florida property & casualty insurance market update trends, challenges & opportunities...
TRANSCRIPT
Florida Property & Casualty Insurance Market Update
Trends, Challenges & OpportunitiesFlorida Chamber of Commerce Insurance Summit
Orlando, FLOctober 27, 2015
Download at www.iii.org/presentations
Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038
Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
2
Insurance Industry Financial Performance
2014 Was a Reasonably Good Year2015: A Repeat of 2014?
2
P/C Industry Net Income After Taxes1991–2015:H1 2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013 ROAS1 = 10.2% 2014 ROAS1 = 8.4% 2015:H1 ROAS = 9.2%
• ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.2% ROAS in 2014, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.
Sources: A.M. Best, ISO; Insurance Information Institute
$1
4,1
78
$5
,84
0
$1
9,3
16
$1
0,8
70
$2
0,5
98
$2
4,4
04 $3
6,8
19
$3
0,7
73
$2
1,8
65
$3
,04
6
$3
0,0
29
$6
2,4
96
$3
,04
3
$3
5,2
04
$1
9,4
56 $
33
,52
2
$6
3,7
84
$5
5,5
01
$3
0,9
72
$3
8,5
01
$2
0,5
59
$4
4,1
55
$6
5,7
77
-$6,970
$2
8,6
72
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
15:H
1
Net income fell modestly
(-12.5%) in 2014 vs. 2013
$ Millions
5
ROE: Property/Casualty Insurance by Major Event, 1987–2015E
* Excludes Mortgage & Financial Guarantee in 2008 – 2014. Sources: ISO, Fortune; Insurance Information Institute.
-5%
0%
5%
10%
15%
20%
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E
P/C Profitability Is Both by Cyclicality and Ordinary Volatility
Hugo
Andrew
Northridge
Lowest CAT Losses in 15 Years
Sept. 11
Katrina, Rita, Wilma
4 Hurricanes
Financial Crisis*
(Percent)
Record Tornado Losses
Sandy
Low CATs
Modestly higher CATs
9
Return on Equity by Financial Services Sector vs. Fortune 500, 2004-2014*
*GAAP basis. Sources: ISO, Fortune; Insurance Information Institute.
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
04 05 06 07 08 09 10 11 12 13 14
Fortune 500 P/C Insurers Life Insurers Commercial Banks(Percent)
Average: 2004 - 2014
Fortune 500: 13.9% Commercial Banks: 9.8% Life: 8.2%
P/C: 7.1%
Banks and Insurers Have Substantially Underperformed the Fortune 500 Since the Financial Crisis
-5%
0%
5%
10%
15%
20%
25%
50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
*Profitability = P/C insurer ROEs. 2011-14 figures are estimates based on ROAS data. Note: Data for 2008-2014 exclude mortgage and financial guaranty insurers.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.
1977:19.0%1987:17.3%
1997:11.6%
2006:12.7%
1984: 1.8%
1992: 4.5%
2001: -1.2%
ROE
1975: 2.4%
2013 9.8%
2015E 8.8%
Back to the Future: Profitability Peaks & Troughs in the P/C Insurance Industry, 1950 – 2015E*
1969: 3.9%
1965: 2.2%1957: 1.8%
1972:13.7%
1966-67: 5.5%1959:6.8%
1950:8.0%
1950-70: ROEs were lower in this period. Low interest rates,
low inflation, “Bureau” rate regulation all played a role
1970-90: Peak ROEs were much higher in this period while troughs
were comparable. High interest rates, rapid inflation, economic
volatility all played roles
1990-2010s: Déjà vu. Excluding mega-
CATs, this period is very similar to the 1950-1970 period
13
RNW All Lines by State, 2004-2013 Average:Highest 25 States
20
.5
18
.4
14
.6
14
.3
13
.4
13
.3
12
.3
12
.1
12
.0
12
.0
11
.7
11
.4
11
.1
11
.1
10
.9
10
.8
10
.7
10
.7
10
.5
10
.5
10
.3
9.9
9.8
9.8
9.6
9.5
02468
1012141618202224
HI AK VT ME WY ND VA ID NH UT WA SC MA NC OH DC CA OR RI WV CT IA NE SD MT MD
The most profitable states over the past decade are
widely distributed geographically, though none
are in the Gulf region
Source: NAIC; Insurance Information Institute.
Profitability Benchmark: All P/C
US: 7.9%
14
9.2
8.6
8.4
8.3
8.2
8.2
8.1
8.0
7.9
7.7
7.7
7.5
7.4
6.8
6.6
6.4
6.1
5.7
5.3
5.2
5.0
4.3
2.5
1.9
-6.9
-9.3
-14-12-10-8-6-4-202468
10
NM FL TX WI KS MN CO PA US AR IL IN AZ MO KY TN NV NJ GA NY DE MI AL OK MS LA
RNW All Lines by State, 2004-2013 Average: Lowest 25 States
Source: NAIC; Insurance Information Institute.
Some of the least profitable states over the past decade
were hit hard by catastrophes
15
19
.0
14
.3
14
.2
13
.9
13
.7
13
.5
12
.4
12
.1
11
.3
11
.3
10
.8
10
.7
10
.5
9.9
9.9
9.9
9.7
9.6
9.5
9.3
9.2
9.2
9.1
9.0
8.9
8.8
02468
10121416182022
HI ME DC ID VT ND AK NH IA WY OH MN WV AZ OR VA CA RI CO KS CT WI NM MT UT IN
RN
W P
PA
*Latest available.Sources: NAIC.
Hawaii was the most profitable state for auto insurers from 2004-2013
Return on Net Worth: Pvt. Passenger Auto, 10-Year Average (2004-2013*)
Top 25 States(Percent)
16
8.8
8.6
8.6
8.6
8.5
8.3
8.1
7.8
7.7
7.6
7.5
7.5
7.4
7.1
6.3
6.2
6.1
5.9
5.8
5.6
5.0
4.5
4.4
3.8
3.3
-2.5
-3
-1
1
3
5
7
9
NE
MD
SD
WA IL NY
MA
TX
PA
AL
AR
MO
SC
US
NC
TN NJ
DE
GA
KY
OK
MS FL
NV
LA MI
RN
W A
uto
Return on Net Worth: Pvt. Passenger Auto, 10-Year Average (2004-2013*)
*Latest available.Sources: NAIC
Michigan was the least profitable state for auto insurers from
2004-2013
(Percent) Bottom 25 States
17
42
.6
23
.6
21
.0
20
.9
20
.2
20
.0
19
.3
18
.4
17
.6
15
.9
15
.8
15
.6
15
.3
14
.7
14
.6
13
.8
13
.0
12
.2
11
.0
11
.0
10
.8
10
.7
10
.6
19
.0
18
.0
14
.00
5
10
15
20
25
30
35
40
45
50
HI DC DE RI NV CA SC VA AK OR MA NY VT WA UT ME MD CT ID NH NC AZ PA WY MI TX
RN
W H
O
*Latest available.Sources: NAIC.
Return on Net Worth: Homeowners Insurance, 10-Year Average (2004-2013*)
Hawaii was the most profitable state for home insurers from 2004-2013 due to the absence
of hurricanes during this period
(Percent) Top 25 States
18
10
.2
9.9
7.8
7.1
6.6
6.3
5.8
4.2
-0.3
8.0
6.0
-2.8
-3.3
-4.0
-4.3
-5.9
-8.2
-10
.2
-13
.1
-16
.0
-19
.6
-25
.8
-2.4
-2.4-0
.5
-0.4
-30
-25
-20
-15
-10
-5
0
5
10
15
WV NM ND IA NJ US MT WI IL SD NE FL CO MO OH KS IN AR KY MN GA TN AL OK LA MS
RN
W H
O
*Latest available.Sources: NAIC
Hurricanes Katrina and Rita made Louisiana and Mississippi the least profitable states for home insurers
from 2004-2013
Bottom 25 States(Percent)
Return on Net Worth: Homeowners Insurance, 10-Year Average (2004-2013*)
Profitability in Florida’s over the past decades is still
weighed down by the record storm losses of 2004/05
Profitability & Politics
2020
How Is Profitability Affected by the President’s Political Party?
