The Risks of Hazard

Did anyone reading the Intelligent Insurer last week notice their Most Read highlights? Here it is from November 15:

I don’t know if it was intentional or not, but they made a perfect microcosm of an interesting and important debate resounding through the corridors of insurance conventions.

Both articles are behind the subscription wall (to which I don’t have a key), but the blurbs illustrate the point brilliantly.

The first article is from an interview with Arno Junke, CEO of Deutsche Rück, and he cautions against becoming “obsessed with developing new products driven by technology and fears of competition from new entrants.”

Meanwhile in the second article, Florence Tondu-Melique - European COO of Hiscox, cautions that “digitally-focused new players in the insurance industry are increasingly threatening the market dominance of traditional insurers in a dynamic that could ultimately force the incumbent players to become nothing more than risk carriers.”

At the Risks of Hazard we explore what is happening in the cat underwriting market. Today we can share a bit of good news close to home – our InsitePro team are now working with Chubb Global Markets. It is exciting for us here because this is a group that is leading the entry of “private flood insurance” (i.e. actual flood insurance from the insurance industry) into the US.

Earlier this year, we introduced the concept of the butterfly chart at the Risks of Hazard. To quickly summarize what the butterfly chart is, there are two distinct opportunities for underwriters to grow flood premium each forms a wing of the butterfly.

Time really does fly – incredibly it has been a year since the epic flooding in South Carolina after Tropical Storm Joaquin inundated the state. To mark the anniversary the trio of Zurich, ISET and Aon has published a white paper on the event. It is a thorough and insightful summary of both the event and the aftermath and is worth reading.

It is even more worth summarizing three key points in a blog.

1.     The Protection Gap

The South Carolina floods were a stark illustration of the protection gap in US flood coverage. The figures are quoted in Zurich CEO Mike Foley’s introduction to the report:

"The floods caused an estimated USD 12 billion in total losses with approximately USD 2 billion in insured and other funded losses. As we approach the one year anniversary of the floods, some residents are still trying to rebuild, and the sad reality is South Carolina could experience this type of extreme event again".

This is massive. A flood is considered noteworthy when it causes $1 billion in losses – this event caused $10 billion in uninsured losses. The true gap, though, is illustrated by the second sentence – a year later many families impacted are still trying to get their lives back on track. The flood protection gap is a rare opportunity to grow revenue/profits in a way that can really improve people’s lives.

As we move into Autumn, and Q4 and hurricane season, let’s take a quick look back at the three most popular Risks of Hazard blogs. It was an exciting few months here at the blog, highlighted by a new monthly readership record in September and our first appearance on NPR.