Sutherland insights insurance news flash mar 3, 2014

INSURANCE NEWS FLASH March 3, 2014

Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 7 Technology .......................................................................................................................... 12 Strategy .............................................................................................................................. 16

2|Sutherland Insights Insurance News Flash Mar 3, 2014

Sales & Marketing Flood insurance rate increases front and center in Scott and Obama talks February 28, 2014 | Live Insurance News http://www.liveinsurancenews.com/flood-insurance-rate-increases-front-center-scott-obamatalks/8532622/ The governor had the opportunity to speak to the White House this week in a meeting with the President.

Governor Rick Scott or Florida has been making a tremendous effort to try to put the spotlight on the issue of the increases in flood insurance rates which have impacted many states, among which his own has been one of those hit the hardest.

He finally received an ideal chance to address this topic with the President, this week, at the White House.

As a result of a law passed in 2012, the flood insurance premiums paid by many residents of Florida experienced a tremendous spike. Several members of Congress are now working to try to reverse that law. That said, Scott, the Republican governor who is running for re-election, has now been focused on placing both the responsibility and the blame on President Obama, for many weeks now.

He and other governors met with Obama this week and flood insurance was a primary topic of discussion.

Following the meeting, Scott said that “We’ve been asking the president to use his pen and stop these unreasonable, unfair increases.” He also said that Obama’s response was that Congress would pass a bill that would bring the issue back again. In Scott’s opinion, “There’s a lot of talk in Washington, there’s not enough action.” He expressed frustration with the fact that while there has been a great deal of discussion on this insurance program, there has yet to be anything passed.

That said, at the same time that Scott is trying to pressure the president to use executive action, Republicans as a whole have been criticizing him for having acted alone in other areas.

The legislation in question, the 2012 Biggert-Waters Act, had been created in order to help to phase out the rate subsidies so that the premiums being paid would come closer to reflecting the actual flooding risk faced by the properties being covered. It was implemented on October 1 of last year and started to remove more subsidies of over five years for the owners of homes that had been constructed before the flood zone mapping program had started. Buyers of homes that were sold after July 2012 experienced an immediate loss of the flood insurance subsidy.

3|Sutherland Insights Insurance News Flash Mar 3, 2014

Insurance industry losses are massive due to disastrous winter weather February 26, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-industry-losses-massive-due-disastrous-winterweather/8532590/ Over $1.4 billion in losses have been seen due to the extreme conditions that have been experienced.

With continual snow and temperatures that are continually below the averages, the insurance industry is starting to feel the same winter blues that are being experienced by the cabin feverish residents of the icy and snowy regions of the country.

As much as snowplows and two truck drivers are frustrated, the losses seen by insurers is even greater.

According to the data that was issued by Impact Forecasting, the extra wave of severe winter weather that gusted its way across the United States in January led to over $1.4 billion in insured losses. This hit taken by the insurance industry was a direct result of the so-called polar vortex that blasted its freezing temperatures and seemingly never-ending snow and ice across the country. Even cities that are farther south, such as Atlanta, were not immune to Jack Frost’s latest strike.

As the temperatures occasionally ease, the insurance industry is now seeing heavier snowfall than usual.

While the temperatures have been staying quite cold – lower than average – overall, the occasional milder day or two (relatively speaking) has been breaking the frigid trends on the mercury. However, instead of bringing weather relief and a chance to melt away the tremendous accumulation of snow that already exists, it has only opened up the door to even greater snowfall, leading to more need for exhausted snowplow and tow truck drivers, and further insurance claims from homeowners, motorists, and business owners.

Vehicle accidents – particularly those involving multiple cars and trucks at a time – have become commonplace in many areas that are experiencing treacherous highway conditions. Frozen pipes and falling trees have meant that property and building damage has skyrocketed.

Moreover, it should be noted that the data taken into account by Impact Forecasting for its damage report is for a period that does not include the latest harsh winter blasts that made their way through many parts of the country last week, particularly in the areas of the Northeast and the Great Lakes.

With another possible full month of winter yet to come, the country and the insurance industry are bracing for what is yet to come. It is easy to believe that these were not the last storms that will be seen for the season.

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Homeowners insurance won’t save you from a rockslide February 25, 2014 | Live Insurance News http://www.liveinsurancenews.com/homeowners-insurance-wont-save-rockslide/8532582/ Natural disasters feel as though they are becoming more common but many policyholders don’t understand their coverage.

As the weather heads toward another shift in the changing of the seasons, the potential for a new wave of severe storms is building, and homeowners insurance customers may not know exactly what type of coverage they have when Mother Nature decides to show the world what she’s really about.

Rockslides, landslides, mudslides and sinkholes are all building up a new level of threat.

While many property owners may feel that they have coverage through their homeowners insurance policies, they may want to think again as the typical policy across the United States does not cover the type of damage that is caused by “earth movements”. That would require an additional level of coverage or an entirely different policy.

Insurers are remind homeowners insurance policyholders to gain a good understanding of the coverage they do have.

