Monthly Archives: October 2012

No hurricane deductibles in NJ

On phone, so can’t link to today’s earlier discussion, but NJ DOI weighs in:

Acting Commissioner (Ken) Kobylowski said the hurricane deductible trigger does not apply in New Jersey because the National Weather Service downgraded Sandy to “Post-Tropical Cyclone” before it reached land in New Jersey.

Update: NY and CT followed suit – sorry, don’t have the link.

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Sandy and BI claims

Artemis provides a nice overview of the issues surrounding Sandy’s business interruption claims.

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AIR’s estimate for Sandy

. . . $10B, with a range of $7B to $15B. Details here. (Recall Eqecat estimated $5B to $10B.)

However . . .

  • The estimate doesn’t count low-level losses in Virginia and Ohio. Nor does it count the West Virginia blizzard.
  • It assumes that 10% of NYC commercial insureds bought flood insurance. (A 50% take-up rate adds $600M to $1.2B to the estimate, AIR notes.)
  • The estimate includes business interruption coverage. However the model doesn’t consider flooded subway lines and loss of the Con Edison explosion, either of which could drag things out for days.
  • And perhaps most interesting: That wasn’t a hurricane that hit New Jersey; it was a “post-tropical cyclone,” according to the National Weather Service. And, in AIR’s words, “There is, as a result, uncertainty in how carriers will treat deductibles.” Most policies have a higher deductible for hurricane losses. AIR’s estimate reflects the use of a hurricane deductible.

Update: About the deductible: This pdf from NJ DOI seems pretty clear. A hurricane deductible can only be invoked “from a storm designated as a hurricane by the National Weather Service and (emphasis in the original) only if sustained wind speeds of 74 mph have been measured somewhere in the state.” Well, the storm was designated a hurricane. There were plenty of gusts above 74 mph – my hometown clocked 88 mph – but I haven’t found a record of sustained wind speeds that exceeded 45 mph. Wouldn’t be surprised if this ended up in court to interpret the meaning of the word sustained.

Modeling Sandy

Eqecat briefing. Sounds like Sandy was a storm never seen before, not even close to anything in the company’s storm set:

Sandy is expected to produce very high absolute damage and loss numbers, but low losses as a portion of the underlying economy and asset base. EQECAT is currently working to produce a refined post-event loss estimate for this event.

Eqecat plans a briefing Nov. 1.

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Bad journalism alert

Every problem this article frets over has been addressed by cat modeling and territorial rating.
So why was it written?

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Sandy: An early assessment

The storm hasn’t come ashore as I write this, but already Eqecat has an estimate: insured losses between $5B and $10B. Reading details on Aretmis, this appears to be less a modeling estimate as an estimate based on triangulation (worse than Irene hitting NYC, not as bad as Ike hitting Houston).

The upper estimate would make Hurricane Sandy one of the 10 U.S. catastrophes, in terms of insured losses, as the chart below shows:

P/C360 has also republished its coverage of a speaker at an Advisen conference earlier this year who called New York City “the most dangerous place in the world for storm surge.”


Claim of the Week

Claims Journal:

Damage from a southwest Michigan apartment complex fire believed to have been sparked by a resident trying to cook a squirrel with a propane torch is estimated at $1.4 million.

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Exams and Frankenstorm

Sounds crazy. Good luck and be careful. Credentials are awarded posthumously, but raises and promotions are not.

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A test

Trying something new.

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SOA presses its attack

Well, this certainly merits mention:

The Society of Actuaries (SOA) recently announced that its Board approved a proposal to not continue the Joint Preliminary Actuarial Examination Agreement with the Casualty Actuarial Society as of December 31, 2013.

Sounding like what I feared – SOA seems determined to force the merger it proposed with the CAS, or to put it out of business.