Data security

Boston – A new probabilistic model designed to help insurers better understand the location of their exposures relative to high risk areas and to estimate potential losses from wildfires is now available from AIR Worldwide Corp., a Boston risk modeling company. The U.S. Wildfire Model is designed to help insurers, reinsurers, and intermediaries manage wildfire risk both for individual policies and entire portfolios of properties in California. Nationally, wildfires have cost the insurance industry more than $5 billion since 1980 with a majority of the losses occurring in California. The 2003 Cedar and Old wildfires in Southern California, for example, cost insurers more than $2 billion. Together, the fires burned more than 750,000 acres, destroyed 3,700 homes and resulted in the deaths of 24 people. In 2006, more than 8.7 million acres have burned in Western states to date, equaling the acreage burned in all of 2005, one of the worst years on record. “The growth in insured losses from wildfires is a result of the same broad demographic trend we’ve observed with respect to other perils—namely, increasing property development in high risk areas,” said Dr. Jayanta Guin, vice president of research and modeling at AIR. “In the case of wildfires, we are witnessing property growth in the buffer zone between wildlands and the urban environment. According to U.S. Fire Administration statistics, nearly 40 percent of new home development in the Western United States is occurring in this wildland-urban interface, putting more insured property at risk every year.” Insured losses from wildfires are influenced by factors such as local fuels, topography, weather, and the vulnerability of affected structures. AIR’s model employs high-resolution fuel (vegetation), topographic, and weather data. The model incorporates 13 burnable fuel types at 30-meter resolution accounting for variations in moisture content, fuel loading, and horizontal continuity. Since fire spread is influenced by topography, AIR has incorporated high-resolution USGS digital elevation data. The model also considers the effect of wind speed and direction, including the Santa Ana winds in Southern California and the Diablo winds in the northern part of the state. The AIR model also estimates the mitigating impact of firebreaks created in the course of fire suppression activities, as well as the exacerbating impact of impaired road access. The flammability of roof and siding materials is the primary determinant of a structures’ vulnerability to fire. The AIR model accounts for a wide range of residential and commercial constructions and takes into account mitigating factors, such as fire resistant roofing and siding materials, to build an estimate of damage and loss. AIR’s probabilistic wildfire model is based on a robust stochastic catalog of potential future events that provides insurers with full probability distributions of loss and the ability to generate loss costs. The model is available now for AIR’s CLASIC/2, CATStation, and CATRADER catastrophe risk management systems to analyze exposures in California. Future releases of the model will expand its coverage to other Western states. Source: AIR Worldwide Corp.

Hartford, Conn. - Many commercial lines insurers imagine a world of potential success by applying to their businesses the predictive modeling techniques now widely used in personal lines, according to a new survey-based study by Conning Research and Consulting, Hartford, Conn. "It is clear from our survey results that commercial insurers are inspired by the advances in predictive modeling that are revolutionizing the personal lines marketplace," said Stephan Christiansen, Conning's director of research. "Since the commercial lines industry is still in the early stage of exploration of predictive modeling, it is not yet clear whether the early and aggressive pursuit of the right combination of data and tools will lead to a permanent competitive edge." The Conning Research study, "Commercial Lines Predictive Modeling: Searching for the Lift" identifies the environmental contrasts between commercial and personal lines, current activity in commercial lines predictive modeling implementation, potential barriers, and likely outcomes in this search for predictive modeling competitive advantage. "Certainly, predictive modeling has become a key tool in personal lines, but that is not necessarily predictive of a success in all commercial lines," Christiansen said. "Our research shows that insurers and modeling vendors perceive strong opportunities in some segments, weaker opportunities in others. And while there are barriers to successful implementation, our analysis has identified potential solutions for these hurdles." Source: Insurance Newslink

London - Eighty percent of major European insurance companies have begun their Solvency II implementation program, and, two-thirds (61%) see it as a means to improve all aspects of their risk management across the whole business, according to London-based Ernst & Young Global Ltd. However, while the benefits are welcomed, there is still much work to be done."The 2006 Solvency II Readiness Survey: Readiness and Beyond," published by Ernst & Young's Global Insurance Center, interviewed senior managers with responsibility for Solvency II in 54 of Europe's largest insurers, spread across 16 countries, with an average asset size of 110 billion Euros.

