NU Online News Service, Feb. 6, 1:18 p.m. EST

Catastrophe losses in 2011 led to the U.S. property and casualty industry’s largest underwriting loss since 2002, and while 2012 should see a “modest improvement” in pricing, a true hard market is likely “at least a year or two away,” according to A.M. Best.

In a special report on theU.S.property and casualty industry’s 2011 results, Best says $44.1 billion in catastrophe losses for the year helped drive net income down 49.2 percent to $21.9 billion. In 2010, industry net income was $43.1 billion and catastrophe losses totaled $19.6 billion.

Underwriting losses are expected to total approximately $33.9 billion for 2011, the second consecutive year of underwriting losses and the third-larges annual underwriting loss ever behind 2001 ($56.4 billion) and 2002 ($34.3 billion).

The industry’s combined ratio climbed 6.5 points to 107.5 for 2011. Catastrophe-related losses accounted for 10.1 points, compared to 4.6 points in 2010. Reserve releases shaved 2.7 points off of the 2011 combined ratio, down from three points from reserve releases in 2010.

Best says it expects the impact of reserve releases to decline going forward. “While there are select lines where reserving strength remains, A.M. Best continues to believe the overall industry’s previous reserve cushion is largely exhausted because of sizable reserve releases over the past six calendar years.”

The ratings agency adds, “With overall industry reserve redundancies expected to continue through 2012, albeit to a lesser extent, the overall reserve deficiency will continue to increase, and core, undiscounted reserves will remain inadequate.”

Despite the challenges in 2011, the industry’s policyholders’ surplus declined only 1.4 percent to $562.7 billion, Best says. In 2010, policyholders’ surplus stood at a record $570.4 billion.

Additionally, the industry saw net premiums written increase 3.5 percent to $442 billion.

Best says, “While the overall U.S. P&C industry demonstrated its resiliency yet again in 2011 and remains well capitalized, the year’s results—and expectations for 2012—will vary by segment.”

Best says pricing continues to improve in personal lines and in catastrophe-exposed property accounts, but some commercial lines are still “fundamentally underpriced, and the segment continues to be negatively impacted by weak macroeconomic conditions and decreasing reserve adequacy levels.”

The outlook for commercial lines remains negative as a result, Best says, while personal lines andU.S.reinsurance are stable.

Looking ahead to 2012, Best says it believes a traditional hard market is still a year or two away, although, industry operating performance is expected to improve in 2012. Best says insurers “still face a challenging environment, with relatively weak underwriting results and lackluster investment returns expected to influence operating results over the next year.”

NU Online News Service, Feb. 10, 3:15 p.m. EST

Rates on commercial all-risk property policies saw across-the-board increases in January, climbing by close to 6 percent in some cases, says insurance broker Marsh.

In its “Marsh Insights: Benchmarking Trends,” Marsh says rates rose an average 5.3 percent last month on all renewals based on its Global Benchmarking Portal for January 2012.

Catastrophe-exposed risks experienced the sharpest increase with average increases of 5.7 percent. Non-catastrophe exposures rose 5.2 percent on average.

Marsh calls the overall rate changes “relatively modest” in the 2011 fourth quarter.

“While clients with significant losses in 2011 or heavy [catastrophe] exposures are more likely to experience considerable rate increases at their upcoming renewals, the January 2012 chart illustrates that insurers are continuing their upward pressure on rates across the board,” Marsh says.

The trend toward increases is expected to continue through the first quarter of this year “as this transitional market continues to shift,” says Marsh.

Marsh says that 58 percent of January renewals received increases while 20 percent were unchanged and 22 percent managed decreased rates. This compares with 51 percent seeing increases in the 2011 fourth quarter and 15 percent seeing no change. Thirty-four percent experienced decreases, which was the same as the third quarter of 2011.

“While this analysis provides further evidence of the trend of ever-rising share of placements with rate increases, it is clear that there are flat to modest decreases available for some clients,” the report says.

NU Online News Service, Jan. 26, 12:06 p.m. EST

Airline insurance claims dropped 66 percent below 2010’s loss numbers, and pricing in the marketplace exhibited stability through the 2011-2012 renewal period, says insurance broker Aon.

In its Airline Insurance Market News report for the 2012 first quarter, the Chicago-based insurance broker says final loss figures for 2011, excluding minor losses, came in at $530 million compared to more than $1.5 billion in 2010.

