Commentary/Opinion
What if Your Data is Actually an Expense Instead of an Asset?
If data fundamentals are lacking, however, insurance organizations won’t be in a position to cash in, and, if you aren’t the one gaining the competitive advantage, then you are losing ground.
When considering the acquisition of a new software solution, hiring additional full-time employees (FTEs), partnership with a third-party provider, or even changes to physical assets, it is often necessary for businesses to build a comprehensive cost-benefit analysis (CBA) to justify the spend to higher-ups with budget control. This is true for insurance organizations just as it is across all other industries.
Disproportionately, insurance organizations struggle harder than companies in other industries to justify the costs of data-related projects. The major stumbling block is that insurance organizations, in particular, often fail to recognize the cost of NOT being able to protect, utilize, or monetize internal data. This can mean not being able to meet growth objectives, not having access to the information needed to inform key decisions, not being able to respond expeditiously to inquiries from regulators, not knowing whether the customers perceived as most important are profitable, or not being able to protect customer data from hackers and data thieves.
The recent Salesforce ad campaign, “Ask More of AI,” takes a stab at illustrating the value of data, especially customer data. In a 60-second ad spot that first appeared in May of 2024, Matthew McConnaughey (as Salesforce) talks about the “wild, wild west of AI” and watches train robbers (representative of data thieves or hackers) steal a gold bar of customer data, including “purchase histories, financial records, chat histories,” and even one passenger’s “Q3 sales forecast.”
Bruce Broussard, Jr., Prior to founding Percipience, Broussard led the Data & Analytics practice at MVP Advisory Group and served as SVP & General Manager of the Data Solutions Business Unit for Insurity
Research
Survey: People Open to Higher Premiums to Subsidize Higher-Risk Individuals—Sometimes
A surprising percentage of people are open to paying higher insurance premiums to subsidize higher-risk individuals, but only when they believe a risk is outside of a policyholder’s control.
A survey of U.S. adults, conducted by think tank RAND, sought to study collective attitudes toward sharing and spreading risk. The report aimed to find out:
In what contexts does the public support insurance premiums that are based on individual risk factors?
How much are people willing to pay to subsidize the premiums of higher-risk policy- holders?
How does support of pricing based on individual risk factors vary across demographic groups?
News
Reinsurers to Push for Double-Digit U.S. Casualty Price Increases
Reinsurers are likely to push for double-digit increases in U.S. casualty premium rates when policies come up for renewal in January 2025 to keep up with higher loss costs, Fitch Ratings says. Adverse loss development trends in U.S. casualty business due to higher social inflation is a key risk to our ‘neutral’ global reinsurance sector outlook.
We anticipate tough negotiations with cedants as reinsurers do not believe this year’s U.S. casualty price rises have been sufficient. At the mid-2024 renewals, rates increased by up to 15% for loss-affected accounts and up to 10% for no-loss accounts. In addition to further increases in January 2025, we expect cover limits and quota-share commissions to be reduced.
Reinsurers’ concerns that market prices are too low is leading them to prune their exposure and limit capacity in the lines of business most affected by adverse loss development. Munich and Swiss Re, in particular, have significantly reduced their exposure. Reinsurers are also asking for more granular information from cedants as they tighten their risk selection. Meanwhile, demand from cedants is increasing, leading to a widening supply and demand gap and adding to the upward pressure on pricing.
We expect loss costs to continue rising in 2025 due to social inflation and U.S. legal system abuse. More frequent verdicts that exceed payouts of USD10 million, a higher proportion of claims with attorney involvement, and evolution of the litigation funding industry will add to the trend. Latent liability risks from opioids, microplastics and synthetic chemical substances known as PFAS pose considerable challenges and uncertainty for casualty reinsurers.
InsurTech/M&A/Finance💰/Collaboration
Swiss Re Expands GenAI Partnership with mea Platform for Global Operations
Swiss Re has selected mea platform’s Generative AI (GenAI) solution for its global reinsurance and insurance operations, marking a significant expansion in the companies’ partnership.
According to reports, the decision follows the successful collaboration initiated in July 2023, when Swiss Re first adopted mea’s technology for its Corporate Solutions business.
