Sutherland insights insurance news flash mar 17, 2014

INSURANCE NEWS FLASH March 17, 2014

Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 7 Technology .......................................................................................................................... 12 Strategy .............................................................................................................................. 17

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Sales & Marketing Super-Sized Ships Creating Super-Sized Challenges for Insurers March 13, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/13/super-sized-ships-creating-super-sizedchallenges?ref=rss LONDON (Reuters) - The rise of super-sized container vessels and the opening up of potentially hazardous routes through once-frozen Arctic waters pose the biggest new challenges to ships and their insurers, a report said.

German insurer Allianz flagged these "emerging risks" in its annual Safety and Shipping report, published on Thursday. The company said increased use of these large cargo ships, such as the Maersk "Triple E class", which is as long as four football pitches, could lead to potentially massive insurance claims.

"The claims arising out of maritime emergencies of these mega ships can be huge. For example, just think of the business interruption of ports and terminals if an accident was to block the entrance," Sven Gerhard, Global Product Leader, Hull & Marine Liabilities at Allianz Global Corporate & Specialty, said.

The insurer also pointed to increasing use of greener fuels such as liquefied natural gas to power ships as a potential hazard because of a lack of infrastructure in ports or expertise in handling it.

A third emerging risk were new Arctic trading routes, opened up my melting sea ice.

Shipping casualties in the Arctic have increased to an average of 45 per year during 2009 to 2013, from only seven between 2002 and 2007, Allianz said.

Shipping losses in 2013 were down 20 percent from a year earlier with 94 vessels lost worldwide.

Most of these were due to vessels sinking, often on account of bad weather, the insurer said in the report.

On piracy, Allianz said this was declining globally, down 11 percent last year to 264 reported incidents. But the company also said this masked a rapid increase in attacks in specific regions. Last year, there were 106 reported incidents inIndonesia, a 700 percent increase since 2009, Allianz said.

Customers Wary of Receiving Analytics-Driven Behavior Criticism from Insurers March 13, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/13/customers-wary-of-receiving-analytics-drivenbehav?ref=rss Celent's study shows that customers are neutral--and even hate--receiving messages based on their data and social media pattens

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Customers aren't ready to receive messages from the insurance industry that are based on the customers' analytics and social media patterns, according to Celent's "Customers Don't Want to Buy Insurance From Big Brother" report.

“Most people will hate receiving messages that imply the organization has gone a step further in understanding their data. Either we’re too early, or this must be an opt-in process,” says Craig Beattie, senior analyst with Celent’s Insurance Group and author of the report, “What surprised us, though, was that each message had people who would love to receive it. Given that this was typically in the younger age groups, we’re going to be seeing this kind of interaction in the future.”

The survey of 2,642 people in the U.S. and the U.K. seeks to help insurers understand how to recognize groups that would be likely to respond well to 8 potential messages. On a scale of hating these messages to loving them, the mean response to Celent's survey was at best neutral, and, for most of the messages, much closer to the hate end of the scale.

Survey respondents were asked to rate each message on a scale of 1 (hate) to 7 (love). No message received a positive average response (5 or greater) across the group of respondents. Younger people are more likely to respond positively to the messages, as are those people who collect or share data.

It's not about "familiarity with technology" the report states. "Target social media users rather than smartphone owners and geeks." And above all, avoid criticizing the behavior of the message recipient.

20 Least Expensive 2014-Model Cars to Insure March 12, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/12/20-least-expensive-2014-model-cars-toinsure?ref=rss Along with the top 20 most expensive 2014-model cars to insure, Insure.com also released its ranking of the top 20 least expensive 2014-model vehicles to insure. Whereas the “most expensive” list was dominated by expensive sports cars, the “least expensive” list mainly features SUVs and a few minivans.

Insure.com explains that family-friendly SUVs and minivans are made for safely transporting children, therefore drivers of these vehicles are among the least likely to speed, crash, or have an insurance claim.

Seven of the 20 least expensive cars to insure are Jeeps, with the Jeep Wrangler Sport being the least expensive to insure, with an average premium of $1,080. While Jeeps may appear to be rugged, adventurous vehicles, Karl Brauer of Kelley Blue Book tells Insure.com that the owners of Jeeps tend to be single or married women under the age of 45. These vehicles “are used to carefully haul kids around suburbia at sub-50-mile-per-hour speeds most of the time,” Brauer tells Insure.com “This demographic and these driving conditions don’t cause a lot of accidents.”

Wranglers are also economical to repair, says Insure.com. For example, if a door is dented, body shops can easily remove and replace the door because it is bolted rather than welded together. Easy repairs like this helps keep insurance rates down.

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Joe Wisenfelder of Cars.com tells Insure.com that Jeeps and other SUVs also likely have an advantage towards having lower insurance premiums because of their height. “They are higherriding than the average car, so if they are in a collision with an average car, that car will have greater damage.”

Insure.com worked with Quadrant Information Services to find the average auto insurance rates for 2014 model vehicles using data from Allstate, Farmers, GEICO, Nationwide, Progressive, and State Farm. Averages are based on full coverage for a single 40-year-old male with a clean record and good credit who commutes 12 miles to work each day, with policy limits of 100/300/50 and a $500 deductible on collision and comprehensive coverage.

Employers Raise U.S. Worker Deductibles to Reduce Health Costs March 12, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/12/employers-raise-us-worker-deductibles-toreduce-he?ref=rss (Bloomberg) -- Four of five U.S. companies have raised deductibles or are considering doing so as health costs increase, according to a survey of more than 700 employers.

