Archive for the ‘Uncategorized’ Category
Posted on December 29th, 2011 by Lynn Sheils
-Authored by Steve McElhiney, President of EWI
EWI ended 2010 by posting a blog of its outlook for the reinsurance market in 2011. EWI was accurate in most of its predictions for the 2011 year. As for our 2012 forecast? In our view, the insurance risk markets and the capital markets (and macro economics) are highly inter-connected; thus, our forecasts are provided across a variety of fronts. We believe you simply can’t arrive at credible views of the reinsurance markets without first looking at these other factors. Please click “Outlook 2012″ for our 2012 forecast. Best wishes for the New Year!
Outlook 2012
Posted on December 29th, 2011 by Lynn Sheils
EWI participated in the holiday charity event of the Fort Worth Chapter of CPCU by collecting Care Packs for Kids for the Lena Pope home. Most children coming into foster care have nothing with them but the clothes on their back when they arrive at the home. Care Packs for Kids is a program that puts together back packs and duffle bags filled with shampoo, body wash, toothpaste, toothbrushes, deodorant, personal care items, journal, and hat and gloves. Care Packs for Kids benefits children from birth to age 18, as well as children leaving foster care and going on to college. Photo features: (L-R) Amy Trione, CPCU North Texas Governor; Debra Richardson, CPCU Fort Worth Chapter President; Steve McElhiney, Presdient of EWI and CPCU National President; and Marilyn Sammons, Lena Pope Foundation
Posted on September 23rd, 2011 by Lynn Sheils
On August 29, 2011, Steve McElhiney, President of EWI and President-Elect of the CPCU Society, along with Toni Green, Vice President of Claims at EWI, visited the Texas Southern University Campus in Houston, Texas to offer advice and insight on insurance career opportunities to a Risk Management/Finance class on Health, Disability, and Long-Term Care Insurance. Students in the class are preparing to take the 556 CPCU exam as part of the class’s curriculum. This offers students a unique opportunity to get a jump on earning a CPCU designation.
Posted on July 19th, 2011 by Lynn Sheils
- by Michael McKee
2011 includes the 10 year anniversary of the tragic 9/11 attacks on the World Trade Center. This milestone should be viewed by Risk Managers as an opportunity to remind your business units to be vigilant against terrorism threats and discuss ways to assist authorities in the recognition of threats to facilities. Terrorism may not be actively portrayed in the news media, but the threat is always among us (thus the reason this type of threat is called terrorism). In the US alone since 9/11, there have been multiple terrorism activities either thwarted by the authorities or which did occur and are publically known, including:
2003: American charged with plotting to use blowtorches to collapse the Brooklyn Bridge
2004: Plan to plant a bomb at NYC Penn Station during the Republican National Convention
2005: Los Angeles terrorists plot to attack National Guard, LAX, two synagogues and the Israeli consulate
2005: Plot to blow up natural gas refinery in Wyoming, the Transcontinental Pipeline, and a refinery in New Jersey
2006: Liquid Explosives Plot: Thwarted plot to explode 10 airliners over the US
2007: Khalid Sheikh Mohammed: confessed in court in March 2007 to planning to destroy skyscrapers in New York, Los Angeles and Chicago
2007: JFK Plot: Four men accused of plotting to blow up fuel arteries running through residential neighborhoods at JFK Airport in New York
2009: Radicalized Muslim US Army officer commits the worst act of terror on American soil since 9/11 at Ft Hood, TX
2009: Nigerian man who claimed ties to al-Qaida attempts to destroy a Detroit-bound airliner
2010: Plot to detonate explosive device – Times Square, NY
2011: Khalid Aldawsari – plotted to blow up hydroelectric dams and nuclear power plants.
2011: Killing of Osama Bin Laden in Pakistan
Terrorist groups cannot be viewed strictly as political extremists. Other types of groups use terror as a means to compel target businesses to change their operations or philosophies. Terrorist groups are generally subtyped as politically, economically or socially motivated. Politically motivated terrorists will try to cause as much direct and collateral damage as possible on a target to sensationalize their aims. This includes injury to physical assets, to people and to the environment.
Economic terrorism is waged by groups who want to destabilize the economic and financial stability of individuals, organizations, societies or states. Many tend to view wealth as a communal asset which should be shared. Therefore, any individual ownership of wealth or business success can be a target.
