Climate Change/Sustainability/ESG
NAIC Adopts First National Climate Resilience Strategy for Insurance to Close Coverage Gaps and Improve Recovery from Natural Disasters
Putting the focus on reducing losses and speeding recovery from natural disasters, the National Association of Insurance Commissioners' (NAIC) Membership adopted the first-ever NAIC National Climate Resilience Strategy for Insurance to protect the nation's property insurance market.
The strategy was developed under the coordination of the NAIC's Climate and Resiliency Task Force, co-chaired by Alaska Division of Insurance Director Lori K. Wing-Heier and California Insurance Commissioner Ricardo Lara, bringing together insights and approaches from U.S. insurance regulators representing jurisdictions that are large and small, coastal and inland, and urban and rural, as well as the island jurisdictions that face urgent and unique challenges.
The goal of the strategy is to drive faster and more effective risk reduction by state insurance regulators to ensure that insurance continues to be available and reliable as a crucial backbone to communities facing climate risks. This strategy gives regulators the tools to do that and an action plan by advocating for home hardening from wildfires, floods, and storms; utilizing catastrophe modeling information; better informing the public of risks; and making sure new solvency tools are updated to incorporate further analysis of climate risks.
A linchpin of the nonpartisan strategy is the states' Property & Casualty Market Intelligence Data Call (PCMI) to collect and analyze data covering more than 80% of the U.S. property insurance market by premium volume. Announced March 8, the PCMI data call will gather data from more than 400 property insurers operating locally and across the country to give state insurance regulators a clear sense of what is happening in their individual property markets and the nation overall.
March marks yet another record in global heat
Summary
- Last 10 months all broke global temperature records
- Climate change continues to drive exceptional heat
The world just experienced its warmest March on record, capping a 10-month streak in which every month set a new temperature record, the European Union's climate change monitoring service said on Tuesday.
Each of the last 10 months ranked as the world's hottest on record, compared with the corresponding month in previous years, the EU's Copernicus Climate Change Service (C3S) said in a monthly bulletin.
The 12 months ending with March also ranked as the planet's hottest ever recorded 12-month period, C3S said. From April 2023 to March 2024, the global average temperature was 1.58 degrees Celsius above the average in the 1850-1900 pre-industrial period.
"It's the long-term trend with exceptional records that has us very concerned," C3S Deputy Director Samantha Burgess told Reuters.
"Seeing records like this - month in, month out - really shows us that our climate is changing, is changing rapidly," she added.
Zurich Insurance Implements Stricter Policies on Fossil Fuel Projects
Zurich Insurance Group AG has announced significant changes to its underwriting policies, revealing it will no longer support new oil and gas ventures and will tighten scrutiny on clients looking to expand into metallurgical coal mining.
This move represents a notable departure for Zurich, which currently provides insurance for fossil fuel infrastructure across various regions, including North Sea drilling and US natural gas terminals. Despite generating approximately $2.1 billion in premiums from such clients last year, equivalent to 7% of its total commercial premiums, Zurich insists the policy update will have limited impact on its financial performance.
Zurich clarified that the new restrictions apply solely to new fossil fuel projects, affirming its continued support for existing ones. The company asserts that these measures are unlikely to significantly affect its bottom line.
The insurance industry has faced challenges in navigating the complexities of climate change. Zurich’s decision follows its withdrawal from the Net Zero Insurance Alliance last year, amidst criticism and legal scrutiny. CEO Mario Greco has defended the move, asserting the company’s commitment to its principles.
Zurich’s policy revision has garnered praise from climate advocates. Nora Scheel, a climate campaigner at Swiss nonprofit Campax, described the changes as an “important step” toward aligning with European peers.
Looking ahead, Zurich aims to engage with its highest-emitting corporate clients, setting interim emissions targets and urging commitments to achieve net zero by 2050. Signorelli stressed the importance of tangible progress, stating that Zurich may consider exiting partnerships if substantial advancements are not made.