Moreover, while flood policies and earthquake insurance can be purchased separately, it is important to have a look at those types of coverage, too. The reason is that those policies are typically quite specific, so even when the additional protection has been purchased, it is still important to know exactly what it provides. For instance, if only one rock or tree falls onto the structure, the policy may label it as damage that is caused by a falling object.

It is important to remember that the regular freezing and thawing that occurs in many parts of the country at this time of year can loosen the ground and the soil. This means that objects – such as trees, rocks, and anything else in or on the ground – may not be as secure at this time of year as they were before the snow first started falling.

Moreover, as the melt and rains pick up, this can cause water to flow on and in the ground, taking soil along with it, disturbing things further. Every year, many homeowners insurance customers make claims, feeling that they will be protected against many types of damage from this form of event, only to find themselves denied as their policies don’t protect them in that way. The insurance industry is hoping to minimize that occurrence, this year, through increased awareness.

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AIG Product Covers Cross-Border Risks for U.S. Multinationals February 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/20/aig-product-covers-cross-border-risks-for-usmulti?ref=rss American International Group launched a new product to cover cross-border casualty risks for U.S.based multinational companies, the company announced in a press release. Called the Global Casualty Single Solution (GCSS), the product is designed for middle market businesses with up to $700 million in annual revenue.

GCSS allows brokers to access on behalf of customers AIG’s U.S. domestic, foreign, and excess casualty products and services through one underwriting contract, using one online submission, and a single global claims coordinator. This consistency across policy forms can help mitigate the risk of casualty insurance gaps, whether based on geography, severity, or coverage type.

The product was developed with the manufacturing and wholesale industries, financial institutions, and business, legal, and engineering service firms in mind.

Allstate to Fill 1,000 Agency Positions in Texas February 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/19/allstate-to-fill-1000-agency-positions-intexas?ref=rss Allstate is launching a recruitment campaign to appoint 120 new agency owners in Texas in 2014, according to a statement. Agency owners are also searching to fill over 800 sales positions across the state.

Allstate says the population boom in Texas in recent years is a significant factor fueling its agency growth strategy. “Many Texas cities are making headlines for their impressive economic population expansion,” says Lisa Banks, Texas strategic deployment leader with Allstate.

“Candidates don’t need an insurance background," says Banks. "We’ll provide them with comprehensive education and the resources to help them get off to a solid start.”

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Finance New Estimates Say UK Floods Could Cost Insurers up to $2.5 Billion February 28, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/02/28/321862.htm An additional £500 million [$838 million] has been added to the flood loss estimates from the almost continual storms, some reaching hurricane strength, which have produced widespread flooding to parts of Britain since December. The latest figures indicate that they could reach £1.5 billion ($2.51 billion), according to consultants at Deloitte.

The consultancy had previously estimated insured losses from winter storms in the UK since the autumn would be up to £1 billion [$1.676 billion], but they have upgraded their view after the bad weather continued into February.

“Our view on the cost of weather claims from both the storms and the floods from December through to the end of February is that it has now gone through the £1 billion mark and is heading towards £1.5 billion,” said James Rakow, insurance partner at Deloitte.

Rakow added the bulk of the cost will be attributed to damage to commercial and domestic property since the start of the year on account of storms in mid-February and floodwaters reaching the affluent outskirts of London.

Earlier in February, the British government summoned senior executives from top insurers to brief ministers on how they were addressing the damage caused by flooding.

Insurer RSA said on Thursday it expects to take a £45-£60 million [$75 to $100.5 million] hit from claims related to flooding in the UK while Direct Line forecast a £70-£90 million [$117.3 to $150.8 million] cost from claims between the start of the year and February 22.

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Ratings Roundup: China Taiping (UK), Quálitas February 28, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/02/28/321818.htm A.M. Best has assigned a financial strength rating of ‘B++’ (Good) and an issuer credit rating of “bbb” to China Taiping Insurance (UK) Company Limited (CTIUK), both with stable outlooks Best said the ratings “reflect CTIUK’s improving operating performance and good risk-adjusted capitalization. The ratings also take into account the company’s niche business profile and strong links with its ultimate parent, state-owned China Taiping Insurance Group Ltd. (China Taiping). Best also explained that CTIUK “is a niche insurer catering predominantly to the needs of the Chinese communities established in the United Kingdom and a select number of other European countries. The company mainly operates in the retail market, targeting restaurants, takeaway outlets and shops. However, it has been diversifying its business profile by writing more commercial combined policies in 2013. In addition to this, CTIUK’s recent acquisition of several new broker partners should bolster premium growth in 2014. While CTIUK only accounts for a small proportion of China Taiping’s consolidated revenue, it benefits from the group’s brand recognition as well as investment and reinsurance support.” The report also noted that despite CTIUK’s volatile earnings in the past, “its profit before tax has improved in the last couple of years. This was driven by a more stable underwriting performance following the cancellation of loss-making professional indemnity business and recovering investment results. Going forward, the company is targeting a profit in the range of £1.52 million [$2.51 and $3.345 million] per year, but profit margins are expected to remain constrained by high acquisition expenses.” In addition Best indicated that “CTIUK’s risk-adjusted capitalization has been improving in recent years as a result of lower exposure to equity investments, relatively stable net written premium and increasing retained earnings. Going forward, the balance sheet strength is expected to remain supportive of the current ratings, despite the strong premium growth anticipated in 2014. In conclusion Best said: “Positive rating actions could occur for CTIUK if, over the next few years, it consistently improves its underwriting results while maintaining adequate riskadjusted capitalization. Negative rating actions could occur as a result of excessive growth leading to a significant deterioration of earnings or risk-adjusted capitalization.”

