News
Insurers to see limited hit from CrowdStrike disruption, Fitch says
The global insurance and reinsurance industry is likely to avoid any major financial impact from the outage sparked by CrowdStrike's glitchy security software update that disrupted internet services worldwide last week, Fitch Ratings said.
Preliminary estimates suggest that insured losses could be in the range of mid-to-high single-digit billion dollars and most claims would be within the purview of primary insurers, the ratings agency wrote in a report on Monday.
The findings could allay investor concerns over claims and litigation stemming from the disruption. Insurers most exposed to such losses tend to transfer some of their liability to reinsurers.
CrowdStrike's (CRWD.O), opens new tab update crashed computers powered by Microsoft's Windows operating system, restricting several industries such as airlines, banking and healthcare.
"Although standard cyber insurance covers cloud downtime due to security failure, operational failure or system failure of the insured's own operations, it typically does not cover downtime due to non-malicious cyber events at a third-party network service provider," said Loretta Worters, a spokesperson at the Insurance Information Institute.
Fitch, however, said accounting for cyber risk continues to be difficult for the insurance industry.
CrowdStrike event may impact product lines beyond cyber insurance: Guy Carpenter
Experts at the reinsurance broking arm of Marsh McLennan (MMC), Guy Carpenter, have said that while business interruption losses will be in scope for re/insurers, the magnitude of last week’s global IT outage suggests that lines of insurance beyond cyber risk might also be impacted.
After a software update for CrowdStrike Falcon Sensor product caused a mass global IT outage last Friday, there’s been a lot of discussion in the risk transfer industry about the potential fallout, as the event is expected to test the cyber insurance and reinsurance marketplace.
In its analysis of the cyber incident, reinsurance broker Guy Carpenter notes how the event demonstrates a single point of failure for a complex, global IT supply chain.
“Cyber insurers should use this event to evaluate policyholder supply chain dependencies, assess the potential for aggregation across commonly used technologies, and recalibrate risk tolerances accordingly,” says Guy Carpenter.
As highlighted by the broker, cyber insurance provides for broad coverage of business interruption resulting from network outage, and the trigger for this protection includes system failure resulting from non-malicious acts, including human error, which extends to contingent business interruption (CBI) caused by an outage of a vendor on which an insured relies to operate its network.
Insurers Face Business Interruption Claims After Global Tech Outage
Insurers could face a raft of business interruption claims after a worldwide tech outage crippled industries from travel to finance on Friday, insurance industry experts said.
A software update by global cybersecurity firm CrowdStrike appeared to have triggered systems problems that grounded flights, forced some broadcasters off air and left customers without access to services such as healthcare or banking.
“Insurers are bracing for hundreds, if not thousands, of claim notifications from organizations that are impacted by the CrowdStrike event,” said Ryan Griffin, a partner focused on cyber at insurance broker McGill and Partners.
Insurance Journal
Data shows hurricanes and earthquakes grab headlines but inland counties top disaster list
Floyd County keeps flooding and the federal government keeps coming to the rescue.
In July 2022, at least 40 people died and 300 homes were damaged when the eastern Kentucky county flooded. It was the 13th time in 12 years that the rural county was declared a federal disaster. These are disasters so costly that local governments feel they can’t pay for it all, so the governor asks the president to declare a disaster freeing up federal funds.
“After that flood I had 500 homeless people looking at me, ‘Judge what are we going to do’?” recalled Judge Robbie Williams, administrator for the county of a bit more than 35,000 people. “It’s overwhelming and it’s just a matter of time before it happens again.”
It did. In 2023, Floyd County was declared a disaster again for 14th time, starting in 2011. And Floyd County isn’t even the nation’s most disaster-prone county. Neighboring Johnson County has 15 disasters declared by the Federal Emergency Management Agency since 2011.
When it comes to extreme weather and other so-called natural disasters, people generally look to the hurricane or earthquake-prone coasts and say that’s where the danger is. But that’s not where the highest concentration of federally declared disasters are, according to an atlas of 713 FEMA declared disasters created by Rebuild by Design and New York University. While most people in disasters think about federal government direct financial help to individual victims to pay for lost housing and businesses, the atlas focuses on the $60 billion pot of FEMA aid to governments.
Eight of the nine counties with the most federal declared disasters since 2011 — more than a dozen each — are in Kentucky, with the one in Vermont. These counties have four to five times the number of disaster as the national average of three in the past 13 years.
Financial Results
WR Berkley Corporation improves earnings in Q2
WR Berkley Corporation has released its earnings report for the second quarter and first half of 2024.
According to the insurance group, its net investment income also grew in the quarter, by 51.8% to a record $372.1 million. This was attributed to an increase in fixed-maturity income from a growing portfolio with higher yields.
“We anticipate that the company’s new money rate will remain higher than the current yield of our fixed-maturity securities for the foreseeable future,” it shared. “Coupled with our increasing investment portfolio from continuing record cash flow, we remain well-positioned for further investment income growth.”
Meanwhile, the total capital returned to shareholders amounted to $381.3 million. Broken down, this consisted of $223.8 million in share repurchases, $127 million in special dividends, and $30.5 million in regular dividends.
“Continued strong underwriting and investment income drove our 20% annualized return on beginning of year common stockholders’ equity in the second quarter,” WR Berkley Corporation went on to note.
“Market conditions remained favorable in many areas of our business, fueling growth in net premiums written of 11.2%. Our combined ratio was 91.1% inclusive of 3.2 loss ratio points of catastrophe losses.”
InsurTech/M&A/Finance💰/Collaboration
Liberty Mutual Strategic Ventures announces second venture capital fund
Liberty Mutual Strategic Ventures is announcing the launch of its second venture capital fund, with $200 million aimed at supporting entrepreneurs “reshaping the future” of the P&C insurance industry.
