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March 28, 2024

Fruit and Vegetables Farmers Find Difficulty Getting Crop Insurance

Farmers who grow fresh fruits and vegetables are often finding crop insurance prohibitively expensive — or even unavailable — as climate change escalates the likelihood of drought and floods capable of decimating harvests. Their predicament has left some small farmers questioning their future on the land. Efforts to increase the availability and affordability of crop insurance are being considered in Congress as part of the next farm bill, but divisions between the interests of big and small farmers loom over the debate. The threat to farms from climate change is not hypothetical. A 2021 study from researchers at Stanford University found that rising temperatures were responsible for 19 percent of the $27 billion in crop insurance payouts from 1991 to 2017 and concluded that additional warming substantially increases the likelihood of future crop losses. About 85 percent of the nation’s commodity crops — which include row crops like corn, soybeans and wheat — are insured, according to the National Sustainable Agriculture Coalition, a nonprofit promoting environmentally friendly food production. In contrast, barely half the land devoted to specialty crops — supermarket staples like strawberries, apples, asparagus and peaches — was insured in 2022, federal statistics show. Among those going without insurance is Bernie Smiarowski, who farms potatoes on 700 acres in western Massachusetts, along with 12 acres for strawberries. His soil is considered some of the nation’s most fertile. The trade-off is the proximity to the Connecticut River, a bargain that grows more tenuous as a warming world heightens the likelihood of flooding. Mr. Smiarowski lost nearly $1.25 million worth of potatoes to floods last year, when heavy rains pummeled the area and water from the river seeped into his fields. It was the third straight year of challenging weather. “We had two extremely wet years, sandwiched around one of the driest years I’ve ever seen,” he said. “We can’t sustain another year like last year.” Even in an ordinary year, his expenses of $2,000 an acre yield returns ranging from a 20 percent profit to just breaking even. Mr. Smiarowski said the least expensive plans quoted to him — around $170 an acre annually — would be a significant outlay but would cover only 60 percent of the potatoes’ wholesale price. He sees the case for insurance, but for now, he’s simply hoping for the best. And specialty farmers say few agents will work with them. “I know of only one in the state,” said Mike Koeppl, who grows strawberries on seven acres near Oshkosh, Wis. Their reluctance is financial, experts say. Agents make more money insuring vast tracts of corn and soybeans. The average American farm is 445 acres, according to the U.S. Department of Agriculture, but the average specialty farm is considerably smaller. And most insurance plans cover a single crop, meaning specialty farmers growing a variety of fruits and vegetables need to buy multiple policies. Companies offering crop insurance stress that their plans must offer payouts that roughly equal the insurance premiums taken in. Kristen Ward, regional vice president for crop insurance for Farm Credit Mid-America, said that her company worked with farmers in six states, covering crops from barley to grapes, but that it could not do so in places where conditions were not conducive to specialty fruits and vegetables. Premiums offered to farmers are based on risk, “which is rated accordingly for where the crop is grown,” she said. “That may look different in a different parts of the country.” Products to fill such gaps have emerged, including whole farm revenue protection, a comprehensive insurance policy for farms growing multiple crops. More than 220,000 American farms grow specialty crops, according to the American Farm Bureau Federation, a trade group. But only 18,659 whole farm revenue plans have been sold in the decade they have been offered, federal statistics show. Advocates for the small specialty farmers are looking to Washington for relief. The federal crop insurance program was born during the Great Depression, when the Dust Bowl ravaged the farm belt. Under the $18 billion program, the government pays half a farmer’s crop insurance premium to guarantee a secure food supply. In December, Congress extended the current farm bill through 2024, but lawmakers have been unable to agree on what will follow. The National Sustainable Agriculture Coalition recently released a set of recommendations including easing access to whole farm revenue insurance and expanding disaster relief. “Floods, drought and hurricanes are all becoming more frequent and strong,” said Billy Hackett, a policy specialist for the coalition. “That’s why it’s important to have a safety net.” Senator Debbie Stabenow, a Michigan Democrat, has proposed language in the farm bill giving specialty farmers access to highly subsidized insurance policies and streamlining the application process for products like whole farm revenue coverage. “I will always fight to make sure that specialty crops are a central part of farm policy,” Ms. Stabenow said in a statement. A stand-alone bill, whose co-sponsors include Senator Cory Booker, Democrat of New Jersey, provides incentives for insurance agents to work with small and specialty crop farmers. The bill bases subsidies on the complexity of an insurance plan, rather than the size of the premium. But commodity farmers are wary of modifications to the crop insurance program. Growers of corn, soybeans and wheat worry about “changing how the program functions broadly in a way that sets everyone back rather than helping to fill the gaps that exist for certain crops,” said Danny Munch, an economist for the American Farm Bureau Federation. Some lawmakers oppose changes because of those concerns. “For years, Iowa farmers have told me to leave crop insurance alone in the next farm bill,” Senator Charles E. Grassley, Republican of Iowa — a state heavily dependent on commodity crops like corn and soybeans — said in a statement. “There’s no need to fiddle with something that’s not broken.” The impasse has led some farmers to pursue other sorts of assistance. After Mr. Smiarowski’s Massachusetts crop was ruined last year, he and other farmers affected by the flood appealed to Gov. Maura Healey for help, which came in the form of disaster relief. Mr. Smiarowski was grateful, but he said his share covered only about 20 percent of his losses. The support was also temporary, leaving him with no option but to wish for more favorable weather in the future. “When times are bad, you get what you can and you hope for a better year next year,” he said.    
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March 28, 2024

