More than 40% of London's 301,000 commercial buildings face the threat of flooding from torrential rains according to an analysis by Zurich UK. The analysis revealed that in addition nearly half (14,780) of London’s 33,200 basements in commercial use are at risk of flooding from heavy rains. Of these, 5,692 face a ‘high’ or ‘extreme’ flood risk. In July 2021, London homes and businesses were inundated when a month’s worth of rain fell in one day, with basements properties among the hardest hit. The analysis has also revealed the potential impact of climate-driven weather on London’s economy. Zurich UK chief claims office David Nichols has said that failing to prepare for more regular bouts of heavy rain could have a knock-on impact on London’s economy which accounts for a quarter of the country’s GDP. He said, “Flash floods are one of the most serious climate threats facing the capital. Even at current levels of global warming, we saw the chaos heavy rains caused in 2021. More frequent and severe rainstorms could be hugely disruptive for Londoners, businesses and the city’s economy. Extreme weather is the new normal, and businesses need to adapt. It’s crucial that firms urgently assess the flood risks they face and put in place plans to respond and recover.” The Centre of London research director Claire Harding said, “London faces increasing risks from heatwaves and flash flooding: and our aging infrastructure isn’t keeping up. The impacts will often be worse for Londoners living in inner city areas with high population density and little green space.” According to the Met Office, extreme rainfall in the UK could become more frequent and severe than previously thought. New calculations suggest that 30mm of rain per hour – the threshold for flash flooding – could be two-and-a-half times more likely in London by the 2070s, compared with the 1990s. Paving over of the capital, a lack of green spaces and increased use of basements, is piling pressure on London’s antiquated sewage system, contributing to the rise in surface water flooding. Mr Nichols said, “It’s not too late to prepare our towns and cities for more surface water flooding, but the current the pace of change is too slow. The government needs to accelerate the retrofitting of sustainable drainage in public spaces, or rainfall will increasingly overwhelm city sewers.” Zurich Insurance has also launched a build back better scheme to help flood-hit home and business owners improve their property resilience to future flooding. It also offers free counselling service for customers impacted by flooding. Source: asiainsurancereview.com

New research in the US has examined how the tragedies from hurricane Andrew ultimately paved the way for positive community safety innovations through modern building codes and enhanced regional mitigation initiatives. The study, however, reveals that new man-made events have also increased insurance crises for the US consumers. The joint research ‘It's Not Just the Weather: The Man-Made Crises Roiling Property Insurance Markets’ released on the eve of the 30th anniversary of hurricane Andrew has been conducted by the American Property Casualty Insurance Association (APCIA), the Reinsurance Association of America (RAA), the Association of Bermuda Insurers and Reinsurers and University of South Carolina Risk and Uncertainty Management Center director and professor of finance Robert Hartwig. The study reveals that 30 years later, there are new, growing property insurance crises in many US states resulting from man-made events - legal system abuse, government interference and fraud. APCIA president and CEO David Sampson said, “Unchecked plaintiff bar tactics, legal system abuse, fraud, and misguided government policies are having a significant impact on the availability and affordability of insurance for American families, individuals, and businesses. He said, “Collectively these factors have driven the average Florida homeowner’s insurance policy to nearly $3,000 in 2022, roughly twice the US annual average.” Dr Hartwig said, “Hurricane Andrew forever changed the way American communities prepared for natural disasters. At the time, it was the costliest natural disaster in the US with an estimated $27.3bn in insured losses. Now, 30 years later, we are experiencing a new major catastrophe in states such as Florida, California and Louisiana, except this one is man-made.” RAA president Frank Nutter said, “In Florida alone, seven insurers went insolvent in the last two years and 14 other companies have stopped writing new policies to avoid similar stability risks. “A report by Florida state’s insurance regulator found that the state accounted for 79% of the nation’s homeowners’ insurance claim lawsuits, while making up only 9% of the nation’s homeowners’ insurance claims.” According to the Florida Office of Insurance Regulation, in the last 10 years, $51bn has been paid in insurance claims and of that, 71% went to attorneys’ fees and public adjusters while only 8% went to claimants. Fraud related to property insurance claims is another issue that costs policyholders and impacts the marketplace. According to data from the FBI the cost of non-health-related insurance fraud is estimated to be more than $40bn per year, which can translate to an additional $400 to $700 annually in insurance premiums for the average US family. Source: asiainsurancereview.com

