Insurance industry decision makers and thought leaders gathered yesterday for the Triple-I Joint Industry Forum (JIF) in New York City to share insights on managing risk in the post-pandemic world.
The in-person, daylong program was conducted in accordance with New York City’s COVID-19 protocols. Topics ranged from climate and cyber risk and the impact of “runaway litigation” on insurer losses and policyholder premiums to the challenges and opportunities presented by “the Great Resignation” for acquiring and nurturing talent in the industry.
The panels featured speakers from across the insurance world, academia, and media. Watch this space next week for panel wrap-ups.
This year’s hurricanes have served as a wakeup call about the importance of flood insurance and the fact that not enough people have it. Only 1 in 6 homes in the United States is insured against flood, yet 90 percent of natural catastrophes in the country involve flooding.
More of the population is moving into flood-prone areas. Not only does this increased residential and commercial development put more people in harm’s way, it reduces the amount of land available to absorb excess water. This means more homes and businesses inundated, more contents damaged or destroyed, and more vehicles immersed.
Nowadays, flooding tends to cause more costly damage than wind. An average storm year will generate uninsured losses of $10 billion due to flooding, compared to insured losses of $5 billion.
“One of the most frustrating things for our industry related to flood is that this is actually an insurable peril and it’s broadly uninsured,” said Keith Wolfe, president of U.S. property & casualty insurance at Swiss Re. Wolf recently spoke with Triple-I CEO Sean Kevelighan, in the latest edition of Triple-I’s Executive Exchange, about closing the flood-protection gap.
That’s changing, however, as the public and private sectors work together to improve consumer behavior and harden communities. The private market is slowly but surely closing the flood protection gap as it emerges as a viable complement to the National Flood Insurance Program.
Improvements in modeling are making this peril more insurable, and private companies are recognizing the flood-insurance opportunity and entering the market. According to Swiss Re, flood represents a $1.1 billion growth opportunity for insurers.
In high-risk areas like the West Coast with its wildfires and Florida with its hurricanes and floods, insurance non-renewals are on the rise as insurers attempt to limit their exposure to future losses. Homeowners insurance protects your most valuable possession, so the prospect of getting a notice that your policy will not be renewed can be nerve-racking.
But don’t panic if that happens – you have options.
Know the difference between cancellation and non-renewal
There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies can’t cancel a policy that has been in force for more than 60 days except when:
Nonrenewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days’ notice and explain the reason for not renewing before it drops your policy.
Question the non-renewal
If you think the reason the insurance company provided for non-renewing is unfair or want a further explanation, call the company. You may get an opportunity to keep your coverage by verifying that you’ve taken risk mitigation measures such as replacing the roof or removing flammable materials near your house.
If your policy isn’t renewed because of a failed inspection, making the proper updates could help you maintain coverage.
Ask friends and relatives for recommendations for insurers and then do your due diligence.
Contact the state insurance department to find out whether they make available consumer complaint ratios by company. If they do, check into the insurers you’re considering doing business with.
Check the financial health of prospective insurance companies by using ratings from independent rating agencies and consulting consumer magazines for reviews.
For price quotes, call companies directly or access information online. Your state insurance department may also provide comparisons of prices charged by major insurers.
Get quotes from at least three companies.
Don’t shop based on price alone. Remember, you’ll be dealing with this company in the event of an accident or other emergency. When you need to file a claim you’ll want an insurer that provides good customer service, so test that while you’re shopping, and choose a company whose representatives take the time to address your questions and concerns.
Explore your state’s shared market option
If you’ve shopped around and can’t find coverage, you may need to turn to the state-run shared market. Many states offer Fair Access to Insurance Requirements (FAIR) policies for high-risk homes, or beach and windstorm plans for coastal properties. These policies offer limited coverage and are often more expensive than a standard home policy from a private insurer.
For more comprehensive coverage, homeowners in California may purchase a “difference in conditions” policy that complements FAIR Plan coverage.
Look into surplus lines
The surplus lines market, which is comprised of highly specialized insurers, exists to provide coverage that is not available through licensed insurers in the standard market. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state.
Available surplus lines companies vary by state. Speak with an insurance agent or broker about surplus lines if you’ve been rejected by at least three other insurers.
Non-renewals in disaster-prone areas
State regulators are pushing back against the non-renewal trend by placing moratoriums on non-renewals for certain zip codes, as happened in California recently, or for certain companies, as is the case in Louisiana.
Whether the decision not to renew is yours or your insurer’s, don’t put off shopping for a new policy. You don’t want coverage on your home to lapse.
Standard homeowners and renters insurance policies include additional living expenses (ALE) coverage. ALE pays the costs of living away from home—above and beyond your customary expenses— if you cannot live at home due to damage caused by an insured event that makes the home temporarily uninhabitable.
What expenses are typically covered by ALE?
ALE covers living expenses incurred by you so your household can maintain its normal standard of living. These expenses could include:
Temporary housing
Moving costs
Grocery or restaurant bills
Storage costs
Laundry expenses
Transportation (e.g., if your temporary home requires a longer commute)
Parking fees
Pet boarding
Your homeowners policy’s ALE coverage is usually equal to 20 percent of your home’s insured value—a home insured for $200,000, for instance, may have ALE coverage of up to $40,000—or limited to a certain timeframe (e.g., no more than 12 months).
