businesses after a cyber incident. Cyber BI incidents are increasing, resulting from hacker attacks, such as ransomware incidents, but more frequently from technical failures and employee error. Natural disasters ranked as the 3^rd most pressing global risk, with survey respondents expressing concern that climate change and rapid urbanization will contribute to loss potential. 2017 was the most expensive catastrophe loss year in history (with insured losses of about $135 billion) and executives are concerned that it portends things to come. Full report

This McKinsey & Co, report analyzes the 2017 hurricane season's impact on the property/casualty insurance industry, and concludes that although P/C insurers have more than sufficient ($700 billion) policyholder surplus to pay their share of losses, they are not as prepared from an operational or customer experience perspective. Looming reputational risks need to be adequately addressed, and the insurance industry as well as governments that provide public insurance should address the structural needs to close the coverage gap on flood insurance, a long-standing issue that has slowed down recovery efforts. Full report

Each year, CoreLogic analyzes the severity of natural hazards in the U.S. The firm’s 2017 interactive report provides a thorough assessment of the wildfires that devastated California, the flooding from Hurricanes Harvey, Irma and Maria, an account of the damage from earthquakes, wind, hail, tornadoes and other catastrophes like Cyclone Debbie and the earthquakes in Mexico. The report evaluates the physical scale of damage including the financial impact for the calendar year, assesses the risk levels for both residential and commercial properties, and discusses what can be expected in 2018. The National Oceanic and Atmospheric Administration Billion-Dollar Weather and Climate Disasters Table of Events shows 16 individual weather and climate disaster events with losses of more than $1 billion in the U.S. in 2017. The flood damage to residential and commercial properties from Hurricanes Harvey and Irma is estimated at between $69 billion and $105 billion. Approximately 75 percent of the residential property damage caused by Harvey and 80 percent of such damage from Irma was uninsured. More than 9 million acres were consumed by wildfires, the third-highest level in U.S. history. Full Report

This report, from Aon Benfield’s catastrophe model development team, indicates that insured losses for the 330 natural catastrophes in 2017 totaled $134 billion, representing 38 percent of the economic losses of $353 billion. The uninsured cost of natural catastrophes caused by severe weather reached a new record cost of $344 billion, or 97 percent of the total cost. The $134 billion in insured losses, covered by both the private sector and government programs, were the second-costliest ever recorded and slightly lower that the $137 billion in 2011. The report also said that insured losses in 2017 increased 139 percent, compared with the $56 billion reported the previous year. The report covers global economic and insured loss trends and contains a climate review section. Full report

This report from the National Institute of Building Sciences (NIBS) highlights the unprecedented importance of mitigation investment, as 2017 marked one of the costliest years on record due to weather-related disasters. The report found that every dollar invested in disaster mitigation could save the U.S. $6 in future costs. When it comes to riverine flood mitigation, the return on a dollar invested is $7 in cost savings. NIBS found that for every dollar spent on building to a higher standard than select building codes require could save the nation $4. The mitigation measures studied by the report's project team include: Demolishing flood-prone homes; using hurricane shutters and other wind-resistant strategies; shoring up building strength in earthquake-prone areas; and replacing roofs and wooden water tanks for fire resistance. The NIBS projected that implementing resiliency measures and building to stricter codes could create 87,000 new long-term jobs and increase use of American-made construction materials by 1 percent. Sponsors of the report include FEMA, HUD, EDA, ICC, the Insurance Institute for Business & Home Safety (IBHS), the National Fire Protection Association (NFPA) and the American Institute of Architects (AIA). Full Report

This report contains predictions about actions companies will take in 2018 to address cyber threats, as well as other cybersecurity trends anticipated for the year. One trend is the more widespread adoption of standalone cyber insurance policies by businesses. Reduced earnings, operational disruption, and claims brought against directors and officers following cyberattacks will lead businesses to turn to tailored enterprise cyber insurance policies, rather than relying on “silent” components in other policies. Also, a wider range of industries is expected to purchase cyber insurance. Regulators at the international, national and local levels will be stricter about enforcing existing cybersecurity regulations and will introduce new regulations. In the U.S., big data organizations (aggregators and resellers) will come under scrutiny on how they are collecting, using, and securing data, and industry organizations will push back on regulators, calling for alignment of cyber regulations. Organizations will need to pay more attention to their use of the IoT in relation to third-party risk management. A new wave of companies is expected to embrace multi-factor authentication to combat the assault on passwords and attacks targeting biometrics. Cryptocurrencies will support the flourishing of ransomware as criminals evolve their tactics to target specific companies and demand ransomware payments proportional to the value of the company's encrypted assets. The full extent of cyberattacks and incidents caused by insiders will not become fully public as many companies will continue to respond reactively to incidents behind closed doors and remain unaware of the true cost and impact of insider risk on the organization. Full report

