Climate/Change/Sustainability/ESG
Principles for Sustainable Insurance – A global framework for the insurance industry to address ESG risks and opportunities
Launched at the 2012 UN Conference on Sustainable Development, the UNEP FI Principles for Sustainable Insurance (PSI) serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities.
The PSI initiative is the largest collaborative initiative between the UN and the insurance industry.
Pioneering work by the PSI initiative includes the Net-Zero Insurance Alliance, the Sustainable Insurance Facility of the Vulnerable Twenty Group of Finance Ministers (V20), research on nature-positive insurance, development of Environmental, Social and Governance (ESG) guides for insurers as well as work supporting the implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and relevant to emerging frameworks such as the Task Force on Nature-related Financial Disclosures (TNFD).
Earth Day 2024: The clock is ticking as the planet takes a licking
Earth Day on April 22 will be an occasion to celebrate the beauty of nature. But the sweet call of nature might be drowned out by the shrill cries of “drill, baby, drill.” President Biden will trumpet his strong environmental record, honor his legacy and roll out the green carpet for the event. Republicans will just walk away.
The celebration of the 54th anniversary is a day of reckoning for the planet that we call home, at least until Elon Musk makes his space vehicle into mass transit. Hopefully, he will have an easier time with that enterprise than he did reviving X. He needs to get cracking before hell freezes over and Miami is underwater.
Abnormal weather is the new meteorological normal at home and abroad. Every day is an extreme weather day somewhere.
If you are one of the hardy souls here in the United States who are brave enough to watch the nightly carnage on the network news, you’re acutely aware of the death and devastation wrought by erratic climate driven weather patterns.
Predicting Future Floods, and Why Historical Data No Longer Holds Water : Risk & Insurance
In the insurance industry, assessing and managing flood risk is a critical endeavor. However, the conventional approach of referring to flood risk in terms of “1 in X years” is not only misleading but also leads people to underestimate the true extent of their risk.
Imagine you’re a homeowner considering flood insurance for your property. Your insurance agent tells you your home is in a “100-year flood zone.” Essentially, this means there is a 1% chance you will see a flood like the one on the FEMA flood map each year. Since 1% is also “1 out of 100,” the term “100-year flood” was adopted because it’s easier for insurers and underwriters to explain to homeowners.
On the surface, this may sound reassuring, as you only expect to live there for five or 10 years. After all, who wouldn’t feel relatively safe with odds like that? The problem with this terminology is that it fails to capture the full picture of flood risk today.
False Sense of Security
Firstly, the “1 in X years” terminology is based on historical data and statistical probabilities, which may not accurately reflect the increasing frequency and severity of floods due to climate change and urban development. As extreme weather events become more common, relying solely on past data to assess future risk is inherently flawed.
Moreover, this terminology can lull people into a false sense of security, leading them to underestimate the likelihood and potential impact of a flood
Jonathan Jackson is the CEO of Previsico, a UK-based Insurtech that provides technology and expertise in real-time flood forecasting to insurers, government agencies, and businesses. Previsico’s technology delivers early warnings to minimize the impact of flooding, enabling people and organizations to proactively mitigate flooding effects worldwide.
News
Tokio Marine and Trans Pacific Insurance Latest Providers to Exit California; Homeowners Lose Out
Thousands more Californians are set to lose their home insurance this summer as two insurers, Tokio Marine and Trans Pacific Insurance, exit the state.
In filings with the California Department of Insurance, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. announced their withdrawal from the homeowners and personal umbrella insurance markets in California. Both companies are subsidiaries of Japan-based Tokio Marine Holdings Inc.
The move marks a total of 10 major carriers withdrawing from the US state, leaving FAIR Plan as the now, over-used and only option for homeowners, one report stated.
So far, companies to have withdrawn, include: The Hartford, Allstate, State Farm, CSE, USAA, Kemper, Berkshire Hathaway’s AmGUARD as well as Falls Lake Fire & Casualty.
State Insurance Commissioner Ricardo Lara, during Santa Rosa visit, discusses his plan to stabilize insurance industry
California Insurance Commissioner Ricardo Lara described the state's last-resort homeowner insurance plan as a "ticking time bomb" and detailed some of his efforts to get insurers to resume writing homeowner policies.
Lara was in Sonoma County Friday morning, attending a press conference at a Santa Rosa health clinic, where he was promoting the recent expansion of Medi-Cal to undocumented immigrant adults.
After the press conference, Lara spoke at length about his regulatory effort to overhaul the state's insurance market in, which he said will be possible through an "historic agreement" with the insurance industry.
Under that agreement, he said his department will modernize and streamline the rate approval process and allow insurers to tie rate premiums to more complex "catastrophe modeling" projections rather than historical data.
In exchange, he said, insurance companies will be required to cover homeowners in the state's wildfire urban interface at 85% of their statewide coverage, as well as help depopulate the state FAIR Plan, an insurance pool of last resort comprised of all licensed insurers.
"We need to depopulate the FAIR Plan, because the FAIR Plan right now for us is a ticking time bomb," he said.
Streamlining the rate approval process is an important step to modernizing insurance regulations in an era of climate change, he said.