The expanded agreement now extends mea’s GenAI capabilities to Swiss Re’s Property & Casualty (P&C) reinsurance operations, following a rigorous testing phase. Swiss Re, one of the world’s leading re/insurance companies, chose mea for its ability to streamline complex data processing, particularly for intricate formats like Schedules of Value (SOV) and Loss Runs in Excel and PDF formats.
mea’s platform, Ora, automates insurance processes by using natural language processing and machine learning to extract unstructured data from submission documents and convert it into structured, analysable data. The technology significantly reduces manual work, enhancing efficiency and cutting down the time and resources required to manage submission flows
Climate/Change/Sustainability/ESG
Best’s Commentary: Growing Gulf Coast-Focused Insurers Face Key Test in Hurricane Francine
AM Best expects the bulk of losses resulting from Hurricane Francine to be manageable and borne by primary insurers given a shift toward higher reinsurance attachments, but companies focused on growing business in Gulf Coast states will face a key test as claims materialize.
The Best’s Commentary, “Growing Gulf Coast-Focused Insurers Face Key Test in Hurricane Francine,” noted that a trend toward higher attachments were part of de-risking measures by reinsurers that followed Hurricane Ian in 2022. In the case of Hurricane Francine, the landfall location in a more sparsely populated section of Louisiana should limit the economic impact. This hurricane is also being considered more of a flooding event than a wind event, which could also temper the volume of insured losses.
“However, there could be pockets of concentrations in which insurers with higher dependence on reinsurance could see greater impacts, which will take time to determine,” said Jason Hopper, Associate Director, AM Best.
Texas Wildfires Illustrate Challenges
Wildfires have become a relentless threat across the U.S., with the 2024 Texas Panhandle wildfires being one of the most recent and severe examples. The Texas Panhandle wildfires—including the Smokehouse Creek fire, the largest in Texas history—caused $123 million in preliminary agricultural losses, making it the costliest wildfire on record.
As these disasters grow in frequency and intensity, U.S. insurers face increasingly complex challenges in responding effectively. Here, we’ll explore the key challenges insurers encounter during wildfires and discuss potential solutions, drawing recent insights from the Texas Panhandle wildfires and global wildfire trends.
Escalating risk exposure One of the most significant challenges insurers face is the increasing risk exposure due to the expanding wildland-urban interface (WUI). The WUI is the area where human development and undeveloped wildland meet, and development in this zone has grown significantly, especially in Southern and Western areas of the U.S. As more homes and businesses are built in wildfire-prone areas, the potential for massive financial losses surges.
The Texas Panhandle fires alone devastated over a million acres, destroying hundreds of properties and causing significant economic disruption. With such widespread devastation, insurers are struggling to balance the risks associated with providing coverage in these high-risk areas.FULL COMMENTARY
Stephen Bennett, Demex Group's Chief Scientist, to lead Industry Advisory Board for new Cooperative Center for Interdisciplinary Research on Convective Storms
Severe thunderstorms, encompassing damaging winds, tornadoes, hail, and torrential rain, caused $42 billion in insured losses worldwide during the first half of 2024. In the United States, insured losses from severe convective storms have escalated by approximately 8% per year since 2008. (Swiss Re Institute). These events pose a wide range of challenges, including extensive property damage, loss of life, community disruption, increasing burdens on taxpayers, and rising insurance premiums driven by the surge in claims.
Public-Private Partnership to Research Economic Challenges of Severe Convective Storms
The National Science Foundation (NSF) and the National Oceanic Atmospheric Administration (NOAA) are supporting an initiative to research, and find solutions to, the challenges being caused by severe convective storms. The Cooperative Center for Interdisciplinary Research on Convective Storms (the Center) is being proposed by Northern Illinois University and the University of Wisconsin-Madison, along with key industry players. The initial meeting, held on September 12 and 13th, attracted more than 70 stakeholders, including representatives from some of the world's largest insurers.
Stephen Bennett, Chief Scientist of Demex, a risk analytics and intelligence company offering reinsurance solutions for severe convective storms, will serve as interim lead of the Center's Industry Advisory Board. Bennett is a renowned weather and climate scientist, who chairs the committee on climate-linked economics for the American Meteorological Society. At Demex, he is instrumental in developing the models that feed into its new parametric reinsurance solutions designed to protect insurers from an accumulation of severe convective storms losses.
Financial Results
US insurers report $95 billion gain in 1H2024, driven by strong premium growth – Verisk
Verisk and the American Property Casualty Insurance Association (APCIA) have reported estimated gains of $95 billion for the US insurance industry in the first half of 2024.
