Wildfires in 2015 have already caused more damage and financial loss in the United States than in any other year since 2007.

Aon Benfield’s latest Global Catastrophe Recap report reveals that California wildfires during September destroyed more than 2,000 homes and resulted in estimated insured losses of at least $1.1 billion—the costliest since 2007.

The Valley Fire, northwest of San Francisco, and the Butte Fire, southeast of Sacramento, were the most destructive of the fires.

In its report, Aon notes that the Valley Fire left four people dead, destroyed 1,958 residential and commercial structures and damaged 93 others. It is the third-most damaging wildfire in state history.

Total economic losses were estimated beyond $1.5 billion, while preliminary insured losses were put at in excess of $925 million, Aon reports.

The Butte Fire left two people dead and destroyed 475 homes, 343 outbuildings and damaged 45 other structures. It is the seventh most damaging wildfire in state history.

Total economic losses were estimated at $450 million while preliminary estimated insured losses are in excess of $225 million.

With the peak of California wildfire season just beginning, the severity of the September events serves as a reminder of how costly the peril can be for the insurance industry, Aon Benfield said.

Elsewhere around the world, wildfires continued to pose problems in parts of Indonesia as officials declared 2015 the worst year for wildfires since 1997.

One study reported that Indonesia would endure $4 billion in direct and secondary economic losses from the fires in the regions of Sumatra and Kalimantan, Aon said.

The Insurance Information Institute (I.I.I.) provides some useful facts and statistics on wildfires here.

A recent I.I.I. media advisory notes that seven of the 10 costliest wildfires in U.S. history in terms of insured losses have occurred in California. The costliest of these was the 1991 Oakland fire which produced $2.7 billion in claims (in 2014 dollars).

For more on the California wildfires, Janet Ruiz, I.I.I.’s Northern California-based representative can be reached at janetr@iii.org or (707) 490-9375.

A poll of board directors and executives from Forbes Global 2000 companies finds that cybersecurity is being taken much more seriously in the boardroom these days, as is cyber insurance.

Nearly two-thirds (63 percent) of respondents to the study developed by the Georgia Tech Information Security Center (GTISC) say they are actively addressing computer and information security, up from 33 percent in 2012.

There has also been a significant shift in the number of boards reviewing cyber insurance. Nearly half (48 percent) of respondent boards were reviewing their company’s insurance for cyber-related risks, compared with just 28 percent in 2012.

However, the 2015 survey suggests there may be confusion over what type of insurance to purchase or appropriate coverage limits. Only about half of the respondents (47-54 percent) indicated that they had quantified their business interruption and loss exposure from cyber events.

Almost all boards (90 percent) are reviewing risk assessments, and an increasing number of them (53 percent) are hiring outside experts to assist on risk issues. Interestingly, the highest degree of attention was being paid to cyber risks associated with supplier relationships.

The survey, which was supported by Forbes, the Financial Services Roundtable (FSR), and Palo Alto Networks, found that some of the biggest improvements over time have been organizational.

For example, the majority of boards (53 percent) have established a risk committee, separate from the audit committee, with responsibility for oversight of cyber risk. In 2008, just 8 percent of boards had this in place.

The financial sector far exceeds other industry sectors with 86 percent having a board risk committee separate from the audit committee, followed by the IT/Telecom sector at 43 percent.

Another positive sign? Boards are now placing much more importance on risk and security experience when recruiting board directors, with 59 percent saying their board had a director with risk expertise, and nearly one quarter (23 percent) one with cybersecurity expertise.

Something to bear in mind: the response rate to the 2015 survey was low – with results received from just 6 percent, or 121 respondents at the board or senior executive level at 1,927 Forbes Global 2000 companies.

We’re well into the second week of the VW emissions scandal fallout and as we scan the latest news headlines it appears that reputation risk-related matters remain front and center.

Multiple auto manufacturer reputations are on the line especially with the news that the Environmental Protection Agency (EPA) has now broadened its investigation to look into at least 27 diesel vehicle models made by BMW, Chrysler, General Motors, Land Rover and Mercedes-Benz.