With eco-terrorism (environmental), the picture is not so clear. Eco-terrorism exists in many forms. The US Federal Bureau of Investigations defines eco-terrorism as the use or threatened use of violence of a criminal nature against people or property by an environmentally-oriented, subnational group for environmental-political reasons, or aimed at an audience beyond the target, often of a symbolic nature. The intent of the group may be to cause direct property damage, but no resulting pollution or collateral damage to people or property. The theory being that the terrorists wish to punish a specific target organization, but not punish or harm unrelated businesses, or cause pollution that impacts the general public. These types of eco-terrorists seek to strike at night or on weekends or when there is minimal staff at the target location.
At the other end of the eco-terrorism spectrum is the radical group that seeks to cause as much direct and collateral damage as possible to both people and property. Their goals include sensationalizing what they perceive to be the evils of the target organization/location. Eco-groups may sabotage new construction or disrupt operations which are contrary to their cause. A classic example is tree spiking; utilized to injure employees of timber harvesting companies. Eco-terrorist groups may also employ tactics to deny businesses the resources they need to operate. This could involve picketing to keep employees from entering work-sites, or the erection of physical or human blockades at points of entry to interrupt the supply chain. Acts of eco-terrorist groups could involve blockades or industrial sabotage against third parties in order to secondarily impact your operations.
A major difference between the types of terrorist groups is that certain politically motivated terrorists are willing to die for their cause. Notwithstanding, in terms of potential damage to business, the radical eco-terrorist could be as disruptive and destructive as a political based terrorist. Accordingly, it should be assumed that either type of terrorist could cause significant damage. It should also be assumed that they are as well organized, sophisticated, and equipped as politically motivated terrorists. Under these guises, many facilities could be viewed as attractive or are near such targets due to the raw materials, process intermediates, or end products manufactured. Everyone should be vigilant to recognize this potential threat and look at existing and possible future actions that can be taken to minimize the risk. The US Department of Homeland Securities current awareness campaign is relevant to vigilance – “If You See Something, Say Something”. All it may take to avert a terrorist event is the observation of suspicious activity and to alert authorities to it.
Terrorist acts may take many forms. Risk Managers should take the time to review their organization’s particular situational exposures and contemplate controls that could be instituted to minimize the threat or the results of a terrorist attack. Some areas of specific analysis could include:
• Airborne pollution potential
• Onsite pollution potential
• Water pollution potential
• Population proximity and density in relation to your facility
• Risks associated with facility profile
• Property-collateral damage potential
• Facility vulnerability and security
• Emergency response planning and assessments
• Situational responses to outside events (what is the response the attacks on nearby facilities).
• Review of the vetting process for third party security providers
• Review of how local emergency response units (fire, police, etc) would respond to various types of terrorist events and how site specific plans could best dovetail with same.
Remember – “If You See Something, Say Something” (US Dept. of Homeland Security)
Posted on April 11th, 2011 by Lynn Sheils
Steve McElhiney presented in a webinar on Friday, April 8th, concerning the Japan Earthquake. Advisen picks up Steve’s comments in today’s Advisen post titled Many U.S. Businesses Lack Coverage for Earthquake Liabilities. See that Advisen post linked here Many US Businesses lack coverage for EQ liab
Posted on March 7th, 2011 by Lynn Sheils
The third installment of a three part series on enterprise risk management authored by Steve McElhiney, president of EWI Risk Services and president-elect of CPCU Society. This third article discusses the balance that is needed between risk appetities and risk undertakings in order to keep capital levels safe.
Practical ERM Considerations – Part 3
Posted on February 15th, 2011 by Lynn Sheils
BSSA Newsletter February 2011
Posted on December 28th, 2010 by Lynn Sheils
- authored by Steve McElhiney, CPCU, President of EWI
As we move into 2011, EWI offers the following insights into the insurance, reinsurance, and financial markets as well as various economic trends.
We share the sentiments of most industry pundits that we are in a continuing soft insurance and reinsurance market as a result of more than adequate market capacity coupled with resurgent investment asset valuations (from both fixed income instruments in the generationally low interest rate environment buoyed by “Q.E. II” and soaring equity market valuations) and a manageable 2010 CAT environment. Despite a fairly active 2010 global CAT environment, the North American continent has seen fairly benign CAT activity. Global capacity remains more than adequate to support global insurance and reinsurance demand; the “supply/demand” dynamic continues to favor buyers of the insurance product into 2011.