A.M. Best has upgraded the financial strength rating to ‘B’ (Fair) from ‘B-‘ (Fair) and issuer credit rating to “bb” from “bb-” of Mexico’s Quálitas Compañia de Seguros S.A.B. de C.V., both with stable outlooks. Bet said the “rating upgrades reflect Qualitas’ leading market position in the increasingly competitive Mexican automobile insurance segment, its formidable distribution network and solid overall profitability in recent years. Qualitas operates through a network of local agents, financial institutions and service offices and has established a formidable distribution capability throughout Mexico. This has enabled the company to maintain its leading market position in the Mexican automobile insurance segment in extremely challenging economic and market conditions. Qualitas reported favorable underwriting net income in 2012, reflecting its highest historical operating performance.” As offsetting factors Best cited, “Qualitas’ consistently elevated underwriting leverage and trend of underwriting losses. Historically, the company has operated with underwriting leverage considered higher than expected for an automobile insurance provider. Additionally, Qualitas maintains combined ratios just above breakeven due to its high level of loss and loss adjustment expenses recorded each year.” Best also noted that “key rating drivers that could lead to positive rating actions for Qualitas include continued favorable trends in revenues and earnings, capital growth and improvement in the underwriting leverage. Key factors that could lead to negative rating actions include unfavorable operating performance or weakened risk-adjusted capital.”

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Zurich CEO Senn Says Time to Go on Offense to Attract Investors February 28, 2014 | Insurance Journal http://www.insurancejournal.com/news/international/2014/02/28/321815.htm Zurich Insurance Group AG’s CEO Martin Senn said an above-average dividend is no longer enough for investors and that now is the time to expand his business as the economy rebounds.

“The world is a bit more stable,” Senn said yesterday during an interview at Bloomberg LP headquarters in New York. “We’re going to be a bit more on the offense in terms of how and where to grow our market share.”

Zurich, based in the Swiss city of the same name, climbed 6.3 percent in the past year through yesterday, lagging behind the 16 percent advance of the Bloomberg World Insurance Index.

Shareholders have benefited from the company’s 6.3 percent dividend yield, which is more than twice as much as the average for the 83 insurers in the benchmark.

“The dividend gives a good downside protection when the market becomes more volatile,” Senn said. “The world is much more in a growth mode.”

Senn has sought to build investor confidence in Zurich, Switzerland’s largest insurer, after executive departures and the suicide of Chief Financial Officer Pierre Wauthier last year, which prompted Chairman Josef Ackermann to resign. The CEO has signaled his willingness to scale back or exit underperforming businesses to bolster earnings growth.

The company said in December it expected as much as $600 million in restructuring costs over the next 12 months. It lowered its profit goal to a range of 12 percent to 14 percent return on equity for the three years through 2016. That compares with the previous target of 16 percent.

U.S. Growth The area of focus for Zurich is insuring risks for large, global firms, Senn said yesterday. He cited opportunities covering businesses in the U.S., where his company is one of the biggest sellers of policies for the construction industry.

“Economic activity has significantly picked up,” he said. “The growth pattern in the U.S. is clearly ahead of Europe.”

Zurich is also one of the largest sellers of home and auto policies in the U.S. through a management relationship with Los Angeles-based Farmers Insurance.

Car coverage will evolve as new technologies allow for self-driving vehicles, Senn said. Such a change would mean carriers like his would have to reassess their business models.

“The question is moving from property risk to liability risk,” Senn said. “Who is liable when things go wrong? If everything is automated in the world and every car drives itself, who is liable when things go wrong? Is it Google Maps? Is it the telecom signal provider? Is it the car manufacturer?”

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Strong 2013 Results Fuel Higher Bonuses, but Set Bar High for 2014 and Beyond February 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/18/strong-2013-results-fuel-higher-bonuses-butset-ba?ref=rss Mild weather and positive commercial-pricing trends bolstered insurers’ 2013 results and, consequently, bonus payouts are largely up for the year. But the success of 2013 may set the bar considerably high for bonuses in 2014, Towers Watson says.

“As insurers wrap up their books for 2013, both management and boards can feel good about the performance they delivered and the resulting payouts,” Towers Watson says in a statement about its survey of 50 leading insurance companies about their 2013 bonus-pool funding and results.

