Open-access content
10th August 2012
Motor claims/ Ponzi schemes/ Wildfires/ Hailstorms/ Hailstorms/ Derechos
Rise in motor claims linked with claims management activity
On 4 July, the UK third-party motor and periodic payment orders (PPOs) working parties of the Institute and Faculty of Actuaries, established under the GIRO banner, released their third annual report looking at 2011 claims data. A key finding is an increase of 18% in the proportion of third-party accidents involving bodily injury from 2010 to 2011. This is the biggest increase ever recorded, and is estimated to cost insurers an additional £400m. The authors believe that this rise is due to unprecedented activity by claims management companies, noting a clear correlation between the office locations of claims management companies and the 'hotspots' for bodily injury claims. In addition to coverage in the insurance press, the report received widespread attention in the national press and on radio and television.
Ponzi scheme mastermind to appeal 110-year sentence
On 14 June, Texan financier Allen Stanford was sentenced to 110 years in prison for running a US$7bn Ponzi scheme, in which he stole money from his investors to finance an extravagant lifestyle in the Caribbean. This follows his conviction in March on 13 charges, including fraud and conspiracy for selling certificates of deposit from his bank in Antigua to thousands of investors in the United States and Latin America. Stanford's defence attorney said that the sentence would be appealed.
Floods in UK
- from 9 June onwards
Record rainfall in the UK during June resulted in a series of flash floods. The first major incident was in mid-Wales on 9-10 June, when three caravan parks and two villages were evacuated from fast-flowing water and the threat of a landslide. Less than two weeks later, parts of northern England (especially Lancashire and Cumbria) were deluged with a month's rainfall in 24 hours, with floods affecting many homes and businesses. On 27 June, the focus moved to Northern Ireland, where main roads in south and east Belfast were impassable as a result of flood water, abandoned cars and other debris. On the following day, exceptional rainfall associated with two powerful thunderstorms swept across Wales, the Midlands and into north-east England, causing more flash floods and one fatality when a car driver was trapped in rising water. There were severe hailstorms in the east Midlands. The storms and floods also caused widespread power cuts and the suspension of rail services on both main routes between England and Scotland. The exceptional rainfall continued into July, with further flood warnings. Although no authoritative estimate of the cost is to hand, it seems likely that the overall insured loss will run into hundreds of millions of pounds. For catastrophe purposes, it is unlikely that the succession of floods will be considered as a single event.
Hailstorms, Texas, US
- 13 June.
Two exceptional storms, with hailstones reportedly the size of baseballs, hit suburbs of Dallas and highways in the metropolitan area during the evening rush hour, causing severe damage to cars and homes (especially older, historic homes). Some reports suggest that the storms, which lasted up to three hours, produced hailstones that accumulated to a depth of 1.2 metres in places. An early estimate suggested that there may have been damage to 60,000 vehicles and over 20,000 insured homes. The total insured cost, originally put at up to US$2bn (£1.3bn) is now expected to be around US$1bn (£640.8m) - similar to the highest cost for any previous hailstorm in the state. According to the Insurance Council of Texas, this was US$1.1bn (£704.9m) in 1995.
Wildfire in Colorado, US
- 23 June onwards
This fire, known as Waldo Canyon, is the most destructive in the state's history, killing two people, burning more than 14,000 acres of woodland and brush and destroying around 350 homes, valued at at least US$110m (£70.5m). At one time, about 35,000 people were evacuated from their homes in and around Colorado Springs and some looting from evacuated properties has been reported. By 6 July, the fire was said to have been 95% contained, at a cost of nearly US$15m (£9.6m). The overall economic and insured costs are not known at the present time.
North American derecho,
- 29-30 June
A derecho is a widespread, long-lived, straight-line windstorm that is associated with a fast-moving band of severe thunderstorms. This one affected north-eastern states between Iowa, where it started, and the eastern seaboard from North Carolina to New York. Wind gusts up to 92mph were recorded (equivalent to a high Category 1 hurricane) and hailstones measuring up to 2¾ inches in diameter were seen. Extensive damage to property was recorded over a wide area, with trees uprooted and major power cuts affecting more than 3.7m customers. At least 22 people were killed, mainly by falling trees. A state of emergency was declared in Ohio, West Virginia, Virginia and Maryland. An early estimate described the insured cost as "running into hundreds of millions of dollars", which may rise as the clean-up progresses.
