Reinsurers to Drive Premium Correction

U.S. home insurance premiums remain insufficient to reflect the growing risks from climate change, according to Jacques de Vaucleroy, chairman, Swiss Re. Despite rising premiums, homes continue to be built in high-risk areas, indicating that current pricing is not deterring homeowners. In a Bloomberg interview, de Vaucleroy suggested higher insurance costs could encourage proactive measures to mitigate climate impacts, including a retreat from riskier areas.

One working paper published by the National Bureau of Economic Research supports de Vaucleroy’s views. It found that nominal U.S. home insurance premiums increased by 33% between 2020 and 2023, and estimated that the 5% of U.S. households most exposed to climate change will see insurance rates rise substantially by 2053.

Reinsurance costs, which doubled between 2018 and 2023, are the main driver of rising premiums, partly due to reinsurers’ “climate epiphany” and need to reprice risk, but other factors — like inflation and high-value houses — also play a significant role.

De Vaucleroy hopes higher prices will prompt property owners to better prepare for climate risks, drawing a parallel to the improve­ments seen in cybersecurity due to insurer demands, and predicts that continued risk increases and appropriate reinsurance pricing will urge all stakeholders to follow suit.

Driver Data Sales Draw Senate Scrutiny

A letter from Senators Ron Wyden and Edward J. Markey to the FTC revealed that General Motors, Honda and Hyundai have been sharing customer driving data with analytics company Verisk, the New York Times reported. The automakers tracked drivers’ behavior and sold the data to the insurance industry to assess risk levels. Data included instances of hard braking, rapid acceleration and speeding.

The senators urged the FTC to investigate the auto industry’s data collection and sharing practices, and criticized the automakers for selling data without customer consent. Verisk paid Honda $25,920 over four years for data from 97,000 cars, and Hyundai received just over $1 million over six years. GM’s earnings were estimated in the low millions on data from over eight million cars.

The senators described the enroll­ment process for this data sharing as “deceptive.” Hyundai automatically enrolled cars with internet connections, while GM and Honda required customers to opt in. A March NYT report prompted the sharing of driver behavior data to stop, but GM still shares anonymized location data without customer consent. To opt out, customers must disable their car’s internet connection.

This marks the third congress­ional request for the FTC to inves­­tigate data collection from cars. The FTC has yet to confirm an investigation.

Russian Sanctions and Maritime Insurance

UK ship insurer West has warned of potential difficulties in settling claims for vessels involved in accidents with those insured by Russian insurer Ingosstrakh due to sanctions, potentially complicating Moscow’s oil trade, per Reuters.

In June, Ingosstrakh, which provides services to Russian oil exporters, was added to the UK’s sanctioned entities list, part of the British government’s efforts to increase economic pressure on Moscow. West is one of a dozen International Group insurers that provide protection and indemnity insurance to ships and collectively cover about 90% of the world’s oceangoing tonnage.

West’s advisory suggests it may be limited in covering liabilities involving another vessel insured by Ingosstrakh, especially in oper­ations like ship-to-ship oil transfers. In such cases, West may need a license to pay or reimburse any resulting liabilities, which could be time-consuming and potentially unattainable.

Ingosstrakh labeled the advisory misleading, arguing that sanctions laws do not prohibit coverage payments to the injured party, only to Ingosstrakh.

This issue speaks to economic sanctions’ broad impact on the global insurance industry and maritime trade, including the potential to disrupt operations and increase risks for shipowners, particularly in the oil trade. &