15.10%
9.00%
8.93%
8.65%
8.35%
8.33%
7.98%
7.68%
6.98%
6.97%
5.43%
5.03%
4.83%
4.68%
4.43%
3.55%
16.43%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
Carter
Reagan II
Obama II
Nixon
Clinton I
G.H.W. Bush
G.W. Bush II
Clinton II
Reagan I
Nixon/Ford
Truman
Eisenhower I
Eisenhower II
G.W. Bush I
Obama I
Johnson
Kennedy/Johnson
*Truman administration ROE of 6.97% based on 3 years only, 1950-52;. Source: Insurance Information Institute
OVERALL RECORD: 1950-2014*
Democrats 7.72%Republicans 7.85%
Party of President has marginal bearing on profitability of P/C insurance industry
P/C Insurance Industry ROE by Presidential Administration, 1950-2014*
-5%
0%
5%
10%
15%
20%
25%
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
BLUE = Democratic President RED = Republican President
Tru
man Nixon/Ford
Ken
ned
y/
Joh
nso
n
Eis
enh
ow
er
Car
ter
Reagan/Bush I Clinton Bush II
P/C insurance Industry ROE by Presidential Party Affiliation, 1950- 2014
Obama
. Source: Insurance Information Institute
23
Profitability and Growth in Florida P/C Insurance
Markets
Analysis by Line and Nearby State Comparisons
24
RNW All Lines: FL vs. U.S., 2004-2013
Source: NAIC.
-40%
-30%
-20%
-10%
0%
10%
20%
30%
04 05 06 07 08 09 10 11 12 13
US All Lines FL All Lines
P/C Insurer profitability in FL is above that of the US
overall over the past decadeUS: 7.9%FL: 8.6%
(Percent)
25
RNW PP Auto: FL vs. U.S., 2004-2013
Source: NAIC.
0%
2%
4%
6%
8%
10%
12%
14%
04 05 06 07 08 09 10 11 12 13
US PP Auto FL PP Auto
Average 2004-2013US: 7.1%FL: 4.4%
26
RNW Comm. Auto: FL vs. U.S.,2004-2013
Source: NAIC.
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
04 05 06 07 08 09 10 11 12 13
US Comm Auto FL Comm Auto
(Percent)
Commercial Auto profitability in FL is
generally below the US average
Average 2004-2013US: 9.2%FL: 4.7%
27
RNW Comm. Multi-Peril: FL vs. U.S.,2004-2013
Sources: NAIC.
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
04 05 06 07 08 09 10 11 12 13
US Comm M-P FL Comm M-P
(Percent)
Average 2004-2013US: 8.9%FL: 7.4%
28
RNW Homeowners: FL vs. U.S.,2004-2013
Sources: NAIC.
-200%
-150%
-100%
-50%
0%
50%
100%
04 05 06 07 08 09 10 11 12 13
US HO FL HO
(Percent)
Average 2004-2013US: 6.6%FL: -0.4%
Even With Returns Near 30 Percent for Much of
the Decade, Florida Insurers Lost Money on
Homeowners Line.
29
RNW Workers Comp: FL vs. U.S.,2004-2013
Sources: NAIC.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
04 05 06 07 08 09 10 11 12 13
US WComp FL Wcomp
(Percent)
Average 2004-2013US: 7.1%FL: 10.5%
All Lines: 10-Year Average RNW FL & Nearby States
2.5%
7.9%
8.6%
11.4%
-6.9%
5.3%
-10% -5% 0% 5% 10% 15%
South Carolina
Florida
US
Georgia
Alabama
Mississippi
Source: NAIC, Insurance Information Institute
2004-2013
Florida All Lines profitability is below the US average and above the regional average
PP Auto: 10-Year Average RNW FL & Nearby States
4.5%
7.1%
7.4%
7.6%
4.4%
5.8%
0% 2% 4% 6% 8%
Alabama
South Carolina
US
Georgia
Mississippi
Florida
Source: NAIC, Insurance Information Institute
2004-2013
Florida PP Auto profitability is
below the US and regional average
32
Top Ten Most Expensive And Least Expensive States For Automobile Insurance, 2012 (1)
RankMost
expensive statesAverage
expenditure RankLeast
expensive statesAverage
expenditure
1 New Jersey $1,219.93 1 Idaho $534.56
2 D.C. 1,154.91 2 South Dakota 556.51
3 New York 1,152.45 3 Iowa 561.26
4 Florida 1,127.93 4 North Dakota 576.08
5 Louisiana 1,112.53 5 Maine 582.43
6 Delaware 1,065.37 6 Wisconsin 598.84
7 Michigan 1,048.87 7 North Carolina 611.48
8 Rhode Island 1,034.50 8 Nebraska 616.78
9 Connecticut 986.73 9 Wyoming 618.81
10 Massachusetts 976.65 10 Kansas 632.07
(1) Based on average automobile insurance expenditures.
Source: © 2014 National Association of Insurance Commissioners.
Florida ranked 4th as the most expensive state in 2012, with an average expenditure for auto insurance of $1,127.93.
Comm. Auto: 10-Year Average RNW FL & Nearby States
4.7%
6.4%
9.2%
9.5%
3.7%
5.7%
0% 2% 4% 6% 8% 10%
South Carolina
U.S.
Georgia
Mississippi
Florida
Alabama
Source: NAIC, Insurance Information Institute
2004-2013
Florida Commercial Auto profitability is below the US and regional average
Comm. M-P: 10-Year Average RNW FL & Nearby States
-1.6%
7.4%
8.9%
10.5%
-6.4%
5.0%
-10% -5% 0% 5% 10% 15%
South Carolina
U.S.
Florida
Georgia
Alabama
Mississippi
Source: NAIC, Insurance Information Institute
2004-2013
Florida Commercial Multi-Peril profitability
is below the US average and above the
regional average
Homeowners: 10-Year Average RNW FL & Nearby States
-13.1%
-0.4%
6.6%
20.0%
-25.8%
-8.2%
-30% -20% -10% 0% 10% 20% 30%
South Carolina
U.S.
Florida
Georgia
Alabama
Mississippi
Source: NAIC, Insurance Information Institute
2004-2013
Florida Homeowners profitability is below the US average and above the regional average
36
Top Ten Most Expensive And Least Expensive States For Homeowners Insurance, 2012 (1)
Rank Most
expensive statesHO average
premium RankLeast
expensive statesHO average premium
1 Florida $2,084 1 Idaho $538
2 Louisiana 1,742 2 Oregon 567
3 Texas 1,661 3 Utah 580
4 Oklahoma 1,501 4 Wisconsin 631
5 Mississippi 1,314 5 Washington 648
6 Alabama 1,248 6 Nevada 674
7 Rhode Island 1,233 7 Delaware 678
8 Kansas 1,213 8 Arizona 691
9 Connecticut 1,160 9 Ohio 721
10 New York 1,158 10 Maine 741
(1) Includes policies written by Citizens Property Insurance Corp. (Florida) and Citizens Property Insurance Corp. (Louisiana), Alabama Insurance Underwriting Association, Mississippi Windstorm Underwriting Association, North Carolina Joint Underwriting Association and South Carolina Wind and Hail Underwriting Association. Other southeastern states have wind pools in operation and their data may not be included in this chart. Based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. Provides “all risks” coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.
(2) The Texas Department of Insurance developed home insurance policy forms that are similar but not identical to the standard forms. In addition, due to the Texas Windstorm Association (which writes wind-only policies) classifying HO-1, 2 and 5 premiums as HO-3, the average premium for homeowners insurance is artificially high.
Note: Average premium=Premiums/exposure per house years. A house year is equal to 365 days of insured coverage for a single dwelling. The NAIC does not rank state average expenditures and does not endorse any conclusions drawn from this data.Source: ©2014 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
Florida ranked as the most expensive state for homeowners insurance in 2012, with an average expenditure of $2,084.
Workers Comp: 10-Year Average RNW FL & Nearby States
4.6%
7.3%
7.9%
10.5%
3.1%
7.1%
0% 2% 4% 6% 8% 10% 12%
Florida
Alabama
Mississippi
U.S.
Georgia
South Carolina
Source: NAIC, Insurance Information Institute
2004-2013
Florida Workers Comp profitability is above the US average and above the regional
average
38
All Lines DWP Growth: FL vs. U.S., 2005-2014
Source: SNL Financial.
2.3% 3.
4%
0.5%
-2.1
%
-3.3
%
0.0%
3.7% 4.6% 5.
5%
4.4%
10.3
% 13.9
%
-1.2
%
-9.1
% -6.5
%
1.3%
3.7% 5.
8%
4.3%
3.7%
-15%
-10%
-5%
0%
5%
10%
15%
20%
05 06 07 08 09 10 11 12 13 14
US DWP: All Lines FL DWP: All Lines
(Percent)
Average 2005-2014US: 1.9%FL: 2.6%
39
Comm. Lines DWP Growth: FL vs. U.S., 2005-2014
Source: SNL Financial.