"What do we need to do? How do we move quickly on these rate filings," he said. "How do we streamline the process so that we don't wait two or three years to get a rate approved and by the time it's approved the risk has already tripled."
Progressive Gains as Drivers Shop Around for Auto Insurance
Although it may have seemed like drivers had thrown in the towel on trying to find cheaper auto insurance prices late last year, a new study of consumer behavior finds they’re back to shopping around.
In addition, when they decide to switch carriers, Progressive is the big winner among the top auto writers.
The latest loyalty indicator and shopping trends (LIST) report from J.D. Power, conducted in collaboration with TransUnion, shows the shopping rate (or quote rate) for March 2024 came in at 13.5 percent—marking the highest rate for a single month since September 2020, when this data was first captured.
Research
[Ed. Note: Highly Recommended] Auto insurance in the emerging mobility era | McKinsey
Technology disruptions are reshaping mobility solutions. Will mobility insurance see a meteoric transformation?
Before the end of this decade, autonomous vehicles (AVs), electric vehicles (EVs), and shared forms of mobility are poised to transform the mobility landscape. How will the auto insurance landscape evolve to adapt to this wave of disruption?
This is a large question with many, many answers. At ITC Vegas 2023, McKinsey brought together a group of 20 leaders from auto insurance, automotive, and mobility to discuss the future of the industry (see sidebar, “About the research”). Despite the convergence of expertise, the diverse perspectives highlighted the complexity and dynamic nature of the characteristics expected to separate winners from “also-rans” in the coming years.
Celent Study: Benefits of Connecting Manufacturers to Insurers | Insurance Innovation Reporter
By connecting to manufacturers, insurers and their clients can realize the kinds of advantages in underwriting and risk mitigation resulting from increased data collection from automobiles during the past decade.
Underwriting a risk requires understanding it, and that understanding potentially increases along with an increase in availability of relevant data. Such an increase provided an opportunity to auto insurers during the last decade, and now a similar opportunity exists for insurers of manufacturers, according to a new Celent study, “Connecting Manufacturers to Insurers,” authored by Donald Light, Director of the Boston-based research and advisory firm’s North America Property/Casualty Practice.
As with automobiles, there is a great deal of data that can—or could be—gathered by connecting to manufacturing equipment itself or the instrumentation that governs it. And just like data produced by automobiles produce, data from manufacturing equipment has the potential to provide valuable guidance for pricing and underwriting—and also to mitigate risks through newly precise forms of loss control.
“This report looks at today’s state of play and growing opportunities for insurers of manufacturers,” Light comments.
Anthony O'Donnell, Executive Editor, Insurance Innovation Report
Commentary/Opinion
The Cars of The Future Are Arriving. How Can Auto Insurance Adapt? It’s Complicated.
When cars began to hit American roads in great numbers a little more than a century ago, they did more than create a sense of freedom (and, eventually, traffic jams). They created new markets in a wide range of industries, including insurance.
Now the auto industry could be at a new kind of inflection point. The convergence of technology, regulatory support, and global efforts to mitigate climate change are creating momentum for electric vehicles (EVs), autonomous vehicles (AVs), and new kinds of shared services.full article
Tanguy Catlin is a senior partner in McKinsey & Company’s Boston office. Doug McElhaney is a partner in Washington, DC
Time-Tested Loss Reserving Methods Challenged: AM Best
Reflecting on one of the trends that surfaced as property/casualty insurers announced 2023 financial results recently, AM Best expects reserve strengthening for accident years 2015-2019 to continue, the rating agency said in a new report.
As companies “finished reporting their results for fourth-quarter and full-year 2023, the numbers and the stories behind them indicate worsening reserve risk,” according to the special report published yesterday, “Heightened Risk Landscape Create New Challenges for Reserve Management.”
A Major Reason It's so Expensive to Own a Home Right Now
Aspiring homeowners might be out of luck this year — and high mortgage rates are only part of the problem.
Rising insurance costs could keep homeownership out of reach for many. An April analysis from personal finance company Nerdwallet shows just how dire the situation is: Homeowners are now spending between $500 and $5,500 a year on insurance, depending on where they live.
According to the insurance comparison shopping site Insurify, overall home insurance costs have risen about 20% in the past two years and have the potential to rise another 6% in 2024.
As the economy recovers from the pandemic, the Federal Reserve has been working to fight inflation by raising interest rates, a strategy that has had a freezing effect on much of the housing market. Steep rates — which jumped to 7.1% for 30-year fixed-rate mortgages on April 18 — have made current homeowners less likely to sell and contributed to an ongoing shortage of affordable housing.
InsurTech/M&A/Finance💰/Collaboration
Broker M&As slow in first quarter
Mergers and acquisitions among insurance brokers and agents declined 18% in the first quarter, falling to the lowest level of deals since the beginning of the COVID-19 lockdowns in 2020, according to a report released Friday by Optis Partners LLC.
A drop-off in deals by two of the biggest acquirers over the past several years – Acrisure Inc. and PCF Insurance Services – accounted for much of the decline, the Chicago-based investment banking and financial consulting firm said in the report.
There were 155 deals among U.S. and Canadian brokers, agents and related insurance intermediaries in the first quarter, down from 188 in the same period in 2023, Optis said.
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