Is too big not enough?

Posted by Bill Raymor on May 16, 2018 8:18:05 AM

President Trump signed a hurricane relief bill that includes $16 billion in debt relief for the embattled National Flood Insurance Program. The flood program has a Congress mandated debt ceiling of $30.4 billion, which it reached during Harvey, Irma, and Maria (HIM). This action will allow U.S. Treasury funding of the program.

Is help on the way?

Well, kind of. Premiums are on the rise as the search for actuarial solvency continues for the NFIP. You can read the entire Insurance Journal article from April 5th titled Federal Flood Insurance Average Premium to Rise 8% but here is how it ends: ‘However the premium hikes are likely insufficient to keep the program from sinking into debt, according to a recent government report.’

What is being done currently –

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Topics: Flood Insurance, Private Flood, FEMA

Flood Insurance Models Around the World

Posted by Ivan P. Maddox on May 9, 2018 9:52:25 AM

Flood poses risk to property and productivity on every continent, and most developed countries have flood insurance available to mitigate that risk. However, everywhere you go, the flood insurance market is different.

There are four principle types of flood insurance models around the world, differentiated by who backs the insurance (government or private markets), and whether it’s bundled or separate from other property insurance coverage (e.g., flood and fire insurance are frequently bundled together).

Each style has its own pros and cons, and each exists in its region for a variety of reasons. Here is a quick look at the four types.

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Topics: Flood Modeling, Private Flood, Risk Scoring

Why We Like The Flood Conference

Posted by Ivan Maddox on May 2, 2018 8:00:00 AM

It’s spring, which means one thing: The Flood Conference. Oh, it also means flooding in Hawaii, but that’s different.

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Topics: Floods, Flood Risk, spring, Flood Conference

How do you determine risk for a location that has no address?

Posted by Ivan Maddox on Apr 25, 2018 8:00:00 AM

Many solution providers in the market today use addresses as input to determine the risk from multiple perils at a specific location.

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Topics: InsitePro, Risk Management, Risk Scoring

If everyone uses the same risk model, is it still useful?

Posted by Ivan Maddox on Apr 4, 2018 8:03:01 AM

One of the recurrent themes of this blog is to explore the usefulness and limitations of risk models. This post explores the implications of the widespread — in some cases, universal — use of these models. Is there a limit to a model’s usefulness if everyone is using it? How can a model’s limitations be overcome?

When a peril is well modeled, and that model is comprehensively applied throughout a market by both the carriers and re-insurers, it becomes very difficult to differentiate coverage because everyone has priced the risk similarly. The implications of this blanket usage begin to manifest when nothing happens for a while; i.e., when no significant catastrophe fulfills the model’s predictions. The capacity to cover the expected loss is collected by everyone, and with no claims to release the capital, the market gets soft. Competition becomes tighter, and it becomes necessary to look for new markets, or entirely new activities, to maintain a constant level of premium.

This recent article from Intelligent Insurer explores this phenomenon in the current reinsurance market. The big boys are moving to specialty reinsurance and even primary insurance amid a very soft market. Naïve capital accumulates and the only outlet is a catastrophe that is unexpected — i.e., unmodeled – to release the excess capacity through claims that exceed predictions.

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Topics: Insurance Underwriting, Risk Management, Other Risk Models

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