Survey more than 800 corporate counsel representing companies across 26 countries on litigation trends and issues and you get some insightful findings.

Such is the case with the recently released Norton Rose Fulbright 2015 Litigation Trends Annual Survey.

For example, class action lawsuits were listed as the top issue by respondents in the United States, Canada and Australia.

U.S.-based respondents also reported a more litigious business environment than their peers, with 55 percent facing more than five lawsuits filed against their companies in the previous 12 months, compared with 23 percent in the United Kingdom and 22 percent in Australia.

There are also significant differences in the types of litigation that U.S. companies face compared with their peers worldwide.

For example, personal injury litigation is much more prevalent in the U.S. than elsewhere, with 21 percent of those polled selecting it as one of the most numerous types of cases faced in the previous 12 months, compared to just 15 percent in the survey overall.

In addition, intellectual property/patents (18 percent) and product liability (17 percent) cases were more common in the U.S. than worldwide (13 percent and 11 percent, respectively).

Going forward, more U.S. respondents say regulatory/investigations are a top concern (48 percent) compared with the broader sample (39 percent).

Intellectual property (IP)/patents disputes are also of greater concern in the U.S. (30 percent) compared with all respondents (21 percent).

In addition, more U.S. respondents list class actions (25 percent) and product liability (18 percent) as top concerns compared with the total sample (18 percent and 14 percent, respectively).

In the words of Richard Krumholz, head of dispute resolution and litigation, United States, Norton Rose Fulbright:

Our survey clearly demonstrates that the litigation and regulatory environment in the United States continues to pose some of the greatest risks which businesses from around the world face. This is reflected in rising litigation budgets and the size of disputes-focused staff compared to peer companies around the globe.”

Just to be clear, the average U.S. company has 20 in-house lawyers to handle disputes and the number of U.S. companies with an annual litigation spend of $1 million or more increased from 52 percent to 69 percent from 2012 to 2014.

Slightly more than half of the survey respondents are from companies with headquarters in the U.S.

The Insurance Information Institute (I.I.I.) has an excellent resource on business liability insurance here.

Insurance Information Institute (I.I.I.) chief actuary James Lynch is on the road.

Spring is heavy conference season. I type this from an Orlando hotel room on May 14, after day one of the Annual Issues Symposium put on by the National Council on Compensation Insurance (NCCI). Ahead are trips to Colorado, Philadelphia and Atlanta, as well as two meetings close to home, in New York.

The NCCI conference is perhaps best known for president and chief executive officer Steve Klingel’s summary of the workers compensation line in a single word or phrase. This year: Calm now . . . but turbulence ahead. With premium up 4.6 percent and the combined ratio (98) at its lowest since 2006, workers comp results have been good, but outside pressures could make the ride bumpy.

One pressure is low interest rates. Years can pass from the time an insurer collects premium and injury claims get paid, and insurers in the meantime invest that premium, with the proceeds helping pay for claims and bolstering profits.

Interest rates have been so low for so long that the industry can’t rely on interest rates to deliver results anymore.

Another is the sharing economy. As Dr. Robert Hartwig, president of the I.I.I. and an economist, noted later that day, the smartphone has made it easy to summon people to do ad hoc jobs, with the best known being Uber’s ride-sharing battalion.

Those workers are independent contractors (though that has been challenged) and as such don’t get traditional benefits, including workers comp coverage. As the sharing economy grows, workers comp could shrink.

The third is a series of attacks on the basic principles of workers compensation. News reports suggest workers comp doesn’t compensate injuries equitably; lawsuits suggest the line has violated the Grand Bargain that gives up a big tort payoff in exchange for a steady flow of benefits; and a nascent movement would let employers opt out of the workers compensation system altogether.

But workers comp has survived a lot in the century since it took hold in the United States and seems well-equipped to handle the, well, turbulence.

“While I am confident that we will work our way through these challenges,” Klingel said, “it is important to be realistic about current conditions and to recognize that the current positive results may not last.”

The I.I.I. has more workers comp facts and statistics available here.