What about Damage from Hurricane Ida?
Standard ALE coverage should be triggered if damage from a covered peril (e.g., wind and rain) caused the home to be uninhabitable. In addition, some companies provide ALE coverage when policyholders leave their home or apartment due to mandatory evacuation orders. Policyholders should speak with their insurance professional to confirm whether their policy provides ALE coverage for their situation.
As a reminder, standard homeowners insurance policies typically do not provide coverage for flood damage. The National Flood Insurance Program (NFIP) covers physical damage from flood but does not include ALE. Some privately sold flood policies offer ALE following flood losses.
What Other Help Is Available?
Federal assistance has been made available through the Federal Emergency Management Agency (FEMA). On September 2, FEMA announced they will cover hotel expenses for survivors of Hurricane Ida with damaged homes or dwellings in 25 parishes in southeast Louisiana.
The program, known as Transitional Sheltering Assistance, will provide survivors with short-term housing free-of-charge as they recover from the Category 4 storm. Survivors must first register with FEMA at disasterassistance.gov or by calling the FEMA helpline at 800-621-3362. Those wishing to take advantage of the program must find and book their own hotel rooms. Participating hotels are listed at www.femaevachotels.com.
“The cyber landscape to me looks a lot like the counterterrorism landscape did before 9/11.” – Garrett Graff , historian and journalist
Before Sept. 11, 2001, terrorism coverage was included in most commercial property policies as a “silent” peril – not specifically excluded, therefore covered. Afterward, insurers began excluding terrorist acts from policies, and the U.S. government established the Terrorism Risk Insurance Act (TRIA) to stabilize the market.
TRIA requires insurers to make terrorism coverage available to commercial policyholders but doesn’t require policyholders to buy it. Originally created as three-year program allowing the federal government to share losses due to terrorist attacks with insurers, it has been renewed four times: in 2005, 2007, 2015, and 2019.
An evolving risk
Terrorism risk has evolved in complexity and scope, and some in the national security world have compared U.S. cybersecurity preparedness today to its readiness for terrorist acts two decades ago.
“The cyber landscape to me looks a lot like the counterterrorism landscape did before 9/11,” historian and journalist Garrett Graff said during a recent Homeland Security Committee event at which scholars and former 9/11 Commission members urged lawmakers to increase funding for the Cybersecurity and Infrastructure Security Agency (CISA) and other federal agencies focused on preventing attacks.
Cyber is more complicated, said Amy Zegart, co-director of Stanford University’s Center for International Security and Cooperation, due to the private sector’s role “as both a victim and a threat vector. There are more people in the U.S. protecting our national parks than there are in CISA protecting our critical infrastructure.” Cyberattacks like the one on the Colonial Pipeline underscore this reality.
When TRIA was reauthorized in 2019, a crucial component was the mandate for the Government Accountability Office (GAO) to make recommendations to Congress on amending the act to address cyberthreats. The trillion-dollar infrastructure bill now being considered in Congress proposes $1.9 billion for cybersecurity, with more than half set aside for state, local, and tribal governments. It would establish a Cyber Response and Recovery Fund for use by CISA.
“Silent cyber”
Like terrorism before 9/11, much cyber risk remains silent. Silent cyber – also called “non-affirmative cyber” – refers to potential losses stemming from policies not designed to cover cyber-related hazards. If silent cyber isn’t addressed, insurer solvency could be affected, ultimately hurting policyholders.
The United Kingdom’s Prudential Regulation Authority in 2019 sent a letter to all U.K. insurers saying they must have “action plans to reduce the unintended exposure” to non-affirmative cyber. Later that year, Lloyd’s issued a bulletin mandating clarity on all policies as to whether cyber risk is covered. This led many insurers to exclude cyber or include it and price the risk accordingly.
“Other regulators and the rating agencies have been less vocal about the issue” writes Willis Towers Watson, “and, until recently, efforts to address silent cyber have been limited.” Some insurers – most notably in the specialty mutual sector – updated their policies in the mid-2010s to provide clarity on cyber. But, until recently, movement elsewhere has been sporadic, Willis writes.
Event-driven action
The recent proliferation of ransomware attacks leading to business interruption has led to cyber insurance – which began as a diversifying, secondary line – becoming a primary insurance-purchasing consideration. Unfortunately, while policies are available, many policyholders still incorrectly expect to be covered under their property and liability policies. Confusion around cyber coverage can lead to unexpected gaps.
“In a best-case scenario, a cyber incident may trigger coverage under multiple policies and increase the available total limit to respond to a covered event,” said Adam Lantrip, CAC Specialty’s cyber practice leader. “In a more common scenario, multiple policies may be triggered but not coordinate with one another, and the policyholder spends more on legal fees than the cost of having purchased standalone cyber insurance in the first place.”
