News
Home insurance 'bubble' popping climate risks mount
Home insurance costs that have soared in much of the US may get even higher.
Tens of millions of properties around the country are insured at prices that haven't caught up with the danger of hurricanes, wildfires and floods, according to a new report from the First Street Foundation, a nonprofit that works to define and communicate risks posed by climate change.
First Street estimates that 39 million US homes are insured at artificially suppressed prices compared with the risk they actually face. Of those, nearly 6.8 million homes are covered by state-backed "insurer of last resort" policies.
Hard Commercial Market Conditions Continue Driving Captive Formations
With hard market conditions continuing in the traditional insurance market, captive domicile regulators say new captive insurance company formations remain at a high level.
In Vermont, the biggest US captive domicile with 656 captives, 25 new captives have been licensed so far this year, with several captive applications now being processed.
"The activity is very healthy. The hard conditions in the traditional market are a driver for new captive formations," said Sandy Bigglestone, Vermont's deputy commissioner of captive insurance in the state's Department of Financial Regulation in Montpelier.
Captive formation growth also has been strong in other domiciles. For example, in Utah, 29 captives have been licensed so far this year, bringing its total captive count to 424.
Much of that growth is due to hard conditions in the traditional market making it "difficult for finding coverage at a reasonable price or even finding coverage," said Travis Wegkamp, captive insurance director with the Utah Insurance Department in Salt Lake City.
In North Carolina, about a dozen captives have been licensed so far this year, with 12 licenses pending, said Lori Gorman, deputy commissioner of the North Carolina Department of Insurance, Captive Insurance Division, in Raleigh.
"We crossed 300 this year, and that is a great milestone for North Carolina," Ms. Gorman said. Currently, North Carolina has 305 captives.
In Montana, 31 captives have been licensed so far this year, boosting the state's captive count to 283..
Hard property market spells 'turbulent times' for cannabis insurance
The hard market in property insurance, as well as regulatory and other challenges in the cannabis industry, are adding up to “pretty turbulent times” for cannabis insurance, according to one expert.
“While there’s a lot of optimism around New York, New Jersey and some of the momentum we’re seeing in the new cannabis markets in the East, the legacy markets, or the oldest, most mature markets for cannabis in the West continue to struggle,” said Norman Ives (pictured), cannabis practice leader and executive vice president with Amwins Brokerage, in Seattle, Washington.
Businesses in states such as Washington, Oregon, California, and Colorado that were early adopters of the adult-use recreational market are seeing price compression and downward pressure on their products, where supply far outstrips demand, according to Ives.
“That’s creating difficult business conditions on the operators, which is going to have an impact on their available funding and financing for insurance products,” he said.
Erie Insurance Future Focus program recognized among industry's 50 best internships for a third-straight year
The Erie Insurance (ERIE) Future Focus internship program has been named to the Rising Insurance Star Executive (RISE) list of the insurance industry's 50 best internship programs in 2023. This is the third consecutive year that ERIE has achieved the honor.
ERIE's summer internship program, which began more than 20 years ago, offers opportunities for college students to gain relevant and real-world business experience in the insurance industry and at a Fortune 500 company.
"We're excited that our Future Focus internship program has been recognized once again as a RISE Elite 50 best internship," said JR Wilwohl, talent acquisition partner and ERIE's internship program coordinator. "Our interns share with us that our program offers a remarkable experience in the industry, and this award is a further demonstration of how much our interns and the teams they work with are invested in each other's success."
ERIE's Future Focus program has helped launch the careers of hundreds of current employees and offers paid, competitive internships across many career pathways.
According to Jon O'Camb, talent acquisition manager, ERIE's internship program is one of the company's largest opportunities to attract early career talent and helps ERIE further its commitment to growing diversity within its talent pool.
"Our internship program is an extension of how ERIE values and celebrates diversity. Our talent pipeline is continuously growing through strong relationships with colleges and universities across ERIE's footprint and connections made through ERIE's affinity networks to help further reach candidates," said O'Camb. "Once interns are hired, we also provide them with multiple opportunities to get involved with our company's affinity networks, business resource groups and community outreach initiatives and encourage them to become active in community service projects during their internship."
Commentary/Opinion
California's urgent need for wildfire mitigation, risk models and sustainable insurance
Sustainable insurance withstands catastrophic events while enabling insurers to conduct business and plan for the future.
