Commentary/Opinion
Hurricanes amplify insurance crisis in riskiest areas
Until late last month, there was optimism in the insurance industry. Hurricane season had been quiet, and the number of wildfires was still below the yearly average. Insurers were beginning to hope that the cost of reinsurance - that is, insurance for insurers - would only inch up next year, instead of shooting higher as it did the previous two years.
Two major hurricanes have upended their calculations.
Total economic losses from Hurricane Milton and Hurricane Helene could soar over $200 billion, according to early estimates. While it's far too soon to know exactly what portion will be covered by insurance companies, some consumer groups, lawmakers and analysts are already worried about a big hit to insurers' finances that could ultimately affect millions of people living in the most vulnerable areas.
As climate change increases the intensity of natural disasters, insurance companies have pulled back from many high-risk areas by raising premiums or ending some types of coverage. The fallout from the two hurricanes, which landed within the span of two weeks, could accelerate that retreat. It could also further strain an already feeble federal flood insurance program that has filled in gaps for homeowners living in areas where private insurance companies no longer offer flood coverage.
Sridhar Manyem, an analyst for the insurance industry ratings agency AM Best, said that while it was too early to estimate insurers' obligations, industry insiders were already beginning to compare Milton to Hurricane Ian, which caused more than $55 billion of insured losses in 2022 when it hit the same area.
Research
Personal Lines Underwriting Results Improving; Natural Catastrophes, Fed Rate Decreases, and Tempered Geopolitical Risks Are Critical to Sustainable Trajectory: Triple-I/Milliman
First-half 2024 economic and underwriting results for the U.S. P/C industry were better than expected, according to Triple-I and Milliman.
First-half economic and underwriting results for the U.S. property/casualty (P/C) industry were better than expected, according to the latest forecasting report – Insurance Economics and Underwriting Projections: A Forward View – from the Insurance Information Institute (Triple-I) and Milliman, a collaborating partner.
“The ongoing performance gap between personal and commercial lines remains, but that gap is closing." - Dale Porfilio, Chief Insurance Officer, @iiiorg
The net combined ratio (NCR) estimate of 99.4 improved by 2.3 points year-over-year, with commercial lines continuing to outperform personal lines. Additionally, the Federal Reserve’s easing of monetary policy by continuing to lower interest rates and the stability of geopolitical risks will be key to maintaining the performance growth trend.
Highlights of the Triple-I/Milliman report include:
- Homeowners 2024 NCR of 104.9; a 6-point improvement over 2023. Profitability is expected in 2026 with continued expected double-digit net written premium (NWP) growth of 10% in 2025.
- Personal auto NCR of 100 is 4.9 points better than 2023. The 2024 NWP growth rate of 14.5% is the highest in over 15 years.
- Commercial lines 2024 NCR remained relatively flat at 97.1. Despite improvement in commercial property, commercial multi-peril and workers’ compensation, commercial auto and general liability continued to see deterioration.
- Personal Lines NWP growth is expected to continue to surpass commercial lines by nearly 9% points in 2024.
Best's Review Examines U.S. Private Passenger Auto Insurers That Bucked Broader Industry Trends
In the October issue, Best’s Review reports on private passenger auto insurers.
At press time, AM Best’s outlook for the U.S. personal auto segment remains at Negative. Factors cited include rising loss severity caused by growing costs to repair newer vehicles; higher used-car prices; supply chain and labor market challenges; and medical costs, which continue to increase.
“Finding the Fast Lane: Pricing Helps Auto Insurers Navigate Roadblocks to Profitability in Difficult Market.”
Some insurers—large companies like Berkshire Hathaway and Progressive, for instance—are seeing success, even in markets that are complicated by slow rate approvals, increasing litigation and rising claims costs. But there are also some smaller insurers that have been turning a profit consistently in personal auto for several years.
Learn more about them in our recent article, “Finding the Fast Lane: Pricing Helps Auto Insurers Navigate Roadblocks to Profitability in Difficult Market.”
Best’s Review is AM Best’s monthly insurance magazine, covering emerging issues and trends and evaluating their impact on the marketplace. The complete content of Best’s Review is available here
Climate/Resilience/Sustainability
Hurricane Milton could cost insurers $60 billion
Devastation in Florida triggers massive losses, with reinsurance rates expected to spike
Hurricane Milton has battered Florida's Gulf Coast, with analysts forecasting potential insurance losses of up to $60 billion, a blow that could ripple across the global insurance industry.