For 2013, Towers Watson notes over 80% of participating insurers in its survey estimated their bonus pools would fund above target for 2013, with 70% of those companies estimating funding levels at 125% of target or higher.

“More than half of the companies surveyed reported improved bonus pool funding over 2012 levels, with half of those saying they would exceed the 2012 pool by 20% or more,” Towers Watson says.

The firm adds 2013 was “quite a good year for most insurance companies across most business lines — and, in turn, a good year for executive bonus pools in the industry.”

But replicating the year’s performance in 2014 will be challenging, Towers Watson says, citing pricing trends, the weather and continuing economic and capital-markets uncertainty.

PC360 has reported on several analyses predicting a slowdown in commercial-lines pricing throughout 2014. Concerning the weather, Swiss Re and others have pointed out below-average U.S. losses headlined a relatively mild year in 2013 for catastrophes.

Towers Watson notes it is “unclear whether the strong performance and payouts of 2013 can be repeated to the same degree” this year and in 2015. This impacts potential bonus payments now in particular, the firm points out, as there is currently “intense intense scrutiny of executive compensation and the focus on strengthening linkages between pay and performance.”

Towers Watson suggests that conversations between boards and management will likely include questions such as: •

How challenging will it be to raise the bar for 2014 and 2015? If 2013 was a high-water mark, what level of incentive payouts will be acceptable for achievable levels of performance?

•

Can insurance companies reasonably expect higher levels of performance without going outside their defined risk appetite?

•

Do the bonus metrics and results align with performance against company strategy? Are annual and long-term incentive plan goals coordinated (and/or redundant)?

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Group Led by Greenberg's Starr Investment to Buy MultiPlan February 17, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/17/group-led-by-greenbergs-starr-investment-tobuy-mu?ref=rss (Reuters) - A group led by former AIG boss Maurice "Hank" Greenberg's Starr Investment Holdings said it would buy health insurance claims processor MultiPlan Inc. Terms of the deal were not disclosed. A person familiar with the matter said the deal values MultiPlan at $4.4 billion.

MultiPlan, owned by BC Partners and Silver Lake, helps manage the claims process for big health insurers and has a network of over 900,000 healthcare providers.

Swiss investment firm Partners Group is the other lead investor in the deal.

BC Partners and Silver Lake bought MultiPlan in 2010 for about $3.1 billion from rival buyout firms Carlyle Group and Welsh, Carson, Anderson & Stow.

BC Partners and Silver Lake each invested about $600 million in equity when they acquired MultiPlan, according to a person familiar with the matter.

The two private equity firms now stand to make more than two times their money through the sale of MultiPlan, that person added.

Starr Investment said the deal had fully committed financing from Barclays Plc and J.P. Morgan Chase & Co.

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Technology Will auto insurance rates rise because of Google Glass?

February 27, 2014 | Live Insurance News http://www.liveinsurancenews.com/will-auto-insurance-rates-rise-google-glass/8532616/ The popularity of wearable technology and augmented reality glasses could soon have an impact on premiums.

In a move that could one day – in the not too distant future – impact the auto insurance premiums that motorists are facing every year, Google is currently lobbying officials in three or more American states to try to put a halt to the proposed limitations for driving while wearing augmented reality glasses and headsets, such as Google Glass.

This represents one of the first major legal battles over the AR based wearable tech.

At the moment, there are eight states that are looking into regulations regarding the use of Google Glass, a very small computer screen that is worn in a way that is similar to eyeglasses, just out of the main line of sight. The primary concern that law enforcement and other groups are having with this concept is that drivers who wear these mobile devices will be spending more of their time behind the wheel reading emails than they do looking at the actual road. As distracted driving is already a high contributor to the frequency of road accidents, this could only lead auto insurance rates to climb as the gadgets become more popular.

Auto insurance rates have already been impacted by the use of cell phones while driving.

Many states have now banned the use of handsets while a vehicle is in operation, as the number and severity of accidents had increased notably and the cost of insurance coverage had risen along with them.

Google Glass is hardly the only form of wearable technology that is presenting this type of distraction to drivers. It is merely one of the most high profile and, as it has already been involved in a traffic ticket that went to court, it is certainly an issue in the public spotlight, right now.

Also keeping it in the headlines is the fact the Google has, after all, deployed its own lobbyists to help to persuade Delaware, Illinois, and Missouri officials that unlike the case of other mobile devices, it isn’t necessary to implement restrictions for using Google Glass while driving. This, according to state lobbying disclosure records.

What impact they will have and how this will influence auto insurance rates, only time will tell.

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ING Goes Social: Rolls Out LinkedIn for Advisors February 25, 2014 | Insurance and Technology http://www.insurancetech.com/quickview/ing-goes-social-rolls-out-linkedin-for-a/4923?wc=4 It comes as no surprise the adoption of social media has created many grey areas in the rules and interpretation of regulation and compliance. Social media profiles on LinkedIn or Twitter accounts can be seen as advertising for professional services, and in FINRA's view considered equivalent to a poster or flier that needs to be peer reviewed and documented by compliance officers.