Any number of risks can threaten a family’s or business’s financial viability, and insurance helps mitigate those risks. Without insurance, an event such as a car accident, storm or fire could wreak havoc on one’s finances.
That is why we should pay attention when major insurers withdraw from writing new insurance policies in the California as occurred earlier this summer when State Farm and Allstate, two of the nation’s largest insurers, announced they would stop issuing new policies in the state.
The reasons for these actions are not singular or simple. Yet, to successfully address this situation, we must begin to dig into the problem and seek solutions. At the heart of the problem in California is the state’s wildfire risk, and population and building growth in wildfire-prone areas. With an average of 8,273 wildfires per year, California is the state most prone to wildfire risk, according to data from HazardHub.
Yet, data shows that 98% of the property damage is concentrated in the 10% of the state rated by HazardHub as an F for wildfire risk. Homes and structures in these areas are 50 times more likely to suffer damage from wildfires.
Thus, a logical starting point to address the situation is to develop a more sustainable approach to wildfire mitigation, housing growth, and construction standards in those high-risk areas. A sustainable approach to the state’s insurance market is needed as well.
Sustainable insurance ensures sufficient coverage capacity to withstand catastrophic events like wildfires while maintaining the ability of the insurer to conduct business and save for the future.
John Siegman co-founded HazardHub
Blockchain Is Here. But Can Insurance Unlock Its ROI in Meaningful Ways? - Risk & Insurance : Risk & Insurance
From early-stage adoption and collaborative efforts to innovative use cases, blockchain technology is poised to reshape claims and insurance market dynamics. But where does it stand in terms of returns?
As blockchain technology matures and more players in the insurance industry integrate it into their operations, many are wondering what kind of return companies are seeing on their blockchain investments.
“That’s a very difficult question, because I actually don’t think the insurance industry broadly is using much blockchain,” said Siddhartha Jha, founder, chairman and CEO of Arbol Inc., a global climate risk coverage platform and FinTech company. “They’re still at a very early POC stage in many cases.”
David Edwards, founder and CEO at ChainThat, a London-based insurance technology provider, has a similar take.
“For individual insurers and participants, there’s no benefits, in terms of the ROI for blockchain,” Edwards said. “It must be done as a group, as a kind of a consortium, to get it going. And the only way really to get that going is to get them all to work together. That’s the biggest challenge that we’re still seeing in the insurance industry.”
Insurers Poised to Transform Property Insurance—if Data & Analytics Can Catch Up
The real answer in the data game is to figure out where the data may be applied, where it will have the most impact, and do the best.
Do you have a favorite sauce? One of mine is a sweet chili sauce that I use on salmon, cucumber salad, and other recipes. Most everyone has a favorite sauce or a dip, with a few hundred varieties to choose from. You may like a particular marinara, tzatziki, or tahini. You may fancy a chutney, wasabi, soy, or sriracha. Whether you like béchamel, béarnaise, or barbecue, there’s undoubtedly some kind of sauce that you periodically just crave.
The strange thing about sauces, though, is that they are food, but they aren’t a meal. They aren’t soup. They aren’t appealing on their own. They are simply meant to be “food support.” They complement and enhance. Sauces aren’t the thing. They get added to the thing to make it better. Everything tastes a little better with the right kind of sauce.
It is the same with data. Data isn’t the thing. It is crucial and can make or break your insurance operation. But data is a key supporting player, an integral part of the products, services, and experiences it enhances.
Data is the lifeblood of insurance and the key to unlocking the power and potential in much of what insurers do. Data is the key to underwriting established products properly. It’s the key to developing new products based on new markets and newly available data sources. It’s the key to winning the profit game. It’s the key to identify fraud. There is almost nowhere in insurance that won’t improve if you know how to apply data in the right manner. In insurance, everything goes better with data.
Denise Garth, Chief Strategy Officer, Majesco
Events
Global Insurance Forum | Nov. 5-7 | Hilton Singapore Orchard
Global Insurance Forum on Nov. 6. The Forum runs Nov. 5-7 at the Hilton Singapore Orchard.
Featuring: Global Innovation Awards
The Global Innovation Awards presented by the International Insurance Society and Insurance Thought Leadership celebrate the transformative power of innovation within the insurance and risk management industry. These prestigious awards recognize insurers and insurtechs who push boundaries, drive positive change, and contribute to a more sustainable society.
Three winners representing three categories will be honored at an awards dinner at the Global Insurance Forum on Nov. 6
- Property & Casualty
- Life, Health, and Retirement
- Predict & Prevent
The Forum runs Nov. 5-7 at the Hilton Singapore Orchard.
