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Hurricane Irma
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Hurricane Irma Closing in on Florida

Hurricane Irma Closing in on Florida 897 736 adapt ready

Hurricane IrmaAs Hurricane Irma barrels down on Florida, insurers are vulnerable to a myriad of exposures. As of this writing, all the major and minor ports serving the state have been shutdown.

The Tampa, FL port is a crucial gateway for fertilizers as it handles over 20% of the US exports, with its biggest customer, The Mosaic Company, being affected in particular – not just from the port closure, but due to the closure and potential impact on its phosphate production locations in the vicinity.

Mosaic serves customers in over 40 countries, and acknowledges that it conducts operations through a limited number of key production and distribution facilities. (Phosphates accounted for nearly 41% of the company’s revenues in 2016). The larger implications on agri-based businesses (including Campbell Soup, Kellogg, Tyson Foods and PepsiCo) remains to be seen.

Irma is also after orange juice: Bradenton, FL based Tropicana, is the world’s largest producer of branded juice, and one of the billion-dollar-plus subsidiaries of PepsiCo. The Tropicana plant is in the path of the hurricane, and its closure could severely impact production for days to come.

A quick rundown of industrial exposures at major ports follows:

Major PortIndustryPotentially Impacted Companies
TampaFertilizer, Agriculture, Food & BeverageMosaic Company; PepsiCo; Campbell Soup
JacksonvilleAuto industry (635,000 automobiles imported annually)Volkswagen; Porsche; Toyota
Port EvergladesIndustrial and heavy equipmentHurst
MiamiClothing, medical equipment and pharmaceuticals, metal products, and printingSteiner Atlantic; Noven Pharmaceuticals
West Palm BeachShips and boatsRybovich; Horizon Yacht; Bahama Boat Works

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    Hurricane Irma’s Forecast Cone image courtesy of the National Hurricane Center.

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    Tianjin Port Explosion: 20 Months On

    Tianjin Port Explosion: 20 Months On 640 426 adapt ready

    About 20 months after the Tianjin Port explosions that left insurance companies with as high as ~$4bn in claims, the port stays abuzz with cargo activities, with Beijing-based companies expected to invest $23 billion in the city. In 2016, the port saw throughput volumes to the tune of 14.49m teu, a 2.9% year-on-year rise.

    • “Tianjin port will apply the brakes to coal transportation by trucks from the second half of 2017, to alleviate pollution caused by diesel-powered trucks and coal consumption”, the mayor said.
    • Environmental clean-up is complete, new facilities built to improve local surroundings
    • The Ministry of Environmental Protection have established an environmental monitoring station to scrutinize the port and surrounding areas 24 hours a day
    • For four months after the blast, the city had checked more than 2,000 enterprises that dealt with dangerous substances and chemicals

    What are insurance companies doing?

    Adopting InsurTech

    “Insurance Technology” or the topic of technology-driven innovation in insurance is the focus for most insurance companies. Drones, robots, start-ups in this space, are contributing to its growth. Sensors built on ‘Internet of Things’ are being used on cargo to help companies rapidly understand the situation after catastrophic events (e.g.: the Tianjin explosion)

    Applying Changes to Cargo Underwriting
    • Building newer disaster models and cargo models
    • Improved understanding of risk accumulations
    • Pricing for the unknowns

    What do experts say?

    All Eggs in One Basket

    The Tianjin event highlighted how risks can be accumulated in a single location. A massive 285 of the Fortune Global 500 companies had facilities there. Following the event, insurers and reinsurers were exposed to claims from multiple lines of business, involving multiple policies across property, marine, motor vehicle and personal injury.

    Data for annual turnover in terminals, average turnaround times and market share of an insurer etc., enables calculation of risk scenarios and to identify accumulations.

    Know Thy Neighbor

    If the underwriters in case of Tianjin had known about the presence of lethal chemicals in Ruihai International Logistics, they would have priced the risks very differently. It is essential for underwriters to understand and evaluate neighboring risks/risks in proximity.

    BI from human error supersedes those from Nat Cats

    Mr Damien Pang, Head of Short-Tail Claims at AGCS Asia, notes that increasing BI claims are more from human error or technical failure rather than from Nat CATs. He suggests companies to increase their supply chains’ resilience by mapping them, identifying critical suppliers and their locations, get back-up suppliers and increase stocks. “These “redundancies”, once considered “cost-blocks”, are now instead viewed as investments in reliability and safety” he adds.