A compliance officer must be notified of all changes to social profiles including "likes," endorsements, connections and comments. "That's one of the toughest things to deal with at large scale," says Bruce Milne, chief marketing officer at Socialware, a social business solution provider for regulated industries.

Due to the onerous archiving and compliance requirements the great majority of financial firms choose to stay out of the social sphere, but ING US (soon to be VOYA Financial) is taking on the challenge. In collaboration with Socialware, ING recently announced it will begin to roll out of LinkedIn profiles for its 2,400 financial advisors.

Strict Compliance "We had a very strict policy in place," explains Ann Glover, chief marketing officer for ING US. "Our financial service advisors were not able to use LinkedIn until we could figure out a way for them to use it in a compliant manner." Now, after a successful pilot with 10 users, ING is opening the program to a waiting list of over 100 advisors by year end. Word of mouth has spread quickly and Milne reports several inbound calls each day from advisors interested in joining the wait list.

From a business perspective, Glover says LinkedIn is an ideal place for advisors to manage relationships with current and prospective clients and to keep in touch as clients go through life events. "Only about 40 percent of the workforce is prepared for retirement," she says, "The direct demographic of LinkedIn is the target of ING, largely around preparing for a predictable and secure financial future."

Who's Using What: The Latest Insurance Software Implementations February 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/20/whos-using-what-the-latest-insurancesoftware-impl?ref=rss Crawford & Co. deployed its latest product suite for its affinity claims business. The new Affinity Portal can be used to submit claims, look up their status and communicate with Crawford adjusters online using a computer, smart phone or tablet device. Additionally, the claimant self-service technology MyClaimsAgent allows claimants o submit supporting claim documentation online, improving client experience while improving operational efficiency.

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Donegal Insurance Group selected Guidewire Software Inc.'s Guidewire BillingCenter to provide the company with a new billing system. BillingCenter will provide Donegal with a more intuitive and configurable platfor which will allow the company to further complement the experience for the agent and policyholder.

US Assure completed its nationwide rollout of MajescoMastek's STG Billing. US Assure expanded the system's use to include the US Assure network of more than 50,000 agents and brokers, and is now benefitting from the modern, user-friendly system.

Tech Development ISO and the Alaska Department of Labor and Workforce Development are collaborating to create an EDI Data Quality Improvement Program that will improve overall quality and usability of workers' compensation data among the state and its data reporters. The program is expected to roll out in April of this year.

Vertafore Files Mobile App Patent Application February 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/19/vertafore-files-mobile-app-patentapplication?ref=rss Insurance software provider Vertafore filed two patent applications for mobile application and remote file management innovations.

Development manager Aleksey Sinyagin and software test engineers Judy Wang and Justin Vinall filed the first patent application. They discovered their invention while working on the release of the Vertafore Producer Advantage mobile app after the company needed a more effective way to test online services within an environment where changes were continually being made to the app.

Sinyagin, Wang and Vinall developed a self-learning, auto-expanding test system for web services integration testing enabling the app to have 1,200 test cases auto-generated every day. The automated system iterates as well as makes high quality changes and test cycle converges on a set of tests. This innovation has the potential to save time and money for mobile application developers in any industry that performs testing to ensure the quality of the products.

Senior software test engineer Raul Alvarez filed the second patent application. Alvarez’s invention seeks to save software developers time by using cryptographic technologies to compare files at a rapid pace.

The invention achieves this by reducing the size of the individual file comparisons from hundreds of megabytes to a few dozen bites per file. It also removes the need to physically access the remote file system or download large files from the production server.

“Vertafore’s software developers and engineers are leading the way in helping further our position as a technology leader that our customers can rely on to solve all their software challenges,” said senior vice president of engineering and operations Theo Beack.

“Innovation has been in our DNA since our founding, and we will continue to recruit the best and the brightest inventors to push meaningful change in the software industry.”

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Cyber liability insurance gains popularity outside of corporations February 18, 2014 | Live Insurance News http://www.liveinsurancenews.com/cyber-liability-insurance-gains-popularity-outsidecorporations/8532428/ Other types of organizations, including school boards, are now investing in the coverage.

Following the latest tremendous data breach – the one that struck Target and that gave hackers access to the consumer debit and credit card account information from about 40 million people – a growing range of types of organizations are looking into cyber liability insurance and the type of coverage that it can provide them.

Ann Arbor Public Schools is the latest to join this flood of non-retail groups that are covering themselves.

While Target fights to recover from the breach and is now paying for free credit monitoring for all of the affected customers, other organizations are looking into the difference that cyber liability insurance could make in case they should ever experience their own data breaches. Ann Arbor Public Schools has realized that this threat is a real one and that a data breach could be very harmful to them if they were to experience one without this additional security protection.

Cyber liability insurance was once rare but is now becoming a standard part of doing business.