About one-third of the companies have already increased deductibles or other cost-sharing provisions like copays, and 48% are considering similar moves, the survey by New York- based consulting firm Mercer LLC found.

Employers are looking for ways to trim expenses as health- care costs continue to rise and the Patient Protection and Affordable Care Act increases required benefits and imposes new taxes.

United Parcel Service Inc. dropped coverage for employed spouses and Home Depot Inc. sent 20,000 part-time workers to government-sponsored insurance websites.

“Employers with a lot of part-time workers and low-wage employees are going to bump against the coverage requirements for anyone working 30 or more hours,” Beth Umland, Mercer’s director of research for health and benefits, said in a telephone interview. “Employers who already offered generous packages, who don’t have a lot of part-timers, are worried about the excise tax.”

Allianz Lead Insurer for Malaysia Airlines; Willis Broker for Hull and Liability March 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/10/allianz-lead-insurer-for-malaysia-airlineswillis?ref=rss FRANKFURT/LONDON, March 10 (Reuters) - Germany's Allianz has said it is the lead insurer covering the Malaysia Airlines jet that disappeared over the Pacific Ocean on Saturday, while Willis has emerged as broker.

Allianz confirmed on Monday that it was the main provider of insurance on the aircraft itself and the liabilities attached to the passengers and cargo but declined to comment on the extent of its exposure or identify other insurers with exposure.

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"We extend our sympathy to all those affected by the loss of flight MH370, and will be working closely with co-insurers to support our client... as fully and quickly as possible," an Allianz spokesman said on Monday.

A source at London-based Willis said on Monday the company had brokered the cover and that Malaysia Airlines was a client but did not disclose the size of the deal or the insurers involved.

"Malaysia Airlines is a client of ours (both hull and liability) and we have people working closely on the ground with them at the moment," the source said.

Related Hannover Re Sees $40M+ Hit From Malaysian Jet Loss Hannover Re expects to face claims totaling around $42.6 million from the apparent loss of a Malaysia Airlines' jet over...

Aviation insurance is typically sold to a syndicate of insurers with one taking the lead, or largest slice, with several other companies sharing the rest.

While the insured value of the aircraft could amount to around $100 million, the liabilities and compensation typically amounts to a far higher amount.

An air and sea search, now in its third day, has failed to find any confirmed trace of the plane, a Boeing 777-200ER, delivered in 2002, or the 239 people aboard.

Meanwhile, legal experts said settling claims could be difficult unless wreckage is found and investigators can establish a cause of the disaster.

"All those potentially involved from a liability perspective: the airline itself, the hull manufacturer, engine manufacturer, the service departments, and the airport security department will wish to ascertain the cause of the loss of the aircraft," said Anna Tipping, partner at Norton Rose Fulbright in Singapore.

"There is a complex matrix of contractual liability between all of these entities."

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Finance Hartford Financial Said Near Sale of Japan Operation to Orix March 16, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/16/hartford-financial-said-near-sale-of-japanoperati?ref=rss (Bloomberg) -- Hartford Financial Services Group Inc., the insurer that’s been focusing on propertycasualty coverage, is near a deal to sell Japan operations to Orix Corp., according to two people with knowledge of their talks.

The transaction would include retirement products known as variable annuities, said the people, who asked not to be identified because discussions are private. Orix would pay about $875 million, according to Nikkei, which reported on the talks yesterday.

Hartford Chief Executive Officer Liam McGee, 59, has sold a U.S. unit to Prudential Financial Inc. and added hedges to guard against currency fluctuations and stock-market declines as he seeks to limit liabilities tied to life and retirement contracts issued in prior years. He announced a deal last year to sell a U.K. variable annuity unit to Warren Buffett’s Berkshire Hathaway Inc. “We continue to look at ways to further accelerate the runoff of the legacy annuity block and to permanently eliminate these exposures, Shannon Lapierre, a spokeswoman for the Hartford, Connecticut-based insurer, said in an e-mail yesterday. ‘‘A transaction is one of the options we would evaluate.’’

Hartford advanced 0.9 percent to $35.25 in New York trading yesterday, paring its decline this year to 2.7 percent.

Lapierre said any offer would be evaluated based on the likelihood of regulators’ support and the prospect that a deal would help release capital. She declined to comment on Orix, citing company policy about market speculation. Atsushi Horii, a Tokyo-based spokesman for Orix, declined to comment.

Economic value John Nadel, an analyst at Sterne Agee & Leach Inc., said he expects the sale to free up at least $600 million of capital that was backing Japanese obligations. Hartford had about 305,000 variable annuity contracts outstanding in Japan as of Dec. 31, according to a document on the company’s website. ‘‘Management has consistently indicated it would sell the block only if it was able to generate something close to the true economic value of the business,” Nadel said in a research note yesterday. “We have a high level of confidence in management to do exactly that.”

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Uncertainty Drives Down U.S. P&C Carrier M&A in 2013 March 14, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/14/uncertainty-drives-down-us-pc-carrier-ma-in2013?ref=rss Uncertainty and risk aversion trumped other, more favorable mergers and acquisitions factors present in 2013 to drive U.S. property and casualty M&A activity to its lowest level since the 2008-09 fiscal crisis, a new report says.

Conning’s recent “Global Insurance Mergers & Acquisitions in 2013: A Tale of Two Markets” reveals U.S. insurance M&A activity declined in volume and value from 2012 to 2013, with activity particularly weak among underwriters. The insurance-distribution and insurance-services sectors saw more robust activity, Conning says.