By Herminia S. Jacinto ON Aug. 25, 2022, or about a week ago, the Insurance Commission issued Circular Letter 2022-41 requiring life insurance companies, non-life insurance companies and professional reinsurers to adopt their own risk and solvency assessment (ORSA) framework. This risk assessment framework is in line with the enterprise risk management (ERM) for solvency purposes to manage insurers' risks in an integrated manner. It may sound complicated to the ordinary buyer of insurance, but the intention is for the insurers to be strong and capable risk takers. In other words, the intention is to protect the insuring public. The ORSA is only the latest of the various requirements that the insurance industry has to comply with. Insurance companies have to identify the foreseeable and material risks and the interdependencies of such risks and capital management. Covered companies are required to conduct the ORSA at least once a year, and the first submission is due not later than June 30, 2023. While the guidelines of this framework are stated in the circular letter, the companies will have to set forth their own risk assessment framework which is not an easy task. The insurance industry is still in the process of revising its financial reporting system as it implements the Philippine Financial Reporting System, better known as PFRS17. This reporting framework changes the existing accounting and reporting systems, and it will require a complete revamp of their computerized systems and applications. The tax and other regulatory implications are still being discussed by the affected parties. All companies should be under the PFRS17 reporting system by year 2025, but companies have to restate their 2024 financial statements for comparison purposes. Regulation is not new to the insurance industry. Republic Act 10607 which amended Presidential Decree 612, otherwise known as the "Insurance Code," is the bible of the insurance industry. Add to that, the various circulars and memorandum orders issued by the Insurance Commission on matters that may affect the orderly operations of the companies. Regular examination of the financial affairs and specific functions like pricing, claims settlement and reinsurance placements further ensures efficient conduct of insurance business. By the end of the year 2022, all insurance companies are required to have a net worth of P1.3 billion, a P400 million increase from the existing net worth requirement. The P1.3 billion net worth is the highest net worth requirement for insurance companies in the Asean region, and some companies are still on the way to complying with it. This requirement is further strengthened by the risk-based capital (RBC) framework which the Insurance Commission implemented several years back. This framework determines the amount of capital or net worth needed by a company to match its risk appetite. The formula assigns risk ratings to the assets and liabilities of the insurance company, including all its insurance activities (sales, underwriting, claims) and the result is compared to the company's audited net worth. Various sanctions can be imposed based on the rate of compliance with the RBC formula. Source: manilatimes.net

Aon will collaborate with climate risk analytics firm Jupiter to help its financial institutions clients quantify and disclose their climate-related financial risks. This will assist global financial institutions in navigating the increasing volatility resulting from climate change. A media release by Aon said financial institutions in many jurisdictions are now expected by regulators to quantify, disclose and manage the climate-related financial risks that exist in their investment and loan portfolios. “This new collaboration between Aon and Jupiter will calculate the range of potential impacts of climate change on financial institutions’ balance sheets, assisting them to identify risks and opportunities and to respond to the increasing volume, specificity, and quantification of climate regulations and disclosure requirements,” Aon said. The Jupiter collaboration will increase clients’ experience when engaging with Aon, while also having access to the firm’s catastrophe modelling and risk consulting capabilities. With such comprehensive service, financial institutions can re-evaluate capital needs, address volatility and build business resilience while satisfying regulatory requirements. Aon Reinsurance Solutions global growth leader Joe Monaghan said, “We believe that such comprehensive analyses will become even more crucial to financial institutions understanding the impact of climate change while maintaining operational effectiveness and regulatory compliance.” The global economy is increasingly exposed to climate change risk, creating unpredictable business and operational environments for financial institutions. Meanwhile, the physical risks of climate change are severe: in 2021 natural catastrophes caused $343bn of global economic loss – nearly 30% above the 21st century average, according to Aon’s 2021 Weather, Catastrophe and Climate Insight report. Financial institutions globally maintain a critical role in a transitioning economy, navigating a complex network of first- and third-party climate risks. Source: asiainsurancereview.com