From ignition switch defects, to exploding air bags, to unintended acceleration and now diesel emissions test cheating the beleaguered auto industry continues to face record recalls and massive reputation damage, not to mention the associated financial impact on stock prices and corporate profits.

After all, more than 25 percent of a company’s market value is directly attributable to its reputation, according to the World Economic Forum.

A global survey of 300 executives by Deloitte notes that a company’s reputation should be managed like a priceless asset and protected as if it’s a matter of life and death.

Some 41 percent of companies that experienced a negative reputation event reported loss of brand value and revenue, Deloitte found.

In the case of VW, the struggle to regain consumer trust in its product and to rebuild its tattered reputation is likely to be protracted and costly.

Criminal investigations, civil fines and penalties and a mounting pile of lawsuits add to the rising volume of liability costs the company will face. Some analysts even estimate the total cost to VW could reach $87 billion.

Consider the following:

–Some €29 billion wiped off VW’s market capitalization in a matter of days after its deception was uncovered, a cost which far outweighs the savings VW made by cutting corners on its diesel vehicles in the U.S., as the New York Times DealBook reports here.

–A refit of 11 million diesel VW and Audi vehicles that have the illegal software, a fix which some analysts have estimated could cost more than $6.5 billion, according to this Reuters report.

–U.S. lawsuits filed against VW are seeking billions of dollars in damage, the Wall Street Journal reports. More than 34 lawsuits filed by U.S. vehicle owners, shareholders and dealerships have been noted so far, and that number is set to grow.

–More than $18 billion in civil penalties and fines, plus other fees for violating the Clean Air Act, based on the Environmental Protection Agency (EPA) notice of violation.

The resignation and replacement of VW’s CEO Martin Winterkorn (now the subject of his own criminal investigation) and widespread criticism of VW’s supervisory board leads us to the potential directors & officers’ exposure facing VW.

A Business Insurance article here explains why VW’s exposure to D&O lawsuits may be limited in the U.S. More on this topic in an excellent post by Kevin La Croix of The D&O Diary blog.

The Insurance Information Institute (I.I.I.) explains why a business should consider purchasing D&O insurance here.

Insurance Information Institute (I.I.I.) chief actuary James Lynch brings us a cautionary tale from the open road:

It’s a gritty drive from Los Angeles to San Francisco as I learned with my wife and older daughter this summer – a climb through dry mountains, then across the nation’s Salad Bowl, the San Joaquin Valley, passing strings of tractor-trailers headed up the interstate toward Sacramento and cow country.

Like most tourists, we left the trailers behind by turning west on state Route 46. My wife drove. We passed a thicket of oil derricks and, frankly, not much else. The roads were well-designed and well-kept. Everyone drove fast. Far off we saw the hills that would lead us to Highway 101 and north again.

We came upon what, for that desolate place, was a major intersection – a flashing yellow light and a lane that let oncoming traffic turn left in front of us. A line of cars waited to make that left. Daylight was fading, and it was hard to pick out exactly how many wanted to turn or whether any had begun to.

“That looks like a dangerous spot,” I said.

Then we saw the sign: James Dean Memorial Junction.

Yeah. Right there, 60 years ago – September 30, 1955 – actor James Dean was cruising maybe 85 in his Porsche Spyder when Donald Turnupseed turned left. In moments Dean went from an astounding actor (East of Eden, Rebel Without a Cause, Giant) to a roadside tragedy.

He wasn’t a teen-ager, but he was a teen idol squeezed between the Sinatra and Elvis eras, and now his case is one I can’t help but think of as that older daughter baby-steps toward her first license this fall.

2015 09 25 cholame


James Dean Memorial Junction still seems dodgy, but overall driving is much safer. The accident rate has fallen on average about 1 percent a year for decades. But long-term trends have statistical blips. We are in one now.

