The compound annual growth rate (CAGR) of insured electric vehicles (EVs) was 59.3% between 2018 and 2022, while the total number of insured vehicles under personal motor insurance grew by 2.7% annually on average over the same period, says Korean Re in a blog posted on its website. About 157,000 EVs were insured in South Korea in 2022, accounting for 0.9% of the total insured cars under personal motor insurance policies. The blog, titled “Review of the Electric Vehicle Insurance Market in Korea”, also says that the number of insured EVs has been surging recently in line with the proliferation of EVs across the country. By age group, drivers aged 40-44 took up the largest portion (17.4%) of the total insured drivers of EVs, followed by aged 45-49 (14.9%) and aged 35-39 (14.5%), whereas for conventional vehicles, the 50-54 age group has the highest proportion at 15.2%. More than 55% of EV drivers purchased their motor insurance via the Internet compared to 42.5% for non-electric cars. It is generally cheaper to buy car insurance online, and relatively younger drivers of EVs are presumed to prefer the internet-based channel especially given higher insurance premium rates for EVs. Insurance Insuring EVs tends to be more expensive primarily because their actual cash value is higher than that of non-electric vehicles. In 2022, the average actual cash value of EVs that are five years old or less was 1.8 times higher than that of conventional vehicles. The average premium per car under personal motor insurance for EVs in Korea was KRW890,000 ($692) in 2022, 1.26 times higher than KRW707,000 for gas-powered vehicles. In particular, the premium for the own damage coverage was much higher for EVs due to the high actual cash value and replacement costs. The cost of repairing or replacing parts of EVs is typically higher compared to non-electric vehicles. In 2022, repair costs under the own damage car insurance coverage averaged KRW2.7m for EVs, 1.4 times higher than internal combustion engine vehicles. Even a minor accident that damages the battery pack of an EV may require the entire battery to be replaced. It costs KRW15-20m on average to replace a damaged high-voltage battery in an EV. Although the price of an EV battery pack has been declining lately, it still represents a large portion of the car price. Other parts of EVs such as electronic control devices and sensors cost more and take longer to be repaired compared to non-electric cars. It is for these reasons that the amount of claims under the own-damage coverage is generally higher for EVs than their conventional counterparts. Risks In the case of fire or explosion, both EVs and gas-powered vehicles pose fire and explosion risks. In the event of a collision, EV batteries have the potential to ignite or explode, while an internal combustion engine vehicle's gas tank also holds the risk of catching fire or exploding. The loss frequency of EVs was lower compared to non-electric cars. From 2018 to 2022, there were 29 incidents of own damage losses for EVs arising from fire or explosion, indicating that 0.78 out of 10,000 EVs got involved in a fire or explosion accident. The rate was higher at 0.9 for conventional cars. However, EVs can be exposed to a higher risk of accidents compared to non-electric cars due to their fuel efficiency and longer average driving distances, according to the Korea Insurance Development Institute. A study conducted by AXA also says that EVs are involved in more traffic accidents than conventional petrol and diesel cars because of the driving behaviour of the individuals operating these vehicles. The primary factor contributing to the accidents is the rapid and abrupt acceleration of EVs, which often catches drivers off guard, particularly those who are inexperienced with such vehicles. Another notable characteristic of EVs is their quiet operation. Specifically, the engine is almost silent when starting, which can lead to serious collisions in an urban environment where many pedestrians cross roads using their hearing without looking properly. Source: asiainsurancereview.com

By Michael F. Rellosa IN previous columns, I mentioned that we are amid an unprecedented hard market as far as natural catastrophe (Nat Cat) risks are concerned. Both the January and April renewals were virtual bloodbaths for local insurers, where they experienced not only increased prices for reinsurance protection but were accompanied by a shrinking capacity as well. This was a double whammy, especially for the Philippines, which we all know is considered the most vulnerable country to Nat Cat events and therefore the one most in need of Nat Cat protection. Indications show that the June renewals are experiencing the same fate, as no improvements have been experienced thus far. Historically, episodes of hard and soft markets are cyclical; some reinsurance market analysts, however, say that the current cycle (hard market) has not completed itself and will last probably beyond the next season, especially if the world experiences more or severe Nat Cat events. In addition, there are several concurrent constraints such as the elevated cost of capital, limited capacity and macro uncertainty that are not being resolved as fast as we would want them to be. Other analysts, however, sense