2.6
% 4.6
%
-0.1
%
-4.0
%
-7.3
%
-2.5
%
5.1
%
5.1
%
6.1
%
4.3
%
12
.6%
15
.3%
-3.3
%
-11
.7%
-9.7
%
-3.4
%
2.2
% 5.6
%
5.5
%
6.7
%
-17%
-12%
-7%
-2%
3%
8%
13%
18%
05 06 07 08 09 10 11 12 13 14
US DWP: Comm. Lines FL DWP: Comm. Lines
(Percent)
Average 2005-2014US: 1.4%FL: 2.0%
40
Personal Lines DWP Growth: FL vs. U.S., 2005-2014
Source: SNL Financial.
2.2
%
2.3
%
1.2
%
-0.1
%
1.1
% 2.5
%
2.2
% 4.2
%
5.1
%
4.8
%
8.5
%
1.0
%
-6.5
%
-3.5
%
5.4
%
4.9
%
5.9
%
3.5
%
1.7
%
12
.8%
-11%
-6%
-1%
4%
9%
14%
05 06 07 08 09 10 11 12 13 14
US DWP: Pers. Lines FL DWP: Pers. Lines
(Percent)
Average 2005-2014US: 2.6%FL: 3.4%
41
Private Passenger Auto DWP Growth: FL vs. U.S., 2005-2014
Source: SNL Financial.
0.5%
0.4%
0.0%
-0.3
%
-0.1
%
1.5%
1.5%
3.5%
4.6% 4.9%
-2.9
%
-2.8
%
-3.2
%
3.2%
0.3%
2.6%
-3.3
%
-3.1
%
-5.2
%
-5.2
%
-6%
-4%
-2%
0%
2%
4%
6%
05 06 07 08 09 10 11 12 13 14
US DWP: PP Auto FL DWP: PP Auto
(Percent)
Average 2005-2014US: 1.6%FL: -2.0%
42
Homeowner’s MP DWP Growth: FL vs. U.S., 2005-2014
Source: SNL Financial.
7.4
%
7.4
%
4.2
%
0.5
% 3.8
%
4.9
%
3.8
%
5.7
%
6.2
%
4.4
%
21
.1%
31
.9%
6.7
%
-4.3
%
9.2
%
3.9
% 6.6
%
4.6
%
-0.6
%
-15
.6%
-20%
-10%
0%
10%
20%
30%
40%
05 06 07 08 09 10 11 12 13 14US DWP: HO Lines FL DWP: HO Lines
(Percent)
Average 2005-2014US: 4.8%FL: 6.3%
INVESTMENTS: THE NEW REALITY
43
Investment Performance is a Key Driver of Profitability
Depressed Yields Will Necessarily Influence Underwriting & Pricing
43
Property/Casualty Insurance Industry Investment Income: 2000–2015E1
$38.9$37.1 $36.7
$38.7
$54.6
$51.2
$47.1 $47.6$49.2
$48.0 $47.3$46.2 $46.8
$39.6
$49.5
$52.3
$30
$40
$50
$60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E
Due to persistently low interest rates,investment income fell in 2012, 2013 and 2014.
1 Investment gains consist primarily of interest and stock dividends. *2015 figure is estimated based on annualized data through Q2.Sources: ISO; Insurance Information Institute.
($ Billions) Investment earnings are still below their 2007 pre-crisis peak
CAPITAL/CAPACITY
56
Capital Accumulation Has Multiple Impacts
Alternative Capital Impacts?
56
57
Policyholder Surplus, 2006:Q4–2015:Q2
Sources: ISO, A.M .Best.
($ Billions)
$487
.1
$496
.6
$512
.8
$521
.8
$478
.5
$455
.6
$437
.1 $463
.0 $490
.8 $511
.5 $540
.7
$530
.5
$544
.8
$559
.2
$559
.1
$538
.6
$550
.3
$567
.8
$583
.5
$586
.9 $607
.7
$614
.0
$624
.4 $653
.4
$671
.6
$673
.9
$674
.7
$672
.4
$662
.0
$570
.7
$566
.5
$505
.0
$515
.6
$517
.9
$400
$450
$500
$550
$600
$650
$700
06:Q
4
07:Q
1
07:Q
2
07:Q
3
07:Q
4
08:Q
1
08:Q
2
08:Q
3
08:Q
4
09:Q
1
09:Q
2
09:Q
3
09:Q
4
10:Q
1
10:Q
2
10:Q
3
10:Q
4
11:Q
1
11:Q
2
11:Q
3
11:Q
4
12:Q
1
12:Q
2
12:Q
3
12:Q
4
13:Q
1
13:Q
2
13:Q
3
13:Q
4
14:Q
1
14:Q
2
14:Q
3
14:Q
4
15:Q
2
2007:Q3Pre-Crisis Peak
Surplus as of 6/30/15 stood at a near-record high $672.4B
2010:Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business .
The industry now has $1 of surplus for every $0.73 of NPW,close to the strongest claims-paying status in its history.
Drop due to near-record 2011 CAT losses
The P/C insurance industry entered 2015in very strong financial condition.
61
Alternative Capital
61
New Investors Continue to Change the Reinsurance Landscape
First I.I.I. White Paper on Issue Was Released in March 2015
Global Reinsurance Capital (Traditional and Alternative), 2006 - 2014
2014 data is as of June 30, 2014.Source: Aon Benfield Analytics; Insurance Information Institute.
Total reinsurance capital reached a record $570B in 2013, up 68% from
2008.
But alternative capacity has grown 210% since 2008, to $50B. It has more than doubled in the past three years.
Alternative Capital as a Percentage of Traditional Global Reinsurance Capital
2014 data is as of June 30, 2014.Source: Aon Benfield Analytics; Insurance Information Institute.
2006 2007 2008 2009 2010 2011 2012 2013 2014
-2%
0%
2%
4%
6%
8%
10%
12%
4.6%5.7% 5.9% 5.8% 5.4%
6.5%
8.4%
10.2%
11.5%
Alternative Capital’s Share of Global Reinsurance Capital Has More Than Doubled Since 2010.
Catastrophe Bond Issuance and Outstanding: 1997-2015:Q2
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*0
5,000
10,000
15,000
20,000
25,000
948.2
874.2
1,062.5
1,142.0
966.9
989.5
1,988.2
1,142.8
1,499.0
4,614.7
7,187.0
3,009.9
3,396.0
4,599.9
4,107.1
5,855.3
7,083.0
8,026.7
3,842.2
4289
5085
7677
13416.4
12538.6
12508.2
12195.7
12342.8
14839.3
18576.9
22867.8
21559.6
New Issuance Outstanding
65
Risk Capital Amount ($ Millions)
Cat Bond Issuance Appears to Be Slowing Down in 2015 from 2014’s Record Pace. Lower Yields on Bonds Explain Some of the Contraction.
Source: Guy Carpenter.
4. M&A UPDATE: A PATH TO GROWTH?
70
Are Capital Accumulation, Drive for Growth and Scale Stimulating
M&A Activity?
70
71
U.S. INSURANCE MERGERS AND ACQUISITIONS,P/C SECTOR, 1994-2014 (1)
$5,1
00
$11,
534
$8,0
59
$30,
873
$19,
118
$40,
032
$1,2
49
$486
$20,
353
$425
$9,2
64
$35,
221
$13,
615
$16,
294
$3,5
07 $6,4
19
$12,
458
$4,6
51
$4,3
97
$6,7
23
$55,825
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Tra
ns
ac
tio
n v
alu
es
0
20
40
60
80
100
120
140
Nu
mb
er o
f tran
sa
ctio
ns
($ Millions)
(1) Includes transactions where a U.S. company was the acquirer and/or the target.
Source: Conning proprietary database.
M&A activity in the P/C sector was up
sharply in 2014 but remains well
below pre-crisis or late 1990s levels.
M&A activity in 2015 will likely
reach its highest level since 1998
75
Growth
Premium Growth Rates Vary Tremendously by State and
Over Time, But…
75
76
-5%
0%
5%
10%
15%
20%
25%
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*
Net Premium Growth (All P/C Lines): Annual Change, 1971—2015:H1
(Percent)1975-78 1984-87 2000-03
Shaded areas denote “hard market” periodsSources: A.M. Best (1971-2013), ISO (2014-15).
Net Written Premiums Fell 0.7% in 2007 (First Decline
Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.