The report notes, “Many of the ingredients for a robust U.S. insurance M&A market were present in 2013,” pointing to signs of life in the job market, recovering consumer confidence, publicly traded insurers achieving stock prices above book value for the first time in several years, attractive lending conditions, and active purchasing among sophisticated private-equity investors.

Despite these factors, Conning says uncertainty muted M&A activity within the U.S. “Attractive international acquisition opportunities, reserving issues at home, changing U.S. and European statutory capital requirements and rating downgrades all had some influence on the tone of the market,” states the report. “Thus, without a reasonable degree of certainty surrounding future growth prospects, inactivity in insurance M&A prevailed.”

Conning says 70% of the top 20 global transactions were completed outside the U.S. in 2013.

Related Top 6 Issues That Will Impact M&A Activity in 2014 M&A activity in the insurance industry was lower than expected in 2013, but Deloitte expects that to change in 2014....

For P&C insurers, Conning says there were 39 announced transactions in 2013 “involving a U.S. entity as buyer or seller of a property-casualty target, down from 46 in 2012.” The aggregate value of the deals dropped to $4.4 billion compared to $4.7 billion in 2012.

Lingering uncertainty about the economic recovery and reduced confidence in loss-reserve adequacy impacted activity, Conning says. “Many of the targets of M&A were specialty insurers focusing on lines related to…recovering economic sectors—workers’ compensation, personal lines, surety, and commercial automobile,” the report adds.

M&A activity within the U.S. was also adversely impacted by a drive for global growth. “Three of the transactions involved a U.S. insurer acquiring a non-U.S. entity,” Conning says.

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Two P&C underwriter transactions were valued at over $1 billion: •

Goldman Sachs’ $1.1 billion acquisition of 50% of U.K. direct automobile writer Hastings.

•

Travelers’ $1.1 billion acquisition of the Dominion of Canada.

There were seven U.S. midsized property-casualty transactions, where the announced value was between $100 million and $1 billion, compared to seven in 2012.

Agent/broker market remains active For the insurance-distribution sector, the M&A market was robust for both buyers and sellers, says Conning.

Commissions increased due to more insurable exposures in a recovering economy and favorable P&C pricing trends in 2013. The healthcare law also drove M&A activity: “Reporting and servicing requirements resulting from the implementation of the [Affordable Care Act] are driving many smaller employee benefits brokers to seek refuge in the arms of their larger competitors,” Conning says.

The report adds, “All consolidators in 2013 were faced with the same market dynamics: competition from an increasing number of newer private-equity buyers with readily available financing to complete acquisitions quickly, [and] pricing for properties at the higher end of historical norms as both strategic and financial buyers compete aggressively for assets.”

Conning notes these influences will likely be present in early 2014 as well.

The most active aggregators, according to the report, “continue to be Arthur J. Gallagher, Hub International, Confie Seguros, Assured Partners, BroadStreet Partners, and Digital Insurance, each completing at least 10 acquisitions in 2013.”

The drivers of property-casualty M&A activity in 2013 were the recovery of economic growth, albeit modest. Sectors benefiting from a recovering economy include consumer spending, housing and construction, employment, and transportation.

Outside of the U.S., Conning says, “Acquisitions of Central and Eastern European insurance targets by non-U.S. buyers reflected the interest in tapping into higher economic-growth rates in Eastern European countries. The second-largest M&A transaction of the year was such a transaction— Generali acquiring the remainder of its share of a joint venture with the Czech PPF for $3.3 billion.”

Interest continued in acquiring targets “in the coveted Asia and Latin America regions,” but Conning says activity slowed in these regions, “perhaps reflecting overheated competition over few available targets.”

Ultimately, Conning says M&A in the insurance industry overall in 2013 “proved to be simultaneously positive and negative, inspiring some opportunistic mergers while mostly driving caution-inducing inaction.”

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P&C CFOs See Alternative Capital Creating Softer Reinsurance Market March 13, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/13/pc-cfos-see-alternative-capital-creatingsofter-re?ref=rss Many property and casualty CFOs agree with what large brokers, analysts and industry observers have been saying: alternative capital is holding down reinsurance rates, contributing to a market that is softer than the primary market.

In Towers Watson’s sixth North American P&C CFO Survey, which included 29 CFO participants, 55% of respondents say the property reinsurance market is softer than the primary market, while 34% say the same is true for casualty business. The CFOs cited “the significant growth of insurance-linked securities and other alternative forms of reinsurance capital” as a primary reason, Towers Watson says.

Regarding the impact the softer reinsurance market could have on the primary commercial market, which has already seen some moderation in rate increases, Stuart Hayes, senior consultant, Towers Watson, says, “As reinsurance costs are a component of primary insurance prices, declining prices in the reinsurance market as a result of the influx of alternative capital could potentially contribute to a softening of the primary market.”

He adds, though, that there are other market forces that determine pricing in the primary market, such as “profitability, competition and the availability of more traditional forms of capital to the primary market….”

Hayes adds Towers Watson’s previous CFO study on the state of the primary P&C market revealed the current hard U.S. primary insurance market is “projected to be relatively shallow and short-lived compared to prior hard markets, and the availability of reinsurance capital could be considered as one possible driver of this.”

In the most recent CFO survey, nearly all respondents (97%) say they utilize traditional reinsurance, while most insurers are not currently using alternative forms of capital to protect their business.

“Twenty-seven percent are currently using, or look favorably on the use of, both insurance-linked securities, such as catastrophe bonds, and hedge fund-owned reinsurers,” Towers Watson says.

In a statement, Hayes says, “The opportunities in the risk-transfer market are just starting to be realized. Many fresh sources of capital are seeking investments that are uncorrelated to their existing investment holdings. With risk-transfer arrangements continuing to evolve, we anticipate P&C insurers hastening their participation in various structures across the risk-transfer spectrum, thus complementing their traditional reinsurance programs.”