Port of Baltimore’s Indefinite Closure Deals Blow to City, State Economy

The collapse of the Francis Scott Key Bridge on Tuesday after it was struck by a container ship has disrupted the Port of Baltimore’s container shipping services, which will impact the economy of the city and beyond, analysts said.

Six people are missing and presumed dead after the Singapore-flagged MV Dali slammed into the bridge in the early morning hours, sending debris into the Patapsco River that continues to block a large portion of the channel that leads into Baltimore’s harbor.

The state of Maryland and the U.S. Department of Transportation announced the closure of the shipping lane to the port until further notice as the investigation, recovery and cleanup get underway.

Economist Anirban Basu said that along with the Johns Hopkins Health System, the Port of Baltimore is one of the main drivers of the city and state economy, and its indefinite closure will impact jobs and revenue across the region.

Baltimore is the largest city in Maryland, with a population of about 576,000. It has more than 2.8 million in its metropolitan area.

“I would say the Port of Baltimore is the leading economic driver for the region in Baltimore,” Basu, chairman and CEO of Baltimore-based Sage Policy Group Inc., told FreightWaves. “One could argue that the leading driver is Johns Hopkins. It’s a difficult comparison, because you’re talking about two very different fields of endeavor. But the Baltimore region has been one of the nation’s underperformers in recent years. In the Baltimore region, we have had to clawback the jobs lost early during the pandemic.”

The port is the deepest harbor in Maryland’s Chesapeake Bay, with five public and 12 private terminals. It handled over $80 billion worth of cargo in 2023. It serves more than 50 ocean carriers making nearly 1,800 annual port calls.

The port generated nearly $3.3 billion in total personal income and supports 15,330 direct jobs and 139,180 jobs connected to the port, according to state data.

“If you were to compare the jobs in the Baltimore region in February of 2020 just before the pandemic, to February of 2024, the Baltimore region is down 34,900 jobs, the state of Maryland is down 41,100 jobs, while the nation is up 5.5 million jobs during this period …,” Basu said. “But one thing we could say in Baltimore was that we are anchored by the Port of Baltimore, that whatever has happened with our corporate headquarters, many of them have just disappeared, but the Port of Baltimore was not going anywhere.”

According to recent data from Implan, the port’s 15,000-plus direct employees could lose an estimated $275 million in labor income if container operations are down for a month.

Implan is a Huntersville, North Carolina-based economic software and analysis firm.

“Before we even performed the analysis, we knew this event would have a negligible loss to the U.S. gross domestic product,” Candi Clouse, Implan’s vice president of customer success and education services, told FreightWaves. “The logistics and shipping will just shift to another U.S. port temporarily. However, the potential impact to Maryland is something to keep an eye on. Even if the port is only closed for 30 days, Maryland would be at risk for losing $550 million to its gross domestic product and $1 billion loss in total value of goods and services.”

Basu said how much the ship channel’s closure disrupts the city and state’s economy depends on how long until the port is fully operational.