2015:H1: 4.1%
2014: 4.1%
2013: 4.4%
2012: +4.2%
78
Direct Premiums Written: Total P/CPercent Change by State, 2007-2014
70
.7
36
.7
36
.2
30
.3
29
.4
26
.8
24
.7
23
.7
21
.6
20
.7
19
.2
19
.2
18
.6
18
.1
18
.0
17
.0
15
.2
15
.1
15
.0
14
.9
14
.8
14
.7
14
.4
14
.2
13
.8
13
.5
0
10
20
30
40
50
60
70
80
ND
OK
SD
TX
NE
KS IA VT
WY
CO
MN IN MI
TN AR WI
GA
SC NJ
OH
AK
KY VA
LA
CT
MT
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 StatesNorth Dakota was the country’s growth leader over the past 7 years with premiums written
expanding by 70.7%, fueled by the state’s energy boom
Growth Benchmarks: Total P/C
US: 13.0%
79
Direct Premiums Written: Total P/CPercent Change by State, 2007-2014
13
.4
13
.1
13
.1
13
.0
13
.0
12
.9
12
.4
12
.2
11
.7
11
.0
10
.5
9.4
9.4
9.2
9.1
8.2
6.3
6.0
4.7
2.2
1.3
-0.8
-1.6
-4.3
-7.3
-12
.9
-15
-10
-5
0
5
10
15
MO
NY
UT
US
NM
MS
MA
AL
NC
MD
WA RI
NH IL PA ID ME
CA
OR FL AZ
DC HI
WV
NV
DE
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LC.; Insurance Information Institute.
Growth was negative in 4 states and DC between
2007 and 2014
Florida experienced almost no net growth
between 2007 and 2014
80
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2014
80
.4
36
.8
33
.3
29
.4
24
.8
22
.5
21
.0
20
.6
15
.2
14
.6
13
.9
11
.8
10
.3
8.7
8.5
8.4
8.0
7.9
7.6
7.1
6.6
5.9
5.9
5.8
5.4
4.5
0
10
20
30
40
50
60
70
80
90
ND
SD VT
OK
NE IA KS
TX
WY
AK IN
MN WI
MA
AR
CT
NY
NJ
CO
NM
OH LA
US
MS
NH
MO
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LLC.; Insurance Information Institute.
Top 25 States
43 states showed commercial lines growth from 2007
through 2014
Growth Benchmarks: Commercial
US: 5.9%
81
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2014
4.5
4.4
4.2
4.1
3.9
3.8
3.7
3.3
3.3
3.2
3.1
2.8
2.8
2.2
2.1
1.4
0.9
-1.3
-3.2
-5.3
-6.5
-6.9
-9.2
-10
.7
-19
.9
-22
.2
-25
-20
-15
-10
-5
0
5
10
MI
TN
MD
MT
CA RI
WA
GA
PA
UT IL KY VA
NC
ME
SC ID AL
DC HI
FL
OR AZ
DE
NV
WV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LLC.; Insurance Information Institute.
Commercial lines premium volumes in
FL will likely note return to pre-crisis
levels until 2016
Nearly half the states have yet to see commercial lines premium
volume return to pre-crisis levels
82
Direct Premiums Written: Workers’ CompPercent Change by State, 2007-2014*
35
.1
27
.1
27
.1
24
.4
22
.3
20
.6
18
.7
14
.6
11
.7
9.4
7.5
7.1
6.7
4.2
3.9
3.8
2.7
1.7
0.5
0.1
0.1
0.0
-1.1
-1.1
-1.3
-5
0
5
10
15
20
25
30
35
40
IA CA
SD
NY
OK NJ
CT
KS
NE MI
MS IN
MN
US
NM TX WI
IL
CO
GA
VA
NH PA RI
MD
Pe
ce
nt
ch
an
ge
(%
)
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
Only 21 states have seen works comp premium volume
return to pre-crisis levels
83
Direct Premiums Written: Worker’s CompPercent Change by State, 2007-2014*
-2.6
-2.9
-3.6
-4.8
-6.0
-8.5
-9.1
-9.2
-9.2
-11
.7
-12
.2
-13
.5
-14
.4
-17
.1
-17
.9
-19
.4
-19
.5
-23
.4
-25
.2
-29
.5
-30
.3
-34
.9
-80-75-70-65-60-55-50-45-40-35-30-25-20-15-10-50
VT
DC
MA ID NC AZ
MO LA
TN AR
SC
ME
AK
AL
FL
KY
UT
MT HI
DE
OR
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.
States with the poorest performing economies also produced some of the most
negative net change in premiums of the past 7 years
Florida’s construction dependent economy was
devastated when the housing bubble collapsed, causing payrolls and WC
premium volumes to plunge
91
Underwriting Performance
91
Homeowners Insurance Combined Ratio: 1990–2015F
11
3.0
11
7.7
15
8.4
11
3.6
10
1.0 10
9.4
10
8.2
11
1.4 1
21
.7
10
9.3
98
.2
91
.7 96
.4
85
.4 91
.7
11
4.5
10
3.1
10
3.8
11
9.4
10
1.4
87
.7 92
.4 96
.6
11
8.4
11
2.7 12
1.7
80
90
100
110
120
130
140
150
160
170
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F 15F
1
Homeowners Performance in 2011/12 Impacted by Large Cat Losses. Extreme Regional Variation Can Be Expected Due to
Local Catastrophe Loss Activity
92
Hurricane Ike
Hurricane Sandy
Record tornado activity
Hurricane Andrew
Sources: A.M. Best (1990-2014F);Conning (2015F); Insurance Information Institute.
93
Homeowners Multi-Peril Loss & ALAE Ratio, 2014:Highest 25 States
14
2.8
13
2.6
11
6.0
10
2.5
80
.4
80
.2
74
.6
69
.2
66
.8
66
.8
65
.8
62
.4
60
.7
59
.3
59
.2
58
.7
58
.2
58
.0
56
.4
55
.5
54
.1
52
.4
51
.7
51
.2
51
.1
50
.3
0
20
40
60
80
100
120
140
160
MT NE SD CO IA MI IL VT PA ID WY GA DE MD AR WV WA MO MS WI IN SC OR TN US AZ
Lo
ss &
AL
AE
Rat
io
(%)
Sources: SNL Financial; Insurance Information Institute.
MT had the worst loss ratio in 2014, followed by
NE and SD…
94
Homeowners Multi-Peril Loss & ALAE Ratio, 2014:Lowest 25 States and DC
50
.1
49
.3
48
.9
48
.3
48
.1
47
.7
47
.3
46
.0
45
.8
45
.6
45
.2
44
.1
43
.2
42
.0
41
.0
40
.8
40
.2
37
.7
37
.5
37
.1
36
.2
32
.8
32
.3
28
.0
27
.3
25
.7
0
10
20
30
40
50
60
CA NJ OH TX AL ME KY NC NM NH NY NV UT MN KS DC CT VA AK RI MA ND LA HI FL OK
Lo
ss &
AL
AE
Rat
io (
%)
Sources: SNL Financial; Insurance Information Institute.
OK and FL had the best performances in 2014. Traditionally
high cat-loss states did well last year due to unusually low cat activity
Florida Citizens Exposure to Loss, 2002 – 2015* ($ Billions)
*As of October 6, 2015.
Source: PIPSO; Florida Citizens https://www.citizensfla.com/about/bookofbusiness/; Insurance Information Institute (I.I.I.).
$154.6
$195.5 $206.7 $210.6
$408.8
$485.1
$421.9 $406.0
$460.7
$510.7
$228.9$202.0
$173.4
$429.4
$0
$100
$200
$300
$400
$500
$600
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
FL Citizens exposure to loss is down 66%
($337.3B) from its 2011 peak)
A lack of major hurricanes, ample private sector/reinsurer capital and capital market interest—combined with structural changes to Citizens—have combined to take Citizens policy count and exposure to their lowest levels in many years
Florida Citizens Policy Count, 2003 – 2015* (Thousands)
*As of October 6, 2015. All other figures are as of Dec. 31.
Source: Florida Citizens https://www.citizensfla.com/about/bookofbusiness/; Insurance Information Institute (I.I.I.).
820.3874.0
810.0
1,298.9 1,304.9
1,084.21,029.3
1,283.5
1,472.4
1,314.8
661.2574.1
1,021.7
0
200
400
600
800
1,000
1,200
1,400
1,600
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
A lack of major hurricanes, ample private sector/reinsurer capital and capital market interest—combined with structural changes to Citizens—have combined to take Citizens policy count and exposure to their lowest levels in many years
Florida Citizen’s policy count is down by nearly
900,000 (61%) from its 2011 peak
Private Passenger Auto Combined Ratio: 1993–2017F
10
1.7
10
1.3
10
1.3
10
1.0
10
9.5
10
7.9
10
4.2
98
.4
94
.3
95
.1
95
.5 98
.3 10
0.2
10
1.3
10
1.0
10
2.0
10
2.1
10
1.6
10
2.3
10
2.2
10
2.3
10
2.4
99
.5 10
1.1
10
3.5
80
85
90
95
100
105
110
115
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F
Private Passenger Auto Underwriitng Performance Is Exhibiting Remarkable Stability
97Sources: A.M. Best (1990-2014); Conning (2015F – 2017F); Insurance Information Institute.