Climate risks can harm Australian banks' mortgage portfolios and climate-vulnerable homes may also be difficult to insure according to Reserve Bank of Australia (RBA). RBA head of domestic markets Jonathan Kearns has said that if the physical impacts of climate change erode the value of a home, a mortgage borrower may find it hard to refinance or move. Speaking on Managing Financial Services Risks in an Age of Uncertainty Mr. Kearns said, “The lender may then find that the loan on that property has a much longer realized maturity and the collateral backing the loan has a lower value.” He said, “Climate-vulnerable homes may also be difficult to insure either because insurance companies won’t cover them or because the policies are too expensive. This poses a risk to banks, because uninsured home values could drop sharply following floods, storms, or fires. The lower the value of the underlying mortgage collateral, the greater the potential loss a bank would suffer should the mortgage borrower default. “Climate change risks can manifest in different ways for different types of financial entities. If financial entities mismanage their climate risks, they are also exposed to liability risk,” said Mr. Kearns. He said general insurers have a bit of a head start in managing the financial risks of climate change. First, because their policies make payments for damage from extreme weather events, insurers already have in place systems for assessing the likelihood and cost of these events. “The frequency and severity of these events is, however, generally increasing, and so insurers need to plan accordingly, including for larger potential losses,” said Mr. Kearns. Second, premiums on general insurance policies are typically repriced annually, which provides a regular interval for insurers to reassess risks. So insurers can adjust their premiums, or even decide not to write policies in some locations, as climate change alters the pay-outs they may have to make. Mr. Kearns said, “Such a reduction in insurance coverage could have significant implications for the society, the economy and the financial system. Also, the fact that insurers can later decide not to provide cover means asset owners should not take comfort from being able to insure climate risks at this moment in time. He said, “Some other insurance policies, such as life insurance, have longer periods over which payouts might need to be made, but they generally have less direct exposure to climate change.” Source: asiainsurancereview.com

The record-breaking heatwave experienced across Europe in the summer of 2022 will be considered an 'average' summer by 2035. A recent report commissioned by the Climate Crisis Advisory Group (CCAG) with data made available by the UK Met Office Hadley Centre has found that this would be normal even if countries meet their current climate commitments so far agreed in negotiations under the 2015 Paris Agreement. The temperatures are rapidly changing across Europe since 1850 against model predictions. An analysis found that according to current predictions an average summer in central Europe by 2100 will be over 4°C hotter than it was in the pre-industrial era. This serves as an urgent reminder of the need for countries to go well beyond their nationally determined contributions so far pledged under the Paris Agreement, which aims to limit global warming to under 1.5°C if at all possible. As such, CCAG argues for mitigative action to be pursued along three axes which the group has termed the 3Rs. Reduce emissions urgently, deeply and rapidly, while ensuring an orderly and just transition Remove CO2 and other greenhouse gases from the atmosphere in vast quantities to reduce the total from today, in excess of 500ppm, to less than 350ppm Repair broken parts of the climate system, starting with the Arctic. To create a manageable future we must refreeze the Arctic Ocean which has already warmed to 3.5°C above the pre-industrial levels and is exacerbating the extreme weather events around the world. The third ‘R’ is needed to buy time for us all to complete the actions on the first two. CCAG chair Sir David King said, “Even if countries meet their commitments to reduce emissions they have made so far, the situation is still set to get worse, with weather in Europe predicted to become even more extreme than seen this summer. Sir King said, “This data doesn’t fully account for the instability of the Arctic, which we now know is a global tipping point which that could have major cascading consequences for the entire planet.” Met Office Hadley Centre Professor Peter Stott said, “In the aftermath of the 2003 European heatwave, which is estimated to have killed over 70,000 people, I had predicted that such temperatures, so exceptional at the time, would become the norm under continued emissions. That prediction has now been realized. The risks of extreme weather, including fires, drought and flash floods, will keep increasing rapidly unless emissions of greenhouse gases are reduced substantially.” Source: asiainsurancereview.com