that there may be light at the end of the tunnel, with capital inflows from noninsurance players occurring. There is a caveat, however, as in the past, capital from these sources just as readily disappear when losses do happen, and insurers may again be left holding an empty bag. Locally, new brokers from the Indian subcontinent and Arabian peninsula are starting to show interest in the local market as they got their feet wet with local risks being marketed in their area, proof of how far and wide local insurers have cast their nets due to the capacity crunch. This could become one of the developments that the regulators must keep a watch on. It is true that it is not only the Philippines that is experiencing this but the whole world, but we are experiencing the raw end of it, and at the risk of sounding repetitive, we are the ones that need it (affordable reinsurance protection) most. How did we get into this quagmire? Obviously, it did not happen overnight, years of turning a blind eye to the need to review local rates and see if it was still adequate, years of unbridled competition, years of allowing the more profitable lines of business to subsidize the loss leaders, all added up, and we are now paying the cost. It is true that many of us have woken up, but many still have their heads buried deep in the sand. It is now time to call for an all-of-society approach to fix what needs to be fixed. Regulators, insurers, intermediaries, solutions providers, adjusters and all those within the insurance ecosystem must work to be on the same page and find solutions for the greater good. It is never too late to do this, and we have only ourselves to rely on. Source: manilatimes.net

By Michael F. Rellosa IF the topic of climate change is du jour, so will the topic of Nat Cat coverage be, and with it the slew of issues that accompany Nat Cat insurance, especially in the Philippines. My previous columns touched on the need to adjust the rates of Nat Cat protection to make it sustainable in the face of the ever-hardening reinsurance market and the fact that the local rates have not been reviewed in two decades. What is the point of having a solution that will not be sustainable and will be pulled out after a streak of losses? We also talked about the launch of initiatives that will provide more local Nat Cat capacity and maximize the efficiencies of a pooling arrangement to obtain better terms from the international reinsurance market. Another topic talked about is the launching of a new product especially designed for the underserved portion of the populace who are disproportionately exposed to Nat Cat events and are prey to their dire results. I am not exactly sure what is keeping us from finalizing these initiatives as well as reviewing the current pricing of Nat Cat coverage. There are some intricacies that need the regulators' nod as the initial steps depend on it; hopefully they will get to see the forest for what it is and not just the trees. In the end, it is the insuring public that will benefit from having access to the appropriate coverage provided by a sustainable industry that will be there when the rubber hits the road. What baffles me no end, is that the General Insurance Stakeholders not only are aware of the situation but do understand how it came about and have a rather good idea of the solution. What is then preventing us to band together, put our cards on the table and agree on the best way forward for our good and the good of the insuring public? To go the usual way of undercutting each other just to get the business is just no longer feasible and will be downright foolhardy. The other players such as the multilateral aid organizations such as the World bank and Asian Development bank; National AID Organizations such as USAID, GIZ, the Academe, NGO’s and even civil society, the various regulators prime of which is the Insurance Commission are all busy with their pet projects, but what if we all sat down agreed on the low hanging fruit and agree to work on each in succession guaranteeing greater success for each of the chosen projects. The past years have seen fits and starts with none of the projects having been fully accomplished despite the enormous amount of time, effort and resources poured into getting these various projects off the ground. Let us not wait for another catastrophe a typhoon, the floods it causes or a major earthquake to spur us on to action and results. Let statistics, history and science move us to completing the initiatives already set into motion so that when such a catastrophe occurs, we are ready for it and the vulnerable will have the means albeit limited to pick up the pieces of their lives and start over. On a related note, I would want to plug a planned workshop to be held in Manila first week of August collaborated on by the Insurance Development Forum; the Micro-insurance Network; the InsuResilience Global Partnership, The Insurance and Risk Facility of the UNDP, The Insurance Institute for Asia and the Pacific as well as the Philippine Insurers and Reinsurers Association. This forceful coalition brings together all the important stakeholders to discuss and allow for a coordinated and comprehensive approach to address the issues at hand. These are being held around the world in chosen countries one of which is the Philippines on account of the vulnerabilities we have to Nat Cat events and the sizeable protection gap that has been identified. Hopefully, the sheer number of individuals and groups working towards providing Insurance protection to the least of our compatriots would make us see the value of each of these individual initiatives and convince us to hastily work towards its fruition. Source: manilatimes.net