98
Florida Average No-Fault Claim Severity, 2009:Q1 - 2015:Q2*
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
13
:Q1
13
:Q2
13
:Q3
13
:Q4
14
:Q1
14
:Q2
14
:Q3
14
:Q4
15
:Q1
15
:Q2
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
$8,500
$9,000
$9,500
$10,000
$7
,09
8
$7
,24
6
$7
,46
4
$7
,57
3
$7
,76
7
$7
,84
1
$7
,99
9
$8
,29
1
$8
,44
3
$8
,62
0
$9
,05
9
$9
,32
2
$9
,55
3
$9
,69
1
$9
,30
1
$9
,01
6
$8
,63
8
$8
,42
9
$8
,44
6
$8
,29
7
$8
,22
4
$8
,25
4
$8
,02
7
$8
,06
3
$7
,82
1
$7
,97
9
The Average Cost of No-Fault Claims in Florida Rose Rapidly Until mid-2012 but Has Dropped in Recent Years
*All figures are the average of the most recent four quarters ending in each period,.Source: ISO/PCI Fast Track data; Insurance Information Institute.
No-fault claim severity (average cost per claim) hit
peak in 2012 but is down significantly since then
99
Florida No-Fault Paid Claim Frequency, 2015:Q2*
08
:Q4
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
13
:Q1
13
:Q2
13
:Q3
13
:Q4
14
:Q1
14
:Q2
14
:Q3
14
:Q4
15
:Q1
15
:Q2
1.00
1.20
1.40
1.60
1.80
2.00
2.20
1.4
8
1.4
7
1.5
4
1.6
2
1.7
0 1.8
0
1.8
9
1.9
8
2.0
1
2.0
2
2.0
2
1.9
1
1.8
9
1.8
9
1.9
1
1.9
0
1.8
5
1.7
6
1.6
1
1.5
7
1.5
5
1.5
5
1.5
6
1.6
2
1.6
3
1.7
1
1.7
3
The Frequency of No-Fault Claims in Florida Is Rising Once Again
*All figures are the average of the most recent four quarters ending in each period,.Source: ISO/PCI Fast Track data; Insurance Information Institute.
No-fault claim frequency rose until mid-2011 and hit a trough in early 2014 but is once gain
showing some signs of increase
10
9.4
11
0.2
11
8.8
10
9.5 1
12
.5
11
0.2
10
7.6
10
4.1
10
9.7
11
0.2
10
2.5 1
05
.4
91
.1
93
.6
10
4.2
98
.9
10
2.4
10
7.9
10
3.5
94
.8
94
.3
98
.3 99
.210
2.0
11
1.1
11
2.3
12
2.3
90
95
100
105
110
115
120
125
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
F
16
F
Co
mm
erc
ial L
ine
s C
om
bin
ed
Ra
tio
*2007-2012 figures exclude mortgage and financial guaranty segments.Source: A.M. Best (1990-2014); Conning (2015-16F) Insurance Information Institute.
Commercial Lines Combined Ratio, 1990-2016F*
Commercial lines underwriting performance improved in 2013/14 but higher cats, diminishing prior year reserves and rising loss cost trends in some lines could push
combined ratios higher
101
108
Insured Catastrophe Losses
2013/14 and YTD 2015 Experienced Below Average CAT Activity After Very High CAT
Losses in 2011/12Winter Storm Losses Far Above Average in
2014 and 2015108
109
$1
3.0
$1
1.3
$3
.9
$1
4.8
$1
1.9
$6
.3
$3
5.8
$7
.8
$1
6.8
$3
4.7
$1
0.9
$7
.7
$3
0.1
$1
1.8
$1
4.9
$3
4.6
$3
6.1
$1
3.1
$1
5.5
$1
1.0
$75.7
$1
4.4
$5
.0 $8
.2
$3
8.9
$9
.1
$2
7.2
$0
$10
$20
$30
$40
$50
$60
$70
$80
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*
U.S. Insured Catastrophe Losses
*Through 9/30/15 in 2015 dollars.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.
2013/14 Were Welcome Respites from 2011/12, among the Costliest Years for Insured Disaster Losses in US History. Longer-term Trend is for
more—not fewer—Costly Events
2012 was the 3rd most expensive year ever for
insured CAT losses
$11.0B in insured CAT losses though
9/30/15
($ Billions, $ 2014)
109
114
Number of National Flood Insurance Program Policies in Force at Year-End, 1980-2015*
Source: National Flood Insurance Program. * As of July, 2015
2.10
4
2.01
7 2.47
8
3.47
7
4.36
9 4.96
2
5.65
6
5.68
4
5.70
0
5.64
5
5.64
6
5.62
0
5.56
9
5.35
1
5.15
1
0
1
2
3
4
5
6
1980 1985 1990 1995 2000 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015*
(mil
lio
ns)
The number of NFIP policies in force has
plunged by 549,000 or 9.6% since 2009, even
as coastal development surges and sea levels rise
116
Top 16 Most Costly Disastersin U.S. History—Katrina Still Ranks #1
(Insured Losses, 2014 Dollars, $ Billions)
$8.1 $9.0 $9.4 $11.4$13.8
$19.3$24.6 $25.3$26.4
$50.2
$7.7$7.3$6.9$5.8$5.7$4.6
$0
$10
$20
$30
$40
$50
$60
Irene (2011) Jeanne(2004)
Frances(2004)
Rita (2005)
Tornadoes/T-Storms
(2011)
Tornadoes/T-Storms
(2011)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Sandy*(2012)
Northridge(1994)
9/11 Attack(2001)
Andrew(1992)
Katrina(2005)
Storm Sandy in 2012 was the last mega-CAT
to hit the US
Includes Tuscaloosa, AL,
tornado
Includes Joplin, MO, tornado
12 of the 16 Most Expensive Events in US History Have Occurred Since 2004
Sources: PCS; Insurance Information Institute inflation adjustments to 2014 dollars using the CPI.
118
Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1995–20141
0.1%
1.5%5.4%
0.1%
6.2%
6.8%
39.2%
40.7%
1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2014 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.Source: ISO’s Property Claim Services Unit.
Hurricanes & Tropical Storms, $161.2
Fires (4), $6.0
Events Involving Tornadoes (2), $154.9
Winter Storms, $26.9
Terrorism, $24.5
Geological Events, $0.5
Wind/Hail/Flood (3), $21.4
Other (5), $0.2
Wind losses are by far cause the most catastrophe losses,
even if hurricanes/TS are excluded.
Tornado share of CAT losses is
rising
Insured cat losses from 1995-2014
totaled $395.6B, an average of $19.8B per year or $1.65B
per month
Winter storm losses were much above average in 2014/15 are
will push this share up
128
Federal Disaster Declarations Patterns:
1953-2015
128
Disaster Declarations Set New Records in Recent Years
Number of Federal Major Disaster Declarations, 1953-2015*
13 1
7 18
16
16
7 71
21
22
22
0 25
25
11
11
19
29
17
17
48
46
46
38
30
22 2
54
22
31
52
42
13
42
7 28
23
11
31
38
45
32 3
63
27
54
46
55
04
54
5 49
56
69
48 5
26
37
55
98
19
94
76
24
54
143
0
20
40
60
80
100
120
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
*
*Through October 25, 2015.Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute.
The Number of Federal Disaster Declarations Is Generally Rising and Set New Records in 2010 and 2011 Before Dropping in 2012-2014
The number of federal disaster declarations set a new record in 2011, with 99, shattering 2010’s
record 81 declarations.
There have been 2,244 federal disaster
declarations since 1953. The average
number of declarations per year is 36 from 1953-2014, though
there haven’t been that few recorded since
1995.
41 federal disasters have declared so far in 2015*
129
130
Federal Disasters Declarations by State, 1953 – 2015: Highest 25 States*
90
81
76
69
67
61
61
58
57
56
56
56
54
54
53
52
51
51
51
50
47
47
45
44
41
0
10
20
30
40
50
60
70
80
90
100
TX CA OK NY FL KY LA AL AR MO IA WV MS TN IL NE MN KS WA PA OH VA ND SD ME
Dis
as
ter
De
cla
rati
on
s
Over the past 62 years, Florida has had the 5th
highest number of Federal Disaster Declarations
*Through Oct. 25, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/disasters; Insurance Information Institute.