The federal Bureau of Transportation Statistics said as of noon Tuesday, three bulk carriers, one vehicle carrier, two general cargo ships, one oil/chemical tanker and three logistics naval vessels were stuck behind the fallen bridge in the port. One vehicle carrier was in the port but outside the bridge, and nine bulk carriers, one vehicle carrier and two general cargo vessels were anchored.

“The short-term effects are very large. … There is a significant amount of cargo being diverted away from the Port of Baltimore to other ports, who are often competitors,” Basu said. “This impact is multimodal, because not only is the ocean carrier community impacted by this, but so too is rail transport, trucking and even air cargo, including cargo operations at Baltimore-Washington International Airport.”

With 31,000 vehicles per day crossing the Francis Scott Key Bridge, it is a major conduit for traffic in the region. Basu pointed to several ways trucking operations at the port and in the area will be affected.

The port is not only adjacent to I-95, it’s in the proximity of I-70, and so it’s a major way for northwest and east-to-west routes,” Basu said. “One would think that the trucking community would be quite meaningfully impacted as would distributors located in the region. Distribution is going to be less efficient, given lengthier travel times, both into the distribution centers and from the distribution centers.”

Supply chain visibility platform project44 released a report detailing how an estimated $1 billion per week in goods will be affected by the bridge collapse and indefinite suspension of container activities at the port.

“The Port of Baltimore handles freight from major automakers including, but not limited to, Nissan, Toyota, General Motors, and Volvo,” the project44 report said. “Expect disruptions to manufacturing in the automobile market until companies can establish dray networks through neighboring ports.”

Rerouting the port’s container cargo to ports in New York and New Jersey, Philadelphia, or Virginia could push up some trucking and rail prices in the short term, according to Tony Thrasher, senior director of product management at SPS Commerce.

“In the short-term, there is an impact on exporting/importing goods and services,” Thrasher said in an email to FreightWaves. “However, once things get cleaned up, and other routes out of the port are determined, operations will resume and the initial downtime will be over. Operations won’t be as efficient, and there will be additional costs to use other ports that are further away. Retailers that have prepared for disasters will navigate this disruption fine.”

Minneapolis-based SPS Commerce provides cloud-based supply chain management software to retailers, suppliers and 3PLs.

“Since we are in March, retailers are not in the crazy holiday rush yet, so I see this impact being short-term and not hurting big retailers,” Thrasher said. “I don’t think consumers will see the impact either. Retailers will have to deal with it, but the delays will not be enough for consumers to feel.”

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March 28, 2024

Explosive Atlantic Hurricane Season Predicted for 2024: AccuWeather

The scene is being set for a turbulent year in the tropics, one that could approach a record-setting pace that may exhaust the entire list of names for tropical storms and hurricanes -- and then some. The Atlantic hurricane season officially gets underway on June 1 and runs through the end of November, and AccuWeather's team of long-range forecasters say now is the time to prepare for a frenzy of tropical systems. There are signs that the first named system could spin up before the season kicks off as the calendar flips to June, a precursor of what's to come. "The 2024 Atlantic hurricane season is forecast to feature well above the historical average number of tropical storms, hurricanes, major hurricanes and direct U.S. impacts," AccuWeather Lead Hurricane Forecaster Alex DaSilva said. This echoes the early warning AccuWeather issued in late February, ringing the alarm bells about the potential for a surge in tropical activity. Last hurricane season featured 19 named storms, but there were only four direct U.S. impacts. Hurricane Idalia was the storm of the year, which slammed into Florida as a powerful Category 3 hurricane in late August. Additionally, Tropical Storm Harold drenched southern Texas, and Tropical Storm Ophelia made landfall in North Carolina. Lee also swiped the New England coast as a tropical rainstorm before making landfall in Nova Scotia, Canada. All signs continue to point toward the upcoming season being worse than the last, with the potential for the 2024 Atlantic hurricane season to rank as one of the most active in history.

