CISA urges ALL organizations across ALL sectors to follow guidance to address the widespread domestic and international exploitation of Microsoft Exchange Server product vulnerabilities; see CISA’s newly released web page for details. https://t.co/VwYqAKKUt6. #Cyber#InfoSec
The alarm about the ongoing hack of Microsoft Exchange Server, which began as early as January, appears quite justified. Microsoft believes a state-sponsored Chinese group called Hafnium orchestrated the attack that exploited flaws in Exchange software to gain access to email accounts and install unauthorized software, gaining full control of affected systems.
Hafnium primarily targets entities in the United States across a number of industry sectors, including infectious disease researchers, law firms, higher education institutions, defense contractors, policy think tanks and NGOs, according to Microsoft.
In a tweet, the United States Cybersecurity and Infrastructure Security Agency (CISA) urged “ALL organizations” across “ALL sectors” to follow its guidance to address the email software’s vulnerabilities.
The number of U.S.-based organizations affected is estimated to be at least 30,000, while worldwide that number is close to 100,000. The vulnerability can be exploited to compromise networks, steal information, encrypt data for ransom, or even execute a destructive attack. CISA advises business leaders at all organizations to ask IT personnel to immediately address this incident or get third-party IT support.
A Hafnium attack should trigger any cyber insurance an organization has in place, according to Lockton, an insurance broker. Lockton recommends that organizations contact their insurer only if they discover that the vulnerabilities being exploited are present in the system. If an attack is underway, it should be reported to cyber insurers immediately.
Class action lawsuits filed in Nevada last month against 10 auto insurers are more likely to hurt policyholders than help them.
The suits contend that discounts, rebates, and policyholder dividends provided in 2020 – amounting to about $14 billion nationally – were not “meaningful” and that the rates charged violate state law against excessive premiums. The $14 billion figure does not include the more than $280 million in philanthropic contributions the industry has also made during COVID-19 to support communities.
The fact is, auto insurance premium rates fell nationally in 2020 for the first time in a decade. Insurers’ net income after taxes fell 26.1 percent through the third quarter of 2020, compared with the same quarter the previous year. A major factor was the pandemic-related discounts granted in 2020.
“The rate is lower because people are driving less,” said Triple-I chief actuary James Lynch, noting that during a lockdown period in the spring driving was down as much as 50 percent. Fewer cars on the road should lead to fewer accidents, and this expectation is what led insurers to proactively provide discounts and other policyholder benefits during the pandemic. Many auto insurers have built these discounts into premium rates for 2021, Lynch said.
Accidents down, fatalities up
Accidents did decline in 2020; unfortunately, traffic fatalities and claims increased. According to the National Highway Traffic Safety Administration (NHTSA), fatalities rose 4.6 percent in the first nine months of 2020, despite overall vehicle miles traveled having decreased. Fatalities in the third quarter of 2020 were 13 percent higher than in the same period of 2019 – the largest such increase in more than a decade. This suggests that driver behavior deteriorated rapidly and significantly during the pandemic.
The 2020 premium reduction would have even been larger, Lynch said, “if people had slowed down.”
Claims rising faster than premiums
Even before COVID-19, auto damage claims were rising faster than general inflation, and auto insurance premium increases trailed inflation. Fatalities had been declining as cars became safer – but safety technology is expensive, making repairs more costly and driving up the size of policyholder claims.
The 2020 trend of increasing fatalities could worsen as traffic volume returns to pre-COVID levels. Data show that many motorists who substantially increased their driving speed when traffic was 50 percent below normal have not slowed down as traffic increased, Lynch said.
“The concern is that frequency patterns will return to the norm, but fast driving will keep claim severity high, putting upward pressure on rates,” Lynch said.
The salient point is this: Insurers have kept their promises to pay claims, given $14 billion back to policyholders, and generously supported communities through philanthropy – even as rising accident severity during the pandemic dented their net incomes. Defending themselves against frivolous litigation will only add to their expenses, and lower premiums are unlikely to be the result.
By Scott Holeman, Media Relations Director, Triple-I
Floods kill more people than any other thunderstorm-related hazard. Many flood deaths are the result of people driving into water-covered roads. Triple-I has these tips on how to protect your family.
Recent flooding in Kentucky “is going to be one that goes into the record books,” the state’s Emergency Management Director Michael Dossett said in a news conference this week. At least 49 counties had issued disaster declarations following days of rain that dumped four to seven inches across a wide stretch of the state and pushed rivers to levels not seen for decades.
Dossett and Gov. Andy Beshear said the state had been in contact with the Federal Emergency Management Agency (FEMA) to seek federal aid and that assessments would be made next week for both the flooding and an ice storm last week. Damage assessments for the ice storm had been put on hold by the floods.
Extreme weather events, like these floods and last month’s winter storm that left dozens of Texans dead, millions without power, and nearly 15 million with water issues, underscore the importance of resilience planning and of homeowners and businesses having appropriate insurance coverage.