131
Federal Disasters Declarations by State, 1953 – 2015: Lowest 25 States*
43
40
40
39
39
37
36
34
30
29
28
28
27
26
25
25
24
23
23
20
18
17
15
13
12
11
11
0
10
20
30
40
50
NC AK IN GA VT WI NJ NH MA OR HI NM MI PR MD MT AZ ID CO CT SC NV DE DC RI UT WY
Dis
as
ter
De
cla
rati
on
s
Over the past 60 years, Wyoming and Utah had
the fewest number of Federal Disaster
Declarations
*Through Oct. 25, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/disasters; Insurance Information Institute.
132
Natural Hazard Risk Scores, 2014Highest 25 States*
94
.5
79
.7
79
.2
75
.6
72
.1
69
.5
69
.0
66
.8
66
.4
65
.4
64
.9
61
.5
61
.0
60
.9
59
.7
57
.8
57
.3
57
.1
56
.7
55
.3
52
.8
52
.3
51
.9
51
.9
51
.8
0
10
20
30
40
50
60
70
80
90
100
FL RI LA CA MA KS CT OK SC DE OR NJ IA TX NC MO DC MS AR NH ID MD CO NE IL
Ha
zard
Ris
k S
co
re
Note: Score is based on data on 9 natural hazards: flood, wildfire, tornado, storm surge, earthquake, straight-line wind, hurricane, wind, hail and sinkhole.
*Analysis Includes DC. Excludes Alaska and Hawaii due to limited natural hazard risk data.
Sources: CoreLogic release “CoreLogic Identifies US States at Highest Risk of Property Damage Loss from Natural Hazards,” Sept. 10, 2014; Insurance Information Institute.
Florida received the highest Natural Hazard
Risk Score
Workers Compensation Operating Environment
134
Workers Comp Results Have Improved Substantially in Recent Years
134
Workers Compensation Combined Ratio: 1994–2014P
102.
0
97.0 10
0.0
101.
0
112.
6
108.
6
105.
1
102.
7
98.5
103.
5
104.
5 110.
6 115.
0
115.
0
108.
0
101.
0
98.0
121.
7
107.
0
115.
3
118.
2
80
85
90
95
100
105
110
115
120
125
130
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14P
Workers Comp Results Began to Improve in 2012. Underwriting Results Deteriorated Markedly from 2007-
2010/11 and Were the Worst They Had Been in a Decade. Sources: A.M. Best (1994-2009); NCCI (2010-2014P) and are for private carriers only; Insurance Information Institute. 137
WC results have improved markedly
since 2011
Workers Compensation Premium: Fourth Consecutive Year of IncreaseNet Written Premium
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14P0
10
20
30
40
50
31.0 31.3 29.8 30.5 29.126.3 25.2 24.2 23.3 22.3
25.0 26.129.2 31.1
34.737.8 38.6 37.6
33.830.3 29.9
32.335.1 36.9 38.5
35.3 35.734.3 35.4
33.6
30.128.5
26.9 25.9 25.0
28.6
32.1
37.7
42.3
46.547.8
46.544.3
39.3
34.6 33.836.4
39.541.8
44.2
State Funds ($ B)
Private Carriers ($ B)
Pvt. Carrier NWP growth was +4.3% in 2014, +5.1% in 2013 and 8.7% in 2012
$ Billions
Calendar Yearp Preliminary
Source: NCCI from Annual Statement Data.Includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT.Each calendar year total for State Funds includes all funds operating as a state fund that year.
139
2014 Workers Compensation Direct Written Premium Growth, by State*
PRIVATE CARRIERS: Overall 2014 Growth = +4.6%
*Excludes monopolistic fund states (in gray): OH, ND, WA and WY.Source: NCCI.
While growth rates varied widely, most states experienced positive growth in
2014
Workers Compensation Medical Severity:Moderate Increase in 2014
148
Accident Year
Annual Change 1991–1993: +1.9%Annual Change 1994–2001: +8.9%Annual Change 2002–2010: +6.0%
Average Medical Cost per Lost-Time ClaimMedical
Claim Cost ($000s)
$8
.1
$8
.2
$8
.1
$8
.8
$9
.1
$9
.8
$1
0.8
$11
.7
$1
2.9
$1
3.9
$1
5.7
$1
7.1
$1
8.4
$1
9.4
$2
0.9
$2
2.1
$2
3.4
$2
5.0
$2
6.0
$2
6.1
$2
6.8
$2
7.4
$2
8.3
$2
9.4
+6.8%+1.3%-2.1%+9.0%+5.1%
+7.4%+10.1%
+8.3%+10.6%
+7.3%
+13.5%
+8.8%+7.7%
+5.4%
+7.8%+5.8%
+5.9%
+6.9%+4.0%+0.5%
+2.4%+2.4%
+3.2%+4%
5
10
15
20
25
30
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14p
2014p: Preliminary based on data valued as of 12/31/2014.1991-2013: Based on data through 12/31/2013, developed to ultimateBased on the states where NCCI provides ratemaking services including state funds, excluding WV; Excludes high deductible policies.
Cumulative Change = 263%(1991-2014p)
Accident Year
Medical severity for lost time claims was up 4% in 2014, the
largest increase since 2009
THE ECONOMY
156
The Strength of the Economy Will Greatly Influence Insurer Exposure Base
Across Most Lines
156
157
US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 10/15; Insurance Information Institute.
2.7%
1.8%
-1.8
%1.
3%-3
.7%
-5.3
%-0
.3%
5.0%
2.3%
2.2% 2.6%
2.4%
0.1%
2.5%
1.3%
4.1%
2.0%
1.3%
3.1%
0.4%
2.7%
1.8%
3.5%
-0.9
%4.
6%4.
3%2.
1%0.
6%3.
9%2.
1% 2.7%
2.6%
2.7%
2.6%
2.6%
-8.9%
4.5%
1.4%
4.1%
1.1% 1.
8% 2.5% 3.
6%3.
1%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
2
00
0
2
00
1
2
00
2
2
00
3
2
00
4
2
00
5
2
00
6
2
00
7
08
:1Q
08
:2Q
08
:3Q
08
:4Q
09
:1Q
09
:2Q
09
:3Q
09
:4Q
10
:1Q
10
:2Q
10
:3Q
10
:4Q
11
:1Q
11
:2Q
11
:3Q
11
:4Q
12
:1Q
12
:2Q
12
:3Q
12
:4Q
13
:1Q
13
:2Q
13
:3Q
13
:4Q
14
:1Q
14
:2Q
14
:3Q
14
:4Q
15
:1Q
15
:2Q
15
:3Q
15
:4Q
16
:1Q
16
:2Q
16
:3Q
16
:4Q
Demand for Insurance Should Increase in 2016 as GDP Growth Continues at a Steady, Albeit Moderate Pace and Gradually Benefits the Economy Broadly
Real GDP Growth (%)
Recession began in in June
2009
The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%
Q1 2014/15 GDP data were hit hard by this
year’s “Polar Vortex” and harsh
winter
State Leading Economic Indicators through November 2015
Sources: Federal Reserve Bank of Philadelphia at http://www.philadelphiafed.org/index.cfm ;Insurance Information Institute. 158
Growth in the West is
finally beginning to pick up
The economic outlook for most of the US is generally
positive, though flat-to-negative for 10 states, several
of them energy dependent
159
Real GDP by State Percent Change, 2014*:Highest 25 States
6.3
5.2
5.1
5.1
4.7
3.6
3.1
3.0
2.8
2.8
2.7
2.7
2.5
2.3
2.3
2.3
2.2
2.2
2.1
1.9
1.9
1.9
1.8
1.8
1.8
1.7
0
1
2
3
4
5
6
7
ND TX WY WV CO OR UT WA OK CA ID FL NY GA NH MA US SC OH MI MN LA MT KS PA TN
Pe
rce
nt
Ch
an
ge
(%
)
*Advance statisticsSources: U.S. Bureau of Economic Analysis; Insurance Information Institute.
North Dakota was the economic growth juggernaut of the US
in 2014—by far
Only 7 states experienced growth in excess of 3% in 2014, which is a
growth rate we would see nationally in a more typical recovery
Growth Benchmarks: Real GDP
US: 2.2%
160
1.6
1.4
1.4
1.2
1.2
1.2
1.0
1.0
1.0
1.0
0.9
0.8
0.8
0.8
0.7
0.7
0.6
0.6
0.6
0.4
0.4
0.4
0.2
0.0
-1.2
-1.3-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
DC NC AZ IL RI DE WI KY NM NV MO AR HI MD NE AL SD VT CT IA IN NJ ME VA MS AK
Pe
rce
nt
Ch
an
ge
(%
)Real GDP by State Percent Change, 2014*: Lowest 25 States
*Advance statisticsSources: US Bureau of Economic Analysis; Insurance Information Institute.