The Ann Arbor Public School (APPS) district has decided that this coverage is especially important as it transitions its human resources department onto a new platform that is web based. Officials from the district felt concern that this could increase some security vulnerabilities regarding the student, parent, and employee personal information when it comes to cyber attacks and theft.

The policy that the APPS purchased provides coverage for up to $1 million. This is being provided to them at an annual premium of $21,407. This will be the first year that the district has coverage of this nature.

That said, this is only the latest among thousands of organizations that are watching an increasing number of data breach headlines of companies that had previously been considered to be large and highly secure. The Financial Times reported that in the past year, there has been a notable jump in the number of companies and organizations that are purchasing this protection.

It is becoming clear that companies of all size are vulnerable to data breaches and that cyber liability insurance is one of the only things that can be purchased to ensure that the massive expenses related to this type of occurrence will be manageable if they should occur.

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Strategy US lawmakers may be ready to fix flood insurance February 19, 2014 | Live Insurance News http://www.liveinsurancenews.com/us-lawmakers-may-ready-fix-flood-insurance/8532498/ Federal insurance program continues to struggled beneath massive debt The U.S. Congress may be ready to finally find a solution to the problems that have crippled the National Flood Insurance Program. The program has been the only place that homeowners could find flood protection for several years, but the program itself has struggled under financial strain for nearly as long as it has existed. After being hit by several powerful natural disasters, the insurance program is currently more than $27 billion in debt, which has affected its ability to pay claims related to flood damage.

Legislators could resolve floor protection problems by the end of the month In 2012, the insurance program became the focus of the Biggert-Waters act, which aimed to address many of its financial issues by changing the way the program offered coverage. The legislation caused flood insurance rates to spike in many parts of the country, making it financial unfeasible for some homeowners to maintain their coverage. Now, federal lawmakers are ready to address this issue and may be able to find a solution before the end of this month.

New legislation aims to resolve outstanding insurance issues New legislation, supported by Senator Mary Landrieu, has been introduced to the Senate. The legislation aims to make flood protection more affordable for homeowners. Per the legislation, FEMA, which manages the National Flood Insurance Program, would be required to reconsider the changes it has made to its flood maps. These flood maps often dictate the actual cost of flood protection. The legislation would also require FEMA to take into consideration levees that are used as a form of flood protection for communities in so called “high risk� parts of the country.

Reform law of 2012 may be doing more harm than good for homeowners Many lawmakers are beginning to claim that the Bigger-Waters Act of 2012 had little to no impact on the problems experienced by the National Flood Insurance Program. Some argue that the law has simply made insurance protection more of a financial burden on homeowners. These homeowners have been quick to voice their displeasure concerning the rising rates of flood protection.

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Feds Publish Guidelines for Cybersecurity Framework February 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/18/feds-publish-guidelines-for-cybersecurityframewor?ref=rss One year after the White House directed the development of cyber standards by executive order, the National Institute of Standards and Technology (NIST) last week released voluntary industry standards and best practices to prevent cyber attacks in its publication "Framework for Improving Critical Infrastructure Cybersecurity."

In a statement, President Barack Obama says "Cyber threats pose one of the gravest national security dangers that the United States faces." He calls the Framework a turning point, but also notes that there is still work to be done against cyber threats.

NIST also released a Roadmap for future versions of the framework, which details cybersecurity development, alignment and collaboration.

The Framework was created through collaboration between the government and private sector. The government notes that the Framework should be used to complement an organization's risk management and cybersecurity program.

The government says that these guidelines are ideal for the country's critical infrastructure, which includes the energy grid and financial sector, but any organization—located within or outside the United States—may use the guidelines to strengthen cybersecurity efforts.

It is divided into three components: core, tiers and profiles.

The core provides a set of activities that achieve specific cybersecurity outcomes. The five functions can be performed concurrently to address risk.

1. Identify: Develop the organizational understanding to manage cybersecurity risk to systems, assets, data and capabilities. Outcomes include asset management; business environment; governance; risk assessment; and risk management strategy.

2. Protect: Develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services. Outcomes include access control; awareness and training; data security; information protection processes and procedures; maintenance; and protective technology.

3. Detect: Develop and implement the appropriate activities to identify the occurrence of a cybersecurity event. Outcomes include: anomalies and events; security continuous monitoring; and detection processes.

4. Respond: Develop and implement the appropriate activities to take action regarding a detected cybersecurity event.

5. Recover: Develop and implement the appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to a cybersecurity event.

Outcomes include recovery planning, improvements and communications.

The tiers provide context on how an organization views cybersecurity risk and the processes in place to manage risk.

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1. Partial: Cybersecurity risk management practices are not formalized.

2. Risk Informed: Risk management practices are approved by management but may not be established as company policy. Cybersecurity priorities are determined by organizational risk objectives, threat environment or business requirements.

3. Repeatable: Risk management practices are formally approved and expressed as policy.

Practices are regularly updated based on changing threats and technology.