Even with the excess capacity in the reinsurance market, only 21% of the CFO respondents feel there is a need for consolidation among reinsurers, and just 24% feel consolidation will take place in the next two years. Fifty-two percent, though, say a prolonged soft market could drive reinsurancemarket consolidation in the future.

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Hannover Re Sees $40M+ Hit From Malaysian Jet Loss March 11, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/11/hannover-re-sees-40m-hit-from-malaysianjet-loss?ref=rss HANOVER, Germany (Reuters) - Hannover Re expects to face claims totalling around 30 million euros ($42.6 million) from the apparent loss of a Malaysia Airlines' jet over the weekend, the reinsurer's chief executive said on Tuesday.

"After preliminary assessment, we see a hit for Hannover Re of around 30 million euros," Ulrich Wallin said at a news conference.

Towers Watson Survey Shows Commercial Lines Up 5% in Q4 March 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/10/towers-watson-survey-shows-commerciallines-up-5-i?ref=rss The much-discussed moderating trend in commercial-lines rate increases was seen in Towers Watson’s most recent Commercial Lines Insurance Pricing Survey, which showed rates up by 5% in 2013’s fourth quarter compared to the same period in 2012.

By contrast, rates were up by 7% in 2012’s fourth quarter compared to 2011’s fourth quarter, and in the first three quarters of 2013, year-over-year rate increases were either 7% or 6%.

Towers Watson says price increases by line of business “were lower than those reported in the third quarter in all lines, with the exception of general/products liability and excess/umbrella liability.”

The firm says most lines saw rate increases in the mid-single digits, with the largest increases in employment-practices liability, followed by workers’ compensation and excess/umbrella. No line of business reported a rate decrease.

The CLIPS survey says loss ratios improved by 3% compared to the same period in 2012 “as earned price increases more than offset reported claim-cost inflation.”

Rates for specialty lines increased at a lower rate than standard lines, Towers Watson says.

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Technology Pitney Bowes Releases Big Data Management Capabilities March 12, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/12/pitney-bowes-releases-big-datamanagement-capabili?ref=rss In response to the growing need to effectively manage data, technology solutions company Pitney Bowes Inc. released its flagship Spectrum Technology Platform, which provides integrated data quality, data integration, master data management (MDM) and analytics capabilities to help insurers address Big Data challenges with this unified platform. The platform is designed to be flexible and efficient, enabling organizations to extract more value from their data to drive profitability, deliver more personalized customer experiences and reduce risk.

Through the technology platform, global banks can deliver personalized customer experiences across several business channels by establishing a single customer identity across the enterprise.

Pitney Bowes has also helped retailers apply the technology, which allows them to increase the effectiveness of their catalog mailing process by over 50%, improving accuracy and reducing cycle time.

The new technology allows clients to deliver trusted data and insights in context across touch-points, maximizing the value of customer information through aggregating, cleansing and consolidating data from disparate sources, enriched with corporate and third-party reference data. To make the data accessible, it is modeled as knowledge graphs, built on graph database technology, allowing insurers to better leverage the information for optimized business practice and decision-making.

Knowledge graphs give businesses the opportunity to create multi-dimensional views of the information to address specific factors based on the needs of different areas of the business, such as sales, marketing and compliance. For insurers, the platform can visually depict a customer’s risk profile.

“Clients today require more dynamic and flexible solutions to help them manage their customer information,” said Navin Sharma, vice president of Product Management, Information Management Software and Solutions at Pitney Bowes.

Other capabilities in the Spectrum Technology Platform Include: •

Visual Data Modeling. Using an intuitive “white boarding” approach delivered via a web UI, this feature allows businesses to model different outcomes, while managing the complex relationships and hierarchies while supporting collaboration between business and IT functions.

•

Process-centric Data Governance. Making corporate and external source data easily accessible, insurers can review and resolve issues quickly based on analytics. The system also captures data trends, and visualizes them against established Key Performance Indicators to monitor the data assets and assets in context of their processes.

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•

Big Data Readiness. With the ability to handle large data sets, combined with advanced clustering and in-memory caching, organizations can process large volumes of data quickly and effectively.

•

Enhanced Entity Resolution: Companies gain high-performance access to disambiguated information for building comprehensive customer views by leveraging the platform’s advanced search feature, coupled with algorithms against unstructured data.

•

Industry and Application Certifications. Support for new standards and applications were added to the platform, keeping up-to-date with the latest regulatory changes and standard practices.

Capitol Insurance Kickstarts New Business with New Core System March 06, 2014 | Insurance and Technology http://www.insurancetech.com/policy-administration/capitol-insurance-kickstarts-newbusines/240166453 Capitol Insurance recently announced plans to implement OneShield's policy administration solution, OneShield Policy, in its newly created professional liability division. The software will eventually be rolled out across the enterprise.

The creation of the new division began back in September of 2013, when Capitol brought on some new professional liability talent. "The thought is that we will help the business grow with the new professional lines division," says Todd Burrick, chief actuary of Professional Lines at Capitol.

Within the new division, the first pieces of business written on the OneShield platform will include sectors such as smaller miscellaneous medical businesses, consultants, network security companies, insurance agents and environmental liability products. OneShield will serve as a one-stop shopping center for all insurance needs, says Burrick, and having everything on one platform will simplify the purchasing process.