Driving factors for a hyperactive hurricane season

Warm water is fuel for tropical systems, and there will be plenty of warm water for fledgling systems to tap into and strengthen. "Sea-surface temperatures are well above historical average across much of the Atlantic basin, especially across the Gulf of Mexico, Caribbean and the Main Development Region [for hurricanes]," DaSilva explained. The Atlantic water temperatures observed in March were around or even warmer than they were in March ahead of the blockbuster 2005 and 2020 hurricane seasons. Not only will this promote frequent development, but it will increase the potential for systems to undergo rapid intensification, a phenomenon that has occurred in recent years with historic hurricanes. In 2020, Hurricane Laura was in the Gulf of Mexico and was making a beeline toward southwestern Louisiana. In just 24 hours, it rapidly intensified from a Category 1 hurricane with winds of 85 mph to a menacing Category 4 storm with winds of 150 mph -- 7 mph shy of Category 5 status. Unusually warm water could also help to spawn tropical systems in November when the Atlantic hurricane season is winding down. The other major factor in AccuWeather's Atlantic hurricane forecast is hitched to the Pacific Ocean. Water near the equator of the eastern Pacific is in the process of quickly flipping from El Niño, when temperatures in this area are higher than historical averages, to La Niña, when temperatures in this zone are lower than long-term normals. This swift transition may have significant implications across the Atlantic Ocean. La Niña results in less disruptive winds, known as wind shear, over most of the Atlantic basin. "It can be helpful to visualize a stack of pancakes," DaSilva explained. When there is a high amount of wind shear, the top of a tropical system can be pushed and tilted away from its base, causing it to become lopsided. If a mature hurricane is in place, it may weaken but will not necessarily dissipate. "A tall, neat stack is what a tropical system wants to be, but wind shear can cause some pancakes to be displaced and the stack could fall over," said DaSilva. The faster the transition to La Niña occurs, the more active the hurricane season is likely to be. La Niña was present during the 2020, 2021 and 2022 Atlantic hurricane seasons, all of which featured near or well above the historical average of 14 named storms. The 2020 season is tied with the historic 2005 season for the highest number of named storms, with 30.

How many tropical storms and hurricanes are predicted in 2024?

AccuWeather meteorologists are forecasting 20-25 named storms across the Atlantic basin in 2024, including 8-12 hurricanes, four to seven major hurricanes and four to six direct U.S. impacts. This is all above the 30-year historical average of 14 named storms, seven hurricanes, three major hurricanes and four direct U.S. impacts. With so many factors that could bolster development, there is the potential that there could be even more than 25 named storms in 2024. "There is a 10-15% chance of 30 or more named storms this year," DaSilva said. In addition to the number of storms and hurricanes, AccuWeather is predicting an Accumulated Cyclone Energy (ACE) of 175-225, above the historical average of 123. ACE measures the intensity and longevity of tropical systems throughout the year, making it a reliable way to quantify the true strength of a hurricane season. A powerful, long-lived hurricane will generate a large amount of ACE, while a short-lived tropical storm will only generate a small amount of ACE.

What areas of the US have the highest hurricane risk in 2024?

"The Texas coast, Florida Panhandle, South Florida and the Carolinas are at a higher-than-average risk of direct impacts this season," DaSilva said. While these four areas are at an elevated risk for a direct strike from a tropical system, residents near other coastal locations should remain vigilant. "All residents and interests along the U.S. coast, including Puerto Rico and the Virgin Islands, should have a hurricane plan in place and always be fully prepared for a direct impact.," DaSilva added. One tool meteorologists use to create long-range forecasts is analyzing analog years, or past years when the weather patterns were similar to current conditions. An analog year for this season is 2016 -- a year when Hurricane Matthew barreled over Hispaniola and eastern Cuba before taking a swipe at Florida's Atlantic coast. The Category 5 hurricane was the most powerful storm of that season, which took place during La Niña, similar to what is predicted to happen this year.

What happens if there are more than 21 storms and we run out of names?

