As part of its fourth insurance stress testing exercise launched on 14 May 2018, the European Insurance and Occupational Pensions Authority (EIOPA) has included for the first time a ‘cyber questionnaire’ for its target group of participants to complete. This briefing note by Milliman’s Claire Booth and Jonathan Lim highlights the information firms have been asked to disclose. It also explains how firms outside of EIOPA’s target group should consider using the questionnaire.
School districts and legislators across the United States are considering how best to protect children and school staff from gun violence at schools. At least 24 states across the country have policies that allow security personnel to carry weapons in schools, and at least nine states have policies that allow other school employees to do the same.
Arming school staff and allowing guns in schools pose challenging risk and liability issues. As with any legislation, the ramifications of a new policy can be complicated, and there are a variety of factors that governments and school boards must weigh as they debate this issue. This paper examines risk and insurance considerations for school districts and legislators tackling this difficult subject across the United States.
On 11 April, the Prudential Regulation Authority (PRA) issued a Consultation Paper in which it sets out its proposal to consider applications from internal model firms that include a Dynamic Volatility Adjustment. This proposal is relevant to Solvency II firms in the UK and the Society of Lloyd’s and its managing agents. It is also relevant to firms with, or seeking, Volatility Adjustment approval that use, or may develop in the future, a full or partial internal model to determine the Solvency Capital Requirement (SCR). Milliman’s Robert Bugg and Lyndsay Wrobel offer some perspective in this briefing note.
Influencer marketing is a lucrative business. Top social media influencers can earn upwards of $25,000 per post in partnership with a brand or company. Still, social media influencers must think about reputational risks that can have a measurable effect on their revenue.
In this article, Milliman’s Madeline Johnson discusses why individuals who rely on their name for income may need some type of reputation risk or business interruption insurance. She also explains the factors insurance companies should consider if they design an individual reputation risk insurance product.
Here is an excerpt from the article:
Starting with the premise that our “good name” translates to our own individual “brand,” protecting one’s individual reputation correlates to protecting one’s personal brand – and the corresponding income stream and overall marketability contained therein. Just as Bruce Springsteen insured his voice or Heidi Klum her legs, for many professionals and celebrities their income is often dependent on the individual reputation they have created. As social media usage increases, the potential for a negatively received public comment does too. A negatively received post has potential implications not only for the social media star but also potentially for the partner company or brand. These companies hire influencers and pay them to endorse their products or services on various social media venues. Reputation risk insurance could provide a financial safety net by providing coverage if a significant negative media event occurred that quantifiably affected an influencer’s future revenue stream….
… In exploring a structure for a reputation risk insurance product for individuals, an insurance company would need to consider the ramifications of insuring an influencer’s potentially poor choice in posting. In most insurance policies, the insurer is offering protection from an outside risk exposure, not an intentional communication on social media. From an insurer’s perspective, issues to consider include defining the specific social media coverage event excluding instances where protocols were not used and, most importantly, the ability to quantify the premium and loss coverage accurately. The insurer would need a methodology to estimate the predicted occurrence of the negative social media event to determine the risk of loss to the insurer. We would expect the actuarial value of the covered losses to be a key component to the policy. Insurance companies would need to structure the policy using a set of assumptions related to how much has been damaged or lost and for how long. Evaluating past social media influencer income streams versus changes after varying posts and videos to form a predictive view may be helpful in understanding risk exposure. A prudent approach to determining insurance terms and pricing is to perform an actuarial study to evaluate the frequency and severity data from similar past events. This can be accomplished by evaluating relationships between social media influencers that have partnerships with certain brands or products, costs of the ultimate drop in followers and sales, and any existing mitigation activities.
Have you ever wondered what options would be available to your company should it get into financial difficulty? Does your company have a ‘plan B’ and how practical and realistic is it? These are questions (re)insurance companies may soon need to answer. Recovery and Resolution Plans (RRPs) have already been introduced in the banking industry. In this blog I outline a few insights the insurance industry can learn from the recovery and resolution planning process which the banking industry has already commenced. (Re)insurance companies may find this useful particularly in light of the European Insurance and Occupational Pensions Authority (EIOPA) opinion issued last month recommending a harmonised recovery and resolution framework for all insurers across the EU.
Based on the feedback from the banking industry, it would appear that there is more to recovery and resolution planning than meets the eye. In the banking industry, recovery plans, for example, are intended to be living documents which demonstrate that the recovery strategies presented can be implemented in reality—and that is not an easy task.
The following diagram illustrates the embeddedness of recovery plans within banks as well as some of the key considerations which I will expand upon in this blog.
Recovery plans can span hundreds of pages as the practicalities of recovery strategies are explored in great detail in order to have a plan of action in place that is realistic, achievable and capable of being put into action straight away. Regulators expect a short timeframe for implementation of a recovery plan, with the recovery strategies presented typically required to be fully executable within a 12-month period. In addition, it is expected that the recovery strategies take account of the particular scenarios the company may find itself in. For example, the recovery strategies may vary depending on whether an idiosyncratic or a systemic risk has materialised, given that the options a company could take when it alone is in financial difficulty compared to when many companies are in the same boat may well be different.
As more drivers use smartphones to talk, text, and perform other functions while driving, concern over distracted driving and its contribution to climbing collision rates has increased. Using data collected by Zendrive, Milliman recently studied the impact of distracted driving and other driving behaviors on collision frequency. Consultant Sheri Scott provides some perspective in this article.