Capitol chose OneShield because of its flexibility and customization capabilities. While this will be the first system used for the professional liability division, its implementation will be a step forward for Capitol's P&C business. The older system could not be used in browsers such as Safari or Google Chrome, which severely limited access for users and impeded business success. "It didn't have all of the capabilities that we need to move forward and achieve the growth that we want," Burrick explains.

The new system will simplify transactions for insurers and customers. "We can work on multiple browsers with OneShield where we couldn't before," says Burrick. "We can set different user preferences that we couldn't before."

After OneShield has been launched within the professional liability division, it will expand throughout its P&C business. Burrick explains that initially, the system will be limited to in-house use so errors can be addressed. Until they can make all connections on the same platform, he says, they don't want customers to interact with it.

The implementation of OneShield aligns with Capitol's broader initiative to improve customer experience. "We were looking to build a system that is intuitive and easy to use," says Burrick. "We want to help customers grow their businesses and give them a tool that will be their go-to."

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Capitol began the OneShield implementation process in December and is finishing the process of setting it up to work with medical products. It hopes that by the end of March, underwriters will start using OneShield for rating and policy issuance for medical products.

Hiscox Selects Sapiens for Core Revamp March 05, 2014 | Insurance and Technology http://www.insurancetech.com/policy-administration/hiscox-selects-sapiens-for-corerevamp/240166413 Hiscox has selected the Sapiens IDIT Software Suite as a common platform for its global retail insurance businesses. The platform will include policy administration, claims, and billing.

The company cited goals of improving customer experience, speed to market and total cost of ownership as drivers of its core systems strategy.

"We looked at a number of packaged systems on the P&C market and Sapiens IDIT really stood out.

The solution is agile and will boost our ability to respond to the industry's rapid rate of change," said Stephane Flaquet, Global CIO with Hiscox, in a statement.

Big Data: Ready for Takeoff?

March 05, 2014 | Insurance and Technology http://www.insurancetech.com/architecture-infrastructure/big-data-ready-fortakeoff/240166431 Insurance technologists, like their peers across industries, have been tasked with untangling the concepts of big data and analytics. The buzzy terms have taken over not just tech circles, but seemingly the entire corporate enterprise, as all business units look for solutions to tap into the supposed wealth of consumer and market information that provides a competitive advantage.

Establishing data management standards and expertise, and understanding data warehousing, are key projects that insurers must complete before they can tap into the wealth of available data, says Susan Helm-Murtagh, VP of analytics at Blue Cross and Blue Shield of North Carolina (Raleigh, N.C.; 3.7 million policyholders).

Susan Helm-Murtagh, Blue Cross and Blue Shield of North Carolina"The thing that isn't being talked about when people talk about big data is the importance of data management," she says. "If we don't understand data certification and standardization, how to build data models and exchange data with an increasing number of partners, we're going to have problems."

All companies struggle with reaching a consensus on the definition and scope of big data, as well as where to begin and its potential applications. But insurance companies have always, in a way, been stewards of big data, industry experts say. And so for many insurers, the journey to an analytic enterprise begins at home, in using newly available technologies to build a framework around that data."

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There are huge stores of data that are not well-structured at insurance companies. There's lots of forms and documents exchanged," says Adam Kornick, business leader for big data and analytics at Progressive (Mayfield Village, Ohio; $1.2 billion in premiums written, 2013). "I think the ability to take all of that and make predictions based on that is something that previously wasn't feasible."

That's what's been going on at Imperial Fire & Casualty (Opelousas, La.) for about seven years, says COO Duane Heady.

"The insurance industry is overwhelmed with information. Many of us are just data junkies; we can't have too much," he says. "But much of the data that companies are dealing with is legacy data that is difficult to handle, and you're limited in what you can do with it."

[Can legacy stand in the way of big data and analytics innovation?]

Imperial decided about seven years ago to build a data warehouse to get all its data on a common platform. But that turned out to be the easy part. From there, Imperial struggled with an inability to gain in-sights from its data, Heady explains. "We invested heavily in our IT systems, and we certainly had the data in our ware-house and we knew it would be good. But extracting that data could be difficult. You had to go through a query and set up a report," Heady says.

And those reports lacked redundancy, he adds. Each business unit had unique needs from the data, and even within units, different users had different ideas.

"A lot of our folks like to look at things a little differently. You had all these reports with the same information, but they weren't uniform," Heady says. "People within the organization, depending on where they are or what department they fall in, might look at the data in a slightly different way."

So Imperial recently completed implementations of a business intelligence dashboard from Domo and analytics software from Innovation Group, to help it get effective insights from the stored information. It's an existential project, Heady says.

"I had the sense that in order for us to compete, because we are a smaller regional carrier, we aren't going to win on size. Many times we're competitive on our relationships," he says. "All those small details make the difference between companies that are profitable and not profitable. We can grow also through acquisition, and with what we've implemented, we can take on additional companies and settle them into our tech, utilizing our tools and resources.

Willis Report Highlights Tech/TelCom Firms Cyber Risk Exposures March 04, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/03/04/322107.htm In a study of public documents, Willis Group Holdings plc said it has “found that technology and telecommunications companies estimated their cyber exposures at higher levels than others in the Fortune 1000, an indication that those firms may be underestimating their cyber risk exposure.�

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The Willis Special Report: 10K Disclosures – How Technology and Telecom Companies Describe Their Cyber Liability Exposures, published today, examines cyber risk disclosures made by the technology and telecommunications (tech/telecom) sector of the Fortune 1000. The study is part of an ongoing Willis series reporting on how U.S. public companies are describing their cyber risks in financial documents.