Verisk launches Next Generation Models to help re/insurers mitigate losses
Global data analytics and technology provider Verisk has launched its Next Generation Models (NGM), which will be implemented by insurers and reinsurers to evaluate risks and anticipate insured losses from extreme events more accurately.
According to Verisk, this suite of 100+ models is now available on its catastrophe risk management software platform, Touchstone.
“Verisk’s Touchstone and newly released Next Generation Models provide insurers and reinsurers with state-of-the-art resources to boost the capability to assess and price intricate risk, and to fine-tune reinsurance tactics for risk transfer,” the firm observed.
Rob Newbold, president of Extreme Event Solutions at Verisk, commented, “The release of NGM is the next step in our ongoing commitment to making societies more resilient and helping the insurance industry provide protection to their clients when they are impacted by the devastating impacts of natural catastrophes.
“The insurance industry is evolving, creating new and innovative methods for writing policies in a more complex risk environment.
News
US commercial P&C rates decelerate in Q1’24, personal lines steady
Commercial rates in the US went up 3.9% on all property and casualty placements in the first quarter of 2024, a notable decline compared to the plus 5.6% in Q4 2023, while personal insurance rates held steady at plus 4.75% in the period, according to MarketScout.
“January and February posted very modest rate increases; however, rates were trending upward more aggressively in March,” said Richard Kerr, CEO of Novatae Risk Group.
Noting: “Property insurers are nervous about the 2024 catastrophe season. Liability insurers are more calm but economic conditions and incurred, but not yet reported, claim estimates may impact rates later in 2024.”
Among all coverages, auto and property insurance rates remain the highest at plus 6.7% and plus 6.3% respectively. By industry group, transportation risks are being assessed with the highest rate increases at plus 6.7%.
Data Privacy
Key lawmakers unveil landmark data privacy bill
Why it matters: This landmark legislation would make privacy a consumer right and put people in control of their own personal data, per a joint statement from Senate Commerce Committee Chair Maria Cantwell (D-Wash.) and House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.)
- Despite concern among Congress members about the way Big Tech companies use personal data, there's never been a comprehensive national law governing data privacy and consumer rights.
The big picture: The American Privacy Rights Act would eliminate the existing patchwork of state data privacy laws, per the joint statement.
- It would also give consumers the right to sue tech companies that violate their privacy rights and create a new data privacy-focused bureau within the Federal Trade Commission, according to a draft of the bill, which has yet to be introduced.
InsurTech/M&A/Finance/Collaboration
Insurtech Startup Honey Insurance Secures US$108 Million Series A Funding
Founded by entrepreneur Richard Joffe (main picture), known for his involvement with US-based ventures Park Assist and Stella.ai, Honey Insurance made its debut in 2021.
The company made waves early on by raising an impressive $15.5 million in a Seed round, led by underwriting partner RACQ and supported by various institutional investors including AGL, Metricon, Mirvac, and PEXA.
The latest Series A funding was spearheaded by Gallatin Point Capital, marking the investment firm’s first foray into the Australian market. Based in Greenwich, Connecticut, Gallatin Point Capital has a track record of backing emerging insurance ventures. Notably, the firm injected $1.25 billion into Trusted Resource Underwriters Exchange in a partnership with American Family Insurance Group late last year.
Honey Insurance has rapidly captured approximately 1% of the Australian home insurance market. The startup distinguishes itself by offering what it terms “smart” insurance, leveraging Honey-branded sensors developed by US-based tech startup Notion. These sensors are designed to detect common issues leading to insurance claims, such as water leaks, open doors and windows, temperature fluctuations, and activated smoke alarms. To incentivize adoption, Honey Insurance provides the sensor kit free of charge along with premium discounts
TSD and Axle Partner to Deliver Instant Insurance Verification, Streamlining Operations and Reducing Risk for Dealerships and Car Rental Companies
TSD, the world's largest provider of loaner and car rental software, and Axle, the leading universal API for insurance data, have announced a strategic partnership to bring instant insurance verification to dealerships and car rental companies across the US.