Boston - Markets in Financial Instruments Directive (MiFID), a European Union (EU) directive going into effect by November 2007, may affect the conduct of business and approach to operational risk of insurers that operate within the EU and who either provide or procure outsourced services.The directive will require that U.S. financial institutions—including insurers--operating within the EU that outsource an operational function to:

Silver Spring, Md. - Companies have a long way to go when it comes to determining their organizations' technology strategy to meet compliance requirements, according to a survey conducted in June of 741 end users from number of vertical industries, including banking, finance, healthcare and insurance. Partly because of media "over-emphasis" on Sarbanes-Oxley and HIPAA, end users have a "disturbingly narrow view" of compliance as a broader issue and what it means for their organizations, says AIIM, a Silver Spring, Md., enterprise content management association and author of the report.In its analysis, AIIM indicates that survey respondents have an intuitive feel that "something" is wrong within their organizations relative to managing electronic information, but are having a difficult time mounting a systematic and disciplined approach to meet the challenge.

New York - American International Group, Inc. (AIG) today named Anastasia Kelly executive vice president, general counsel, and senior regulatory and compliance officer.

Chicago - Aon Consulting, the human capital consulting organization of Chicago-based Aon Corp., report that Anne Kemp and Kathleen Skapik have joined the electronic discovery business unit. This unit is part of the IT Risk Consulting group, a division of the company's Financial Advisory and Litigation Consulting Services practice.

Hartford, Conn. - Property/casualty carriers in the U.S. can expect another year of overall industry underwriting profit in 2006, matching the results of 2004, according to the latest Conning Research and Consulting Inc. forecast report for the P&C industry, which provides a first look at results through 2008.

Fort Collins, Colo.- Colorado State University’s hurricane forecasters now predict this year's hurricane activity "will be slightly below the long-term," according to a revised forecast issued Friday.

IT INFRASTRUCTURE OUTSOURCING CONTRACTThe Netherlands subsidiary of Blue Bell, Pa.-based Unisys Corp. has expanded its relationship with long-time client REAAL Insurance through a new five-year outsourcing contract with a value estimated at $11.6 million (U.S). By managing the company's IT infrastructure, Unisys will provide support 24 hours a day, seven days a week, to REAAL and its agents. REAAL hopes to achieve significant cost reductions through consolidating infrastructure outsourcing services under one vendor. REAAL will consolidate its hundreds of existing support contracts and suppliers to one central contract with Unisys, and will reduce the number of services suppliers from 20 to one.

Many publicly traded companies are in their third year of dealing with the Sarbanes-Oxley Act (SOX)--the law that makes corporate executives responsible for the accuracy of their financial statements and for the internal controls that minimize errors and reduce fraud.After going through the rigorous process of documenting and testing those controls, such as the segregation of duties and appropriate access to financial systems, many of these companies-including insurers-spent far more on the effort than they ever imagined.

Overall IT spending among U.S. insurers in 2005 will be $28.8 billion, accounting for a little less than 3% of total net written premiums, and will grow to $42 billion by 2010, according to reports from Boston-based Celent LLC.How are IT departments going to manage that spending? What software will they buy? Which software should they toss or keep? What kind of return are they getting? Insurance executives want to know answers to these questions in their own companies.

When Mike Koscielny joined AAA of Michigan four years ago, the Dearborn-based auto club was entering expansion mode. It was acquiring AAA clubs in Illinois, Minnesota, Iowa and Wisconsin-and planned to grow in other nearby states.As a result, senior managers were considering how to accommodate the increase in business, says Koscielny, director of regional underwriting operations. Joking over lunch at Brainstorm's Business Process Management Conference in Chicago in April, he tells Insurance Networking News: "We thought we might have to add on to our building just to house the extra employees we'd need to meet our growth targets."