Flood protection gap
About 90 percent of all U.S. natural disasters involve flooding. Whether related to coastal and inland inundations due to hurricanes, extreme rainfall, snowmelt, mudflows, or other events, floods cause billions of dollars in losses each year. According to FEMA, one inch of flood water can cause as much as $25,000 in damage to a home.
But direct economic losses are only part of the picture. Human costs are enormous, and it can take families, businesses, and communities years to recover.
Flood damage is excluded from coverage under standard homeowners and renters insurance policies. However, coverage is available from the National Flood Insurance Program (NFIP) and from a growing number of private insurers.
Many people believe they don’t need flood insurance if the bank providing their mortgage doesn’t require it; others assume their homeowners insurance covers flood damage; others think they cannot afford it.
A recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods. It identified “around 1.7 times the number of properties as having substantial risk,” compared with FEMA’s flood zone designation.
“This equates to a total of 14.6 million properties across the country at substantial risk, of which 5.9 million property owners are currently unaware of or underestimating the risk they face,” the report said.
Current system unsustainable
The NFIP owes more than $20.5 billion to the U.S. Treasury, leaving $9.9 billion in borrowing authority from a $30.43 billion limit in law. This debt is serviced by the NFIP and interest is paid through premium revenues. With flood losses on the rise, the current system is not sustainable without changes.
In December, FEMA proposed “substantively” revising the “estimated cost of assistance” factor the agency uses to review governors’ requests for a federal disaster declaration to “more accurately assess the disaster response capabilities” of the states, District of Columbia and U.S. territories. Its Risk Rating 2.0 initiative, set for implementation in October, aims to make flood insurance rates more accurately reflect insured properties’ individual flood risk.
In other words, the federal government will likely ask states, municipalities, and some policyholders to shoulder more of the cost of recovering from natural catastrophes.
Complex challenges require multi-pronged approaches to address them, and FEMA and other federal and state agencies are working with the private sector to close the flood protection gap. In the near term, the most cost-effective way for families and businesses to mitigate flood risk is insurance.
If it can rain where you are, it can flood where you are. As Daniel Kaniewski, managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at FEMA, put it during a Triple-I webinar last year: “Any home can flood. Even if you’re well outside a floodplain, get flood insurance. Whether you’re a homeowner or a renter or a businessowner — get flood insurance.”
Sean Kevelighan, Triple-I CEO, will be a featured speaker at the Reinsurance Association of America’s 18th annual Cat Risk Management conference as part of a COVID-19 panel. The panel will discuss the economic impact of the pandemic on insurers, pandemic-related litigation, and reinsurance issues.
The online conference takes place March 22-24 and features a powerhouse roster of experts who will share their views on lessons learned from the tumultuous year just passed, explore risk-management issues, and offer insights on how decision makers can navigate 2021.
Conference registration includes three full days of information, plus an on-demand capability that lets attendees preview sessions before the scheduled presentations and review sessions they might have missed or wish to view again.
The conference targets financial-sector professionals–including insurers, reinsurers, and investment banks–responsible for catastrophe risk management; attorneys specializing in reinsurance; academics; federal/state government officials; and regulators. In addition to the exceptional technical program, it’s a great networking opportunity.
Last month’s winter storm that left dozens of Texans dead, millions without power, and nearly 15 million with water issues could wind up being the costliest disaster in state history.
Disaster-modeling firm AIR Worldwide says claims volume will likely be significant and, with average claims severity values of $15,000 for residential risks and $30,000 for commercial risks, insured losses “appear likely to exceed $10 billion.”
AIR says several variables could drive the loss well above that amount, including:
A higher-than-expected rate of claims among those risks affected by prolonged power outage,
Whether utility service interruption coverages pay out;
Larger-than-expected impacts from demand surge,
Government intervention, and
Whether claims related to mold damage start to emerge as a significant source of loss.
FitchRatings says the widespread scale and claims volume of the event could drive ultimate insured losses as high as $20 billion. For context, the state’s insured losses related to Hurricane Harvey were about $20 billion, according to the Texas Department of Insurance. The deadly 2017 hurricane devastated the Gulf Coast region. Last month’s winter storm affected every region of the state.
“All 254 counties will have been impacted in some way by the freeze,” said Lee Loftis, director of government affairs for the Independent Insurance Agents of Texas. “That is just unheard of.”
All Texas counties have received state disaster declarations by Gov. Greg Abbott, opening them up to additional state assistance. But many rural counties are currently excluded from President Biden’s major disaster declaration.
State and local officials say the federal government moved swiftly to approve declarations for 108 counties and that more are likely coming as reports of damage mount. Eighteen of the state’s 20 most populous counties were included in the declarations. But for the 146 counties — many of them rural — the wait is nerve wracking.
Officials say it’s because those counties lack data on damages. Nim Kidd, chief of the Texas Division of Emergency Management, said the state is urging residents to report their property damage through an online damage assessment tool. State officials will report that damage to FEMA in hopes it will lead to more counties being added to the major disaster declaration.
