Pirates Exemplify Shifting Risk Environment

Three recent news stories have underscored the need for insurance underwriting to adapt to a constantly changing environment, as ISO CEO Frank Coyne recommended during his recent address at ISOTech: the California wildfires, the rise of deer collisions in the Eastern United States and the increasingly brazen and ambitious pirates of Somalia.

The wildfires show that attention to circumstances ought to affect how one takes on new business. While the unusually intense Santa Ana winds driving the scope of the fire are not predictable over the long run, other factors are. For example, unusually rainy seasons over the past two years have caused the build-up of fuel making it far likely that fires would destroy property if they were to be ignited. Also, property owners in pursuit of a more natural environment are building in wilder areas that are more subject to wildfires, according to RMS.

State Farm has calculated that deer-related automobile crashes have risen about 15 percent over the last five years, according to a report by the Property Casualty Insurers Association of America. The report doesn't comment on the possible cause of that increase, perhaps because it would be difficult to discern. Population is a likely factor, but so may be construction, which provides deer with food sources in more traveled areas. Whatever the cause, insurers need to adjust their pricing according to increased probabilities of deer-related collisions, based on the reported incidence of such crashes or other sources, such as information from state wildlife organizations about population changes.