This partnership will allow TSD's 16K car rental and dealership customers to mitigate up to $40,000 of annual unrecovered loss that the average automotive company faces or hundreds of hours spent on the phone verifying insurance due to the lack of access to verified insurance information. Additionally, the Axle integration improves the customer experience by reducing the time customers spend waiting for insurance to be verified and clearing ambiguity on whether they are covered.
Through TSD's scale, this partnership lays the groundwork to improve risk management across the ecosystem, providing OEMs with another way to protect assets across their entire dealership fleet. TSD's status as the exclusive provider for 18 OEM mobility programs will help ensure a smooth rollout due to the long-standing corporate relationships already in place.
When asked about Axle, Shawn Concannon, the president of TSD, replied "We've known the Axle team for years and, with feedback from our customers, we've worked to design an insurance verification experience tailor-made to reduce risks and costs for dealerships and car rental companies while improving the customer experience."
Perseus Group Software Corp. Acquires Valeyo Inc. and its Loan Origination Software (LOS) Business from Securian Canada, Inc.
Valeyo Inc. provides loan origination technology to serve Canadian financial institutions.
Perseus Group Software Corp. ("Perseus"), which is part of Constellation Software Inc., announced today that it has acquired Valeyo Inc. ("Valeyo") and its loan origination software (LOS) business from Securian Canada, Inc.. The insurance portion of Valeyo's business will be retained by Securian Canada. As part of the transaction, Valeyo will be joining forces with Securian Canada to continue to provide an LOS and integrated insurance offering to the market.
The acquisition amplifies Perseus Group's industry-leading technology suite with the addition of flexible, scalable, and dependable loan origination software services for Canadian financial institutions. Valeyo is a leading software provider partnering to deliver a full suite of business loan origination solutions for financial institutions nationwide. For more than 40 years, clients have trusted Valeyo to be their go-to provider based on the strength of their proprietary products, strategic partnerships, and people.
Innovation
Kevin O'Leary rolls out watch insurance platform WonderCare
Kevin O’Leary (pictured above in a screengrab from his X post) has launched his watch insurance platform WonderCare in response to a “broken” market.
The Canadian businessman, who is also known as Mr Wonderful, rolled out the platform over the weekend after three years of working on the offering.
I am launching WonderCare in Geneva on April 7th. A new platform for watch insurance. Something I've been working on for 3 years. The whole idea of WonderCare is to let you take a portion of your collection and insure it between perhaps 1.7 - 2.1% of its value on an annual basis
AI in Insurance
‘Do your homework’: Munich Re urges caution on AI
Insurers should implement artificial intelligence (AI) in their operations slowly and carefully, with full research and oversight, Munich Re says.
The latest Munich Re Tech Trend Radar report, now in its 11th year, says insurers must establish AI governance to safeguard business and protect customers.
“Take implementation step by step. Insurers would be wasting money on AI and [generative AI] projects if overall data quality is insufficient or the underlying systems do not have performant application programming interfaces,” the report says. “It is vital that we do our homework first.”
Brazil, Canada, China, Columbia, the EU, Mexico and the US have adopted a mandatory regulatory approach towards AI. In contrast, Australia, Japan, Singapore and Britain have an “ethical principles” approach with a set of high-level intentions to be followed when developing AI solutions.
“A good example is Australia’s AI Ethics Principles, which is a voluntary framework,” Munich Re says.
Risks posed by AI include: fake information, for example, claims being created at scale; lack of transparency, as it can be difficult to understand how generative AI models arrive at their decisions; lack of security awareness among inexperienced users; and challenges meeting strict regulation.
“While the chances are massive, insurers are also facing several hurdles when it comes to tackling use cases with generative AI,” the report says. “Insurers must address the potential for GenAI to hallucinate or generate false information, and [ensure] appropriate measures are in place to prevent fraudulent or incorrect information from being processed.”
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