National Dog Bite Prevention Week is coming up… Here are some numbers to consider:

  • • Dog bites caused more than 33 percent of all homeowners insurance liability claims in 2014, costing in excess of $530 million
  • • The average cost per claim has increased more than 67 percent from 2003 to 2014
  • • The number of dog-bite claims actually decreased by 4.7 percent but the average cost per claim increased 15 percent from $27,862 in 2013 to $32,072 in 2014
  • • California (1,867), Ohio (1,009) and New York (965) had the highest number of claims in 2014
  • • New York had the highest average cost per claim in the country: a whopping $56,628

Costs per claims have risen due to a variety of factors including increased medical costs and jury awards.  In addition to dog bites, some claims are due to dogs knocking down children, cyclists, the elderly, which can result in fractures and other injuries. All these factors impact the potential severity of losses.

Contact @LWorters for more information.

The financial impact of cyber exposures is close to exceeding those of traditional property, yet companies are reluctant to purchase cyber insurance coverage.

These are the striking findings of a new Ponemon Institute  survey sponsored by Aon.

Companies surveyed estimate that the value of the largest loss (probable maximum loss) that could result from theft or destruction of information assets is approximately $617 million, compared to an average loss of $648 million that could result from damage or total destruction of property, plant and equipment (PP&E).

Yet on average, only 12 percent of information assets are covered by insurance. By comparison, about 51 percent of PP&E assets are covered by insurance.

The survey found that self-insurance is higher for information assets at 58 percent, compared to 28 percent for PP&E.

In some ways, these results are not surprising.

Cyber insurance is a relatively new product, and while interest continues to increase, it will take time for the purchase rate to catch up with traditional insurances.

That said, the values at stake are enormous and as the report states, the likelihood of loss is higher for information assets than PP&E.

Another important takeaway from the survey is that business disruption has a much greater impact on information assets ($207 million) than on PP&E ($98 million).

This suggests the fundamental nature of probable maximum loss (PML) varies considerably for intangible assets vs. tangible assets, Ponemon says.

Business disruption represents 34 percent of the PML for information assets, compared to only 15 percent of the PML for PP&E.

A footnote states that while the survey results suggest PML in the neighborhood of $200 million, a growing number of companies are using risk analysis and modeling to suggest potential losses in excess of $500 million to over $1 billion and seek cyber insurance limit premium quotes and policy terms for such amounts.

More information on the growth in cyber insurance is available from the I.I.I. here.

Some 2,243 individuals involved in cyber and enterprise risk management at companies in 37 countries responded to the Ponemon survey.

We’re reading about the economic and insurance impact of severe thunderstorms in the United States in April 2015, as reported by Aon Benfield’s latest Global Catastrophe Recap report.

Five separate thunderstorm events in central and eastern parts of the U.S. caused expected insured losses of $2 billion, including more than $750 million from one event alone.

What was the $750 million event?

A widespread multi-day severe weather outbreak that hit central and eastern parts of the U.S. from April 7-10, leaving at least 3 dead and dozens injured.

Major damage was noted across the Plains, Midwest and the Mississippi Valley following 25 confirmed tornado touchdowns, grapefruit-sized hail, damaging straight-line winds, and flooding rains, according to Aon.

The April 9 EF4 tornado that devastated the communities of Fairdale and Rochelle, Illinois, is part of this event.

Total economic losses were estimated at $1 billion, while insurers put losses beyond $750 million.

Interestingly, Aon notes that much of the insured losses in this severe weather event were driven by claims resulting from hail.

The Insurance Information Institute (I.I.I.) has some useful facts and statistics on hail here.

It cites ISO figures that indicate events involving wind, hail or flood accounted for $16.1 billion in insured catastrophe losses in 2013 dollars from 1994 to 2013 (not including payouts from the National Flood Insurance Program).

The I.I.I. also notes that there were 5,536 major hail storms in 2014, per statistics culled from NOAA’s Severe Storm database. Nebraska had the largest number of severe hail events in 2014, followed by Texas, Kansas, Iowa and Missouri.

Over the 14 years from 2000 to 2013, U.S. insurers paid almost 9 million claims for hail losses, totaling more than $54 billion, according to a recent report by Verisk Insurance Solutions. That’s a hail of an impact.

The average price of insurance for all U.S. businesses remained the same in April 2015 as it was in April 2014, according to the latest analysis from online insurance exchange MarketScout.