Mississippi and Alaska were the
only states to shrink in 2014
Growth rates in 16 states were still below 1% in 2014, including in AL
165
US Unemployment Rate Forecast4
.5%
4.5
%4
.6%
4.8
%4
.9% 5.4
% 6.1
%6
.9%
8.1
%9
.3%
9.6
% 10
.0%
9.7
%9
.6%
9.6
%
8.9
%9
.1%
9.1
%8
.7%
8.3
%8
.2%
8.0
%7
.8%
7.7
%7
.6%
7.3
%7
.0%
6.6
%6
.2%
6.1
%5
.7%
5.6
%5
.4%
5.2
%5
.0%
4.9
%4
.8%
4.8
%4
.7%
9.6
%
4%
5%
6%
7%
8%
9%
10%
11%
07
:Q1
07
:Q2
07
:Q3
07
:Q4
08
:Q1
08
:Q2
08
:Q3
08
:Q4
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
13
:Q1
13
:Q2
13
:Q3
13
:Q4
14
:Q1
14
:Q2
14
:Q3
14
:Q4
15
:Q1
15
:Q2
15
:Q3
15
:Q4
16
:Q1
16
:Q2
16
:Q3
16
:Q4
Rising unemployment eroded payrolls
and WC’s exposure base.
Unemployment peaked at 10% in late 2009.
* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (10/15 edition); Insurance Information Institute.
2007:Q1 to 2016:Q4F*
Unemployment forecasts have been revised modestly
downwards. Optimistic scenarios put the
unemployment as low as 5.0% by Q4 of 2015.
Jobless figures have been revised
downwards for 2015/16
166
Unemployment Rates by State, September 2015:Highest 25 States*
7.3
6.8
6.7
6.7
6.4
6.3
6.2
6.1
6.0
6.0
5.9
5.8
5.8
5.7
5.7
5.6
5.4
5.4
5.3
5.3
5.2
5.2
5.2
5.2
5.1
5.1
5.1
0
2
4
6
8
WV NM DC NV AK AZ OR MS AL LA CA GA NC SC TN NJ IL RI MO PA AR CT FL WA MD NY US
Un
em
plo
ym
en
t R
ate
(%
)
*Provisional figures for September 2015, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In September, 37 states and the District of Columbia had over-the-month unemployment rate decreases, 6 states had increases, and 7 states had no change.
In
167
5.1
5.0
5.0
4.9
4.6
4.5
4.5
4.4
4.4
4.4
4.3
4.3
4.2
4.2
4.1
4.0
4.0
3.8
3.7
3.6
3.6
3.5
3.4
3.4
2.9
2.8
0
1
2
3
4
5
6
US KY MI DE MA IN OH KS ME OK VA WI ID TX MT CO WY MN VT IA UT SD HI NH NE ND
Un
em
plo
ym
en
t R
ate
(%
)
Unemployment Rates by State, September 2015: Lowest 25 States*
*Provisional figures for September 2015, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In September, 37 states and the District of Columbia had over-the-month unemployment rate decreases, 6 states had increases, and 7 states had no change.
CONSTRUCTION INDUSTRY OVERVIEW & OUTLOOK
168
The Construction Sector Is Critical to the Economy and the P/C Insurance Industry
168
169
Value of New Private Construction: Residential & Nonresidential, 2003-2015*
Billions of Dollars
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
03 04 05 06 07 08 09 10 11 12 13 14 15*
Non ResidentialResidential
Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates
$298.1
$15.0
$613.7
New Construction peaks at $911.8. in 2006
Trough in 2010 at $500.6B,
after plunging 55.1% ($411.2B)
2015: Value of new pvt. construction hits
$788.0B as of Aug. 2015, up 57.5% from the 2010 trough but
still 13.5% below 2006 peak
169
$261.8
$238.8
$404.7
$383.3
*2015 figure is a seasonally adjusted annual rate as of August.Sources: US Department of Commerce http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
171
Value of Private Construction Put in Place, by Segment, Aug. 2015 vs. Aug. 2014*
0.4%
15.2%7.7%
-5.0%
25.5%
11.2%
-8.8%
58.4%63.1%
16.5% 16.1%16.9%
43.2%
27.7%
-20%-10%
0%10%20%30%40%50%60%70%
To
tal
Pri
vate
Co
nst
ruct
ion
Res
iden
tial
To
tal
No
nre
sid
enti
al
Lo
dg
ing
Off
ice
Co
mm
erc
ial
Hea
lth
Car
e
Ed
uca
tio
nal
Rel
igio
us
Am
use
men
t &
Rec
.
Tra
nsp
ort
atio
n
Co
mm
un
icat
ion
Po
wer
/Uti
lity
Man
ufa
ctu
rin
g
Private Construction Activity is Up in Most Segments in the Second Half of 2015; Expansion Should Continue
Growth (%) Led by the Manufacturing, Lodging, Office and Amusement & Recreations segments, Private nonresidential sector construction
activity continues to rise after plunging during the “Great Recession.”
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
174
Construction Employment,Jan. 2010—Sept. 2015*
*Seasonally adjusted.Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
5,58
15,
522
5,54
25,
554
5,52
75,
512
5,49
75,
519
5,49
95,
501
5,49
75,
468
5,43
55,
478
5,48
55,
497
5,52
45,
530
5,54
75,
546
5,58
35,
576
5,57
75,
612
5,62
95,
629
5,62
85,
627
5,60
85,
623
5,63
25,
641
5,64
95,
668
5,68
45,
724
5,74
6 5,79
85,
815
5,81
35,
833
5,85
65,
854
5,86
65,
893
5,91
85,
953
5,93
7 6,00
66,
032
6,06
26,
103
6,11
46,
121
6,15
26,
169
6,19
16,
201
6,23
16,
275
6,31
66,
347
6,33
56,
365
6,37
76,
378
6,38
36,
388
6,39
6
5,400
5,500
5,600
5,700
5,800
5,900
6,000
6,100
6,200
6,300
6,400
6,500
Jan-
10F
eb-1
0M
ar-1
0A
pr-1
0M
ay-1
0Ju
n-10
Jul-1
0A
ug-1
0S
ep-1
0O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb
-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
122/
30/2
0M
ar-1
2A
pr-1
2M
ay-1
2Ju
n-12
Jul-1
2A
ug-1
2S
ep-1
2O
ct-1
2N
ov-1
2D
ec-1
2Ja
n-13
Feb
-13
Mar
-13
Apr
-13
May
-13
Jun-
13Ju
l-13
Aug
-13
Sep
-12
Oct
-13
Nov
-13
Dec
-13
Jan-
14F
eb-1
4M
ar-1
4A
pr-1
4M
ay-1
4Ju
n-14
Jul-1
4A
ug-1
4S
ep-1
4O
ct-1
4N
ov-1
4D
ec-1
4Ja
n-15
Feb
-15
Mar
-15
Apr
-15
May
-15
Jun-
15Ju
l-15
Aug
-15
Sep
-15
Construction employment is +948,000 above
Jan. 2011 (+17.4%) trough
(Thousands)
Construction and manufacturing employment constitute 1/3 of all WC payroll exposure.
176
(Millions of Units)
New Private Housing Starts, 1990-2021F
1.4
81
.47 1
.62
1.6
41
.57
1.6
0 1.7
1 1.8
5 1.9
6 2.0
71
.80
1.3
60
.91
0.5
50
.59
0.6
1 0.7
8 0.9
2 1.1
01
.13 1
.28 1.4
21
.47
1.4
71
.50
1.5
0
1.3
51.4
61
.29
1.2
0
1.0
11.1
9
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F 19F20F 21F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (10/15); Insurance Information Institute.
Insurers Are Continue to See Meaningful Exposure Growth in the Wake of the “Great Recession” Associated with Home Construction: Construction Risk
Exposure, Surety, Commercial Auto; Potent Driver of Workers Comp Exposure
New home starts plunged 72% from 2005-2009; A net
annual decline of 1.49 million units, lowest since records began
in 1959
Job growth, low inventories of existing homes, low mortgage rates and demographics should continue to stimulate new home construction
for several more years
178
Rental-Occupied Housing Units as % of Total Occupied Units, Quarterly, 1990:Q1-2015:Q1
30%
31%
32%
33%
34%
35%
36%
37%
90
:Q1
91
:Q1
92
:Q1
93
:Q1
94
:Q1
95
:Q1
96
:Q1
97
:Q1
98
:Q1
99
:Q1
00
:Q1
01
:Q1
02
:Q1
03
:Q1
04
:Q1
05
:Q1
06
:Q1
07
:Q1
08
:Q1
09
:Q1
10
:Q1
11
:Q1
12
:Q1
13
:Q1
14
:Q1
15
:Q1
Sources: US Census Bureau, Residential Vacancies & Home Ownership in the First Quarter of 2015 (released April 28, 2015) and earlier issues; Insurance Information Institute. Next Census Bureau report to be released on July 28, 2015.