The cyber insurance market has the potential to scale to rival the size of other major P&C lines if three major challenges can be successfully navigated according to a new report by global insurance broker Howden. Howden’s third annual cyber report Coming of Age released in July 2023 reveals that the size of the market could reach $50bn by 2030 as the foundations are in place for the cyber market to scale up. The realization of this potential is, however, tied to three main factors: distribution, tail-risk management and attracting capital. If these challenges can be navigated successfully, the cyber market is on the cusp of potentially transformational growth. Also, future growth and relevance of cyber insurance now centres around three major themes: penetrating new markets, addressing systemic risk and expanding available capital. Surging ransomware claims in 2020 and 2021 led to the cost of cyber cover more than doubling, however, conditions started to stabilize in 2022 as activity relented and more robust risk controls deterred or mitigated attacks. The developments in 2023 point to a nuanced marketplace, with optimism around more favourable supply dynamics for insurance buyers (off the back of improved underwriting performance for insurers) tempered by resurgent ransomware activity, ongoing concerns about potential systemic losses and capital availability. This puts the market on a sound footing for growth, but the report shows that more work needs to be done if it is to meet the growing demands of clients worldwide. By overcoming potential limitations around systemic risk, penetration and capital, the cyber insurance market has an unparalleled opportunity to grow. Howden global head of cyber Shay Simkin said, “Ensuring that cyber insurance is relevant to clients of all sizes, is paramount to improving access in new territories and across different sections of the economy. Attracting capital is also crucial to this goal, a task which should not be underestimated given current macroeconomic challenges and capital constraints.” Source: asiainsurancereview.com

Insurers and long-term savings providers should become 'nature positive' in helping tackle the decline in the nature according to Association of British Insurers (ABI). ABI said nature loss is exposing homes and businesses that insurers protect to a wide range of risks, such as flooding, hence, it is important to provide relevant guidance to the insurers. The ABI launched a guidance book for its members at its third annual climate change summit in July 2023. Nature, which includes biodiversity together with geology, water, climate and all other inanimate components that make up our planet, is in a serious decline. There has been a 70% drop in global wildlife populations since 1970. Around 84% of rivers are in poor ecological health. Drivers for this worrying loss include climate change, changes in land use, pollution and invasive species. Compelling reasons for action: Nature loss exposes the homes and businesses that ABI members protect across the UK to a wide range of risks, which in turn will impact markets and financial performance. Some studies have estimated that half of global gross domestic product – $44tn – is highly to moderately dependent on nature. Impact on health. There is a clear link between physical and mental health and healthy ecosystems. This impacts on the business models of long-term savings providers, life and health insurers. Consumer pressure. There is a clear reputation risk to firms not seen to be addressing nature loss. For example, 94% of residents polled by the Local Government Association in UK in 2021 wanted more local biodiversity. Net zero cannot be achieved with innovation and new technologies alone. We need nature to absorb carbon from the atmosphere and provide resilience. So, carbon credits and offsets must inevitably incorporate nature. ABI said its guide will help firms begin to assess the risks and opportunities, so that they develop a strategy for action. This will include: Identifying external organizations, tools and best practice examples for expertise and guidance Developing a heatmap as an initial estimation of possible impacts and identifying focus areas. Learn from best practice form ‘early movers’ in the sector. Setting up internal working groups within firms, leading the agreement of guiding principles, including governance and accountability. ABI said we will support our members, through collaboration and sharing best practice, consumer advice on ‘nature positive’ behaviours, and how the sector’s fraud tackling expertise can help address environmental crime, like illegal deforestation. Ecosystems are beyond 'tipping point' now Extreme weather events such as wildfires and droughts will accelerate change in stressed ecosystems leading to quicker tipping points of