As we at the I.I.I. note in our Facts and Statistics on highway safety, traffic fatalities at mid-year are 14 percent higher than the same period last year, according to National Safety Council estimates. The economy has improved. People are driving more and perhaps less safely – faster, more texting.

The third week in October is National Teen Driver Safety Week, an event my daughter will be made well aware of, but this year we should all heed its message: Be careful behind the wheel.



As European governments approved a controversial plan to share 120,000 refugees between most of the European Union countries, there’s an important insurance story playing out amid the ongoing flow of thousands of refugees into Europe.

The risk management challenges and costs for freight transporters, haulers and shipowners arising from the refugee crisis are outlined in a recent Business Insurance article.

It reports that with thousands of refugees attempting to board trains and trucks heading for the United Kingdom at the French port of Calais this has caused problems for companies transporting goods.

Some of the risks they face include potential loss of earnings due to delays at ports, risk of damage to goods, fines for illegally transporting refugees if they board trucks undetected as well as driver safety.

Shipowners must also have emergency procedures in place to help their crews deal with situations given their legal and moral obligation to help ships in distress, Business Insurance notes.

A Reuters report suggests that more and more commercial ships are being drawn in to rescue refugees from unsafe and overloaded vessels in the Mediterranean:

Since January 2014, more than 1,000 merchant ships have helped rescue more than 65,000 people, according to estimates from the International Chamber of Shipping. That’s more than one in 10 of the estimated 585,000 migrants and refugees who crossed the Mediterranean over the period.”

Some of the merchant ships’ risks are covered by insurance, Reuters says.

Mutual marine insurers, also known as P&I clubs, provide cover for a wide range of liabilities including crew injury, pollution and cargo loss and damage.

So, if a refugee attacks and injures a crew member or breaks into a container and damages cargo, insurance would cover the shipowner.

But because rescue operations can take ships off course into uncharted waters, Reuters reports that other risks including fines for late arrival or the cost of chartering another vessel at short notice may not be covered.

Uncertainties also surround liability in the case of death or injury of a refugee while being rescued by a ship’s crew.

In June the Maritime Safety Committee (part of the International Maritime Organization) agreed that there was an urgent need for the international community to make greater efforts to address the problem through safer and more regular migration pathways, and to take action against criminal smugglers.

Check out I.I.I. facts and statistics on marine accidents here.

We spend a lot of time explaining why insurance is good for individuals, society and the economy as a whole, but a new report reverses that equation.

It focuses on the current and anticipated impact of women on the global insurance market.

Conducted by the International Financial Corporation (IFC), AXA and Accenture, the report estimates that women’s individual spending on insurance premiums will grow to between $1.45 trillion and $1.7 trillion by 2030—half of it in just 10 emerging economies.

That represents a doubling from the current annual premium value of the women’s global market of $770 billion.

The report cites an increased level of education, income, improved socioeconomic status, and a greater need for protection as key reasons that make women a big opportunity for insurers.

This is strongly reflected in a very simple yet telling number: women across the world are willing to invest 90 percent of their income into their households.”

Furthermore, women entrepreneurs now represent one-third of the world’s business owners, and they need protection for their businesses. Just 31 percent of women entrepreneurs surveyed held protection or savings-oriented life insurance, for example.


The report also highlights that women’s attitudes to fraud, claims and loyalty, their roles as a trusted source of recommendations, and their relational rather than transactional approach to networks make them a valuable customer and inexpensive brand ambassador for insurers.

Women can act as strong advocates or social marketers for insurers and financial services firms, and are more likely than men to recommend a product or service to their friends and family, the report finds. They are also greatly influenced by the advice of their female peers.

Therefore, women can play a key role in explaining and selling insurance products across customer segments, and especially to other women.

What women want and need from insurance varies by age, income level and lifecycle events, however.

The report urges insurers to abandon the one-size-fits-all approach and instead identify and target segments of women who share common needs and constraints in order to take advantage of this growth opportunity.

Check out I.I.I. facts and statistics on careers and employment to discover what percentage of the insurance industry workforce comprises women.