MarketScout CEO Richard Kerr noted that the market remained flat with a zero percent increase in April 2015, down from a 1.5 percent increase in October 2014, continuing the downward trend of the last eight months.

Kerr said:

It’s not dramatic but it is a trend. Coastal property may experience some slight rate increases since we are on the cusp of the wind season. Rates on all other exposures should continue to be quite competitive.”

By coverage classification, rates for business owners policies (BOP), professional liability and D&O coverages decreased in April 2015 by one percent as compared to March 2015, MarketScout reported.

However, commercial auto coverage actually saw a 2 percent increase, while rates for all other coverages remained the same.

By account size, rates remained the same for all except jumbo accounts (over $1 million in premium) which adjusted to a rate reduction of minus 2 percent in April 2015, compared with rates the previous month, MarketScout said.

I.I.I. provides commentary on the P/C insurance industry financial results here.

 

The Kentucky Derby is upon us and insurers are more than just spectators at this major sporting event.

Bloodstock and equestrian insurance is big business with underwriters who specialize in offering tailored protection for high value animals.

Consider the staggering values at stake. A BloombergBusiness article by Mason Levinson tells the tale of American thoroughbred racehorse Tapit.

Tapit began his stud career with an initial stallion fee of $15,000. That fee has soared 20-fold in the past decade and in 2015 Tapit will generate over $30 million for his owners.

Why?

Tapit’s offspring tend to win races.

As Bloomberg reports:

By 2009, his offspring’s racetrack earnings placed him 28th on a national ranking of stallions, according to data compiled by the Bloodhorse. He climbed to 12th the next year, then third in 2011 and first in 2014, a position he has maintained over the first four months of this year.”

One of Tapit’s sons, Frosted, is a top contender in Saturday’s Kentucky Derby.

Today, Tapit’s total value is estimated at about $120 million, the article reports.

Luckily, there’s insurance for that. Whether you own racehorses, stallions, broodmares, or showjumpers, insurers are able to tailor a policy that meets your needs.

A bloodstock insurance policy typically would cover a number of different risks.

For example, all risks mortality would cover the value of the animal if it dies as a result of accident, disease or illness. Theft can also be covered, as well as loss of use (covering financial loss) and public liability.

If you run an equine breeding program, permanent infertility insurance is another important coverage. Stallions are the “calling card” of a major farm and can be synonymous with the farm’s name and reputation.

If a stallion becomes permanently impotent, infertile, or incapable of serving mares, it can be a huge setback for the owner, breeder or shareholder. This important coverage protects one of their most valuable assets.

Perhaps one of the most high-profile equine insurance claims over the years involved the death of thoroughbred Alydar in 1990. Check out this Blood-Horse feature article by Tom Dixon, the Lloyd’s of London insurance adjuster who was first on the scene when Alydar was found in his stall at Calumet Farm with a broken leg.

As the death toll from Saturday’s devastating 7.8 magnitude earthquake in Nepal continues to rise, we’re reading about the health threat facing survivors.

In addition to the injured, an estimated 2.8 million people have been displaced by the earthquake as many are afraid to return to their homes.

The United Nations (UN) has launched an urgent appeal for $415 million to reach over 8 million people with life-saving assistance and protection over the next three months.

Its report offers insight into the scale of the unfolding humanitarian disaster:

According to initial estimations and based on the latest earthquake intensity mapping, over 8 million people are affected in 39 of Nepal’s 75 districts. Over 2 million people live in the 11 most critically hit districts.”

And:

The government estimates that over 70,000 houses have been destroyed, Over 3,000 schools are located in the 11 most severely affected districts. Up to 90 percent of health facilities in rural areas have been damaged. Hospitals in district capitals, including Kathmandu, are overcrowded and lack medical supplies and capacity.”

Strong tremors have damaged infrastructure, including bridges and roads and telecommunications systems. Transport of fresh water has been interrupted and fuel is running low in many areas.

The UN also reports that an estimated 3.5 million people are in need of food assistance, of which 1.4 million need priority assistance, while 4.2 million are urgently in need of water, sanitation and hygiene support.

