Archive for Global Risks

Insurers Prepare For Global Doomsday Scenario

According to scientists the World as we know it is in imminent danger from a Doomsday scenario the likes of which would scare the science fiction writers and not even Dr Who could avert.

No we are not talking about global warming, plate tectonics, mega tsunamis, giant asteroids, disclosure and alien invasion or the Satanic manoeuvrings of the New World Order, but something much more likely to occur first.

The Insurance companies are starting to prepare for the event for the simple reason – it has happened before!

In late August 1859 a very strange phenomena was experienced all across the World which had never been reported before. It was only a short period prior to this date that man had started using electricity for technology.
The first electronic telegraph dates from 1832 when it was invented by Schilling.
As the event occurred, all across the globe telegraph systems failed, in some cases burning out and shocking the users and in others, continuing to transmit code even when disconnected from the electricity supply.

The phenomenon became known as the Carrington Event, was named after a British scientist who first identified the cause – simultaneous coronal mass ejections or CME’s. The CME’s of August to September of 1859 were the largest ‘solar flares’ ever recorded to date.

Threats to the Earth from the Sun include coronal mass ejections and solar radio bursts which create solar winds, solar radiation storms of cosmic rays and magnetic storms.

Coronal Mass Ejection

Coronal Mass Ejection

All of these have in the past since the Carrington Event occured on smaller scales and disrupted power stations, power grids, telephone and television systems.
Since the advent of the digital age, all inter-connected systems, computers and the Internet and homes and businesses are now at major risk.

Solar activity occurs in known 11 year cycles and we are now entering a phase where a large CME or worse is expected anytime between 2012 and 2015.

This fact has not gone unnoticed by Insurers and Governments and Lloyds of London have issued numerous warnings and produced white papers on the global risk potential to business and society.

The largest risks are to power supplies and communications which if destroyed or shut down globally for large periods of time, will be the the proximate cause of the rapid mass breakdown of society as we know it. The scenario is truly frightening and it doesn’t take too much of an imagination to visualise the consequence.

Doomsday!

The Doomsday Vision of the Prophet Ezekiel

The Doomsday Vision of the Prophet Ezekiel

When a large CME occurs the size of the Carrington Event the World will have in the region of 12 to 17 hours of warning to prepare itself before we are hit by the ‘storm’. The normal rate at which solar flares take to reach the earth is two to three days.
Governments will not be able to supress that the event is about to occur due to the numerous individuals and agencies around the globe who are constantly watching and recording solar activity.
However short of sitting on your own personal Faraday cage with electronic equipment, batteries and generators, there is little that a business of individual can do to protect themselves from the electro-magnetic pulse and nothing much can protect from the cosmic radiation.

In a worse case scenario all power stations will be knocked out, transmission cables and electronic equipment – fried.

Satellites, television, radio, landlines, Internet and mobile phones will cease to function and there will be a Global communications blackout that could last for years!
Transportation will be massively affected. Trains, trucks and cars will stop working and planes will literally drop from the sky.

Electronic money will become worthless as ATMs and the systems that control them will be fried globally. Businesses will not be able to carry out any transactions and food supplies will rapidly diminish leading to massive civil unrest and riot.
Water systems which rely on pumps will fail to function and sewage and waste build-up will lead to large scale disease and death.
More frightening will be the secondary damage caused by the failure of the initial systems, such as was witnessed recently after the Fukushima Tsunami incident. When backup diesel generators for water cooling pumps failed due to a lack of supply,  it led to a nuclear core meltdown and radiation emissions not witnessed since Chernobyl. There are approximately 450 nuclear reactors worldwide!

No part of society will escape the consequences of such an event. Business interruption insurance and failure of service supply cover will either reach maximum levels of indemnity which are insufficient or be declared a fundamental risk.  The only action that individuals and businesses can take to mitigate the damage is in the words of Baden-Powell, to be prepared!

Further Reading

Coronal Mass Ejection – http://en.wikipedia.org/wiki/Coronal_mass_ejection
Carrington Event – http://en.wikipedia.org/wiki/Carrington_Event
Lloyds Global Risks White Paper – http://www.lloyds.com/~/media/Lloyds/Reports/360/360 Space Weather/7311_Lloyds_360_Space Weather_03.pdf
Lloyds of London Space Weather Report – http://www.lloyds.com/news-and-insight/news-and-features/market-news/industry-news-2010/be-prepared-stormy-space-weather-ahead
CME Nuclear Risks – http://beforeitsnews.com/space/2011/09/1089880-1089880.html

Commercial Insurance On The Internet

Until recently it was extremely difficult to purchase commercial insurance online. In the last couple of years there has however been an explosion of small business and SME commercial product offerings appearing online and an equally large number of comparison sites, some general price aggregator and other specialist commercial insurance broker websites.

With so many new products and markets for modern risks emerging, knowing what business insurance cover is available online has become increasingly difficult with more choice.
Insurance Blog asked the insuranceblogger to investigate:-

Commercial Insurance Distribution Channels on the Internet

If you worked for a UK Insurance company just twenty years ago or anywhere else in the world for that matter, you would not have heard the term Internet distribution channel, except perhaps in the idle chat of the IT department boffins and analysts in the company cafeteria.

There were only two main distribution channels, or ways of moving insurance products to the market and the Internet as a serious sales and marketing contender would have to wait another ten years to appear.

At the time, the main channels were the direct channel, which meant producing insurance products that could be sold directly to the public from a call centre, thereby cutting out the costs and expense of managing a middleman, and the broker or intermediary channel.

