Tag Archives: COVID-19

Regulating climate-related risks

The social and economic changes caused by the COVID-19 pandemic have had a significant impact on our lives over the course of 2020. It has been argued, though, that the changes we have seen over 2020 pale in comparison to the expected impact that climate change will have on our societies and economies. Some predict that we have just 10 years to act on climate change before the damage to the planet is irreversible.  

With this in mind, regulators are looking to the financial services industry to better understand the challenges posed by climate risk, including a transition to a low-carbon economy. This briefing note by Milliman’s Sinéad ClarkeOrlaith Lehane and Eóin Stack provides a beginner’s guide to climate risk for Irish insurers. It includes a high-level introduction to climate-related risks and information on what the Central Bank of Ireland and European Insurance and Occupational Pensions Authority are currently doing in relation to climate risk in addition to an overview of the approach taken by regulators in the UK. 

Enhancing ERM frameworks based on learned lessons from COVID-19 pandemic

COVID-19 has illuminated the wide-ranging impact that emerging risks can have on insurers across the globe. It has focussed attention on a grey area that exists in recognising when an emerging risk has fully “emerged” and how it should be treated. It would seem logical that once an emerging risk is realised, its subsequent monitoring and management should fall under a pre-existing risk management framework.

In this briefing note, Milliman professionals discuss how traditional enterprise risk management (ERM) frameworks may not fully capture the complexity of an emerging risk event, and reflect on some lessons that can be learned from the COVID-19 pandemic.

How will a work-from-home economy disrupt the insurance industry?

Corporate America has transitioned to remote work during the COVID-19 pandemic because of social distancing requirements. Forced to work from home, many employees have found that they enjoy their home offices and are saving money on gas, parking, and mass transit costs. Likewise, employers have the potential to save money on commercial real estate expenses. The past few months have shown that a remote workforce is feasible without sacrificing productivity.

In the insurance industry, many coverages are based on the assumption that work will be performed in a centralized in-person location. The pandemic has highlighted that many employment practices were outdated before this crisis and the changes now underway will have a profound impact on workplace insurance.

In this article, Milliman actuary John Klodnicki explains that the insurance industry must adapt in order to function in a post-pandemic world and navigate the “new normal” of a work-from-home economy.

How has COVID-19 affected the U.S. mortgage marketplace?

Now that we are several months into the COVID-19 pandemic, sufficient data exists to analyze its effects on the mortgage market and draw conclusions on the impact this disruption will have on the marketplace for the rest of 2020 and into next year.

The mortgage market started the year with robust origination volume, investor appetite, an expanding credit box, and home price appreciation. The pandemic shifted the scene significantly, triggering steep mortgage rate declines, undocumented forbearances to mortgagees, and a freeze of investor appetite. The Federal Housing Finance Agency also released a proposed rule in advance of recapitalizing and potentially releasing Freddie Mac and Fannie Mae from conservatorship, which has widespread implications for the future of the mortgage market.

In this paper, Milliman’s Nate Gorst and Jonathan Glowacki discuss each development and also discuss the impact of these events on the mortgage and housing market.

Reevaluating P&C benchmarks in the COVID-19 era

The introduction of COVID-19 had an almost immediate influence on insurance variables, from exposure levels, claim development, and litigation rates to trends, yet it may take a long time to realize the effects. As a result, typical benchmarks and the process of benchmarking that has worked well in the past may no longer be applicable.

With many users and applications of benchmarks, how can benchmarks continue to be useful when consistency has been significantly disrupted? How did COVID-19 make an impact on common metrics and statistics used in benchmarking?  What are strategies to make benchmarks valuable now and post-COVID-19?

In this paper, Milliman consultant Richard Frese examines property and casualty (P&C) benchmarking in a new era affected by COVID-19.

Forming a captive may address the lack of pandemic risk solutions

The COVID-19 pandemic has challenged business interruption insurance and transformed how the industry looks at workers’ compensation coverage. Cyber liability has taken on new levels of exposure as people work from home, school is held online, and retail converts to no-touch operations.

Companies are realizing what their current insurance does and does not cover throughout these uncharted times. Many have recognized a gap in insurance coverage they should have filled. At present, mainstream insurance companies don’t provide coverage to meet the specific demands of pandemic risk. Even if these unique coverages do exist, some companies find certain types of losses could be handled internally within one’s own captive for less money than the commercial insurance market.

Companies may want to consider captive formation to address the combination of unavailable coverage and future uncertainty related to pandemic insurance. In this article, Milliman’s Rachel Seale and Billy Onion explore what companies need to think about before forming a captive and whether or not it makes sense financially.