    Big Data and Analytics

    To fully exploit the capabilities of Big Data and Analytics, quality data is needed. Industry experts had commented that effective data communication was lacking throughout the underwriting process for the Tianjin event.

    An industry-wide transformation is happening in this area:

    • Consultancy firms launching newer and better cargo modelling tools.
    • Containers are being fitted with RFIDs to help identify locations.
    • Learning lessons from property businesses in Florida where risks come into the market with huge amounts of exposure information.

    Big Data and smart analytics will help make marine data more accessible, thereby enabling better assessment of cargo risk accumulations and create greater scope for modelling. They can also be used to build a knowledge profile of an area or specific property, including proximity to Nat CAT risks.

    References

    http://www3.asiainsurancereview.com/News/View-NewsLetter-Article/id/35863/Type/eDaily/China-Insured-losses-from-Tianjin-Port-blasts-now-estimated-at-US-4-bln

    https://www.linkedin.com/pulse/tianjin-explosion-3-marine-insurance-related-markus-spielmann?articleId=8136159571149071310#comments-8136159571149071310&trk=sushi_topic_posts_guest

    Why should I care about InsurTech?

    http://www.genre.com/knowledge/blog/lessons-from-the-tianjin-explosion-en.html?utm_content=39994145&utm_medium=social&utm_source=linkedin

    http://www3.asiainsurancereview.com/Magazine/ReadMagazineArticle?aid=37947

    https://www.lloydslist.com/ll/sector/insurance/article522140.ece

    Container ship by anaulin is licensed under CC BY-SA 2.0

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    January Risk Report

    January Risk Report 150 150 Leticia Neves

    2016 Risk Report

    2016 Risk Recap – While here you see some highlighted risks, a complete report you can find on the Global Risks Report 2016 by the World Economic Forum.

    Earthquakes and Environmental Refugees: Time for “Green” Engineering – analysis – Indonesia was struck by an earthquake in December of 2016 and left 103 people dead, 932 injured and 88,133 displaced from homes.

    2017

    Americas

    1,000 structures destroyed in Chile wildfires – Chile has had 238,000 ha burned in a whildfire that started late December, damaging towns, ranches, and vineyards.

    ‘Unusual’ yellow fever outbreak threatens Brazil’s most vulnerable – Brazil’s second most populous state declared a 180-day state of emergency due to a yellow fever outbreak. The World Health Organization has warned that if the disease continues to spread beyond the state’s borders, it could cause a larger epidemic.

    Contagious virus that affects young children reaches epidemic levels in Colorado – “Respiratory Syncytial Virus blocks the airways of people who have the virus. It can be deadly for children 2 and under because their airways are so small it makes it difficult for them to breathe, lowering their oxygen levels.”

    Asia

    More Rain to Come as Floods Leave 43 Dead, 1.6 Million Affected, 500,000 Homes Damaged – Six provinces in Thailand are going river flood caused by extreme, long-term rainfall.

    Cagayan de Oro City, in the Philippines, was placed under a state of calamity following massive floods – Seven people were reported dead and the damage to agriculture and infrastructure is estimated at P10 million.

    Thai floods may cost up to $3.4 bi if they last for 2-3 months – floods in early January killed 43 people, threatened agriculture and affected about 1.6 million people.

    Europe, Middle East and Africa

    Italy: Abnormal cold front in the south – Italy was hit by unusual and unexpected cold front that affected agriculture and increased heating costs to farmers.

    Civilian cost of conflict in Iraq increases amid Daesh threat – “Iraq is threatened by Daesh, which has taken power in several cities, including Iraq’s second largest city Mosul. The country also suffers from sectarian conflict as the government has been prioritizing Shiites, while discriminating against the Sunni population. Besides, corruption accusations against the government have also led to social distractions and the ongoing conflicts have a humanitarian cost.”