ecological decline according to a new study published by Rothamsted Research. The research published in a recent issue of scientific journal Nature Sustainability revealed that continuous stress from factors such as unsustainable land use, agricultural expansion and climate change, when coupled with disruptive episodes like floods and fires, will act in concert to imperil natural systems. Using computer modelling, the research team looked at four ecosystems under threat to work out what factors might lead to tipping points, beyond which collapse was inevitable. The team led by Rothamsted Research professor Simon Willcock, looked at two lake ecosystems and two forestry examples, including the historic collapse of the Easter Island (Rapa Nui) civilization, widely thought to have been the result of over-population combined with unsustainable exploitation of tree cover. In some systems, the combination of adding new extreme events on top of other ongoing stresses brought the timing of a predicted tipping point closer to the present by as much as 80%. The models were run over 70,000 times for each ecosystem, with variables adjusted on each occasion. Up to 15% of collapses occurred as a result of new stresses or extreme events, even while the main stress was kept constant. In other words, even if ecosystems are managed more sustainably by keeping the main stress levels like deforestation constant, new stresses like global warming and extreme weather events could still bring forward a collapse. Professor Willcock said, “Over a fifth of ecosystems worldwide are in danger of collapsing. However, ongoing stresses and extreme events interact to accelerate rapid changes that may well be out of our control. Once these reach a tipping point, it’s too late.” The number of extreme climate events has increased since 1980 and global warming even at 1.5°C will increase those numbers further. Scientists are also concerned about possible knock-on effects as one collapsing ecosystem impacts on neighbouring ecosystems. Co-author of the study professor John Dearing said, “Previous studies of ecological tipping points suggest significant social and economic costs from the second half of the 21st century onwards. Our findings suggest the potential for these costs to occur much sooner.” Shrinking Arctic glaciers are unearthing a new source of methane Shrinking glaciers in the warming Arctic are exposing bubbling groundwater springs which could provide an underestimated source of the potent greenhouse gas methane according to a new research study. The new research published in a recent issue of scientific journal Nature Geoscience said these methane emissions will likely increase as Arctic glaciers retreat and more springs are exposed. This, and other methane emissions from melting ice and frozen ground in the Arctic, could exacerbate global warming. The study, led by researchers from the University of Cambridge and the University Centre in Svalbard, Norway, have identified large stocks of methane gas leaking from groundwater springs unveiled by melting glaciers. University of Cambridge department of Earth sciences researcher and lead author of the study Gabrielle Kleber said, “These springs are a considerable, and potentially growing, source of methane emissions — one that has been missing from our estimations of the global methane budget until now.” Scientists are concerned that additional methane emissions released by the Arctic thaw could ramp-up human-induced global warming. The springs the researchers studied hadn’t previously been recognized as a potential source of methane emissions. University Centre in Svalbard professor and co-author of the study Andrew Hodson said, “Living in Svalbard exposes you to the front-line of Arctic climate change. I can’t think of anything more stark than the sight of methane outgassing in the immediate forefield of a retreating glacier.” “Previously, research centred on methane release from thawing permafrost (frozen ground). While the focus is often on permafrost, this new finding tells us that there are other pathways for methane emissions which could be even more significant in the global methane budget.” The methane-delivering springs, the research team identified are fed by a plumbing system hidden beneath most glaciers, which taps into large groundwater reserves within the underlying sediments and surrounding bedrock. Once the glaciers melt and retreat, springs appear where this groundwater network punches through to the surface. The researchers found that methane emissions from glacial groundwater springs across Svalbard could exceed 2,000 tonnes over the course of a year — which equates to roughly 10% of the methane emissions resulting from Norway’s annual oil and gas energy industry. This source of methane will likely become more significant as more springs are exposed. Ms. Kleber said, “If global warming continues unchecked then methane release from glacial groundwater springs will probably become more extensive.” Risk of isolation increases with sea-level rise Scientists and general public alike speak about the rising sea levels and mainly focus on the communities that will be flooded permanently, but rising seas will isolate people much before they are underwater. A new research report published in the