A report in USA Today throws the spotlight on just how many homes in California are vulnerable to wildfire.

Data from the U.S. Forest Service cited by USA Today reveals that one-third of homes in California are located in areas prone to wildfires.

Apparently the Forest Service’s report estimates that 4.5 million homes in California are located in areas designated as the Wildland-Urban Interface (WUI)–developments and communities adjacent to forests.

USA Today goes on to note that California wildfires have destroyed more than 750 houses and hundreds of other buildings in the past week based on figures from CalFire, the state’s firefighting agency.

The Valley fire near Sacramento has been one of the most destructive. Mark C. Bove, senior research meteorologist with Munich Re America tweeted that for Northern California the Valley Fire is likely the biggest wildfire event in terms of insured loss since the Oakland firestorm of 1991.

GCCapitalIdeas.com has a timely roundup of the impact of the Valley and Butte fires here. Another useful resource is I.I.I.’s issues update on wildfires.

In a media advisory the Insurance Information Institute (I.I.I.) notes that seven of the 10 costliest wildfires in U.S. history in terms of insured losses have occurred in California. The costliest of these was the 1991 Oakland fire which produced $2.7 billion in claims (in 2014 dollars).

Over the 20-year period 1995 to 2014, fires—including wildfires—accounted for 1.5 percent of insured catastrophe losses, totaling about $6.0 billion, according to the Property Claims Services (PCS) unit of ISO.

Janet Ruiz, I.I.I.’s Northern California-based representative, is available to conduct interviews in person or via Skype. She can be reached at janetr@iii.org or (707) 490-9375.

The Insurance Institute for Business & Home Safety (IBHS) offers tips on how to protect your property from wildfire here.

A 2015 study by CoreLogic identifies almost 900,000 residential properties across 13 states in the western U.S. —representing an estimated combined total property value of more than $237 billion—at high or very high risk of wildfire damage.

Corporate data breaches and privacy concerns may dominate the headlines, but a new report by Allianz Global Corporate & Specialty makes the case that future cyber threats will come from business interruption (BI), intellectual property theft and cyber extortion.

The impact of BI from a cyber attack, or from operational or technical failure, is a risk that is often underestimated, according to Allianz.

It predicts that BI costs could be equal to—or even exceed—direct losses from a data breach, and says that business interruption exposures are particularly significant in sectors such as telecoms, manufacturing, transport, media and logistics.

Vulnerability of industrial control systems (ICS) to attack poses a significant threat, Allianz says.

To-date, there have been accounts of centrifuges and power plants being manipulated, such as the 2012 malware attack that disabled tens of thousands of computers at oil company Saudi Aramco, disrupting operations for a week.

However, the damage could be much higher from security sensitive facilities such as nuclear power plants, laboratories, water suppliers or large hospitals.

Business interruption can also be caused by technical failure or human error, Allianz notes.

For example, in July 2015, stocks worth $28 trillion were suspended for several hours on the New York Stock Exchange due to a computer glitch, and that same month 4,900 United Airlines flights were impacted by a network connectivity issue.

As a result, Allianz believes that within the next five to 10 years BI will be seen as a key risk and a major element of the cyber insurance landscape.

It points out that in the context of cyber and IT risks, BI cover can be very broad including business IT computer systems, but also extending to ICS used by energy companies or robots used in manufacturing.

Allianz currently estimates the cyber insurance market is worth around $2 billion in premium worldwide, with U.S. business accounting for around 90 percent of the market. However, the cyber market is expected to experience double-digit growth year-on-year and could reach in excess of $20 billion in the next 10 years.

The Allianz Cyber Risk Guide is available here.

Check out I.I.I. facts and statistics on cybercrime here.

The explosions at the Port of Tianjin, China are set to become one of the largest insured manmade losses in Asia to-date with potential losses of up to $3.3 billion, according to a new report by Guy Carpenter.