    Tackling Disaster reduces risk of conflict – “The effects of climate change, population growth, rapid urbanization, and environmental degradation are contributing to greater competition for resources, adding to tensions and instability,”

    Strong global investment appetite into Europe despite geopolitical instability  – Fourteen percent of foreign investors with a presence in the UK plan to change or relocate some of their European operations in the next three years should the UK leave the European single market. Overall, 11% plan to modify their UK presence in Europe following Brexit. Germany was identified as the preferred destination for those investors moving out of the UK (54%), followed by the Netherlands (33%) and France (8%).

    Cyber-Risks

    Russia suspected of hacking diplomats’ emails – Hackers infiltrated the emails of dozens of Czech Republic senior diplomats.

    Russian spies and cyber expert charged with treason for ‘cooperating’ with US – Arrests were made at a time of tension between Washington and Moscow after US intelligence accused Russian hackers of sabotaging US election in favor of Donald Trump.

    Lloyds bank accounts targeted in huge cybercrime attach – After the cyber-attack on Tesco Bank, Lloyds Banking Group suffered 48h online attach by cybercriminals that blocked access from customers.

    Saudi Arabia on alert for cyber-attacks – Saudi Arabia’s telecoms authority is on alert for a virus named Shamoon.

    Top Risks for 2017

    Top 10 Risks to the World in 2017 – An analysis from Time

    Top five global risks for 2017 – An analysis from the World Economic Forum

    The Global Risks Report – Main risks from an Insurance perspective – Zurich

     

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    August Risk Report

    August Risk Report 1000 600 Davis Cherry

    July Was The Hottest Month Ever Recorded – while recent El Niño effects have contributed to recent warming, NOAA scientists say this affect was over in June and that we are still on track for 2016 to be the warmest year on record.

    Alaskan Village Decides to Relocate as Seas Rise – as the town of Shishmaref, Alaska has lost up to 3,000 feet of land to coastal erosion in the last 35 years, its residents have voted to relocate the town to a new site.

    Exxon Mobile Halts Production as Louisiana Floods Threaten Facilities – the area around Exxon’s Baton Rouge 502,500 barrel per day refinery, received 22 inches of rain, 19 above normal for this time in August, forcing it to shut down four production units.

    Extreme Weather and Labor Prices Lead to Price Surge for Cashews – extreme heat and low precipitation in Africa and Asia coupled with rising labor costs in India have led to lower production and prices have increased 20% since the beginning of the year, affecting retailers and food processors around the world.

    Zika Virus Damages Puerto Rican Economy – new figures show that tourism in Puerto Rico earlier this year fell due to worries about the Zika virus. 42,000 room nights were lost between March and May 2016.

    FEMA Seeks to Move Construction Away from Flood Zones – a FEMA proposal would require federally funded projects to be built 2 feet about the 1-percent-chance annual flood level while for projects like hospitals and nursing homes, FEMA could use tougher standards or apply the best available climate science to determine potential future flood conditions over the lifetime of the project.

    NIH Warns Texas, Louisiana Could be Next in Zika’s U.S. Spread – and rising temperatures that lengthen mosquito seasons may contribute to this.

    Plastics Industry in Turkey is Worried About Impact of Unrest on Exports – Turkish plastics processors are worried they will lose business as global manufacturers grow nervous about their sourcing in Turkey in the wake of the failed military coup that killed 300 people.

    World Bank Report Details Growing Water Scarcity – among its many warning, water scarcity, exacerbated by climate change, could cost some regions up to 6% of their GDP.

    US Administration Proposes Requiring Companies to Disclose Climate Risks – the administration recently proposed requiring that all companies doing business with the federal government publicly disclose what they know about their climate-risk exposure. This information will be a factor in taxpayer-funded contracting decisions.

    Earthquake in Central Italy Levels Towns – 240 people have died with many more injured after a 6.2 magnitude earthquake. Many of the buildings in the towns hit hardest were made of unreinforced brick or concrete frames, making them vulnerable to earthquakes.

    Climate Change may halve the world’s regions suitable for growing coffee –  a new report claims that without significant efforts to reduce rising global temperatures, half of the global area suitable for coffee production could become unsuitable for growing coffee by 2050.

    Climate Change is Likely to Cause Allergy Misery for Millions – research from the UK points to a doubling of allergies to ragweed across Europe by 2050. The authors simulated how ragweed is likely to expand across the continent as temperatures rise.

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