Earl Armstrong, a FEMA spokesperson, said in a statement to the Texas Tribune that homeowners and renters who don’t live in a disaster-designated county should file a claim with their insurer, document damage to their home from the storm, and keep receipts for all expenses related to repairs.
Anomalous as the Texas winter storm may have been, it is a salient data point that all states and municipalities should take to heart in their disaster planning. In December, FEMA proposed “substantively” revising the “estimated cost of assistance” factor the agency uses to review governors’ requests for a federal disaster declaration to “more accurately assess the disaster response capabilities” of the states, District of Columbia and U.S. territories.
In other words, the federal government will likely ask states and municipalities to shoulder more of the cost of recovering from natural catastrophes – making it even more important for every state to prepare for and insure against events that might have seemed unthinkable not so long ago.
And as Texas and other affected states recover, they still have 2021’s severe convective storm and hurricane seasons ahead of them.
The insurance industry continues to be a major stakeholder in mitigating the effects of natural disasters on communities. As such, a group of U.S. insurers, reinsurers, intermediaries, and model providers are creating an advisory board called Helix.
Facilitated by The Institutes, Helix seeks to integrate new approaches to automated claims analysis into an overarching framework for the application of new and emerging technologies in natural disaster resilience, according to a Risk & Insurance article.
“We are excited to help coordinate this effort focused on mitigating the adverse effects of natural disasters,” says Peter Miller, President and CEO of The Institutes. He described Helix as an opportunity “to serve as a neutral third party in work on this important issue that ultimately benefits the general public.”
Initially building on work to implement open common data standards for catastrophe risk analytics, the Helix vision is grounded on four pillars to support the industry’s increasingly wide-ranging and growing capabilities:
Climate and resilience: Pursuing hazard and resilience research and advocating for innovation in insurance products and economic responsiveness;
Data standards, data content/interpretation/quality, and industry-level data resources;
Technology: Transparency in models and analytics, Insurtech innovations, and technology solutions;
Operations: Common industry tools, improved communication/exchange across the value chain, and support/education for the industry
Helix builds on the work of The Institutes’ Catastrophe Modeling Operating Standards (CMOS) initiative. The CMOS team completed a survey project in September 2020 to establish and implement an open common exposure data standard. This project also provided a set of recommendations for the community to advance the work.
“Based on the interest in and success of the CMOS, it is clear there is a desire for an industry-wide, cooperative effort focused on resilience from natural catastrophes,” says Sean Ringsted, Chief Risk Officer, Chubb. “We’ve received strong interest in creation of Helix and look forward to welcoming the participation of additional organizations.”
The Institutes is in the process of engaging founding members and building out the appropriate governance structure. As those are put in place, Helix members will determine initial priorities in support of the four pillars and leveraging the work performed under the CMOS initiative. Companies in search of additional information, or that have interest in contributing expertise to the effort can contact The Institutes at helix@theinstitutes.org.
A new study from the nonprofit First Street Foundation projects the impact climate change may have on U.S. flood losses.
The report – The Cost of Climate: America’s Growing Flood Risk –finds that, when adjusting for the long-term impact of a changing climate, nearly 4.3 million homes have “substantial” flood risk that would result in financial loss.
“If all of these homes were to insure against flood risk through the National Flood Insurance Program (NFIP),” the report continues, “the rates would need to increase 4.5 times to cover the estimated risk in 2021, and 7.2 times to cover the growing risk by 2051.”
Last year, the foundation released a report indicating that nearly 6 million U.S. properties could be at greater risk of flooding than currently indicated by Federal Emergency Management Agency (FEMA) flood maps.
The new report is particularly resonant as FEMA prepares to implement Risk Rating 2.0, an initiative to make flood insurance pricing more representative of each policyholder’s exposure and help customers better understand their risks and the importance of having flood coverage. It plans to accomplish this by using industry best practices and technology to deliver rates that “are fair, make sense, are easier to understand, and better reflect a property’s unique flood risk.
Implementation of Risk Rating 2.0 is scheduled to begin in October 2021.
Since homeowners who have federally backed mortgages and reside in FEMA-designated Special Flood Hazard Areas (SFHA) are required to buy flood insurance, the First Street data serve as an example of an early indicator of who could be most affected by risk-based rate changes in the near term and as the impacts of climate change evolve.
Potential cost consequences of expanded coverage under NFIP – or, worse, of not addressing the existing flood-protection gap – underscore the importance of a multi-pronged approach to mitigation and resilience that includes improved attention to how, where, and whether to build or rebuild and expanded availability and affordability of insurance.
By Scott Holeman, Media Relations Director, Triple-I
For Black History Month, Triple-I is putting the spotlight on Black entrepreneurs and innovative leaders in insurance. Connecticut’s first Black Insurance Commissioner, Andrew Mais, is an undisputed insurance leader and mentor as the video above makes clear.
“Connecticut is the insurance capital of the known universe,” says Mais. The state ranks number one for insurance employment and payroll and has the highest concentration of actuaries in the U.S.
Mais wants young people to understand the tremendous opportunities that the insurance industry offers and to consider it as a place to start a career.