This report concludes that an interruption to a leading cloud computing provider in the U.S. could result in business losses totaling as much as $19 billion, and that only a small percentage of the losses would be covered by insurance. The analysis considered potential losses from disruptions to businesses that rely on cloud computing. Such disruptions could be caused by cyber events including hacking, lightning strikes, bombing of data centers as well as human error. The report said that any such incident that forces any of the three leading cloud service providers offline for three to six days could lead to total losses in the range of $5.3 billion to $19 billion, with insured losses totaling in the range of $1.1 billion and $3.5 billion. Full report

This annual homeowners insurance report from the NAIC provides data on market distribution and average cost by policy form and insurance amount. The report includes national- and state-specific premium and exposure information for non-commercial dwelling fire insurance and for homeowners insurance package policies. It also contains data descriptions and a discussion about the way certain economic, demographic and natural phenomena impact the price of homeowners insurance. The data in the report includes written exposure (earned house years) and aggregate written premiums by state and countrywide for the 2015 data year. It contains tables that show state and countrywide exposures by policy type, individual policy form, and insurance coverage amount. The report includes a state-by-state breakdown of the information. Full Report

This report features state-by-state auto insurance data from calendar years 2011- to 2015 for the combined voluntary and residual market. The report contains earned premium and exposure data – as well as incurred loss and claims data (separately) – from calendar/accident years 2012 to 2014 for voluntary and residual market business. Many factors affect a state's expenditures and premiums, including underwriting costs, driving locations, accident rates, traffic density, auto theft statistics, repair costs and state laws. There are also differences in state requirements for insurance coverage, limits and benefits. These variances make direct state-by-state comparisons difficult. Full Report

This Rand Working Paper examines how the Affordable Care Act (ACA) health insurance coverage expansions affect payment for medical care provided through liability insurance, such as auto insurance. The Rand researchers sought to determine whether expanding coverage leads to a substitution of health insurance disbursements for automobile insurance disbursements, or an increase in auto liability claims payments stemming from an increase in the utilization of medical care. The paper evaluates the health insurance-auto insurance interaction by examining the 2010 ACA dependent coverage expansion. Prior to 2010, individuals 19 and older were excluded from health insurance coverage under their parents' health insurance plan. In September 2010, as part of the ACA, individuals were allowed to continue health insurance coverage until age 26. Rand used this policy change and claims data from insurers representing approximately 60 percent of the automobile passenger market. Rand researchers found approximately a 10 percent reduction in the total bodily injury claim count in the policy-affected 19 to 25 ages when compared to the control group of individuals 26 to 34. Conditional on filing a claim, they also found an approximate 9 percent reduction in the mean total auto insurance paid amount in the 19 to 25 ages compared to the 26 to 34 ages. Full text

This research document examines the causes of insurance company insolvency and the decisions made by management, regulators, and policyholders over the life cycle of the insolvency. It also considers ways actuaries and other insurance industry practitioners can be equipped to prevent or mitigate future insolvencies. Each case study provides research on what went wrong for the life/health, and property/casualty insurance companies. Full report

This report from the National Academies of Sciences, Engineering and Medicine concludes that reducing the legal threshold for a driver's blood-alcohol content from 0.08 to 0.05 would be a vital step in reducing the 10,000 deaths annually related to alcohol-impaired driving in the United States. The report also calls for higher state alcohol taxes and reduced availability of alcohol, among other recommendations. The report also provides an overview of available data and surveillance systems and gaps and offers ways to provide a more comprehensive understanding of the problem of alcohol-impaired driving, identify the critical intervention points and monitor the progress of interventions. Full Report

This Swiss Re report found that Increasingly, insurers are focusing on improving relations with existing policyholders by offering higher-value products, and improving claims management. This increased focus on existing rather than new business is about improving customers experience and enhancing long-run profitability. Profits on in-force life books can be improved by judicious asset management, optimal capital allocation and by reducing operating costs. Such actions can reduce the cost of providing coverage and lower prices for consumers. Full report

This report from the International Maritime Bureau (IMB) discloses that a total of 180 incidents of maritime piracy and armed robbery were reported in 2017, the lowest annual number of incidents since 1995 when 188 reports were received. In 2017 pirates boarded 136 vessels, made 22 attempted attacks, fired upon 16 vessels and hijacked 6 vessels. Despite the decline in piracy, the IMB cautions vessels not to be complacent as they transit the Arabian Sea and the Gulf of Aden. The Gulf of Guinea and the waters around Nigeria remain a threat to seafarers. The report also calls on shipmasters to continue to remain vigilant as they sail through waters off Somalia. Nine incidents were recorded off Somalia in 2017, up from two in 2016. News Release