journal Nature Climate Change by a team of researchers University of Maryland US and University of Canterbury, New Zealand has said people will be cut off from roads and other critical infrastructure long before they are underwater. It is a threat that society has not paid enough attention to. The study said the typical displacement metric for sea-level rise adaptation planning is property inundation. However, this metric may underestimate risk as it does not fully capture the wider cascading or indirect effects of sea-level rise. The report says to address this issue, it is proposed to complement it by considering the risk of population isolation: those who may be cut off from essential services. Investigate the importance of this metric by comparing the number of people at risk from inundation to the number of people at risk from isolation. Considering inundated roadways during mean higher high water tides in the coastal US shows that although highly spatially variable, the increase across the US varies between 30% and 90% and is several times higher in some states. The study revealed that the risk of isolation may occur decades sooner than the risk of inundation. Both risk metrics provide critical information for evaluating adaptation options and giving priority to support for at-risk communities. An author of the study Ms. A Reilly said, “While sea level rise is often considered a problem for the far future, people will start getting isolated much sooner. “It is very possible that we could see that in our lifetimes.” The study said, “Worse still, many places currently considered at low risk of sea level rise suddenly become much more vulnerable when isolation is taken into account. While planners know that low-lying Florida will be severely inundated, Maine, with its high rocky coasts, is generally thought to be at low risk. But the study team’s work shows many Mainers are vulnerable to being cut off by flooding in coastal communities and river valleys.” Ms. Reilly said this far more immediate effect of rising seas needs to become part of the broader planning process, both in terms of the adaptations and protections we build and also in how we prepare for the pending wave of climate migrants as people leave places where the quality of life has become too burdened by sea level rise. Financial institutions still underestimating climate risks Financial institutions may still be underestimating climate-related financial risks due to a disconnect between climate scientists, economists, model builders and financial institutions according to a new report by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter. The 32-page Emperor’s New Climate Scenarios – a warning for financial services study report reveals that companies often use models that produce ‘implausible’ outputs and have significant blindspots when it comes to estimating potential hazards, exposures and vulnerabilities under different climate scenarios. This ultimately limits the usefulness of these models in assessing the true extent of financial institutions’ (of banks, insurers and investment firms) climate risks. For example, the report says the current modelling techniques exclude many of the most severe impacts expected from climate change, such as the emergence of climate tipping points and secondary effects, like global food supply shocks and mass migration. As a result, they generate overly benign outcomes, which can mislead financial institutions on the full extent of their risks and potentially delay action on decarbonization. The report recommends that to improve financial firms’ climate risk assessments, the model users should become climate literate and use these tools alongside narrative scenarios that qualitatively describe the potential risks and their impacts. Additionally, institutions should incorporate out-of-model adjustments and error margins in their analyses to account for uncertainties that the models fail to capture. The other major recommendations of the report include: Carbon budgets may be smaller than anticipated and risks may develop more quickly Regulatory scenarios introduce consistency but also the risk of group think, with scenario analysis outcomes being taken too literally and out of context Education is needed on the assumptions underpinning the models and their limitations The development of realistic qualitative and quantitative climate scenarios is required Model development is required to better capture risk drivers, uncertainties and impacts A press release issued by IFoA said, “In the study we have used actuarial principles to examine the limitations and assumptions in relation to climate-change scenario modelling practices in financial services, focusing on hot-house world scenarios of three degree °Celsius or more of warming.” The IFoA said the objective in writing this paper is to help accelerate the progress of more realistic scenario modelling, which, it hopes, will help to further accelerate the progress on decarbonization. Source: asiainsurancereview.com