The event, which blasted shipping containers, incinerated vehicles in the port and on an adjacent highway overpass, destroyed warehouses, production facilities and dormitories, and impacted a nearby railway station and residential structures, will also be considered one of the most complex insurance and reinsurance losses in recent history.

Many classes of insurance were impacted by the loss, including: containers; cargo in containers; property; auto; and general aviation.

While access to the site is limited, Guy Carpenter said its satellite-based catastrophe evaluation service known as CAT-VIEW was able to utilize high resolution pre- and post-event satellite imagery to understand what exposures were present at the time of the blast and therefore could contribute to the loss.

The findings come as a new study published by Lloyd’s says that manmade risks are having an increasingly significant impact on economic output at risk (GDP).

In its analysis, Lloyd’s City Risk Index finds a total of $4.6 trillion of projected GDP is at risk from 18 manmade and natural disasters in 301 major cities around the world—out of a total projected GDP between 2015 and 2025 of $373 trillion.

However, manmade threats such as market crash, power outages and nuclear accidents are associated with almost half the total GDP at risk.

A market crash is the greatest economic vulnerability—representing nearly one quarter ($1.05 trillion) of all cities’ potential losses, Lloyd’s says.

New and emerging threats such as cyber attack, human pandemic, plant epidemic and solar storm are also having a growing impact, representing more than one fifth of total GDP at risk, Lloyd’s reports.

Governments, businesses and insurers must work together to ensure that this exposure—and the potential for losses—is reduced, according to Lloyd’s CEO Inga Beale.

Lloyd’s research shows that a 1 percent rise in insurance penetration translates into a 13 percent reduction in uninsured losses—a 22 percent reduction in taxpayers’ contribution following a disaster.

Insurance also improves the sustainability of an economy and leads to greater rates of growth. A 1 percent rise in insurance penetration leads to increased investment equivalent to 2 percent of national GDP, Lloyd’s notes.

Check out the I.I.I. publication A Firm Foundation: How Insurance Supports the Economy.

A couple of new studies appear to shed light on the continuing need to communicate the importance of insurance for small business owners.

First, a Nationwide-sponsored survey found that 66 percent of small businesses do not have business interruption insurance (hat tip to Insurance Journal for its report here). This is despite the fact that an estimated 25 percent of businesses do not reopen following a major disaster.

Most small business owners are at risk of disaster, Nationwide noted. Some 75 percent of small businesses do not have a disaster recovery plan in place, even while 52 percent say it would take at least three months to recover from disaster.

Nationwide commissioned the survey from Harris Interactive, which polled 500 U.S. small business owners with fewer than 300 employees from June 8-19, 2015.

In a press release, Mark Pizzi, president and chief operating officer of Nationwide Direct and Member Solutions, said:

Small businesses are least likely to have disaster recovery insurance. And yet they are the ones most affected by a disaster. That’s why it’s essential for small businesses to have a disaster recovery plan.”

Meanwhile, a J.D. Power study found that many small business owners are unaware that insurers even provide commercial insurance.

Less than one-fourth of small business owners said they were aware that nine of the 17 insurance providers included in the study offer insurance for business customers.

Only six insurers had awareness rates above 40 percent for their commercial insurance offerings, and five of these are among the largest personal lines insurers, J.D. Power said.

While advertising is important to spread brand awareness, the study suggested that commercial insurers have better success when they develop awareness through agents/brokers, trade groups and word of mouth from other businesses.

The proportion of customers who considered/shopped an insurer among all potential prospects is 61 percent when awareness comes from an agent/broker or trade group, compared with just 38 percent when awareness is attributed solely to advertising.

Still, the study—now in its third year—found that small business customers are increasingly satisfied with their insurance providers. Overall satisfaction was up 10 points at 793 on a 1,000-point scale in 2015, due primarily to improvements in price and policy offerings.

The 2015 U.S. Small Business Commercial Insurance study is based on 3,292 responses from insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance and was fielded from April through June 2015.

The Insurance Information Institute’s excellent online resource for business insurance is available here.

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