USGS: Nearly 75% of U.S. Could Experience A Damaging Earthquake  January 23rd 2024

USGS: Nearly 75% of U.S. Could Experience A Damaging Earthquake

Nearly 75% of the U.S. could experience damaging earthquake shaking, a recent U.S. Geological Survey report shows.

A USGS-led team of more than 50 scientists and engineers in the latest USGS National Seismic Hazard Model created a color-coded map that pinpoints where damaging earthquakes are most likely to occur based on insights from seismic studies, historical geologic data and the latest data-collection technologies.

The NSHM update, which was requested by Congress, was created as a tool to help engineers and others mitigate how earthquakes affect the most vulnerable communities by showing likely earthquake locations and how much shaking they might produce.

The update identifies nearly 500 additional faults that could produce a damaging quake. The latest iteration, the first 50-state comprehensive assessment, was updated from previous versions published in 2018 (conterminous U.S.), 2007 (Alaska) and 1998 (Hawaii).

Are we ready for the next major volcanic eruption?

Gordon Woo from Moody’s RMS and WTW’s James Dalziel consider the unique challenge posed by the unpredictability of volcanic risks, and consider whether insurers should turn to downward counterfactual analysis, learning from near-misses to prevent future catastrophic events.

Volcanic eruptions are relatively uncommon when compared to the frequency of other geohazards such as earthquakes, but volcanic unrest is a phenomenon that occurs much more often.

A period of volcanic unrest is signified by the observation of precursors such as seismicity, ground deformation, release of volcanic gases and increased heat flow. Periods of unrest can be prolonged, lasting for months or even years – for example, in the 1930s there were several years of unrest on the volcanic Caribbean island of Montserrat.

There was no eruption following the unrest in the 1930s, nor in the 1960s when there was further major unrest on the island. But both periods warned of the potential for an eruption, which eventually began on 18 July 1995, claiming 24 lives and destroying nearly two-thirds of the island.

Could Montserrat and the insurance industry have been better prepared? Reflecting on the unrest in the previous decades, could a deeper analysis of “what could have been” – employing downward counterfactual thinking– have spurred more robust preparedness measures?

Tepid demand for volcanic risk modelling

Costly disasters in the 1990s such as Hurricane Andrew highlighted the inadequacy of existing risk management practices and catalysed the emergence of the catastrophe modelling industry. But while models for weather-related and seismic risks gained traction, volcanic risk models did not enjoy comparable adoption, even in the wake of the Montserrat eruption.

Higher Auto Claims, More Frequent Accidents Continue to Outpace Premium Hikes

As claim severity rises, U.S. personal auto results are on the decline, according to AM Best’s Market Segment Report, issued in December 2023.

The 112.2 net combined ratio in 2022 for personal auto was an almost 11-point deterioration from 101.5 in 2021, and about 10 points over the ten-year average and median combined ratios for the line.

Deteriorating liability and physical damage resulted in a more than $4 billion net underwriting loss in 2021 for personal auto insurers. Insurers find rates can’t keep pace with the increasing number of accidents and costs such as economic inflation, supply chain disruptions and technological advances in vehicles, which increase claims costs. In 2022, inflationary pressures on physical damage claims costs, rising medical expenses and greater claims severity caused the more than $33 billion underwriting loss. Even as insurers pursued premium increases, underwriting results in 2022 continued to trend adversely through the first half of 2023.

Christopher Graham, senior industry analyst and co-author of the market segment report, noted in a video discussion of the report that even if there had been no increase in loss costs, carriers would “still need double-digit rate increases just to get to [the] level of being able to break even.”

Commercial insurance rates rise 5.6% in Q4

U.S. commercial insurance rates rose 5.6% on average in the fourth quarter and 4.6% for all of 2023, insurance exchange MarketScout Corp. reported Friday.

U.S. commercial insurance rates rose 5.6% on average in the fourth quarter and 4.6% for all of 2023, insurance exchange MarketScout Corp. reported Friday.

Commercial property insurance rates again saw the biggest increase at 8.3%, followed by commercial auto, up 7%.

In other major lines, umbrella/excess rates were up 6.7%, general liability rates increased 5.3%, professional liability rates rose 4.7%, and directors and officers liability rates were up 2.7%.

Workers compensation rates were flat.

General liability rate hikes ease, auto still tough

General and excess liability policyholders saw some slowdown in the pace of rate increases at year-end renewals, but buyers with a significant auto liability exposure continued to see hefty price hikes.

Primary general liability coverage saw more easing than excess layers, and policyholders who were willing to restructure their programs were sometimes able to achieve flat renewals, experts say.

But a general softening market is not yet in sight as underwriters continue to cite increased claims costs resulting from general inflation, medical inflation and higher court verdicts and settlements.

Policy language continues to tighten as insurers seek to exclude so-called forever chemicals and biometric risks and exert more control over claims settlements, they say.

Gavin Souter, Editor, Business Insurance