A one-in-200-year cyber event has the potential to produce damages between $15.6bn and $33.4bn and a one-in-50-year event could lead to potential damages in the range of $5.5bn-$24.4bn according to a new report by Guy Carpenter. The report, Through the Looking Glass: Interrogating the Numbers Behind Today’s Cyber Market examines the cyber reinsurance market by modelling potential global loss events and the evolution of the cyber market. It also assesses the size and scope of the industry and provides a view of the potential scale of a global cyber industry loss. The report estimates that the US-domiciled cyber market currently stands at approximately $9bn, with the non-US market totalling approximately $5bn. While the majority of global premium is still generated by US-focused carriers, the UK and European markets have seen accelerated growth. The possibility of a global industry event loss was examined across three cyber-modelling platforms. To model the loss, Guy Carpenter leveraged its own data related to nearly 2m cyber policies. The loss scenarios used spanned cloud, data theft and ransomware/malware events. These variations in estimates from the three platforms are driven by scenario interpretation, different views of event footprints and the analysis of historic data points, the report noted. The US market segment constitutes approximately two-thirds of the global total loss, the report found, largely due to its broader market penetration and is closely aligned with the premium splits between territories. Model variations were surprisingly greater at lower-return periods. “A factor attributed to a greater need to interrogate the takeaways from precedents and ‘counterfactuals’ to drive better consensus,” the Guy Carpenter analysis said. Guy Carpenter global co-head of cyber Erica Davis said, “The improvements to data quality and nimbleness of the cyber models are instrumental in continuing to attract capital to the cyber market. Ms. Davis said, “As structures evolve to laser out catastrophe events, reinsurance buyers will have more choice in how they manage their portfolios and the diversity that arises from divergent buying strategies will expand the opportunities for capital to flow into the market, thus feeding its ongoing growth.” Guy Carpenter global co-head of cyber Anthony Cordonnier said, “Market impact from a significant cyber loss is not unexpected given the industry’s resilience to greater losses from other classes. In most cases, these (significant cyber losses) should not be insurmountable.” Source: asiainsurancereview.com

The prices of spare parts for electric vehicles (EVs) are expected to increase due to their sales by a very limited number of garages, according to insurance experts. This situation would lead to hikes in EV motor insurance premiums and have caused delays in the repair period of such vehicles, reported Emirates Today. Insurance expert, Mr. Fouad Salem, said, “The prices of electric car insurance policies fall short of covering the insurers’ expenses, especially with regard to spare parts, which are much more expensive here than in the global market, due to the absence of sales agencies within the country. The sales of spare parts required for repairs is limited to a few garages that are then able to control prices.” He indicates that EV spare parts in the UAE cost four or five times that in several other countries. He pointed out that the continued rise in the prices of EV spare parts would inevitably push insurance companies to raise the premiums payable on policies for the insurers to cover operating costs. An insurance executive said that the UAE should invite EV manufacturers to set up direct repair agencies in the country, to reduce the time taken to carry out repairs and lower the prices of spare parts, to enable EV insurance coverage to be sold at reasonable prices. Source: meinsurancereview.com

Building Resilience for All Rat her than Avoiding Risk for Some GARI has collaborated with ARISE, the United Nations Disaster Risk Reduction (UNDRR) vehicle for encouraging public-private collaboration in disaster risk reduction, to bring focus to issues of equitable disaster recovery. It is now well-established that disasters have a disproportionate impact on socially and historically marginalized populations. In the United States and in other countries, marginalized communities are more likely to live in areas that are vulnerable to climate change impacts, such as poorly connected rural areas, the wildland-urban interface, coastal regions, and areas prone to flooding and extreme weather events and often have fewer resources and less access to financial assistance and insurance to recover from disaster impacts. These systemic disparities often result in exacerbated social and economic vulnerabilities, especially among older adults, people with disabilities, children, women, LGBTQQIA+, and unhoused people. This discussion will focus on what incentives and structures can best help attract private sector capital, and will highlight specific cases and initiatives that create equity in disaster resilience finance. We will feature leaders from Africa, Asia Latin America and the U.S. Keynote/Opening Comments Michael Rellosa, Philippine Insurers and Reinsurers Association Panelists (1) Lauren Burnhill, One Planet Ventures (2) Lisa Davis, PGIM Real Estate (3) Jessica Jacob, Sureco & Partners (4) Andrew Eil, Tata Consultancy Services (TCS), as moderator Co-Hosts (1) Joyce Coffee, Climate Resilience Consulting (2) Lori Collins, GARI Register here.