The broker channel was further sub-divided into insurance brokers, agents, tied agents, consultants, sub-brokers, managing agents for Lloyds and the affinity corporate market.

Both channels offered different propositions for the same products dependent upon the way a policy was sold.

At the time only personal lines insurance products such as car and home insurance were available via the direct channel.

It was also considered that commercial insurance and business insurance were too complicated a product to sell direct over the phone, would take up too much time and would require a bank of approved underwriters with scripts to man the phone lines, as no commercial insurance autoquote systems existed. Consequently nearly all commercial insurance was sold via the intermediary channel.

This dual path situation for the sales, marketing and deliverance of insurance polices continued until Insurance finally became a product that could be bought and sold on the Internet. The earliest offerings around the turn of the Century were for personal lines insurance and there was barely a mention of Commercial insurance, save for the odd contact us button.

Ironically as personal lines insurance developed over the Noughties and became a much larger channel of distribution, the two previous direct and broker channels re-established themselves online, this time in much closer competition.

However both the insurance companies and the insurance intermediaries were caught napping as a new distribution channel emerged on the Internet; the aggregator or price comparison site, and in record time accounted for over 90% of online Internet insurance sales.

The public love to compare prices and the fact that most personal lines products could autoquote without the intervention of an underwriter, meant they could all be aggregated into an online insurance price comparison site, such as we see everywhere in the media today. This is a testament to the comparison sites success as a channel in its own right.

Commercial Insurance in the meantime was still in its infancy as a channel on the Internet, until very recently.

The inertia was mainly due to the reluctance of the large general insurance companies to standardise and autoquote for commercial products. They felt the risk was too high and underwriters resisted the change.

The change came about by market forces as the Broker channel started to sell commercial products using its own web-enabled back office systems.

This meant that online business insurance brokers could collect information about a businesses insurance requirements on a website form, and pass the data to its internal systems. These back office comparison systems are composed of a panel of insurers and providers that provided autoquotes.

Straight through processing to an insurance company could be carried out by the existing EDI or electronic data interchange mechanism.

The single broker business and commercial propositions soon became the target of the price aggregators and the large and now very rich comparison sites, who started to offer online insurance comparisons using broker panels in 2009, which rapidly became popular with small business.

The large composite commercial insurers were forced to respond and last year released a string of autoquote products into the Internet channel including packages for shops, offices, pubs, commercial let property, tradesman, professionals and commercial liability to name just a few.

The fact that it is nigh on impossible to watch television for more than an hour or two today, without seeing an advert for a builders public liability and tools policy from a dotcom is proof that the Internet has finally arrived as a commercial insurance distribution channel.

Commercial Insurance online is available from UK Commercial Insurance. The UK brokers operate one of the largest commercial insurance quotes comparison sites on the Internet.

Shadow Banks Not Banks To Blame For UK Economic Crisis says FSA

Lord Turner, Head of the Government owned,  insurance broker  subsidised UK financial services authority the FSA, has been busy espousing his thoughts on the current economic crisis and apparently the banks are not to blame for the banking crisis!

It’”s not the banks, its the Shadow banks who are to blame”, cries the Lord. These shadow banks are still out there doing damage’ said the Lord, and one can only suppose from his attack that their activities are outside the control of the current banking reforms, and his influence.

Shadow Banks? What on earth are they then me lawd?

Well according to his honourable lordship in last nights speech,  “In autumn 2008 the developed world’s banking system suffered a severe crisis … but it’s striking that the crisis did not initially seem to be one of banks themselves, but rather of an apparently new phenomenon: shadow banking. So we need to ensure that our regulatory response appropriately covers shadow banking as well as banks.”

(Whooa! Hold on me lawd. What about the activites of RBS, Northern Rock, LLoyds etc etc etc. Insurance blog got sick of writing about the baknks in the autumn of 2008. Read our archives!)

Lord Turner then described shadow banking as activities including securitised lending, hedge funds active in credit markets, investment bank trading of credit securities, the issuance of asset-backed commercial paper and the repossession market.

Hmm, yes that covers just about everything that Banks and Insurance companies do with your money when they take your salary, insurance premiums and mortgage payments.

Which begs the question that those in the UK insurance sector have been asking about the FSA since its foundation in 2005. Just what regulatory powers can the FSA possibly have over the Global Free Market other than being a souped up consumer protection vehicle through the FSCS, beggars belief.

If it is aware of all the shadowplay, which is carried out by all the big groups, banks, insurance and assurance companies and holding companies that the FSA is supposed to be regulating, then just what can it do to avert a future scenario like we saw in 2008?

Insurance blog is still firmly of the opinion that the FSA is full of overpaid, bloated bureaucrats, funded by insurance fees, that is no better than an after the event vehicle and punishment body for money making in  fines.

Face it Lord Turner, the FSA will never be able to tell the City how to do business only maybe how to conduct it!

Welcome to the End of the World Party!

Happy New Year to all our readers at Insuranceblog.co.uk.
2011 has certainly been eventful in the Insurance world with European rulings against gender as a rating factor, media attacks on car insurance pricing and the introduction of CIE Continuous Insurance Enforcement for motorists, to name but a few of the major changes that have taken place.
The early part of the year saw also the reinsurance market suffer some of its biggest ever loses with the Tsunami in Japan and other natural disasters.

Well the Mayan calender may be coming to an end and the planets aligned with the centre of the universe, but I’m sure well see just as many interesting developments in Insurance in 2012!

9/11 Remembered

911 remembered

Insurance Blog is remembering the hundreds of insurance workers and employees who perished in the WTC ten years ago.

Novus Ordo Seclorum