A key potential “game changer” is a global Mega-CAT event in 2011. The unusually quiet California EQ environment, from a long-term historical perspective, would appear to be an anomaly; a major EQ event in California (such as recurrences of historically significant fault movements along the San Andreas, Elysian, or Hayward faults) would be a reinsurance market turning event. Similarly, there are literally dozens of potential Mega-CAT events that could occur in the United States, or globally, that would serve to consume available capacity and serve to turn the market.
On balance, we see many parallels of the current insurance market to that of the late 1990’s; continued price softening year-over-year (5%+ average price declines in 2011 are forecast across most lines). We see ample reinsurance capacity for most accounts that we present to reinsurers; including start-ups and management “lift-out” units, captive and alternative risk vehicles, and MGA program deals.
It is our view that the US and global economies are, clearly, in the early stages of a full economic recovery from the 2008 and 2009 lows. While this will serve to increase ratable insurance premiums in the US, there is also more than capacity to support these risks and no significant market pricing impact will be evident as a result in 2011.
Longer-term, we see those global insurance organizations that have a significant presence in the emerging markets of China, India, and Brazil; and to a lesser extent, Southeast Asia and certain Persian Gulf countries will continue to show overall financial outperformance in comparison to those insurance entities that are focused exclusively upon the more mature economies of the US, EU and Japan. This trend will continue in 2011 and beyond.
These emerging countries are in secular growth cycles that will extend over a generation. Rapid technological, energy, and economic development in these regions will drive demand for insurance products that will also evolve as the underlying societies become increasingly advanced. More insurance product for emerging lines of coverage will be demanded as these countries become more advanced over time.
We do not subscribe to the view that a “double dip” economic down-turn is likely in 2011 in the absence of a major catalyst event (such as a geopolitical outbreak or a major terrorist event). There is ample global liquidity to withstand any economic pressure and the systemic effects of 2008 will not likely occur again within a generation.
Thus, we see slow and gradual economic improvement as the US economy struggles to overcome major structural unemployment and global competitiveness issues with unemployment showing a very “sticky” level over the next few years.
Certain US states will show improved economic results more quickly than the nation at large due to shifting economic activity surrounding global trade and overall relative competitiveness, in this new global framework.
The “main event” in 2011 in the United States will be the continued impact of budgetary shortfalls in various states and municipalities given funding constraints and swelling post-employment liabilities. This will also coincide with significant political tension on a national level as certain states seek federal funding and the Congress will not accommodate these requests, in our view, in the current political environment. Thus, several states and municipalities may face severe budgetary constraints that could affect debt service and ongoing pension obligation requirements. Interest rate spreads on state governmental obligations will continue to widen. This is a trend that will begin in 2011 and evolve over the next few years as various states face the impact of diminished growth, contraction in core industries, and swelling pension liabilities.
The generally positive economic trends that are underway will serve to further support US equity market valuations in 2011 with only slight market pull backs throughout the year in reaction to macroeconomic events that may occur, such in the Euro-zone. We see the S&P 500 continuing to perform in a trading range of between 1,000 and 1,350 over 2011.
The situation in Spain, Italy, and to a lesser extent, Portugal will continue to be problematic and will cause continued political tension with relatively stronger Euro-zone export driven economies such as Germany. The Euro will continue to show weakness in this framework during 2011.
An improving export environment, coupled with an increased US focus on fiscal restraint and deficit reductions, will serve to give some short-term strengthening of the US Dollar which we forecast will improve relative to most currencies.
Interest rates will, invariably, increase during 2011 in concert with an improving economy and improved market liquidity and increased loan demand. Any such increases in 2011 will still keep rates at historically low levels.
We do not subscribe to the notion of run-away long-term inflation in the U.S. given heightened pressure for budgetary restraint and the favorable impact of increased tax receipts in concert with an improving economy. The US economy remains a stalwart in all sectors and will continue to the global leader in 2011 and beyond. The current level of the national debt and budgetary deficits is most concerning; however; the depth of the economic contraction of the financial crisis (and the massive deflationary impact) will continue to put a damper on significant price inflation.