With AccuWeather experts predicting 20-25 named storms, meteorologists could run out of names to use for tropical storms and hurricanes. Although the alphabet has 26 letters, Q, U, X, Y and Z are skipped, leaving 21 names. So what happens when we run out? The Greek alphabet was used in the past to name storms, starting with Alpha, but that rule was changed by the World Meteorological Organization (WMO) in 2021. "The use of the Greek alphabet was not expected to be frequent enough to warrant any change in the existing naming procedure," the WMO said on its website. "However, after the record-breaking 2020 season, the WMO Regional Association IV Hurricane Committee annual session in 2021 decided to end the use of the Greek alphabet and instead established two lists of supplemental tropical cyclone names, one for the Atlantic, one for the Pacific." The supplemental list of names is also in alphabetical order, starting with the name Adria. If there are at least 22 named storms in the Atlantic this season, 2024 will be the first time the supplemental list is used.    
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March 28, 2024

Lloyd’s Reports Outstanding 2023 Results

Lloyd’s, the world’s leading marketplace for insurance and reinsurance, today announces its Full Year 2023 financial results, which demonstrate solid profitability on both the underwriting and investment sides, and a strong balance sheet. The market delivered an underwriting profit of £5.9bn (FY2022: £2.6bn) – a £3.3bn increase on the previous year. This contributed to a 7.9 percentage point improvement in the combined ratio to 84.0% (FY2022: 91.9%) – the strongest result since 2007. Underwriting benefited from lower costs from large risks and natural catastrophe claims, with the underlying combined ratio (combined ratio excluding major claims) of 80.5% (FY2022: 79.2%). Lloyd’s delivered a third consecutive year of double-digit growth, with the market’s gross written premium increasing by 11.6% to £52.1bn (FY2022: £46.7bn), driven by volume growth of 4%. With price increases of 7% offsetting inflationary trends, the Lloyd’s market has now seen 24 consecutive quarters of positive price improvement. The drive to improve performance and reduce the cost of doing business at Lloyd’s has resulted in a further 0.1% reduction in the attritional loss ratio to 48.3% (FY2022: 48.4%), with the expense ratio remaining flat at 34.4% (FY2022: 34.4%). Investment returns of £5.3bn (FY2022: £(3.1)bn loss), driven by higher risk-free interest rates around the world and the unwind of the previously booked mark-to-market loss, contributed to an overall profit before tax of £10.7bn (FY2022: £(0.8)bn loss). A strong and resilient balance sheet has supported central and market-wide solvency ratios of 503% and 207% respectively (FY2022: 412% and 181%), with total capital, reserves and subordinated loan notes increasing 12.7% to £45.3bn (FY2022: £40.2bn). Lloyd’s sustainable profitability and resilient capital were reflected in S&P Global upgrading the Lloyd’s market from A+ (strong) stable outlook to AA- (very strong) stable outlook, and A.M. Best boosting the market’s outlook to positive (previously stable outlook). “The results we’re reporting today are our best in recent history, with an outstanding underwriting result underpinned by a strong and resilient balance sheet. Our ability to attract – and provide returns on – capital is vital to ensuring we can support our customers through uncertainty. We’ll continue working with our market to deliver consistent profitable performance through disciplined underwriting – enhancing the value, relevance and long term sustainability of Lloyd’s.” John Neal, CEO, Lloyd’s The key figures reported in Lloyd’s 2023 Full Year results are:
  • Gross written premium of £52.1bn (2022: £46.7bn)
  • Underwriting profit of £5.9bn (2022: £2.6bn)
  • Combined ratio of 84.0% (2022: 91.9%)
  • Profit before tax of £10.7bn (2022: £(0.8)bn loss)
  • Attritional loss ratio of 48.3% (2022: 48.4%)
  • Net investment return of £5.3bn (2022: £(3.1)bn loss)
  • Total capital, reserves and subordinated loan notes of £45.3bn (2022: £40.2bn)
  • Central solvency ratio of 503% (2022: 412%)
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March 28, 2024

Lawyers Gear Up for Swift Start in Legal Fight Over Baltimore Bridge

The first shot in the legal fight over who will pay for the damage and loss from the collapse of the Francis Scott Key Bridge will likely occur in the next few days in a Baltimore courtroom, insurance academics said.

The Singaporean owner of the cargo ship that took down the bridge is expected to invoke a law dating back to the 19th century that limits the liability of ships’ owners, according to Lawrence Brennan, a law professor at Fordham University in New York. The law is similar to one used by the Titanic’s owners after that “unsinkable” liner hit an iceberg.

This Limitation of Liability Act law caps the liability of the cargo ship’s owners—and their several insurers—at the value of the goods the ship was carrying and the value of the ship itself.