The Category 5 storm made landfall late Wednesday, with more than one million residents having been evacuated in what is now one of the most devastating hurricanes to strike the region in recent history.
According to RBC Capital analysts, the losses are expected to be comparable to those from Hurricane Ian, which hit Florida in 2022. They estimate that the industry is well-positioned to absorb the financial impact.
The $60 billion estimate would rank Milton’s impact among the most costly hurricanes, following Ian and Hurricane Katrina in 2005. The Swiss Re Institute notes that insurers have faced rising losses from such events in recent years.
In response, insurance companies and reinsurers – who provide insurance for insurers – have raised prices and tightened terms for higher-risk properties. RBC analysts believe the sector is now better equipped to handle these situations, citing improved reinsurance contracts, diversified earnings, and stronger financial reserves. Meanwhile, Barclays analysts project Milton’s insured losses could exceed $50 billion, further heightening concerns about the storm's financial fallout.
Much of Milton’s Worst Damage Came From Wind, Not Water
Hurricane Milton’s devastating path across Florida has left at least 10 dead, millions without power, and destroyed homes and crops, as authorities warn it could take days to assess the full extent of the damages.
Milton delivered a quick, hard blow to the center of the state, tearing across the peninsula in just a few hours before racing back out to sea. The storm surge that swamped Florida’s west coast on Wednesday was about half as high as forecasters had feared. Landing just outside Sarasota, Milton’s 120 mile per hour winds (193 kilometers per hour) even pushed water out of Tampa Bay and into the Gulf, rather than inundating surrounding cities.
Legal System Abuse/Social Inflation
Third-Party Litigation Funding Transparency Bill Introduced in HouseThird-Party Litigation Funding Transparency Bill Introduced in House
On Oct. 7, the chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, Rep. Darrell Issa (R-California), and Rep. Scott Fitzgerald (R-Wisconsin) introduced H.R. 9922, the “Litigation Transparency Act of 2024" into the U.S. House of Representatives, which would require the disclosure of parties receiving payment in civil lawsuits.
Specifically, the legislation would require the disclosure of investors who have a right to receive payment based on the outcome of a case, as well as the disclosure of the financing agreement between investors and plaintiffs.
Many factors are fueling the current property insurance crisis. Among them is the abuse of the legal system. It is a significant problem and adds considerable costs to the insurance industry and the price that consumers pay for property insurance. While consumers are feeling the pinch on premiums in the hard market, third-party litigation financiers are generating significant financial returns from the American legal system.
Third-party litigation funding (TPLF) involves a third party providing funding to a plaintiff in exchange for a share of any financial recovery from a lawsuit. Proponents argue that it can help plaintiffs pursue legal action when they might otherwise lack financial resources. Opponents argue that TPLF contributes to higher awards, longer cases and greater legal expenses.
The insurance industry is united on Capitol Hill and strongly supports reforms to require disclosure of TPLF to all parties and the courts. The Big “I" and other industry trade associations along with insurance carriers have had numerous discussions with members of Congress and their staff expressing concerns over TPLF.
The Big “I" will continue to advocate for litigation reform, particularly more transparency from those funding litigation, while advocating for independent insurance agents.
InsurTech/M&A/Finance💰/Collaboration
Seventh annual InsurTech100 names the companies transforming the insurance industry
Despite challenging macroeconomic and funding environment recently, the InsurTech industry continues to show resilience, recording strong year-on-year growth.
Based on recent reports the sector’s market size has grown from $18.7bn in 2023 to $25.9bn in 2024. The long-term growth potential of the sector is also providing hopeful reading for investors and industry stakeholders. The InsurTech market is set to grow to a size of $496.5bn by 2033, a whopping 38.8% CAGR growth rate.
Given this strong growth, it is not surprising this year’s contest to make the InsurTech100 ranking was the most competitive to date. To compile the list, a panel of seasoned analysts and industry veterans meticulously reviewed over 2,100 nominations presented by FinTech Global.
Each application was assessed on its ability to leverage technology, to either tackle a significant industry obstacle, or enhance efficiency across the insurance value chain, with only the most innovative and impactful companies making the final cut.