As respects insurance carriers, we feel that fixed income returns will be under pressure in 2011 and beyond and the long-term favorable capital trend of unrealized fixed income appreciation from lowered interest rates will be abated. Insurance companies will also face interest rate reinvestment risk in 2011 as bonds with nominal rates of 5 percent or more are reinvested at much lower rates, in the short-run.
The spiked pricing trends in 2010 of certain commodity prices is distressing and is reaching the level where economic expansion could be threatened; particularly, as respects the price of oil and food. A return to $4.00 to $5.00 per gallon gasoline will inhibit GDP growth markedly. We feel that a strengthening US Dollar and a slight decline in the demand for energy in China will contain this threat.
On balance, we forecast the pricing of certain global commodities will show a slower rate of growth in 2011 given potential constraints in the Chinese economy that are becoming evident in reaction to a potential asset “bubble” and recent governmental restraints.
Posted on December 3rd, 2010 by Lynn Sheils
- by Michael McKee
The holiday season ushers in wonderful celebrations and events. The joy of gift exchanges, parties, company events and family reunions make the season special. Many of us (especially me) look forward to the time of year when we can express our inner Clark Griswold and turn our houses into a twinkling light show! However, every year these happy times are ruined for thousands of individuals and families by injuries and deaths caused by unsafe ladder practices. Most of us don’t use ladders on a regular basis and certainly not at heights required to string our merriment. We should appreciate the risk of working at heights and take appropriate steps to negate and manage that risk while hanging and taking down that electronic holiday cheer. Here are some tried and true safety tips for working on ladders:
o Climb slowly and steadily while always facing the ladder. Many people are hurt falling when they are distracted or make sudden movements.
o Don’t lean off to the side to reach something. The ladder’s center of gravity will move with you as you move up in height. Leaning to the side dramatically affects this and can cause the ladder to shift and fall. The ladder should have four points of contact with the working surface and downward pressure on each leg should be proportional.
o Ladder should always be based on a level surface. Never stack ladders or prop a ladder on top of another object.
o Wear rubber soled shoes and be mindful of slippery rungs and footwear.
o Don’t try and carry heavy or bulky items when you climb. You should always maintain three points of contact with the ladder (two feet and one hand or two hands and one foot). Tow loads on a tow line or have it handed up once in position. If using fall protection equipment such as lifelines, lanyards, and harnesses, seek proper training in the use and selection of that equipment. It must be assembled properly to work properly.
o All ladders are not equal. Differing construction defines its weight and working height capacities. If you have a ladder rated for 200 lbs and you weigh 260, get a different ladder or hire a pro to hang the lights for you (you can go on a diet next year).
o If using a ladder around electrical lines it should be wood or fiberglass. Aluminum is a wonderful electrical conduit and will flow energy to the nearest grounding source (you).
o Be mindful of weather conditions. Winds blow harder the higher you are from the ground so what seems like a light breeze on your porch may be very unnerving at 20-feet. Your vision should be clear so clear sunny days are a must.
o Don’t drink and climb! This may seem silly to say but many people are injured each year when they have a couple of drinks and decide to adjust a light bulb. Alcohol and drugs not only affects your decision making but also your balance and vision. If you need a drink to get the courage to hang the lights, then hire a professional to do your light work!
Posted on November 9th, 2010 by Lynn Sheils
By Tomas Escamilla and Jorge Cardona, EWI Risk Services
Oil and gas companies are expanding their utilization of single parent captive insurance companies as a more cost effective tool to syndicate risks and achieve potentially broader coverages for potential liabilities.
The trends include:
• As a result of the Macondo well spill in the Gulf, companies engaged in offshore exploration and production are examining the captive concept as part of broader enterprise risk assessments to expand capacity and achieve tailored coverage via manuscripted policy forms with reinsurance support; to expand protection from such events.
• Domestic natural gas producers are embracing the captive concept due to potential higher environmental liabilities resulting from the use of hydraulic fracturing techniques and its effect on deep underground water reservoirs.
• Other companies including the majors are using their captives in more creative ways in order to offer environmental impairment property coverage as well as pollution liability, property, business interruption and workers compensation coverages. In the area of employee benefits they are using captives to offer enhanced group life, and long-term disability coverage to employees, and to capture superior experience from their employees compared to standard group rates in the fully insured benefit market.
In hard or soft insurance pricing markets, captives offer great leverage to influence positive behaviors due to the embedded unique relationship between insurer and insured as a long-term value accretion and risk management tool.
