Earthquake coverage demand is on the rise on the American West Coast.
“We might need some more underwriters,” says Susan Rivera, president and CEO of V3 Insurance Partners, which launched its V3antage EQ+ Difference In Conditions program three weeks ago.
“We have over 800 submissions” for the program targeting small commercial businesses with primary exposures in California, she reports. “You are seeing a lot of first-time buyers.”
Tony Morgan, a senior vice president for Bliss & Glennon, a Redondo Beach, Calif.-based wholesale brokerage and MGA, also reports interest in his firm’s 10-year-old residential and commercial programs for Oregon and Washington since the earthquake and tsunami in Japan.
While Rivera and Morgan spoke to NU Online News Service last week specifically about specialty programs their firms have created, Morgan says he’s seen a big jump in applications for risks outside the boundaries of the two Northwest programs—for nonprogram risks in California individually written on the wholesale side.
“We see a lot of people who typically would not buy earthquake insurance now buying it. It’s across the board” for all three states, he says, noting that concerns about tsunami threats are also behind the flood of applications. “Typically, tsunamis are covered under the flood portion of the policy,” he says.
“After New Zealand and Japan, people are saying this isn’t a Hollywood sci-fi film. This is a real exposure. We need to have something in place,” Morgan says.
Bliss & Glennon offers what Morgan refers to as self-rater programs for residences in Oregon and Washington, allowing brokers to answer a few easy questions and fill out a short application by e-mail or fax to bind coverage.
“We were always interested in doing a self-rater program,” says Morgan, noting that it’s very difficult to do anything like that in California “because underwriters want the control. They don’t want to give you that authority because it’s California.”
“But we knew that there was a good market for quake in Washington and Oregon. We also knew insurance companies had a lot of capacity for those two states.” Because they had so much capacity, they were much more open to the idea of finding a different vehicle, like a program, to use that capacity, he says.
Referring to the residential product for Oregon and Washington, Morgan says total insured values could be as high as $2.5 million. Premiums start at $400.
“Basically, if it’s built after 1950 and it’s not on bay mud, and the TIV’s not more than $2.5 million, you have coverage,” he says, noting that total premium volume for the program, written on London paper, is roughly $300,000.
For commercial, TIVs can’t be more than $25 million, and limits up to $10 million are available. Deductibles can be as low as 2.5 percent. “We don’t want unreinforced masonry, and we’ll look at stuff as old as the early 1900s,” he says.
Rivera says V3’s competitive edge with its California commercial program is its use of risk-modeling technology and actuarial methods to various margin calculations that consider probable-maximum-loss estimates at underwriters’ fingertips.
“We spent a lot of time building a very technical rating model” that has a direct feed out to Risk Management Solutions (RMS), she says, referring to the Newark, Calif.-based modeling firm. “We actually send data electronically out to RMS and it comes back to our rater on all of these small accounts. We fully model every location.”
“Rather than worrying about modeling the account, our underwriters are actually spending their time analyzing the output of the actuarial model”—asking why certain indications are high, others are low—and select business “that is best priced for what it’s doing to our overall portfolio.”
Source : Property Casualty 360