Since launching its flagship $150 million fund in 2015, LMSV has been active in the insuretech market, investing in companies such as August Home, Roadster, Turo, Snapsheet, and Roots Automation, among others.
This second fund creates early-stage investment and partnership opportunities that support Liberty Mutual’s diversified, global portfolio of insurance products and services. LMSV’s investment focus areas span AI, Data and Automation, Cybersecurity, Energy Transition, Mobility and beyond.
“In today’s dynamic risk environment, it’s even more critical to continue to support the entrepreneurial ecosystem. Doing so allows us to develop a deep understanding of emerging risks and trends, find innovative solutions for our industry’s challenges and meet ever-changing customer needs. I’m proud of our continued investment in the future of insurance.” – Liberty Mutual Insurance President & CEO Tim Sweeney.
Events
ITC Vegas 2024 - The world’s largest gathering of insurance innovation
Insurtech Consulting and our ‘Connected’ newsletter are proud media partners of ITC Vegas 2024
Event Date: Tuesday, October 15 – Thursday, October 17, 2024
Event Location: Mandalay Bay Convention Center 3950 Las Vegas Blvd S Las Vegas, NV 89119
ITC Vegas combines unbeatable networking with what’s new and next, ensuring your time will be spent meeting more people, sourcing more solutions, and creating valuable partnerships.
Discover solutions to your biggest challenges, gain access to unique and meaningful education, and meet the insurance industry’s best and brightest. Join the insurance event that doesn’t just bring the industry together – it moves the entire industry forward.
The future of insurance is here – at ITC Vegas. If you aren’t here, you are missing out on the conversations that are propelling the industry forward
Register now and save, $200 off. Use promo code 200ITC1813
Code not valid on Independent Agent, Startup, Groups, or LATAM tickets. Discounts only apply to new registrations. REGISTER HERE
Climate/Change/Sustainability/ESG
Can Climate Tech Save Insurance?
The future of the insurance industry is dependent on how it responds to climate change
Stephen Applebaum and Alan Demers
The adage that “everybody talks about the weather, but nobody does anything about it” – often attributed to Mark Twain but written by Charles Dudley Warner in 1897 – is no longer true, especially when it comes to its current and future impact on the insurance industry.
Simply stated, extreme weather is disrupting Property & Casualty insurance profitability while destroying coverage affordability and restricting availability.
As climate impacts continue to mount and sustainability disclosure requirements push insurers to focus more clearly on climate-related risks and opportunities, we expect to see more insurers explicitly integrate adaptation and resilience into their sustainability strategies.
Commentary/Opinion
Potential Solutions to Home Insurance Crisis | Insurance Thought Leadership
As an insurance professional, you’re acutely aware of the growing home insurance crisis in the U.S. From coastal California communities to Gulf Coast states and many areas in between, insurers are dramatically increasing rates, declining to renew coverage and, in some cases, pulling out of states entirely.
Risk mitigation
Individual homeowners and communities can take steps to reduce the risk of losses.
For example, homeowners in areas prone to hurricanes and high winds can have a contractor install hurricane straps on their roofs, reinforce garage doors or install hurricane shutters and impact-resistant windows. These measures help prevent wind damage.
On a community-wide level, local governments can change their building and land use regulations to adopt hazard-resistant building codes and limit new construction in flood-prone areas.
Several state and federal grant programs can provide funding for hazard mitigation projects. For example, the EPA’s Hazard Mitigation Grant Program (HMGP) gives money to states, tribes and territories implementing hazard mitigation after federally declared disasters. The Building Resilient Infrastructure and Communities Grant (BRIC) is available to states that have had a federally declared disaster within the past seven years. It provides funding for hazard mitigation projects that promote climate adaptation and resilience.
Divya Sangameshwar is an insurance expert and spokesperson at ValuePenguin
[Ed. Note: Excellent article; Recommended Read] === Unpacking the Truth Behind High Auto Insurance Premiums
Recently, a local television newscast ran a short report on the current high price of auto insurance. After recording one or two predictable complaints from the general public, the reporter ascribed the high prices to the high cost of “labor and materials.”
This is certainly, at best, a partial and very superficial explanation–one that provides little insight into the dynamics and specialized nature of the insurance industry and marketplace.
Rick Gorvett is a mathematics and actuarial science professor in the Department of Mathematics and Economics at Bryant University in Smithfield, R.I.
Claims Journal
Canada
2024 Executive Forum - “Winning With Innovation” - Wed. August 28, 2024, St. James Cathedral Centre, Toronto.
8th annual Insurance-Canada.ca Executive Forum | ICEF2024: “Winning With Innovation”
Overview of the 2024 Insurance-Canada.ca Executive Forum (ICEF2024), “Winning With Innovation” – Wednesday, August 28, 2024, at the St. James Cathedral Centre, Toronto.
KEYNOTE SPEAKERS:
Kathryn Bakos Director of Resilience Intact Climate Centre Climate Change and the Urgency of Resilience
Intensifying extreme weather events bring escalating financial costs. The need for adaptation is urgent; find out how Canada's insurance industry is uniquely positioned to help.
Denise Garth, SVP - Strategic Marketing, Majesco Top Trends for Insurance in 2024 and Beyond
We are in a time of disruption, with customer needs changing fast. Some insurance leaders are aggressively responding. But others are responding slowly or not at all. Getting out ahead of the curve is more important than ever.
8:30am - 6:00pm, Wednesday, August 28, 2024. Registration and continental breakfast open at 7:45am. The day will conclude with a networking reception 4:30 - 6:00 pm. St. James Cathedral Centre 65 Church St., Toronto, ON