MANILA, Philippines — Supertyphoon Hinnamnor is likely to enter the Philippine area of responsibility (PAR) by evening Wednesday or early Thursday morning based on the track and intensity forecast of the state weather bureau. In its 5AM weather bulletin, the Philippine Atmospheric Geophysical and Astronomical Services Administration (Pagasa) said based on the latest track of Hinnamnor — which will be named “Henry” once it reaches PAR — was last located 1,305 kilometers east-northeast of extreme northern Luzon, packing maximum sustained winds of 195 kph with gustiness up to 240 kph. “Magiging west-southwestward, magiging pababa ang pagkilos nito (Hinnamnor), papasok yan sa loob ng ating PAR kung saan inaasahan natin na mamayang gabi o bukas ng early morning yung posibilidad na ito’y nasa loob na ng ating PAR,” forecaster Grace Castañeda said. Pagasa said Hinnomnor is likely to decelerate once it reaches the northern Philippine Sea so that by late Thursday through Friday it may become “almost stationary.” “Magiging mabagal ang pagkilos nitong Bagyong Hinnomnor at posibleng maging almost stationary ito by late Thursday or though Friday,” Castañeda added. “Hinnamnor may reach a peak intensity of 205 kph within 24 hours before gradually weakening as it enters its quasi-stationary phase. This tropical cyclone may be downgraded to typhoon category by Friday,” Pagasa said in its advisory. This means that the weather disturbance will have a bigger diameter in Pagasa’s monitoring instruments, and will have an effect of increased possibility of raising a tropical cyclone wind signal over the area of extreme northern Luzon, such as Batanes and Babuyan Islands. Light to moderate rains to sometimes heavy rains with isolated thunderstorms may also be expected by late Thursday or Friday as Hinnamnor enhances the southwest monsoon or “habagat” in a large swathe of western Luzon, including Metro Manila. While Pagasa said that Hinnamnor may not make a landfall in any part of the country, it will still dump huge volumes of rainfall in extreme northern Luzon and Luzon, causing floods and landslides. Meanwhile, Pagasa is also monitoring Tropical Depression Gardo, which was last seen moving north-northwestward as it interacts with Hinnamnor. The two weather systems so far has no direct effect but may likely induce habagat rains. Gardo is currently 1,130 kilometers east of extreme northern Luzon, packing maximum sustained winds of 85 kilometer per hour (kph) with gustiness of up to 70 kph. Pagasa said Gardo is forecast to move generally northward or north northwestward as it interacts with Hinnamnor outside of PAR. “’Gardo’ will degenerate into a remnant low [pressure area] this afternoon or evening as ‘Hinnamnor’ begins to assimilate its circulation,” said Pagasa. Supertyphoon Dubbed by Washington Post as a “rare supertyphoon” and a “powerhouse storm,” it said Hinnamnor was 2022’s strongest typhoon to date, the equivalent of a Category 5 Hurricane in the United States. Pagasa has six classifications for tropical cyclones, and while Hinnamor is still categorized as a typhoon as it moves towards PAR, it already packs a maximum wind speed of 195 kph. A typhoon has a maximum wind speed of 118 to 184 kph, while a supertyphoon has maximum wind speed exceeding 185 kph. READ: As supertyphoon threatens PH, LPA becomes tropical depression TD Gardo, Super Typhoon Hinnamnor likely to merge, strengthen in coming days – Pagasa Source: inquirer.net

Understanding insurance is no easy task – aside from calculations, terminologies, coverage, policies may come off as complicated to the untrained and the unfamiliar. One term that confuses many is the word “Deductible”. What is a deductible, and why does it exist? The Insurance Information Institute (iii.org) defines a deductible as an amount of money a policyholder is “responsible for paying toward an insured loss”. When an unforeseen circumstance occurs, or a disastrous accident happen, this deductible is subtracted – or deducted – from what insurance covers and pays for a claim. Simply put, a deductible is the line of risk shared between the policyholder, and the insurer. Deductibles can either be an amount already specified in the policy, or it can be certain percentage of the total insurance amount. Whatever the amount is, it’s determined and established depending on the policy – its type, the coverage, and the terms of coverage. Why do deductibles exist? For two reasons. First, it’s an ample gauge of moral hazards. Sometimes, the insured don’t always act in good faith. In motor car insurance, for example. Without a deductible, a car owner who has car insurance may drive recklessly and unsafely. The insurer is going to cover payment in the event of catastrophic loss, anyway. The existence of a deductible prevents acts such as this. It aligns both the interest of the insurer, and the insured. The second one is quite connected to the issue on moral hazard. The second one is financial stability. A deductible ensures that the insurer has a way to somehow reduce the severity of claims being received. If a deductible does not exist, then the filing for minor claims will seem to have no end, regardless of their amount. This will be challenging, especially when the insurer will be faced with heavier catastrophic losses from policyholders. All types of insurance have their own share of deductibles – depending on the coverage, the kind, the risk. When finding a policy, make sure to find one that is best suited to actual needs, and of course, actual budget. Sources: https://www.iii.org/article/understanding-your-insurance-deductibles https://www.investopedia.com/ask/answers/071515/why-do-insurance-policies-have-deductibles.asp#toc-the-bottom-line