Ann Longmore, the head of D&O, Fiduciary, and EPL Products for Willis FINEX in North America and co-author of the study, said: ”We looked at how tech companies estimate their own cyber exposures, and they’re seeing higher frequency and severity of exposure than others in the Fortune 1000. Significantly, they are twice as concerned about outsourced vendor risk,” she added.

The study found that “tech/telecom companies reported concerns about the potential for outsourced vendor risk at a rate more than double other large corporations (25 percent versus 12 percent). Outsourced vendors are comprised of any organization providing data, IT or security services.”

“We find this compelling because these companies are by and large the cyber vendors for the rest of the Fortune 1000. They’re seeing a big risk involving their own kind,” Longmore said.

Christopher Keegan, Senior Vice President, National Resource E&O and e-risk, Willis FINEX in North America and co-author of the study, commented: “Technology and telecommunications providers that are at the heart of our cyber infrastructure – which, increasingly, is our business infrastructure – are indirectly telling us that our dependencies on vendors may make us more vulnerable than many companies realize. The awareness of that vulnerability – or lack of awareness – may have a bearing on liability in this area as well.”

The results suggest a potential shortfall by others in the Fortune 1000 in assessing cyber risk, Keegan explained. “If you’re a passenger in an airplane and you see the pilot putting on a parachute, it’s probably a good idea to take notice,” he added.

Other key findings of the study include the following: •

The tech/telecom sector disclosed several cyber exposures at a significantly higher rate than the Fortune 1000, including: loss or disclosure of confidential information, loss of reputation, malicious acts and cyber liability.

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In detailing cyber risk remedies, 44 percent of tech/telecom companies cited the use of technical safeguards. However, 20 percent of tech/telecom companies report inadequate resources to limit cyber losses. This indicates that technical protections may not be sufficient to contain some cyber or technology threats.

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11 percent of the sector indicated they purchased insurance for cyber exposures. In Willis’s view the rate of cyber insurance may be substantially higher, particularly among some sub-sectors.

Commenting on the study, Sara Benolken, Willis’s Global Industry Leader for Technology, Media and Telecommunications said, “The issue of cyber vulnerability through vendors has been thrust into the spotlight following news reports that a recent breach at a major retailer was through a vendor’s access to the retailer’s systems. Awareness of outsourced vendor exposure needs to be high on the radar of all tech and telecom firms.”

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Strategy Berkshire's Buffett Says Firm Has Cut U.S. Catastrophe Insurance March 14, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/14/berkshires-buffett-says-firm-has-cut-uscatastroph?ref=rss NEW YORK (Reuters) - Berkshire Hathaway chairman and chief executive Warren Buffett said on Friday that his firm had eliminated most of its catastrophe insurance business in the United States.

Citing a decrease in interest rates, Buffett told cable television network CNBC: "We actually in the United States have almost eliminated our catastrophe-insurance business."

Buffett also said that concerns over weaker economic growth in China and geopolitical tensions surrounding Russia and Ukraine were not a reason to sell assets.

"They're not warranted in terms of the market," Buffett said on the concerns. "I would bet a lot of money that income from a diversified group of stocks will increase significantly over the next 20 years, so the headlines will not make any difference in that," he said.

Buffett also said that the economy was not "remotely close" to another financial crisis similar to the 2008 credit crisis, and that a 50% decline in global stock markets would surprise him a lot.

Industry Leaders form Independent Alliance to Serve HNW Clients March 11, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/11/industry-leaders-form-independent-allianceto-serv?ref=rss (PRMA) was formed as a non-profit, independent, member-owned organization committed to lifting the specialist high net worth insurance category through education, practice management, awareness and advocacy. ACE Private Risk Services, Privilege Underwriters Reciprocal Exchange and other independent agents and brokers across the country are among PRMA’s founding members and sponsors.

The board of trustees for the organizations includes seasoned industry specialists. Members include Ross Buchmeuller, Ray Celedinas, Robert H. Courtemanche, James P. Kane, Lisa Lindsay, Susan Ogrodnik-Smith, Gary J. Pasternack and Nicki Colosi Trilling.

“Despite overwhelming evidence to suggest that affluent families are better served by the coverage and advice offered by specialists, and the growth of the HNW population over the past several years, specialist insurers continue to lose market share to standard providers,” said Sandra Bravo, PRMA president and former CEO of Willis Personal Lines. “We believe that carriers and brokers can reverse this trend by rallying together, increasing awareness, and focusing relentlessly on enhancing the customer experience.”

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Through the “the fellowship of the category,” which is a collaboration by member insurers, agents and other specialists serving the niche market, PRMA intends to: •

Provide independent education opportunities that allow members to provide better service to HNW clients

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Develop a certification program to differentiate individuals who have achieved a higher level of expertise

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Lift awareness of distinctive benefits of specialist insurers, agents and brokers to attract consumers who are insured by the standard insurance marketplace

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Develop practice management solutions

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Provide a unified voice for awareness and advocacy for issues affecting the HNW insurance industry.

3 Signs Your Renters Insurance Needs Fresh Legs March 11, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/03/10/3-signs-your-renters-insurance-needs-freshlegs?ref=rss If I asked you to tell me about your most interesting profit opportunities, the words “renters insurance” probably would not spring to your lips … today. But tomorrow your answer may be different.

What Has Changed?

It turns out that the renters market is growing fast. The demographics of yesteryear are evolving, and thanks to our sputtering economy, many of today’s renters now include middle income families.

In fact, the State of the Nation’s Housing 2013 report from Harvard University confirms that home ownership is in decline and reveals that “More members of groups with traditionally high homeownership rates are becoming renters, including married couples with children, high-income households, and white households.” For the first time ever, average monthly rent exceeds $1,000.

