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INDEX
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| Bad hurricane season expected |
The hurricane season is only a few months away and the predictions aren't looking very good. Forecasters with AccuWeather are predicting an above-average storm season with five hurricanes and two large storms making landfall in the United States.
"This year has the chance to be an extreme season," said AccuWeather hurricane forecaster Joe Bastardi. "It is certainly much more like 2008 than 2009 as far as the overall threat to the United States' East and Gulf coasts."
The AccuWeather forecast also calls for 15 named storms. In a typical season there will be 11 named storms, of which two or three will make landfall, according to AccuWeather. The report was released in March and covers the Atlantic hurricane season, which runs from June 1 to November 30.
AccuWeather's prediction is in line with the hurricane season prediction issued in December by Philip J. Klotzbach and William M. Gray of the Tropical Meteorology Project at Colorado State University. That report predicted "an above-average Atlantic basin tropical cyclone season in 2010" and predicted "an above-average probability" of major landfalls in the United States and the Caribbean.
It's a good idea to begin thinking about hurricane preparation for your business before the season starts. There are some simple things that can be done to increase the likelihood that your business will survive even in the event of a major landfall:
- Prepare your buildings and facilities: In the months before a hurricane this can mean checking roofs and other parts of your facilities to make sure they are in adequate shape to survive hurricane-force winds. This can include making sure such things as air conditioners are securely attached to the building and that small sheds or outbuildings are also secured.
- Protect your files: Create backups of all locally-stored computer files and make copies of all vital, locally-stored papers. Then be sure to move these files to a location that will survive any storm that could damage your buildings.
- Make a plan: Be sure that you and your employees know exactly what to do if a hurricane begins to bear down on your area. Know where to store outside equipment, how to prepare the buildings physically for the storm, what employees' exact duties are before, during and after the storm, and be sure to have ways to get in touch with employees after the storm to give them instructions on when it is safe to return to work.
- Make sure you are covered: This can be as simple as talking to your insurance representative to make sure you have the insurance you need to weather a hurricane. This can include hurricane, flood and business continuation insurance. If you have any doubts as to the terms of your policy or what you need, be sure to ask before the season begins.
Insurance availability and pricing for hurricane insurance are likely to grow more difficult for insurance buyers as the season approaches. Since other catastrophe coverages, such as earthquake, draw from the same reinsurance pools, their availability may contract and their pricing increase as well.
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There is good news about the safety of America's roads. The National Highway Traffic Safety Administration is reporting that the number of fatalities on American roads last year may have been the lowest recorded in more than 50 years.
The preliminary data show that 33,963 people died on U.S. roads in 2009. This is 8.9 percent fewer than the 37,261 who died in accidents in 2008. The trend has been moving in this direction for years as there have been 15 consecutive quarters with a drop in the number of deaths, according to the NHTSA.
The good news wasn't just confined to absolute numbers. Last year was also the safest year on record when the number of miles traveled is taken into account. In 2009 there were 1.16 fatalities for every 100 million miles driven. That was down from 1.25 fatalities for every 100 million miles in 2008.
The decline can be attributed to a number of factors. The NHTSA points to its campaigns to encourage seatbelt use and to discourage drunken driving. However, the drop is more likely attributable to safer roads and safer cars. As cars without advanced features like airbags begin to be replaced on the roads with more advanced cars, there are simply fewer fatalities.
The decline is not just good for the simple truth that any life saved is a good thing. Long-term declines in fatalities can lead to lower costs for businesses. Fewer fatalities means that payouts in lawsuits and insurance claims will drop, which has the possibility of resulting in lower insurance and other costs.
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| Year looking bad for natural disasters |
A new report from Swiss Re has good news and bad news on the global catastrophe front. The good news is that, compared with previous years, 2009 saw few losses from natural and man-made disasters. The bad news is that the world might not be so lucky in 2010.
In 2009, natural disasters cost insurers $22 billion worldwide and killed about 15,000 people. Most of the insured losses were in North America while most of the deaths occurred in Asia.
From a global prospective, 2010 has already gotten off to a bad start. Earthquakes in Haiti and Chile have already killed many times the number of people killed in all of 2009. And insured losses look to beat 2009 totals as well. Thomas Hess, Chief Economist of Swiss Re, said the chances that 2010 will be as good as 2009 are less than 35 percent. "We have already seen significant events in 2010 with winter storm Xynthia in Europe or the earthquakes in Chile and Haiti," he said. "[L]osses could easily be three to five times what they were in 2009. In 2005, insured losses set a record when they soared to $120 billion. I would not be surprised if this record is broken in the not too distant future."
The report noted that while a lot of attention is paid to primary perils like earthquakes and hurricanes, it is often the secondary effects that cause the most damage. These secondary perils include mudslides and flooding. In 2009, these secondary problems accounted for half of all losses from natural disasters, according to Swiss Re.