Adaptive: The organization actively adapts to a changing cybersecurity landscape and responds to evolving and sophisticated threats in a timely manner. Cybersecurity risk management is part of the organizational culture and evolves from an awareness of previous activities, information shared by other sources, and continuous awareness of activities on their systems and networks.

Profiles align functions, tiers, risk tolerance and resources of the organization. Profiles can be used to state current or meet desired cybersecurity practices.

York Risk Services Group Acquires ACSI February 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/18/york-risk-services-group-acquires-acsi?ref=rss York Risk Services Group, a provider of claims administration and risk management services, has acquired the assets of American Claims Services, Inc. (ACSI) based in Houston, Texas and Destrehan, Louisiana.

Both John Bannon and Bill Johnson of ACSI will continue to lead the acquired business. The terms of the acquisition were not disclosed.

ACSI provides claims adjusting services primarily to the London Market, as well as First Response/Medical Management Services 24/7 to the Energy Sector. This acquisition is part of York's ongoing strategic initiative to expand the breadth of its specialized loss adjusting and medical cost containment services.

Commenting on the ACSI deal, Danny Miller, President of York Specialized Loss Adjusting (York SLA), said, "This acquisition builds upon and enhances our presence and reputation in both the London Market and Energy Sector and expands our service offerings. ACSI has quality leadership, claims staff, and dedicated resources for managing and understanding the regulatory and loss fund responsibilities of London Binder business. Bill Johnson and his team are well respected within their energy niche and the addition of First Response will assist York’s portfolio of energy clients in the domestic and international markets.”

John Bannon, ACSI Co-President added, “The ACSI team is excited about our partnership with York.

We believe that being part of York will be a win/win for our customers and employees and will be a springboard for future growth in the London Market.”

Meanwhile, Bill Johnson, ACSI Co-President, said he looks forward to working with York and expanding ACSI’s First Response capabilities to York’s broad customer base. Rick Taketa, president of York Risk Services Group, adds, "ACSI is a natural fit with York, [as] both organizations share a commitment to excellence, service, quality and delivering outstanding results to our customers."

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Chris Heckert, vice president of Generational Capital Markets, was an advisor to ACSI in this transaction.

Report: P&C Insurers May Pay for Obamacare's Cost-Containment Measures February 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/20/report-pc-insurers-may-pay-for-obamacarescost-con?ref=rss Medical providers who see reductions in revenue from health insurers due to Obamacare’s costcontainment measures may try to increase the volume and mix of services that can be billed to property and casualty carriers to compensate, a new report contends.

Whle Obamacare provisions do not directly target or affect P&C insurance, the Insurance Research Council, in a report titled, “The Affordable Care Act and Property-Casualty Insurance,” says, “To the extent the cost-containment provisions of the ACA negatively affect medical-provider revenue, then efforts by providers to increase revenue from other sources, including property and casualty insurance, should be expected.”

Most medical providers that treat injuries covered by P&C products, such as auto insurance and workers' compensation, "are likely to be affected by the cost-containment efforts of public and private health insurers," which could have a "long-term effect on property and casualty insurance claims experience and costs," according to the report.

P&C carriers could be “particularly vulnerable” to cost-shifting efforts, the IRC says, because they do not have the bargaining power that health insurers have when it comes to negotiating prices for medical services. Large health insurers, the IRC says, are able to negotiate lower prices on medical services, while individual, uninsured purchasers of services find themselves at the opposite end of the spectrum. P&C carriers find themselves somewhere in the middle, says the IRC. Should medical providers try to raise revenues by increasing the number of services provided to patients, the IRC says insurance systems “with relatively weak utilization controls” will be especially vulnerable. The report adds that P&C carriers lack “the kind of precertification and concurrent utilization-review controls that are frequently applied in public and private health-insurance programs.

P&C carriers may also be subject to claim shifting from insured individuals, the report argues. If employer-sponsored plans are altered to increase out-of-pocket costs for insureds, such as through higher deductibles, the IRC says insureds could claim that an injury is covered by P&C insurance. “In some cases,” the IRC says, “the claim may be legitimate, but would have been previously filed as a health-insurance claims.” In other instances, claims might be fraudulently represented as P&C related, argues the report.

The potential impact on P&C insurance is not all bad though, according to the IRC report. P&C carriers could see fewer claims if the number of uninsured is reduced—a key goal of Obamacare.

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The IRC says, “By reducing the number of uninsured, the ACA could potentially reduce the number of fraudulent claims” where claimants’ primary motive is to secure coverage when they are not covered by health insurance. The impact on P&C insurers, though, depends on how greatly the law reduces the number of uninsured. “If the impact of the ACA on the uninsured population is significant, then the potential impact on property and casualty claim frequency could also be significant,” the IRC says.

The Washington Report: House Flood Bill; AIG and a Sign of the Times; Federal Regulation in 2014 February 17, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/17/the-washington-report-house-flood-bill-aigand-a-s?ref=rss Personal lines insurers and their captive and independent agents will be paying close attention this week as the House works to craft a politically acceptable bill that will delay or reduce National Flood Insurance Program premium increases mandated by a 2012 law.