A representative of the ship’s owner, Grace Ocean, didn’t respond to a request for comment.

The fight, maritime lawyers say, could run as long as a decade. “It will be one of the most contentious marine insurance cases in recent decades,” said Brennan, the law professor and a retired captain in the U.S. Navy.

While the lawyers fight, most claims will likely get paid by the insurers, including money for the bridge’s reconstruction. Then they will duke it out among themselves. Other claims might take longer, including those by the families of the people killed in the crash.

Other big sources of claims include the loss of revenue for the port, for the vessels now stuck inside it, and for businesses affected by the resulting supply-chain snarl-ups. The bridge part of this web of claims may be the simplest to resolve. The structure cost some $60 million to build in 1977, which is around $300 million today when adjusted for inflation.

The bridge is covered by the state of Maryland’s insurance. The policy, covering property damage and business interruption for bridges and tunnels, pays up to $350 million, documents show.

That ship, the Dali, has coverage through a specialized property and indemnity insurer, the Britannia P&I club. It said it is “working closely with the ship manager and relevant authorities to establish the facts and to help ensure that this situation is dealt with quickly and professionally.”

Britannia is one of a dozen protection and indemnity, or P&I, clubs, which between them insure around 90% of the world’s oceangoing tonnage. Each club, owned by shipowners, operates independently. But the clubs pool resources to buy reinsurance, allowing them to pass on much of the risk they underwrite. That reinsurance covers up to $3.1 billion per ship, according to ratings firm AM Best.

This generous reinsurance safety net is led by French insurer Axa, according to people familiar with the matter, but involves in total around 80 insurers from across the globe. That means, despite a likely eye-popping overall claim, the payout is “unlikely to be significant for individual reinsurers since it will be spread across so many,” said Brandan Holmes, an official at ratings firm Moody’s.

Not all claims springing from the incident will be covered by the ship’s insurance agreements.

The state, with its insurers in support, will likely be among many claimants that sue the Singaporean owner of the giant cargo ship that struck the bridge, seeking to recover their losses. The bridge collapse is a significant blow for a marine insurance market already hit by the costs of the recent Red Sea attacks. Increased rates and new restrictions on coverage are expected to follow.

“This probably will be one of the biggest marine losses in history,” John Neal, chief executive of the Lloyd’s of London insurance marketplace, said Thursday. “It clearly will have an impact on cover and premium.”

The insured losses could total between $2 billion and $4 billion, surpassing the Costa Concordia catastrophe, ratings firm Morningstar DBRS said.

The bridge collapse will likely affect the operations of scores of importers, exporters and other companies that use the port. Many will likely find the event isn’t covered by their business-interruption insurance, according to Robert Merkin, a law professor at the University of Reading.

“Only some policies will cover this—it depends on the wording,” Merkin said. Business-interruption insurance is designed primarily to cover damage to the company’s own premises, although some policies have extensions that might cover external events, such as the bridge collapse, he added.

 
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March 27, 2024

Marine Insurance Industry Bracing for Huge Claims from the Baltimore Bridge Disaster

The marine insurance industry is bracing for huge claims from Tuesday's Baltimore bridge disaster. Insurance claims from the collision of the Dali containership with the Francis Scott Key Bridge could be on par with a 2012 maritime disaster that led to $1.5 billion in payouts, John Miklus, the president of the American Institute of Marine Underwriters, told trade magazine Insurance Business on Tuesday. Luxury cruise ship Costa Concordia capsized off the coast of Italy in January 2012, killing 32 people in one of Europe's worst modern maritime tragedies. That disaster led to the marine insurance industry's highest payout, according to the trade publication. "I wouldn't be surprised if this were similar," Miklus told Insurance Business. It was not immediately clear how long it took to settle all of Costa Concordia's claims, but it appears to have taken at least a few years. "You've got various components to the loss," Miklus added. "A big one is going to be rebuilding the bridge and all the loss of revenue and loss of tolls while that's taking place." The Baltimore bridge brought in about $53 million in toll revenue for the Maryland Transportation Authority in 2023, Moody's analyst Cintia Nazima told The Wall Street Journal on Tuesday. Other insurance claims from Dali's Baltimore collision could include damage to the ship and its cargo, as well as business interruption, property, trade credit, and worker compensation, per Business Insurance. The marine insurance and reinsurance markets are likely to foot most of the bills, S&P Global reported on Tuesday. The Baltimore bridge itself is insured by insurance giant Chubb, per Insurance Insider. Dali, the ship, is covered by Britannia P&I Club, a specialist insurer that provides protection and indemnity cover for the maritime industry. Britannia is a member of the London-based International Group of P&I Clubs. The International Group of P&I Clubs will only cover the first $10 million in claims from any one incident, per the company's website. The remaining bill will be shared by the members, groups from specialist marketplace Lloyd's of London, and reinsurers. The claims process could take years, mirroring the situation surrounding the Ever Given containership, which ran aground and blocked the Suez Canal for six days in March 2021. SCOR, a French reinsurer estimated in June 2022 that Ever Given's claims could top $2 billion. "It will take many years to settle the claims from the Ever Given and the process will include much debate about who is liable," SCOR wrote in the report. "The issue of responsibilities and applicable laws in today's global maritime world is complex."
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March 27, 2024