With an estimate of minor losses added in, overall loss totaled $1.13 billion, 46 percent less than the $2.1 billion in 2010.

Fatalities were at their lowest since 1984 and it was also the lowest number of aviation claims since 1995, Aon says.

In December, Aon said there were a total of 175 fatalities under standard liability policies. The long-term average is 582 fatalities.

“The low level of claims in 2011 has meant that the market is estimated to have enjoyed healthy returns overall,” says Aon.

However, Aon went on to say, this is only the second time in five years that the industry has enjoyed such a low level of claims compared to premium.

Airline-insurance pricing will still depend on individual risks, with those airlines that have had a notable number of losses seeing increases, while those with “well-understood risks” experiencing stable to possible soft renewals.

Aon warns that a “single major incident could harden the market quickly” especially in light of the high level of claims prior to 2011.

“It is relatively easy for an underwriter to maintain a presence in the airline insurance market without committing capacity,” says Aon. “As a result, in the event of a major loss, any market hardening is likely to be short lived because the reintroduction of latent capacity will increase competition and reduce prices.”

Aon notes that one major driver of change in the airline industry is the consolidation of the airlines, many of which have consolidated inEurope.

The broker says the number of airlines dropping below the fleet value of $150 million—which is the threshold for inclusion in Aon’s data—has been greater than the number entering the market. Overall, the number remains not “significantly higher than average.”

Sunday’s collision caused a 160-foot gash in the Costa Concordia’s hull and the evacuation of more than 4,200 passengers. (AP Photo/Gregorio Borgia)

As the Costa Concordia shifts on its rocky perch, search-and-rescue efforts have been temporarily halted. Yesterday the death toll rose to 11 after divers removed five more bodies from the dark abyss. Meanwhile, 23 passengers remain missing.

Amid the choppy waters a glimmer of hope emerged: all of the ship’s 17 fuel tanks appear to be intact, thus diminishing the likelihood of a significant environmental disaster. Officials nevertheless caution the vessel could still slip into deeper waters off the Tuscan coast and that salvage efforts, including siphoning more than 500,000 gallons of fuel, hinge upon effectively stabilizing the ship.

The ship’s many stakeholders find themselves in a precarious situation. Will the heavily battered Costa Concordia ever regain its footing or be declared a total loss? Will the tragedy turn the cruise industry on its side? Were any conceivable profits for marine insurers already swept away with the miscellaneous debris? This is to say nothing of the looming business interruption (BI) expenses.

To explore the tragedy’s potential impact on the global marine insurance industry, we spoke with John Woods, a partner at the New York City office of Clyde & Co. Drawing upon his 31 years of experience representing largely marine insurance interests in both the U.S. and in London, Woods estimates the toll on the industry will be heavy indeed.

NU Online News Service, Jan. 4, 2:49 p.m. EST

It probably comes as little surprise that 2011 was significant in terms of insured losses from catastrophes, but the loss figures have less to do with the number of events as where they took place, according to industry representatives.

In a webinar sponsored by Munich Re today, industry representatives said the 2011 catastrophe season was close to average in the number of events, but produced some very expensive claim events.

“It is a combination of a strong event causing a lot of physical damage with the coincidence that these regions in 2011 were regions with high-insurance penetration, that caused these high losses,” notes Ernst Rauch, head of corporate climate center for Munich Re.

The year produced $380 billion in global economic losses and $105 billion in insured losses, according to Munich Re’s figures compiled through its NatCatSERVICE. The number of events for the year, 820, was just slightly above the average of 790 over the last 10 years and 630 for the last 30 years.

When compared to the previous year, 2010 was more active in terms of number of events, 970, and fatalities (296,000 in 2010 compared to 27,000 in 2011). However, insured losses only came to $42 billion and economic loss to $152 billion.

Unlike years past, most of the 2011 insured losses occurred in theAsiaregion, primarily the result of the Tohoku earthquake and subsequent tsunami that caused $40 billion in insured losses. Added to that were the earthquakes inNew Zealandand flooding inAustraliaandThailand.

Asia accounted for 44 percent of worldwide losses and theUnited States37 percent. On average, theUnited Statesassumes 66 percent of insured losses whileAsiasees 13 percent.