In addition, Enservio data suggests that 85 percent of renters are substantially underinsured. Many are unaware of how much coverage they need or how inexpensive it can be to secure coverage.

According to the Insurance Information Institute, only 31 percent of renters have insurance.

Fortunately, that number is expected to change as landlords are increasingly requiring coverage as a condition of the rental contract. The National Multi Housing Council reports that 84 percent of landlords required renters to have insurance in 2012, up from 25 percent in 2009. So things are moving in the right direction for insurers.

Heeding the Signs With these facts in mind, it’s fair to conclude that renters insurance may be the dark horse of 2014.

Are you ready? Below are three signs your renters insurance needs fresh legs:

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1. If your renters insurance product was designed for young singles, urbanites and college students, then it might be time for an update. Today, you need a renters product that works for families with children who have accumulated a lot of personal property.

2. If you assume that renters know how much personal property insurance they need, then it may be time to challenge that theory. Instead of asking customers to provide a ballpark number for the total value of their belongings, why not ask them to provide values for distinct categories of belongings (such as jewelry, televisions, computers or sporting goods)?

You might also consider leveraging big data to provide customers with guidance about what the average family’s assets are worth in each category. Or, offer a renters inventory app through which they can upload photos of their belongings.

3. If you offer one generic renters policy to all types of families, then you may be outpaced by forward-thinking carriers who offer a variety of policy types tailored for different family demographics, such as sporty families, musical families or boating families. Many of today’s renters are former homeowners insurance buyers. They understand the value of insurance and are willing to pay for policies that fit their unique needs.

House Passes Flood Insurance Bill; Key Senators Sign On March 05, 2014 | Insurance Journal http://www.insurancejournal.com/news/national/2014/03/04/322194.htm The U.S. House of Representatives Tuesday evening passed legislation to curb some of the premium increases in the nation’s flood insurance program that have been causing “sticker shock” for property owners.

H.R. 3370, the Homeowner Flood Insurance Affordability Act, sponsored by Reps. Michael Grimm (RN.Y.) and Maxine Waters (D-Calif.), passed 306-91 under a “suspension of the rules” requiring a twothirds vote in favor. The measure reverses some of the changes to the National Flood Insurance Program (NFIP) introduced by the Biggert-Waters Flood Insurance Reform Act of 2012.

The Senate passed its version of flood insurance legislation, S. 1926, in January by a 67-32 vote. The Senate bill takes a broader swipe at the NFIP and delays most of the reforms and increases of the Biggert-Waters law for four years.

However, key senators, including Sen. Robert Menendez, (D-N.J.), the sponsor of the Senate version, said they would accept the House bill.

The House version, known as the Grimm-Waters bill (see summary below), would provide retroactive refunds for people who have had large flood insurance rate increases due to the sale or purchase of a home, cap average annual premium increases at 15 to 18 percent and allow subsidies for insurance rates that are based on current flood maps.

It also includes non-mandatory language directing the Federal Emergency Management Agency to “strive to minimize the number of policies with annual premiums that exceed one percent of the total coverage.” The House bill also requires FEMA, which administers the flood program, to notify communities and members of Congress of remapping as well as models used in the mapping process. And it includes assessments on property owners to build up an NFIP reserve fund.

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Rep. Grimm, a House sponsor of the measure, called the vote a “tremendous victory” for his constituents “as well as one of Congress’ most consequential bipartisan achievements in recent years.”

“I hope that the passage of H.R. 3370 will serve as an example for future legislators about the good that we can provide for those we represent when we put people over politics,” Grimm said in a statement. “Without a doubt, I will always remember my vote tonight as one of the proudest moments of my life, and hold it up as a constant reminder that through true leadership, common ground is never beyond our reach.”

Rep. Waters acknowledged that the bill will help undo some of the negative effects of the 2012 law she helped write. “If enacted into law, this legislation will provide homeowners living in flood-prone regions with clarity and certainty that the cost of their insurance will not force anyone from their homes, lead to depressed home prices, or undercut their ability to buy or sell a home,” said Waters.

“I urge passage of this legislation by the House and Senate without delay.”

Other House members in coastal states welcomed the vote.

“Congress never intended to punish responsible homeowners,” Rep. Steven Palazzo (R-Miss.) said on the floor of the House. “That is exactly what FEMA is doing as it implements the law with flawed maps and procedures.”

However, Rep. Candice Miller (R-Mich.), who opposed the legislation, called on Michigan Governor Rick Snyder to pull the state from the NFIP completely. “*S+ince the federal flood insurance program started, homeowners in Michigan have paid multiple times more in premiums than has been paid back in claims. This is wrong. And, just like Obamacare, this costly, unworkable, unfair and failed program is exactly why the federal government shouldn’t be in the insurance business,” said Miller.

Miller called on Governor Rick Snyder to “opt Michigan out of the program altogether and instead seek a state or private alternative that stops forcing Michigan homeowners to serve as ATM machines for the rest of the nation.”

Following the House vote, Menendez called for swift agreement by the Senate.

“As a result of improvements made during bipartisan negotiations, I’m very pleased that the bill being put forth in the House will end the most egregious problems with the flood insurance program and bring some real relief to thousands of homeowners who desperately need our help,” said Menendez. “I’m encouraged by this progress and hope we can bring the bill over the finish line very, very soon.”

Menendez was not the lone senator accepting the House version.

“Although it doesn’t go as far as the bill we passed in the Senate, it’s good the House has approved some curbs on flood insurance. For the sake of policyholders facing massive rate hikes, I hope we can get a final version sent to the president quickly,” said Sen. Bill Nelson (D-Fla.).