Marine Mutual Britannia Confirms Insurance Role in Baltimore Bridge Ship Collision

A marine protection and indemnity insurer confirmed it is part of coverage for a container ship that hit a bridge in Baltimore, collapsing the bridge and causing unknown damage at this time. "We can confirm that the ship Dali is entered with Britannia P&I Club," the marine mutual said in a statement to BestWire. "We are working closely with the ship manager and relevant authorities to establish the facts and to help ensure that this situation is dealt with quickly and professionally." The container ship hit the Francis Scott Key Bridge in Baltimore at about 1:30 a.m. EST on March 26, crisis management firm MTI said in a statement sent to BestWire. Grace Ocean Pte Ltd. owns the Singapore-flagged container ship “Dali," and Synergy Marine manages the vessel. “Reinsurers will bear the bulk of the insured cost of the collapse of the Francis Scott Key Bridge in Baltimore," said Matilde Jakobsen, senior director, analytics, AM Best. "Liability cover for most shipping vessels is provided through protection and indemnity insurers known as
P&I Clubs."

Jakobsen said the P&I segment is dominated by the members of the International Group of P&I Clubs, which collectively insure approximately 90% of the world’s ocean-going tonnage. As part of the International Group’s pooling arrangements, member clubs mutually reinsure each other by sharing claims above $10
million.

Additionally, the group buys general excess-of-loss reinsurance cover up to $3.1 billion in the open market, Jakobsen said.

"While the total cost of the bridge collapse and associated claims will not be clear for some time, it is likely to run into the billions of dollars — well above the $100 million attachment point for the GXL contract," she said. "The insurance issues due to the collapse of the bridge will take a long time to determine and may involve several lines such as property, cargo, liability, trade credit and contingent business interruption. The claim will likely involve several insurers, reinsurers, subrogation, and legal issues and will serve to add to the
increasing challenges in reinsurance availability.”

According to MTI, the vessel collided with one of the pillars of the Francis Scott Key Bridge with two pilots onboard. All crew members, including the two pilots, have been accounted for and there are no reports of any injuries amongst the crew. There has also been no pollution reported. At least six construction crew members on the bridge at the time of the collapse are missing, according to reports. The Dali has an Indian crew of 22 and was outbound from Baltimore to Colombo, Sri Lanka. The exact cause of the incident is yet to be determined, MTI said. "The Dali has now mobilized its qualified individual incident response service," MTI said. "The U.S. Coast Guard and local officials have been notified, and the owners and managers are fully cooperating with federal and state government agencies under an approved plan." Shipping firm A. P. Moller-Maersk confirmed the Dali is time chartered by the company. “We are horrified by what has happened in Baltimore, and our thoughts are with all of those affected," the company said in a statement to BestWire. "We can confirm that the container vessel 'Dali,' operated by charter vessel company Synergy Group, is time chartered by Maersk and is carrying Maersk customers’ cargo. No Maersk crew and personnel were onboard the vessel. "We are closely following the investigations conducted by authorities and Synergy, and we will do our utmost to keep our customers informed," Maersk said. The shilling company said it does not own nor does it operate the vessel that has been involved in the Baltimore incident. Despite a relatively benign year for pool claims in 2023, P&I clubs sought further price improvements at the February 2024 renewal, to keep up with claims inflation, according to a new report from AM Best. The Best’s Market Segment Report, “P&I Clubs: Improving Underwriting Results but Further General Increases Needed to Keep Up With Inflation,” notes the general increases announced by P&I clubs for 2024 are slightly below those of the previous year (when some of the clubs applied increases up to 10%). AM Best considers the level of general increases necessary for clubs to maintain breakeven underwriting results in the face of inflationary economic conditions and the potential for a worse pool year to emerge in the future. AM Best’s report also notes the International Group of P&I Clubs renewed its reinsurance program at a lower price and without wholesale cyber and pandemic exclusions being imposed by its reinsurers.
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March 27, 2024