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| More reform called for in California market |
Since California deregulated its workers compensation insurance market in 1995, it has been plagued by high volatility in prices. A recent study by the RAND Corporation and Navigant Consulting predicts that this high level of volatility will remain in the market unless action is taken to reform the system.
Volatility like this can make it hard for businesses to plan ahead and can threaten the insurance market as a whole, according to Bill Barbagallo, co-author of the study and a managing director at Navigant Consulting.
The study identified six key factors that contributed to the insolvencies and volatility over the past 15 years:
- Inaccurate projections of claim costs
- Pricing workers' compensation policies below expected costs
- Reinsurance contracts that give insurers and reinsurers insufficient stake in the profitability of the policies
- Managing general agents who have little financial interest in the ultimate profitability of policies
- Under-reserving for claim costs by insurers
- Insurer policyholder surplus that is inadequate to provide a cushion against adverse events.
"We do not recommend that California reregulate worker's compensation rates," said Lloyd Dixon, lead author of the study and a senior economist at RAND. "Rather, we offer recommendations to reduce the volatility of the market and the frequency of insolvencies, while realizing the benefits of a competitive market."
The study made 29 recommendations on how the state could reduce volatility in the market. Those suggestions include having the state pay actuaries to certify that insurers have enough reserves set aside, increasing transparency by making more information available to the public and reviewing the performance of the Workers' Compensation Appeals Board System to make sure the judges are closely following the law.
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| Wet winter to bring spring floods |
The National Weather Service is warning that parts of the Midwest, Northeast and South are facing an elevated risk of flooding through the rest of spring. Parts of the Dakotas, Minnesota and Iowa have a very high risk of flooding, including along the Red River Valley where crests could approach the record levels set just last year, according to the National Weather Service.
"It's a terrible case of déjà vu, but this time the flooding will likely be more widespread. As the spring thaw melts the snowpack, saturated and frozen ground in the Midwest will exacerbate the flooding of the flat terrain and feed rising rivers and streams," said Jane Lubchenco, Ph.D., under secretary of commerce for oceans and atmosphere.
The East and South are more vulnerable because of an El Niño winter that brought with it above-average percipitation. The snowpack is also a big problem as it is more extensive than 2009 and contains up to 10 inches of liquid water, according to the Weather Service. As temperatures begin to increase throughout the spring, that snow will melt and could cause big problems for those downstream.
The western third of the nation appears to be in better shape. The Weather Service is predicting a below average threat of flooding out west.
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| Quiet winter for twisters won't last |
The tornado season is already in full swing and despite a relatively small number of tornadoes in the early months of 2010, this year could have an above-average number of twisters. In a recent USA Today interview, tornado expert Greg Forbes predicted that there could be a 9 percent increase in the number of storms this year over a typical year based on comparisons in weather patterns in previous years.
Forbes made this prediction despite the fact that there were only 42 tornadoes in the first two months of 2010. Last year there were 54 in the first two months, but 44 of those were in February. In February of this year, there was only one tornado reported.
Tornado season usually begins in the spring and lasts through mid-to-late summer, although most tornadoes come in spring and early summer. Tornado activity is mostly confined to Arkansas, Kansas, Iowa, Louisiana, Missouri, Nebraska, Oklahoma and Texas - or tornado alley - but can occur just about anywhere. The lone tornado that was recorded in the United States in February touched down in California.
One key to preparing for the annual tornado season is to make sure you have sufficient insurance coverage. Be sure your coverage limits adequately cover the potential for a total loss. You should also be sure that you have adequate business interruption insurance, which will cover lost profits and provide the extra money needed to get your business back on its feet after a disaster.
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| Business briefs: Vehicle rates |
The least expensive car to insure turns out to be the Mazda Tribute I, a two-wheel drive sport utility vehicle, while the most expensive car to insure is the Porsche Carrera GT2 two-door coupe, according to insure.com's annual ranking of car insurance rates. Insurance rates vary by car type and model and are based on the type of driver who owns that kind of car, how much horsepower is under the hood and what repair and replacement costs are. The Mazda Tribute I will cost the average 40-year-old male driver $1,070 a year to insure. That same driver would pay $2,943 to insure the Porsche.
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| Business briefs: Tort reform boost |
Tort reformers got some encouraging news in March after being dealt a setback earlier this year when the Illinois Supreme Court struck down a limit on damages from medical malpractice lawsuits. Georgia's highest court affirmed a law that made it harder for those injured in emergency rooms to sue for damages. The law requires that patients prove through "clear and convincing" evidence that an ER doctor acted with "gross negligence" - a far higher standard than would be required under standard negligence law. The Georgia Medical Association hailed the decision saying the law has increased access to medical care by lowering costs for doctors.
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