STUDY SHOWS POOR USABILITY OF WEB HOME PAGESAccording to a recent study by Oak Park, Ill.-based Vox Inc., home page usability of many insurance companies isn't up to snuff. The study analyzed the positioning of key customer and user elements, such as insurance quote and "find an agent" functions. Each company was given a rating based on a set of usability and benchmark criteria. One exception to the overall findings is 21st Century Insurance Co., Woodland Hills, Calif., which recently redesigned its home page. The study, conducted in the first quarter, reviewed content and where it was positioned on the page, comparing 12 insurance providers: State Farm, Allstate, Progressive, Geico, American Family, Liberty, 21st Century, Country Financial, AIG, Nationwide, AAA Chicago and USAA.

WEB-BASED POLICY PROCESSINGAgent X Press, a suite of processing capabilities, is designed to enable small insurers to support their agents and MGAs with Web-based policy processing. The suite from Wyncote, Pa.-based IDP Inc. is available to new and existing clients of IDP's VISION 21 policy management system. Agent X Press' functionality includes online policy inquiry for billing and claims information; and quoting, application submission and issuance. Agents enter a customer's name or unique identification data, such as policy number. They can then obtain the status of a bill or a claim, or obtain an accurate quote, within seconds, according to IDP. Subsequent to providing a quote, Agent X Press will permit the agent to electronically submit the application to further speed the process.

The Data Warehousing Institute based in Seattle came to the conclusion in its August 2005 report, "Strategies and Technologies for Deploying Business Intelligence," that 66% of organizations in different industries are trying to transform business intelligence (BI) from a departmental solution to an enterprise one. Only 17% of organizations have completed the task, while the remaining 17% will continue to deploy BI departmentally. This data shows that BI has a ways to go until it reaches maturity in most organizations.Newport Beach, Calif.-based Pacific Life Insurance Co. seems to have the maturity factor under control. It has implemented an enterprise server equipped with BI features.

Palo Alto, Calif. - Nearly two-thirds of security executives believe they have no way to prevent a data breach, according to research by the Ponemon Institute, an Elk Rapids, Mich.-based privacy and information management research firm. What's more, most respondents believe their organizations lack the accountability and resources necessary to enforce data security policy compliance.The survey report – "National Survey on the Detection and Prevention of Data Breaches" – was sponsored by Palo Alto, Calif.-based PortAuthority Technologies Inc. and examines the responses of 853 randomly selected, U.S.-based information security professionals to questions related to data protection and prevention within their organizations.

Charlotte, N.C. - Montgomery Mutual Insurance Co., a Charlotte, N.C.-based member of Liberty Mutual Group, Boston, implemented the Commercial IQ SmartRisk underwriting and pricing system for business owners' policies developed by Liberty Mutual Agency Markets' strategic business unit.After a pilot launch in Maryland yielded a 100% increase in policy issuance, Liberty Mutual made Commercial IQ SmartRisk available to appointed agents for BOP coverage in Delaware, District of Columbia, Georgia, North Carolina and South Carolina, and will be available to Virginia appointed agents this fall.

Washington - Senior technical and management professionals from a number of insurance companies--Prudential, The Hartford, AIG and Blue Cross Blue Shield of Minnesota--are among the presenters at Rules Technology Summit, a new event at the 2006 International Business Rules Forum, November 5-9 in Washington.The Rules Technology Summit is aimed at technical audiences including IT architects and IS professionals whose goals are to take advantage of the business rules approach to build agile applications with the flexibility to accommodate frequently changing business conditions.

Boston - Dozens of new insurance activities, such as 'green' building credits and incentives for investing in renewable energy, are emerging to tackle the causes of climate change and rising weather-related losses in the U.S. and globally, according to a new report issued this week by the Boston-based Ceres investor coalition. But the report also states that more insurance companies need to be offering similar services to minimize losses and make the most of business opportunities related to climate change.