Weekly News Roundup: January 20th

The Insurance industry is ever-changing and keeping up with everything that happens can be difficult. 

With that in mind, here are some of the recent stories from around the insurance world that we found interesting.

Global events in 2022, such as the war in Ukraine, fractured energy markets, and Hurricane Ian, led to a "hardest property-catastrophe reinsurance market" at the Jan. 1, 2023 renewals, according to Howden Re. The renewal process was described by Gallagher Re as "tense," "late," "complex," and "frustrating." Dedicated reinsurance capital has decreased by 15.7% since year-end 2022 due to rising inflation and higher claims severity costs resulting from global events. Buyers sought additional top-end cover but faced capacity constraints; ILS providers were reluctant to invest until after January renewals had concluded, with no meaningful reload from third-party sources observed afterward either due to heightened uncertainty of outcomes or higher financing costs for carriers. According to James Kent of Gallagher Re, some reinsurers have acted more adeptly than others during this period which could impact long-term relationships between clients and their brokers once competition rebuilds in the global market.

 

2. Allstate Readies Investors for Q4 Loss of Up to $335M

Allstate Corp. estimates a net loss of between $285 million and $335 million for the fourth quarter of 2022, with an adjusted net loss estimated to be between $335 and 385 million. Catastrophe losses during Q4 are estimated at around $779 million pre-tax, with Winter Storm Elliot accounting for 80%, or approximately 478 million, of that total. Allstate's combined ratio is expected to be 109.1 due to increases in claim reserves from prior events as well as additions made to previous year reserves excluding catastrophes; personal auto insurance will have a combined ratio of 112.6 by the end of 2022 after a 10% rate increases across 19 locations were implemented throughout Q4 adding an expected additional written premium amounting up 17%. Homeowners Insurance premiums written are anticipated to be 9% higher than in 2021 (totaling 2.$9 billion), while investment results contributed significantly towards bottom line profits reversing from profit in 2021 ($508m) into a net loss in 2022 ($694m).

3. TWIA to Pursue $2.9B in Reinsurance for 2023 Storm Season

The Texas Windstorm Insurance Association (TWIA) board of directors voted to authorize broker Gallagher Re to pursue $2.92 billion in reinsurance for the 2023 storm season and established a probable maximum loss (PML) of $4.5 billion. With this additional funding, TWIA will have a total of $5.2 billion in statutory funding obligations for 2023, which may include traditional reinsurance and catastrophe bonds as well as existing multi-year catastrophe bonds worth an extra $700 million that insurers are required by state law to pay for through assessments on their property and casualty insurance policies throughout the state. The PML was set lower than what the association's actuarial and underwriting committee recommended while divvying up costs onto insurers; however, it was still based on long-term assumptions from TWIA's modeling vendor Aon with losses adjustment expenses included into consideration when determining its figure. Board member Michael Gerik warned that passing along these costs could burden policyholders across Texas. Still, his concerns were ultimately outweighed by other members' votes who favored keeping rates at reasonable levels so all parties involved could share some responsibility financially if they wanted to write policies within the wind zone area.

4. T-Mobile Investigating Data Breach Involving 37 Million Accounts

T-Mobile is investigating a data breach involving 37 million postpaid and prepaid accounts. The company identified malicious activity on Jan. 5. It contained it within a day. Still, the bad actor obtained some basic customer information such as name, billing address, email, and phone number. In 2021 T-Mobile agreed to pay $350 million to settle litigation over a cyberattack that compromised information belonging to an estimated 76.6 million people. To cover its reinsurance costs of $5.2 billion for potential assessments from wind damage TWIA board voted 4-3 in favor of the funding package, with Michael Gerik being one of three dissenting votes warning policyholders across the state have increased rates due to this burden.

5. Cyber Attack Hits 1,000 Merchant Ships as Norway Firm Targeted

On Jan. 7, Oslo-based DNV, one of the world's top ship-classification firms, suffered a ransomware cyberattack that affected 70 companies and 1,000 ships. The attack did not affect the ships' ability to operate but disrupted some functionalities of its ShipManager servers, which are now being restored by DNV. No other data or servers were affected, and the incident has been reported to Norwegian police. Cyber threats have long been an issue in maritime shipping and logistics industries; however, this occurrence occurs when supply lines are stretched due to Russia's invasion of Ukraine, bringing greater attention to such risks.