That’s because House conservatives are demanding that any reduction from current revenue yielded by the 2012 bill -- such as a rollback of the rate increases -- be paid for through other means, and fees paid to Write-Your-Own Companies and their agents were rumored to be among the usual suspects.

The latest, however, is that an administrative haircut for WYO companies as a pay-for has been rejected by the House Republican leadership, and that the House bill will propose to limit rate increases across-the-board to more than 15 percent annually, PC360 has learned.

According to the latest information, the cost of making up the loss in revenues that would have been generated by full implementation of the 2012 will be recouped by imposing an annual $25 dollar surcharge per policy for residential customers and $100 for commercial customers. Other staffers say the annual surcharge for commercial properties and second homes will be $250.

The House bill will be taken up the week of Feb. 24, when Congress returns from its George Washington recess. It will hit the House floor under accelerated rules, through the so-called “suspension” calendar, several industry lobbyists and congressional staffers said.

That requires a two-thirds vote, though, which could present a problem for House Republicans because of who might sponsor the legislation.

House Republicans want the primary sponsor of the legislation to be Rep. Bill Cassidy, R-La., the primary challenger to Sen. Mary Landrieu, D-La., who is facing a rough re-election campaign.

According to industry lobbyists and congressional staffers, the House Democrats won’t support the bill if Cassidy is the primary co-sponsor.

Meanwhile, the Senate’s bill to delay NFIP rate hikes, passed 10 days ago, would delay all rate increases for approximately four years. There are 235 House co-sponsors to the Senate bill and House Democrats would most likely be able to defeat the preferred Republican version if they objected to Cassidy being the lead sponsor or to the Republican version itself, industry lobbyists and staffers acknowledged.

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Another issue is whether the Senate will even take up the House bill if it is passed, or demand it be conferenced with the Senate bill.

House fiscal hawks object to the Senate bill because the Congressional Budget Office projected that the NFIP would lose $1.9 billion in revenues over five years, therefore rolling back the entire purpose of the 2012 bill, which was intended to put the NFIP back on a sound financial basis.

Congress is reconsidering the underlying 2012 legislation because, while the voters embraced the Republican calls for lesser government in the 2010 wave election, they reconsidered after getting bills calling for huge increases in their flood-insurance premiums.

The 2012 bill exposed political deals providing subsidized flood insurance premium subsidies, some of which date back to 1972.

Sign of the times American International Group’s stock got an initial boost in after-hours trading when it reported strong overall earnings Thursday night, but turned down Friday after analysts took a hard look at the numbers and found adjusted property and casualty underwriting results continued to deteriorate.

AIG president and CEO Robert Benmosche tried to soften the blow by telling analysts that loss ratios continue to accrue, “but remember, it’s not a year-to-year business, it’s a zig zag. I know that’s a technical term for some of you, but there’s up and down, and it doesn’t go straight. And so we’ve seen that, but the trends, I feel, are very strong.”

Benmosche and other AIG officials also said the company has invested heavily in an engineering center that will improve its ability to assess risk, “investing huge amounts of money and time to get better data around underwriting intuition.”

In other words, analysts are having problems because AIG, a well-run company that pays attention to everything because it is under such scrutiny, is running into the same issue as every other P&C company: earnings volatility because of an inability to properly forecast losses in underwriting because weather incidents are becoming more severe and unpredictable.

Maybe security analysts, homeowners and members of Congress are as well. Such storms as Katrina, Sandy, tornadoes, and the recent run of unusual cold weather and storms in the Southeast, as well as the severe problems in the UK are signs that severe weather is going to have to be taken into account when evaluating our economy, specifically the cost of insurance and the subsidies provided by government to help deal with the issue.

Federal regulation and insurance In testimony before the House Financial Services Committee last week, incoming Federal Reserve Board chair Janet Yellen repeated what she said during her confirmation hearing last November, that federal regulators are aware insurers are different from banks and regulatory schemes are going to have to be tailored to fit the insurance model.

John Nadel, insurance analyst at Stern, Agee and Leach in New York, reacted by saying it was “positive news” that the Federal Financial Oversight Stability Council “recognizes that there are several key differences between the business models of large, systemic insurers and banks.”

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Nadel added he believes initial proposals as to how systemic insurers will be regulated at the federal level won’t be proposed before the latter part of 2014, and more likely will slip into 2015. “As we've said before, we believe it unlikely that SIFI (systemically important financial institutions) stress testing for the three named insurers will begin until 2016 based on late 2015 data submissions,� Nadel said. However, the issue is broader than the two current SIFI companies, AIG and Prudential Financial, and, most likely, going forward, MetLife.

The Fed also oversees as consolidated federal regulator insurers which operate savings and loans.

Two of the largest are State Farm and USAA. They will also likely be impacted by how federal regulators determine to oversee insurance companies, including whether they will accept use of statutory accounting principles, or demand an overall switch Generally Accepted Accounting Principles, as used by banks.

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