While it’s far too early to know if these estimates will hold, clearly the Nepal earthquake is as catastrophe modeling firm RMS says: “shaping up to be the worst natural disaster this calendar year, particularly because Nepal is remote, economically challenged, and not resilient to an earthquake of this magnitude.”

Indeed, the earthquake is expected to inflict at least $5 billion in total economic losses – that’s more than 20 percent of Nepal’s gross domestic product – and could end up exceeding the country’s GDP.

Not surprisingly, insurance penetration in what is one of the world’s poorest nations is extremely low, as the I.I.I. explains here.

Information on the most deadly and the most costly world earthquakes is posted here.

Everyone wants to talk about autonomous vehicles, and for proof I.I.I. chief actuary Jim Lynch offers the AIPSO Residual Market Forum, at which he spoke in mid-April.

AIPSO manages most of the automobile residual market, where highest risk drivers get insurance. Each state has a separate plan for handling risky drivers and AIPSO services most of them in one way or another, acting as the linchpin in the $1.4 billion market, about 0.7% of all U.S. auto insurance written in 2013, according to Auto Insurance Report.

Though small, the residual market is important, but it’s not an area that would naturally lend itself to discussing the self-driving car. If cars could drive themselves, of course, there wouldn’t be much of a residual market.

Even so, I was one of three speakers at the forum’s panel exploring industry trends, and at AIPSO’s request, all three of us touched on autonomous cars.

Though he spoke last, Peter Drogan, chief actuary at AMICA Mutual Insurance, probably did the best job of laying out the future technology and some of its challenges. Particularly spooky was a 60 Minutes clip in which a hacker took over a car Lesley Stahl drove over a parking lot test course. She wasn’t driving fast, but she couldn’t stop after the hacker took over the brakes of her car.

Karen Furtado, a partner at Strategy Meets Action, a consultancy that helps insurers plan for the future, laid out the case for disruption. Autonomous vehicles will not only make vehicles safer, they will change driving habits. Fewer cars will be on the road, and more people will share them, summoning self-driving vehicles through ride-sharing apps, all of which could potentially shrink the $180 billion auto insurance market.

I’ve made my thoughts clear before, both in this blog and elsewhere: the technology will change driving forever, but it takes about three decades for auto technology to become common on roadways, giving insurers a lot of time to adjust. And some coverages, like comprehensive, will not be affected, as they protect cars when they aren’t in accidents.

A PowerPoint of my presentation is posted here.

The decision by Texas-based Blue Bell Creameries to recall all of its products after two samples of its ice cream tested positive for listeria is a timely reminder of the importance of product recall insurance.

Product recalls can be costly and logistically complex. In Blue Bell Creameries’ case the expanded voluntary recall announced Monday night includes ice cream, frozen yogurt, sherbet and frozen snacks distributed in 23 states and international locations.

Blue Bell said it was pulling its products “because they have the potential to be contaminated with listeria.”

The company had issued an earlier more limited recall last month after the U.S. Centers for Disease Control and Prevention (CDC) linked ice cream contaminated with listeria to three deaths in Kansas.

As of April 21, 2015, the CDC says a total of 10 people with listeriosis related to this outbreak have been confirmed from four states.

A 2014 report by Aon notes that the number of product recalls in the United States and Canada for both food products and nonfood products continues to grow year over year.

Each year, hundreds of products are recalled in the U.S. Some historically significant recall events have included such well-known brands as Tylenol, Perrier, Firestone Tires, Pepsi and Coca-Cola.

The Insurance Information Institute (I.I.I.) reminds us that product recalls can be financially devastating and potentially put a company out of business. No organization is immune to the risk of a product recall—even those with the best safety records, operational controls and manufacturing oversight.

In a post in the Wall Street Journal’s Morning Risk Report, crisis management experts note that how well a company succeeds at regaining customer trust following a product recall will likely determine whether it recovers from the negative hit to its reputation and bottom line.

True. Insurance can also help defray the financial hit on a company.

Product recall insurance helps cover a wide range of costs including advertising and promotional expenses to launch a recall, as well as the costs related to product destruction and disposal, business interruption and repairing a damaged reputation, the I.I.I. says.

Another coverage worth considering is product contamination insurance, which protects a company’s bottom line in the event its product is accidentally or maliciously contaminated.

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