FinTech Global CEO Richard Sachar commented on the importance of the list, stating, “The InsurTech100 is a vital resource for industry leaders looking to stay ahead of the curve. The companies that have worked their way onto the list are driving real innovation and providing the tools insurers need to navigate the complexities of digital transformation in this dynamic marketplace.
"As industry leaders refine their technology strategies, these companies are playing a pivotal role in shaping the future of insurance. The solutions they offer—ranging from artificial intelligence and machine learning to telematics—are changing the game across the sector.”
Duck Creek Acquires Risk Control Technologies
Risk Control’s Platform Will be Fully Integrated into Duck Creek’s SaaS Suite of Solutions in order to deliver comprehensive risk management and mitigation solutions.
Duck Creek Technologies (Boston), a major provider of a core system/insurance platform and related solutions for the property/casualty industry, has announced its acquisition of Risk Control Technologies, Inc. (RCT), a Toronto-based provider of risk management and loss control solutions. Calling the acquisition a strategic investment, Duck Creek says the addition of RCT’s technology will transform how insurance carriers prevent loss and manage risk, enabling deployment of advanced AI and machine learning capabilities at the forefront.
Karlyn Carnahan, head of Celent’s North American insurance practice—and a former loss control engineer—places Duck Creek’s acquisition of RCT in a set of other acquisitions of loss control vendors by core system/platform vendors. For example, in June 2021, Majesco (Morristown, N.J., purchased Utilant and in September of that year, Insurity (Hartford)* acquired AuSuM.
Announcements
Covr Unveils Its Third Generation Insurance Software: The Most Advanced Platform for Simplifying Insurance for Financial Professionals
Covr Financial Technologies, a leading digital insurance provider, announced this week the launch of Advisor 3.0, the latest version of its industry-leading insurance platform.
This cutting-edge software empowers financial professionals, insurance advisors, and institutions to streamline their insurance business across various product lines, including life insurance, disability insurance, long-term care, and more.
Advisor 3.0 is designed to enhance efficiency by reducing the work necessary to design and complete insurance applications by up to 50% and shortening the cycle time to process cases by an average of 10 days. The platform is fully responsive across any device (mobile, tablet, laptop, or desktop) and offers powerful tools that allow advisors to consult with clients, prepare for meetings, and submit business in minutes—not hours. The platform seamlessly integrates with popular CRM systems, automates form completion, compliance reviews, and provides smart management of client interactions—including case design, new business tracking, and in-force management—all in one digitally enabled platform.
"We're committed to driving innovation in life insurance," said Mike Kalen, CEO of Covr. "With Advisor 3.0, we've taken digital transformation to the next level, providing financial professionals with powerful tools to deliver a faster, more efficient client experience, customized solutions for their clients, and streamlined customer service and compliance."
Innovation
Is this new trend the future of insurance innovation?
The concept of coopetition - where companies collaborate with their competitors to achieve mutual benefits - has become more prevalent across various industries.
Dan Keough, chairman and chief executive officer at Holmes Murphy, is a firm advocate for this approach within the global insurance sector. In his view, embracing coopetition is not only strategic but essential in navigating an increasingly complex and competitive marketplace.
The organization has taken steps to adopt the mindset that competitors can sometimes be beneficial partners, particularly in areas that could have been proprietary to them. Instead of keeping these capabilities in-house, the company chose to share them with other brokers across the country This led to the co-founding and creation of BrokerTech Ventures (BTV) in 2019 – the first broker-led Insurtech Accelerator and innovation community.
“Instead of keeping something that would be proprietary to Holmes Murphy, we just chose the path to partner with other firms who share the same abundance mentality,” Keough told IB.
Keough’s perspective on coopetition goes beyond the typical win-or-lose mentality. He emphasizes that some competitors can push you to improve and learn, whereas others may not share the same values. However, he is clear that this approach does not apply universally.
Webinars/Podcasts/Interviews
What Collision Repairs Need to Know About Estimate Data Privacy - Autobody News
New software tools and state laws are starting to address the problem, but there is still much to be done to protect estimate data.
Collision repair estimate information is still largely not well guarded, and the consequences are felt by auto body shops -- and their customers.
Pete Tagliapietra, managing director of DataTouch, appeared on a CIECA webinar to talk about how estimate information is obtained by third-party companies, who is obtaining it and how they are using it to generate revenue, who they are selling it to and why, and how government legislation is trying to intervene.