Cyber risk will only grow in significance, complexity, and cost as the world becomes more wired and interdependent. The costs of cyberattacks are potentially massive and need to be mitigated in advance.
“Stay informed, stay safe, and contact your insurance professional as soon as possible.”
The Insurance Information Institute is working with insurers in the aftermath of Hurricane Ida to monitor property damages and assist consumers as they recover. In this video, Triple-I CEO Sean Kevelighan provides guidance for homeowners to help them ensure a smooth claims experience and avoid being taken advantage of by unethical contractors and other scammers who tend to emerge after disasters.
“Right now, the most important thing those impacted by Ida can do is remain safe and stay out of the way out of recovery workers,” Kevelighan says. “The storm may have passed, but remember that new dangers may be lurking.”
In particular, he points to threats from downed electrical wires and washed-out roads and bridges. Kevelighan also emphasizes the importance of quickly reporting property damage to your insurer.
Hurricane Ida is forecast to hit the Northern Gulf Coast this weekend as a major hurricane. Residents from the Upper Texas Coast to the Florida Panhandle are warned to prepare for impact. In this video, Triple-I’s Mark Friedlander provides detailed guidance for preparation.
By Mark Friedlander, Director, Corporate Communications, Triple-I
Tropical Storm Henri is forecast to become a hurricane and may impact parts of New England this weekend. Residents are advised to plan and prepare now.
Bermuda is more than pink beaches and golden sunsets – it’s a major force in the re/insurance industry. The Association of Bermuda Insurers & Reinsurers (ABIR) works to raise the profile of Bermuda’s reinsurers and insurers and represents their public policy interests around the world.
ABIR CEO John Huff recently sat down with Triple-I CEO Sean Kevelighan to discuss the contribution of Bermuda companies to global resiliency. Some of those contributions include:
Bermuda insurers and reinsurers paid $2.7 billion in claims from last winter’s storms in Texas.
Some Bermuda companies are preparing to step up and help fund new U.S. infrastructure projects through their investment portfolios.
According to the Bermuda Monetary Authority, the island nation is home to 1,200 (re)insurers holding more than $980 billion total assets and writing gross premium of approximately $240 billion.
Huff is excited about the role the re/insurance industry is playing in securing a more resilient future for society.
“If you talk to your kids, this may be the first time our work is resonating with the next generation,” he says. “I do think it’s our opportunity to lead in the area of climate, resilience and adaptation.”
In discussing the Bermuda value proposition, Huff noted the concentration of exceptional talent within a square mile of Hamilton’s business district, which has captured the attention of investors who have plowed capital into the jurisdiction to form startup companies. Huff also said many established companies in Bermuda are scaling up by expanding their capabilities to take on more risk through analytics, underwriting and capital allocation.
Indeed, Bermuda is full of surprises. Huff said the general public doen’t realize that Bermuda companies underwrite half of the mortgage insurance sold in the US, creating opportunities for more young families to purchase their first home.
The formation of nine large wildfires this week—three in Washington, two in California and Oregon, and one each in Idaho and Montana—highlight the importance of having an evacuation plan and the right coverage.
“Insurers are fulfilling their traditional role as the nation’s financial first responders as thousands of Americans evacuate in the West,” said Triple-I CEO Sean Kevelighan. “Wildfires are actively burning millions of acres, and as we are seeing these regions becoming more populated, it will be critical to focus on rebuilding communities in a more resilient manner, as well as make changes to public policies that are hindering the ability to clean and remove tinder which are fueling the devastation.”
Triple-I’s Resilience Accelerator demonstrates the power of insurance as a force for resilience. It does so by telling the story of how insurance coverage helps governments, businesses, and individuals recover faster and more completely after catastrophes. The Resilience Accelerator also links to HazardHub, an organization that assesses the wildfire risks individual properties face nationwide.
The National Interagency Fire Center (NIFC) reported yesterday that 1.95 million acres have burned in the U.S. during 2021. California’s Antelope, Dixie, McFarland, and Monument Fires grew by thousands of acres over the past few days, the NIFC added.
Oregon’s Bootleg fire, which has been burning along the Oregon and California border since July 6, continues to challenge firefighters while new blazes emerge.
“We are running firefighting operations through the day and all through the night,” said Joe Hessel, incident commander. “We are looking at sustained battle for the foreseeable future.”
A standard homeowners insurance policy covers wildfire-caused property damage to a home’s structure and its outbuildings (e.g., garage), as well as the personal belongings housed on the premises. A renter’s insurance policy covers the renter’s personal belongings. If a residence has been rendered temporarily uninhabitable by a wildfire, standard homeowners and renters insurance policies provide additional living expenses (ALE).
Triple-I offers the following tips to those who live in a wildfire-prone community.
Have an evacuation plan
Check with your insurer to see if you’re eligible to collect ALE. Some states allow ALE claims to be filed in the event of mandatory evacuations. Be sure to save hotel and restaurant receipts
File a claim with your insurer as soon as you are aware of damages to your property
Take photos of damage prior to making repairs
When making either temporary or permanent repairs, save receipts to give to your insurance claim adjuster
Only use licensed contractors to make repairs and beware of contractor fraud