Ransomware attacks on financial services increased by 62% in the global financial services sector during a period of 12 months. The State of Ransomware in Financial Services 2022 survey report by cyber security software and hardware company Sophos found that of the participating organizations, 64% reported an increase in attack complexity and 55% reported an increase in the impact of attacks. The annual study is based on the annual study of IT professionals, of which 444 respondents came from the financial services sector, working in mid-sized companies across 31 countries. The survey demonstrated that cyber criminals have become considerably more capable of executing attacks at scale, however, the sector reported the lowest rate across all sectors surveyed despite the jump in the financial services ransomware attack rate. The surge in ransomware attacks is part of an increasingly challenging broader threat environment that has affected organizations across all sectors. Over the last year, cyber attacks have increased in volume, complexity and impact, which in turn increases the challenge for IT teams. Financial services experienced an above-average increase in the complexity of attacks, in response to this sector’s strong ability to stop attacks, adversaries are forced to increase the sophistication of their approaches. The report stated that the organizations have to get better at dealing with the aftermath of an attack as 99% of the financial services organizations hit by ransomware and had data encrypted in the last year got some encrypted data back by backup to restore data. Some 52% of respondents in financial services reported that they paid the ransom to restore data — which is higher than the global average of 46% — likely reflecting the lower rate of backup use while 24% used other means to restore encrypted data. The report added that the average amount of data recovered after paying the ransom dropped over the last year to 61% compared to 65% in 2020 as the financial services respondents who paid the ransom recovered 63% of their data on average in 2021. This is slightly above the global average of 61% and the amount of data restored by financial services has remained constant at 63% across 2020 and 2021. Encouragingly, there has been a considerable increase over the last year in the percentage of financial services organizations that gain back their encrypted data back, up from 4% in 2020 to 10% in 2021. For comparison, the global average in 2021 was just 4%. This suggests that financial services have an above-average ability to restore encrypted data once the cyber criminals provide the decryption key. That being said, it’s important to note that nine in 10 financial services organizations that paid the ransom did not get all their data back. This clearly demonstrates that paying the ransom will only restore a part of the encrypted data and the affected cannot count on the ransom payment to get all their data back. Source: asiainsurancereview.com

Climate change impacts on healthcare have created a crisis through damage to healthcare provision, including facilities and supply chains. Due to differing climate contexts, a systematic approach is needed for healthcare providers in different communities to understand and prioritize the varied climate change impacts on healthcare operations, finances and reputation. Marsh McLennan Advantage director healthy sciences Kavitha Hariharan and others in a blog wrote about proactively measuring and reporting on climate performance can result in greater access to capital and contracts, better terms and greater trust from lenders, financial institutions and governments. Climate impacts are intensifying to become one of the most significant health crises this century. Quite apart from increasing and changing healthcare needs, such as increased injuries and infectious disease spread, climate change places undue strain on healthcare providers’ operations through damaged facilities and disrupted supply chains. Climate change, directly and indirectly, aggravates pressing environmental, social and governance (ESG) issues in healthcare, including workforce burnout, health disparities and the availability of resources like water. Healthcare providers have different exposures based on location, time horizon, types of assets and underlying vulnerabilities in their communities, they need a systematic approach to understand and prioritize climate impacts on their operations, finances and reputation. A first step is to understand which particular threats are faced where, as explored in a recent Marsh McLennan report, Feeling the heat: how healthcare providers can meet the climate challenge. They can also uncover unrealized opportunities such as pools of green capital, energy efficiencies and enhancing a sense of pride and purpose to retain talent. Healthcare providers urgently need to understand the risks of an evolving climate context and unlock its opportunities, so they can build resilience to climate impacts as well as reduce their contribution to climate change. Some interventions will further adaptation and mitigation goals simultaneously, while others may present trade-offs for providers to articulate and negotiate. Three strategies can help: Aligning business strategy with the climate agenda, shaping corporate governance to integrate climate risks and opportunities and improving communication and collaboration with the broader health ecosystem and surrounding communities to deliver more impact. Unprepared healthcare providers will lurch from one emergency to the next. To future-proof assets and operations, healthcare must act now, before this once-backburner issue becomes the next burning platform. Source: asiainsurancereview.com