On 4 July, the UK third-party motor and periodic payment orders (PPOs) working parties of the Institute and Faculty of Actuaries, established under the GIRO banner, released their third annual report looking at 2011 claims data. A key finding is an increase of 18% in the proportion of third-party accidents involving bodily injury from 2010 to 2011. This is the biggest increase ever recorded, and is estimated to cost insurers an additional £400m. The authors believe that this rise is due to unprecedented activity by claims management companies, noting a clear correlation between the office locations of claims management companies and the 'hotspots' for bodily injury claims. In addition to coverage in the insurance press, the report received widespread attention in the national press and on radio and television.
Ponzi scheme mastermind to appeal 110-year sentence
On 14 June, Texan financier Allen Stanford was sentenced to 110 years in prison for running a US$7bn Ponzi scheme, in which he stole money from his investors to finance an extravagant lifestyle in the Caribbean. This follows his conviction in March on 13 charges, including fraud and conspiracy for selling certificates of deposit from his bank in Antigua to thousands of investors in the United States and Latin America. Stanford's defence attorney said that the sentence would be appealed.
Floods in UK
- from 9 June onwards
Record rainfall in the UK during June resulted in a series of flash floods. The first major incident was in mid-Wales on 9-10 June, when three caravan parks and two villages were evacuated from fast-flowing water and the threat of a landslide. Less than two weeks later, parts of northern England (especially Lancashire and Cumbria) were deluged with a month's rainfall in 24 hours, with floods affecting many homes and businesses. On 27 June, the focus moved to Northern Ireland, where main roads in south and east Belfast were impassable as a result of flood water, abandoned cars and other debris. On the following day, exceptional rainfall associated with two powerful thunderstorms swept across Wales, the Midlands and into north-east England, causing more flash floods and one fatality when a car driver was trapped in rising water. There were severe hailstorms in the east Midlands. The storms and floods also caused widespread power cuts and the suspension of rail services on both main routes between England and Scotland. The exceptional rainfall continued into July, with further flood warnings. Although no authoritative estimate of the cost is to hand, it seems likely that the overall insured loss will run into hundreds of millions of pounds. For catastrophe purposes, it is unlikely that the succession of floods will be considered as a single event.
Hailstorms, Texas, US
- 13 June.
Two exceptional storms, with hailstones reportedly the size of baseballs, hit suburbs of Dallas and highways in the metropolitan area during the evening rush hour, causing severe damage to cars and homes (especially older, historic homes). Some reports suggest that the storms, which lasted up to three hours, produced hailstones that accumulated to a depth of 1.2 metres in places. An early estimate suggested that there may have been damage to 60,000 vehicles and over 20,000 insured homes. The total insured cost, originally put at up to US$2bn (£1.3bn) is now expected to be around US$1bn (£640.8m) - similar to the highest cost for any previous hailstorm in the state. According to the Insurance Council of Texas, this was US$1.1bn (£704.9m) in 1995.
Wildfire in Colorado, US
- 23 June onwards
This fire, known as Waldo Canyon, is the most destructive in the state's history, killing two people, burning more than 14,000 acres of woodland and brush and destroying around 350 homes, valued at at least US$110m (£70.5m). At one time, about 35,000 people were evacuated from their homes in and around Colorado Springs and some looting from evacuated properties has been reported. By 6 July, the fire was said to have been 95% contained, at a cost of nearly US$15m (£9.6m). The overall economic and insured costs are not known at the present time.
North American derecho,
- 29-30 June
A derecho is a widespread, long-lived, straight-line windstorm that is associated with a fast-moving band of severe thunderstorms. This one affected north-eastern states between Iowa, where it started, and the eastern seaboard from North Carolina to New York. Wind gusts up to 92mph were recorded (equivalent to a high Category 1 hurricane) and hailstones measuring up to 2¾ inches in diameter were seen. Extensive damage to property was recorded over a wide area, with trees uprooted and major power cuts affecting more than 3.7m customers. At least 22 people were killed, mainly by falling trees. A state of emergency was declared in Ohio, West Virginia, Virginia and Maryland. An early estimate described the insured cost as "running into hundreds of millions of dollars", which may rise as the clean-up progresses.
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