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FROM THE EDITOR
Compiled by staff from news and wire services.
Build That Wall
No, not that wall.
I’m talking about sea walls, for
Miami, San Francisco, New York,
Norfolk and many other coastal cities
Fact: Climate change is producing
sea rise, which is threatening coastal
real estate values in the hundreds of
billions of dollars.
Probability: The impact of climate
change is not reversible. We can slow
it down some, but at the rate we’re
going, we’re not going to slow it
Thus, we need to take action to
save our coastal cities. That’s why the
ideas proposed by Shalini Vajjhala,
founder and CEO of Re:Focus
Partners are so interesting.
Partnering with Swiss Re
and others, Vajjhala’s group is
championing resilience bonds.
They’re like CAT bonds, only they
also benefit their holders when
disaster doesn’t strike.
Should a municipal resilience
bondholder complete, say, a sea wall,
during the bond’s term, it would
receive a break on the premium, a
“resilience rebate” if you will.
The same models that measure
how badly a city could be impacted
by hurricane-amplified flooding
can also show us how much that
risk would be reduced by a wall, or
some other mitigation project; thus
framing the risk and the cost of the
solution for investors.
After all, here is another fact. Sea
rise is a risk shared by millions of
policyholders. The traditional retail
market is not set up to deal with this.
The solutions must evolve,
according to Swiss Re’s Alex Kaplan.
Resilience bonds may be one
way to fast track the infrastructure
improvements that cities and towns
across this country so desperately
need to implement.
So, let’s invest in these walls with
confidence and just forget about that
LLOYD’S REPORTS $2.6B PROFIT
Lloyd’s of London announced a
2016 profit of $2.6 billion, despite
challenging conditions including
downward pressure on rates and
the influx of both traditional and
alternative capital to the insurance
The level of Lloyd’s major claims,
$2.8 billion, was above the long-term
average. This was due primarily to
Hurricane Matthew and the Fort
McMurray wildfire in Canada.
Lloyd’s saw progress across major
global markets. It remains the leading
provider of excess and surplus lines
in the U.S.; transferred over half its
managing agents to the Shanghai and
Beijing platforms; and was granted
final approval to open an onshore
office for reinsurance in Mumbai.
Following the United Kingdom’s
decision to leave the European Union,
Lloyd’s plans to open a subsidiary
office in Brussels by Jan. 1, 2019.
DISASTER LOSSES UP IN 2016
Total losses from natural catastrophes
and man-made disasters were $175
billion in 2016, almost twice the $94
billion seen in 2015, according to a
study from the Swiss Re Institute.
Global insured losses from disasters
were $54 billion in 2016, up from $38
billion in the previous year but in line
with the inflation-adjusted annual
average of $53 billion over the previous
10 years. The losses in 2016 — both
economic and insured — were the
highest since 2012 and reversed the
downward trend of the last four years.
This was due to sizable disasters,
including earthquakes, storms, floods
and wildfires in 2016, across all regions.
Natural and man-made disasters, and
insured losses, were up in 2016.
Some events struck areas with high
insurance penetration, which accounted
for the 42 percent increase in insured
losses. That also indicates that people
in those areas may have been better
equipped to recover from a disaster.
BERMUDA FACES CONTINUING
The Bermuda market continues to
face challenging underwriting and
investment conditions. A.M. Best’s
“Bermuda Market Composite” has
identified persistent negative trends,
despite improvements in net written
premiums and total revenue. The
market saw an 8.6 percent increase
in property/casualty net premiums
written, its largest uptick in the
current five-year period.
Additionally, the Bermuda
market’s total revenue and collective
shareholders’ equity each increased
by roughly $4 billion in 2016, even
after returning about $4 billion
to shareholders. Unfortunately,
profitability is moving in the opposite
direction as margins get tighter.
Favorable reserve development has
slowly started to dwindle in year-end
2016 results, with favorable reserve
development as a percentage of net
premiums earned dropping below 6
percent for the first time in the current
five-year period. It has been steadily
declining since the five-year high of 7. 3
percent in 2013.
UK INSURERS PREP FOR POST-
UK Prime Minister Theresa May
triggered the two years of negotiations
that will lead to Britain’s withdrawal
from the European Union. The British
Insurance Brokers’ Association (BIBA)
called for “urgent progress” toward an
agreement with the 27 remaining EU
states that preserves free trade as much
It highlighted the $9.7 billion
in European revenues that flow in
through U.K. brokers.
“Having no clear agreement
in place for the right to carry out
cross-border trade with the EU as
is currently possible, creates huge
uncertainty for the U.K. market and
the 2,758 insurance brokers that
possess passports to trade in the EU,”
BIBA said in a statement.
The UK’s leading position in
the European insurance market “is
under serious threat if we do not have
barrier-free, tariff-free access to the
EU market including some form of
passporting model and regulatory
equivalence,” BIBA CEO Steve White
said in a statement.
SETTLEMENT WITH 10 STATES
In its effort to move past its emissions-cheating scandal, Volkswagen agreed
to pay $157 million to 10 states to
settle environmental lawsuits. The
payment will be divided among
Connecticut, Delaware, Maine,
Massachusetts, New York, Oregon,
Pennsylvania, Rhode Island, Vermont
Volkswagen already agreed to more
than $20 billion in federal criminal
and civil penalties related to its sale
of about 600,000 cars equipped with
devices that illegally circumvented
Six executives face charges for their
roles in the scandal.