Senators in other flood-prone states, including Sen. Mary Landrieu (D-La.) and Sen. David Vitter (RLa.), indicated they will urge the Senate to support the House bill as a compromise.

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The Senate version is not only broader in its impact on Biggert-Waters but also includes a provision to create the National Association of Registered Agents and Brokers (NARAB), a legislative priority of insurance agents. The House version does not include the NARAB language.

The Independent Insurance Agents and Brokers of America (Big “I”) welcomed the House vote and said it would work to have the final version of any legislation also include the NARAB provision, although it said there is no indication at this time whether that is likely.

“The Big ‘I’ is pleased that the House has also passed this sound piece of legislation that addresses a major legislative priory for the association: mitigating the rate shock unintentionally caused by Biggert-Waters,” said Robert Rusbuldt, Big “I” president and CEO. “This bill aims to reduce some of the harmful effects of Biggert-Waters without undoing the numerous positive provisions within the law.”

However, the insurance industry is split on the bill. The National Association of Mutual Insurance Companies (NAMIC) called the House bill an unnecessary “overreaction” to problems in the flood insurance program.

“Resolving those few cases where rate increases far exceeded what was anticipated by the 2012 reforms to the National Flood Insurance Program quickly became a choice on Capitol Hill between good policy and good politics, and unfortunately, but not surprising in an election year, politics won the day,” said Charles Chamness, president and CEO of NAMIC. “With today’s vote, the House joins the Senate in stepping away from much-needed reforms that would make the NFIP sustainable for future generations, and instead chose to provide cheap flood insurance coverage to small minority of properties at the expense of everyone else.”

The Property Casualty Insurers Association of America (PCI), whose members include more than two-thirds of the insurers that partner with the NFIP through the “write-your-own” (WYO) program to sell policies and administer this federal program, issued a statement that appeared to support the House action.

“We appreciate that the House amendment to H.R. 3370 will address some of the ‘unintended consequences’ impacting flood insurance policyholders following the enactment of the BiggertWaters Flood Insurance Reform Act of 2012,” said Nat Wienecke, senior vice president, federal government relations for PCI. “We thank Congress for working with the industry to address the technical and timing realities of implementing any programmatic changes to the National Flood Insurance Program (NFIP) ensuring a thoughtful and transparent implementation process for policyholders and other stakeholders.”

Realtors, homebuilders and lenders generally support the legislation to unwind Biggert-Waters while some environmental and taxpayer groups oppose it.

According to the Congressional Budget Office, the House bill would have no effect on the NFIP’s finances over and would pay for itself as it includes annual reserve fund assessments of $25 a year for primary residences and $250 a year for businesses and vacation homes

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CGSC Restructures Asia Marine Team with New Hires, Latitude Brokers Launch March 04, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/03/04/322110.htm Cooper Gay Swett & Crawford (CGSC), the global wholesale and reinsurance broker, announced a repositioning and rebranding of its marine insurance business in Asia.

“Effective from 3rd March 2014, Latitude Brokers has launched in Hong Kong as the marine division of Cooper Gay in Asia,” said the announcement. “The current marine team under the leadership of Tom Fulford-Smith will be strengthened with the recruitment of three senior brokers.

“Andrew Brooker and Vanessa Toucas will be joining from FP Marine Risks and Charles D’Alton will be joining from Charles Taylor (Singapore) where he was underwriter for The Standard Club Asia Ltd. Along with Tom Fulford-Smith, all three will become directors of Latitude.”

CGSC also explained that in due course, “Latitude will become incorporated as a separate entity in its own right and, subject to regulatory approval, will trade as Latitude Brokers Ltd.” CGSC’s CEO Toby Esser commented: “I am very pleased to welcome Andrew, Vanessa and Charlie to CGSC, and to be in partnership with them and Tom as we look to expand our marine business under the umbrella of our Global Marine Practice Group, led by Ruediger Hansel, Steve Barton and Ulfert Paulsen.

“Latitude will join Junge & Co in both Hamburg and Antwerp as our niche marine retail focused brands, whilst we retain the capability to provide our traditional wholesale and facultative support to existing and new clients.”

Ruediger Hansel, CEO of Junge, and Global Marine Practice Group Leader added: “The formation of Latitude is an important development of our marine business and strengthens our proposition to offer dedicated full service retail capability across all of the traditional marine disciplines. It is a key element of our global marine development plan.”

Argo Re Forms Partnership with Horseshoe Group for ILS Market March 04, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/03/04/322120.htm The Bermuda-based Argo Group International Holdings announced that its Bermuda-based reinsurance company, Argo Re, Ltd., has entered into an agreement with Horseshoe Re Limited that will expand its reinsurance product offerings to meet the growing demands of the Insurance Linked Securities (ILS) market.

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The bulletin explained that “Horseshoe Re is a member of Bermuda-based Horseshoe Group, a leader in innovative solutions for the reinsurance marketplace. The exclusive arrangement builds upon Horseshoe Re’s recognized expertise in ILS transformation and Argo Re’s depth of underwriting experience and financial strength to create a seamless link between the reinsurance and capital markets.” It will provide ILS funds and other capital market investors with a “flexible and efficient platform to participate in reinsurance programs that require coverage from highly rated reinsurance carriers.”

Horseshoe Group CEO Andre Perez commented: “Given the limited number of reinsurers available to support programs at this level in the ILS market, we saw an opportunity to address this need. Argo Re’s expertise in worldwide catastrophe reinsurance underwriting coupled with Argo Group’s financial strength makes them an ideal partner.”

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