Adjusting for over $50 billion in capital gains realized by a single insurer, the estimated industry gains for the first half of the year are approximately $45 billion.
Key financial data for private US property and casualty insurers reveal that 2024's first-half losses are similar to those in 2023. However, these losses are no longer eroding surplus as they did in previous years. Despite this, current surplus levels, when adjusted for inflation, have not yet returned to the early 2022 levels before the surplus decline began.
The report also noted that with the increasing impact of extreme weather events and new risks such as cyber, a higher level of surplus may be needed in the future.
Robert Gordon, senior vice president of policy, research, and international at APCIA, stated that while the first-half results show positive signs, insurers are still recovering from substantial underwriting losses experienced in recent years.
He pointed to an underwriting gain of $4.7 billion in 1H2024, compared to a $22.6 billion loss in the same period in 2023. Although surplus is improving from the significant losses of 2022, it has not kept pace with inflation or the growing demand for insurance.
Gordon also noted that while commercial lines have been profitable and are stabilizing, personal lines continue to face challenges in managing rising losses.
Announcements
Guidewire's HazardHub Unveils Granular Hurricane Risk Data
As climate risk intensifies, Guidewire's latest data release offers insurers unprecedented insights into property-level hurricane vulnerability
Guidewire has released comprehensive hurricane risk data and maps for the United States through its HazardHub service. This granular dataset, leveraging over 1,000 data points and risk scores for climate and extreme weather events, is set to improve underwriting processes for property insurers operating in coastal regions.
The HazardHub Hurricane Risk Model reveals stark statistics about the vulnerability of properties in hurricane-prone areas. In Florida, nearly one in three homes—approximately three million residences—are susceptible to storm surge flooding. Louisiana faces an even more precarious situation, with 52% of its 910,000 homes at risk from escalating hurricane threats.
Christina Hupy, Vice President at HazardHub, says: "Understanding hurricane risk is vital for insurers and property owners alike, as it informs their coverage options, emergency plans, and mitigation strategies."
Everest Insurance unveils new US brand
Everest Insurance, the insurance division of Everest Group, has launched a new wholesale brand in the US called Everest Evolution.
According to Everest Insurance, the move is in response to growing demand for access to its products in the US excess & surplus lines sector, which makes up roughly 10% of the country’s total direct insurance premium.
Everest Evolution’s launch comes on the heels of Stephen Buonpane and Danielle Stewart’s appointments as president and chief operating officer, respectively, of the brand.
Explaining the rationale behind the business decision, Buonpane said, “We built Everest Evolution from the ground up with branding that reflects Everest’s 20-year track record and deep commitment to serving the wholesale market.
“We believe that the new brand perfectly captures Everest’s reputation as a nimble and trusted partner, constantly adapting to and evolving alongside our clients’ needs in the rapidly shifting risk environment.”
Everest Evolution is set to make its formal market debut at the Wholesale & Specialty Insurance Association’s Annual Marketplace this month. The brand’s rollout includes a new website, www.everestevolution.com, along with updated branding elements.
People
Big "I" installs new chairman
Todd Jackson has been installed as the Independent Insurance Agents & Brokers of America's (The Big "I") 2024-2025 chairman. Jackson has more than 30 years of experience in insurance, and serves as owner and partner at McGowan Insurance Group in Indianapolis.
Jackson has been a prominent volunteer with the organization at both the state and national levels – serving first on the Big "I" Indiana Board of Directors, then the Indiana Executive Committee before becoming state president in 2013. He has represented Indiana on the national Big "I" Board of Directors for four years. Jackson has also served on the Trusted Choice board and the Finance Committee, and was elected to the national Executive Committee in 2018.
"Todd's dedication to the independent agency channel and to Big 'I' members shines through in the numerous ways he's already served the association and in his continued passion for giving back to the independent agency system," Charles Symington, Big "I" president & CEO, said in a release. "We're grateful for his leadership as the Big 'I' continues to evolve its technology and programs to provide members with the tools they need to succeed in the hard market and beyond."
Jackson succeeds chairman Mike McBride, president of Mason-McBride in Troy, Michigan. McBride will remain on the executive committee for an additional year as immediate past chair.
Other members installed at the Big "I" Fall Leadership Conference include Lou Moran III, president of Inter-Agency Insurance Service in Knoxville, Tennessee, as Big "I" chairman-elect and Angela Ripley, president of VW Brown Insurance Services in Columbia, Maryland, as the 2024-2025 vice chair.
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