InsurTech/M&A/Finance💰/Collaboration
HUB announces completion of "substantial" minority investment
Global insurance brokerage HUB has successfully completed a substantial minority investment from Leonard Green & Partners, L.P. (LGP), along with several other prominent institutional minority investors.
HUB had previously announced the deal with LGP in April 2023, confirming that it expects to receive a “substantial” minority investment from funds managed by the firm, with HUB’s enterprise valuation of $23 billion.
According to the announcement, the brokerage will use the investment to repurchase equity interests from existing equity holders.
HUB’s valuation has grown fivefold over the last 10 years, from $4.4 billion in 2013 when Hellman & Friedman (H&F) initially invested, to $10 billion in 2018 when Altas Partners (Altas) joined with its investment. In 2022, HUB hit $3.7 billion in annual revenue and is valued at $23 billion today.
Morgan Stanley & Co. LLC served as exclusive financial advisor to HUB, Simpson Thacher & Bartlett LLP served as legal counsel to HUB, and MarshBerry provided market research assistance to HUB.
Auto claims insurtech Roadzen launches IPO
Having recently increased its market, Roadzen is turning to a SPAC arrangement to fund further expansion plans. Roadzen, an insurtech specializing in responding to auto accidents with automatic claim filings, is launching an IPO on Nasdaq on September 20, using a SPAC arrangement with Vahana Tech Edge, a technology acquisition company.
The use of SPACs by insurtechs for IPO financing had cooled off since peaking in 2021. The valuation for the IPO will be $750 million.
Roadzen, founded in 2015, has expanded its business significantly in the past two years, according to its CEO, Rohan Malholtra. The company operates in the U.S., U.K., western Europe, Southeast Asia, the Middle East and India. Founded in India, U.S. and U.K. operations began three years ago, and 70% of Roadzen's business is now in those countries and Europe, Malholtra said.
"What we want to do is essentially build the best technology to compete against some of the best tech companies out there, and build a global profile for Roadzen, which I think will be accomplished when we list on the NASDAQ and get access to a deep capital pool," he said.
Roadzen plans targeted investment in AI technology to enhance its services, and acquisitions of auto insurance brokers with good business models that need updated technology, according to Malholtra.
Authentic Raises $5.5 Million Seed Round to Launch "Captive in a Box" Insurance Platform
Authentic's Turnkey Captive Insurance Platform Allows Any Vertical SaaS, Franchise Group, Associations, and Other Organizations to Launch Captive Insurance Programs
Authentic, a turnkey insurance platform that allows vertical SaaS companies, franchises, and other groups to reap the benefits of captive insurance, announced the close of a $5.5M Seed round. The round was led by Slow Ventures with participation from Altai Ventures, MGV, Upper90, Clocktower, Commerce Ventures, Mischief Ventures, Core Innovation Capital, and prominent insurance executives.
According to the NAIC, 90% of Fortune 500 Companies utilize captive insurance, which is a form of "self-insurance." With captive insurance, organizations create their own insurance companies instead of buying insurance from a broker or insurance carrier.
Captive insurance provides many benefits, including creating an additional revenue stream for parent companies, tailored insurance coverage, lower insurance premiums, and more. For the last 50 years, only large corporations have mainly utilized captive insurance companies due to the cost and complexity of setting one up.
People
LEADERSHIP SPOTLIGHT: Lisa Wardlaw, Founder of 360 Digital Immersion, on Shaping the Future of Insurance | Insurtech Insights
As a Founder and former CFO with a background in economics, accounting and back ops digital technologies, Lisa Wardlaw has big ideas when it comes to implementing change in the industry
Lisa Wardlaw is a force to be reckoned with on the insurance scene. Having joined the industry inadvertently (like all experts in the space) via a stint at PwC just after college, she has become one of the foremost influencers in the space.
As part of her rise through the ranks, she spent almost 12 years at the world’s largest reinsurer, Munich Re, culminating in her performing the role of EVP, Global Digital Strategy & Transformation Officer, Global Reinsurance. She then went on to become Chief Strategic Financial Officer at Farmers Insurance.
Today, she is the Founder and President of her own startup 360 Digital as well as an industry consultant. She is also truly passionate about helping to transform the global insurance industry into an entity that befits the technologies, demands and lifestyles of its time. Insurtech Insights finds out more.