Carl Hedde, senior vice president, head of risk accumulation for Munich Re America, Inc., says that thunderstorm activity in theUnited Statesthat produced numerous tornadoes was to blame for a significant share of losses. Thunderstorm and tornado activity was the deadliest since 1975, exceeding $25 billion in insured losses of the total $35.9 billion for the year.

There were a total of 69 severe thunderstorm events claiming 617 lives in 2011, while tropical cyclone activity, that is usually the major driver of loss, saw three events that amounted to estimated insured losses of $5.5 billion.  

It was a “very extreme year” in terms of catastrophe losses from climatic events in theUnited States, notes Robert Hartwig, president of the Insurance Information Institute. The year saw a record number of federal disaster declarations at 99, and if taken as a whole, the spring 2011 tornado and severe storm season would be ranked as the fourth most costly disaster event inU.S.history, Hartwig says.

ForU.S.insurers, the losses increased their combined ratios to 108.2 over the first three quarters, compared to a combined ratio of 100.8 for all of 2010.

Hartwig says that most excess capacity has been removed from the market producing net premium written growth over the past six quarters, a change from the declines seen in the previous years.

NU Online News Service, Dec. 21, 2:00 p.m. EST

When Stephen Gilchrist Glover, better known as Steve-O of “Jackass” fame, wanted to staple his private parts to his leg during the taping of his own show, producers called Lorrie McNaught.

McNaught, reality television expert with Aon/Albert G. Ruben, says it’s her job to “find a way.”

“I have to find an insurer to cover these things—or find a way to make it insurable,” McNaught tells PC360.

That’s exactly what she did so that Steve-O could do what he is famous for—shock. To assuage the expected fear of an insurer to cover such an act, McNaught consulted a doctor to find out just where Steve-O could staple his leg without hitting anything important, like a blood vessel.

“After the doctor and I shared a laugh, he actually told me the place [Steve-O] could do it without seriously injuring himself,” McNaught says.

With more than 15 years working with networks and reality TV producers, McNaught fields numerous calls every day—each presenting insurance dilemmas.

“It’s challenging, and it can be nerve-wracking,” she says. “There can be a lot of people waiting. A crew can be on a Tarmac, waiting to get on a helicopter. Obtaining insurance is always the last call.”

The popularity of reality shows has ballooned and the wide-range of types keep McNaught on her toes and her negotiating skills sharp.

“A lot of these shows are seeking to make the audience gasp,” McNaught says. “That can get risky and, in order to get coverage, part of my job is convincing underwriters the risk is worth taking.”

For the most part, it is. The loss ratio is less than 3 percent, McNaught says. And coverage is mostly affordable. As reality television has evolved, brokers have forced producers to tighten liability releases contestants sign, and to fully explain the contract to them.

However, there are cases in which no insurer can be found—at least not for the stunt as it was originally drawn up. McNaught says one show wanted contestants to pass a baton to each other while sitting on a chair on top of separate biplanes.

“That one got a little crazy,” she explains. “They would have to be really close, the pilots’ would need to be perfect and the weather needed to be right.”

The show, fully insured, wound up doing the stunt—just without the passing of a baton.

When you watch a show such as “Fear Factor,” the risks are obvious. Contestants, for example, are asked to gather flags while climbing on the outside of a car that is dangling from helicopters 100 feet in the air. McNaught has worked with “Fear Factor” and other popular reality shows, such as “Survivor,” and sometimes, the biggest risks are the ones behind the scenes.

For instance, kidnap and ransom coverage is essential for any show leaving the country. Coverage for the confiscation of equipment is important as well, she says.

Location also plays a role. If you’re filming in Iceland, maybe insurance for a volcano eruption wouldn’t hurt. Taping in Florida during hurricane season definitely carries more risk. A remote spot away from medical services can be tricky too, McNaught says.

“These are all things I bring up that they may or may not have thought about,” she says. “But that’s what a good broker does.”

In fact, McNaught says she’s been presented with so many risk scenarios for so many different types of shows, she can normally predict what the show is going to do next.

But for all the talk about the risks associated with reality shows, the most claims are generated by a standard set of stairs.

“The walk-and-talk shows—the game shows,” answers McNaught when asked about the shows that produce the most claims. “Walking up and down a staircase.”