Trough in 2004:Q2 and Q4 at 30.8%
Since the Great Recession ended in June 2009, renters occupied 5.7 million more units (+15.6%).
178
Latest was 36.3% in 2015:Q1
Trend down began in 1994:Q3 from
36.2% in Q2
Increasing percent of
owners
Increasing percent of
renters
179
I.I.I. Poll: Renter’s Insurance
Source: Insurance Information Institute Annual Pulse Survey.
2011 2012 2013 2014 201510%
20%
30%
40%
50%
60%
70%
29% 31%35% 37%
40%
The Percentage of Renters Who Have Renters Insurance Has Been Rising Since 2011.
Q. Do you have renters insurance? 1
1Asked of those who rent their home.
Americans are increasingly choosing to rent, but are slow to understand the
need to insure, exacerbating the underinsurance gap
9. CYBER RISK & CYBER INSURANCE
194
Cyber Risk is a Rapidly Emerging Exposure for Businesses Large and
Small in Every Industry
194
Data Breaches 2005-2015, by Number of Breaches and Records Exposed# Data Breaches/Millions of Records Exposed
*Figures as of June 30, 2015, from the Identity Theft Resource Center,http://www.idtheftcenter.org/images/breach/ITRCBreachReport2015.pdf
157
321
446
656
498
419470
614
400
783
662
117.6
85.692.0
17.522.9
35.7
19.1
66.9
222.5
16.2
127.7
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *20150
20
40
60
80
100
120
140
160
180
200
220
# Data Breaches # Records Exposed (Millions)
The total number of data breaches (+27.5%) hit a record high of 783 in 2014, exposing 85.6 million records. Through June 30, this year has
seen 117.6 million records exposed in 400 breaches.*
Millions
203
US: External Cyber Crime Costs: Fiscal Year 2014
2%2%
18%
38%
40%
* Other costs include direct and indirect costs that could not be allocated to a main external cost categorySource: 2014 Cost of Cyber Crime: United States, Ponemon Institute.
Information theft (40%) and business disruption or lost productivity (38%) account for the majority of external costs due to cyber crime.
Information theft
Equipment damagesOther costs*
Revenue loss
Business disruption
Data/Privacy Breach:Many Potential Costs Can Be Insured
Source: Zurich Insurance; Insurance Information Institute
Forensic costs to discover
cause
204
Source: Insurance Information Institute research.
The Three Basic Elements of Cyber Coverage: Prevention, Transfer, Response
Loss Prevention
Post-Breach Response(Insurable)
Loss Transfer (Insurance)
Cyber risk management today involves three essential components, each designed
to reduce, mitigate or avoid loss. An increasing number of cyber risk products
offered by insurers today provide all three.
205
206
I.I.I.’s New Cyber Risk Report (Oct. 2015): Cyber Risks Threat and Opportunity
I.I.I.’s 3rd report on cyber risk: Cyber Risk: Threat and Opportunity
Provides information on cyber threats and insurance market solutions
Global cyber risk overview
Quantification of threats by type and industry
Cyber security and cost of attacks
Cyber terrorism
Cyber liability
Insurance market for cyber riskhttp://www.iii.org/white-paper/cyber-risks-threat-and-opportunities-100715
208
Marsh: Percentage of U.S. Companies Purchasing Cyber Insurance Increased in 2014
*Take-up rate refers to the overall percentage of clients that purchased standalone cyber insurance.Source: Benchmarking Trends: As Cyber Concerns Broaden, Insurance Purchases Rise, Marsh Risk Management Research Briefing, March 2015
8%
12%
18%
21%
21%
22%
26%
32%
50%
16%
11%
13%
14%
17%
17%
16%
22%
45%
13%
6%Manufacturing
Communications, Media and Tech
Retail/Wholesale
Power and Utilities
Financial Institutions
Services
Hospitality and Gaming
Education
Health Care
All Industries
Take-up rate 2014* Take-up rate 2013
Ever larger numbers of insureds seek financial
protection via cyber insurance. The
percentage of U.S. companies buying cyber
insurance rose to 16 percent in 2014.
209
Marsh: Total Limits Purchased, By Industry – Cyber Liability, All Revenue Size
Source: Benchmarking Trends: As Cyber Concerns Broaden, Insurance Purchases Rise, Marsh Risk Management Research Briefing, March 2015
$22.0
$4.2
$9.9 $10.5$9.5
$11.1$10.2
$13.2
$19.7
$6.7
$23.5
$10.5$12.0
$14.9
$21.0
$4.4
$22.2
$12.8
All Industries Comms, Media& Technology
Education FinancialInstitutions
Health Care Manufacturing Power andUtilities
Retail/Wholesale Services
Avg. 2013 Limits Avg. 2014 Limits
Average limits purchased for cyber risk rose to $12.8 million for all industries and all company sizes in 2014. Power and utility companies witnessed the sharpest
percentage increase in average limits, at 59 percent.
($ Millions)
212
INDUSTRY DISRUPTORS
Technology, Society and the Economy Are All
Changing at a Rapid PaceWill Insurers Keep Pace?
212
214
Media is Obsessed with Driverless Vehicles: Often Predicting the Demise of Auto Insurance
By 2035, it is estimated that 25% of new vehicle
sales could be fully autonomous models
Source: Boston Consulting Group.
Questions
Are auto insurers monitoring these trends?
How are they reacting?
Will Google take over the industry?
Will the number of auto insurers shrink?
How will liability shift?
215
On-Demand/Sharing/Peer-to-Peer Economy Impacts Many Lines of Insurance The “On-Demand” Economy is or
will impact many segments of the economy important to P/C insurers
Auto (personal and commercial)
Homeowners/Renters
Many Liability Coverages
Professional Liability
Workers Comp Many unanswered insurance
questions
Insurance solutions are increasingly available to fill the many insurance gaps that arise
Source: ISO.
Ridesharing Regulation/Legislation and Status of ISO Filings as of 9/30/15
219
Status of ISO FilingsStatus Ride Sharing
Legislation/Regulation
220
Send in the Drones: Potential Rapid Adoption in Industry; Media Loves It
Drones or Unmanned Aerial Vehicle (UAV) technology is seeing rapid adoption rate in many industries, including insurance
~700,000 drones in US by year-end
FAA granting Section 333 exemptions for commercial use and testing of UAS
FAA will require most drones to be registered by year-end 2015.
At least 5 insurers have received permission to test
Wide variety of applications: claims, pre-event property inspections…
Insurers partnering with construction industry to guide R&D and regulation of UAV use via Property Drone Consortium: www.propertydrone.org
Shifting Legal Liability & Tort Environment
221
Will the Tort PendulumSwing Against Insurers?
221
225
$750,392$653,898
$782,657
$1,045,048 $1,009,788
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
2009 2010 2011 2012 2013
Average Personal Injury Jury Award,2009 – 2013
Average awards in Personal Injury cases
have increased by more than 1/3 in recent years
Source: Current Award Trends in Personal Injury, 54th Edition; Insurance Information Institute.
Business Leaders Ranking of Liability Systems in 2015
Best States
1. Delaware
2. Vermont
3. Nebraska
4. Iowa
5. New Hampshire
6. Idaho
7. North Carolina
8. Wyoming
9. South Dakota
10. Utah
Worst States
41. Arkansas
42. Missouri
43. Mississippi
44. Florida
45. New Mexico
46. Alabama
47. California
48. Illinois
49. Louisiana
50. West Virginia
Source: US Chamber of Commerce 2015 State Liability Systems Ranking Study; Insurance Info. Institute.
New in 2015
Vermont New Hampshire North Carolina South Dakota
Drop-offs
Minnesota Kansas Virginia North Dakota
Newly Notorious
Arkansas Missouri
Rising Above
Oklahoma Montana
229
230
The Nation’s Judicial “Hellholes”: 2014/2015
Source: American Tort Reform Association; Insurance Information Institute
West VirginiaIllinoisMadison County
New York City Asbestos Litigation
Watch List
Atlantic County, New Jersey
Mississippi Delta Montana Nevada Newport News, Virginia Philadelphia,
Pennsylvania
Dishonorable Mention
AL Supreme Court PA Supreme Court
California
Florida
Volkswagen: Massive tort actions, fines, penalties certain. Are others vulnerable? Issue of cheating on
environmental standards and liability looms large.
Assignment of Benefits issue
looms large in FL
www.iii.org
Thank you for your timeand your attention!
Twitter: twitter.com/bob_HartwigDownload at www.iii.org/presentations
Insurance Information Institute Online:
231