SEC Ramps Up Massive-Hack Probe With Focus on Tech, Telecom Companies

The U.S. Securities and Exchange Commission is asking tech and telecom companies how they handled the sprawling 2020 SolarWinds cyberattack, and drawing fire from the cybersecurity industry and big business for what they call overreach. The SEC, which sought the information from a broader swath of victim companies in the wake of the massive hack, has been refining its inquiries, according to people familiar with it, who didn’t identify the companies. The regulator has asked for internal communications about the cyber-assault’s impact, probing for gaps in corporate security and for other cyber incidents, according to the people, who asked not to be named discussing a private matter. The probe — aimed partly at determining what the companies may have known but didn’t disclose — follows a landmark lawsuit the SEC filed in October against SolarWinds Corp., claiming it failed to maintain adequate controls and defrauded investors by downplaying security risks. SolarWinds is the Texas software firm whose flagship product was used as a Trojan horse in the attack. The sharpened inquiry into the victim companies themselves comes amid broader pushback against the agency’s regulatory ambitions. Powerful trade and lobbying groups have criticized Gary Gensler’s SEC over its regulation of climate policy, cryptocurrencies, market structure, trade processing and more. The US Chamber of Commerce, which isn’t a party to the SolarWinds suit, nonetheless filed a brief last month asking the court to consider its view — and its view is that the SEC is going too far. ‘Power Grab’ The agency’s “constant power grab” has left companies in a state of uncertainty, and legal peril, over how to design their internal controls, the Chamber and the Business Roundtable argued in their “friend of the court” brief in federal court in Manhattan. The Business Roundtable counts among its members such heavy hitters as Apple Inc.’s Tim Cook, Citigroup Inc.’s Jane Fraser and JPMorgan Chase & Co.’s Jamie Dimon. The SolarWinds case is “a watershed moment in the SEC enforcement program in terms of cybersecurity,” said Jennifer Lee, former assistant director in the SEC’s enforcement division, which is conducting the inquiry, and now a partner at Jenner & Block LLP. The commission has become “very aggressive” in scrutinizing public companies’ disclosures after a data breach “and now, with SolarWinds, is turning its focus to a company’s public statements made before a cybersecurity incident,” said Lee, who predicts the lawsuit could be a sign of future cases. Legal Test In the historic cyberattack, malicious code was installed in software updates. SolarWinds’ Orion software was one of the products the hackers weaponized to spread digital havoc among nine federal agencies and about 100 companies, including such names as networking gear maker Cisco Systems Inc. and cybersecurity firm FireEye Inc., now known as Mandiant Inc. It isn’t clear whether the two are among the companies that have received information requests from the SEC. Lawyers say the suit may be the first legal test of one of the SEC’s tools: what Congress intended when it required that public companies maintain certain “internal accounting controls” half a century ago to ward off bribery of foreign officials. The business trade groups say the agency has distorted the law by applying it to a corporate victim of cybercrime and effectively dropping “accounting” from the equation. “The outcome of this litigation will affect every public company,” Nicole Friedlander, a lawyer for the groups, said in a statement. “For the first time, the SEC asserts the power to penalize companies for alleged failures of controls over access to anything a company owns, not limited to balance sheet assets.” Serrin Turner, a lawyer for SolarWinds, said the case was as “unfounded as it was unprecedented.” “The business community has called for this case to be dismissed because the SEC is trying to expand cybersecurity disclosure obligations well beyond what the law requires,” he said in a statement. From the commission’s standpoint, cybersecurity controls are internal accounting controls, because they are meant to protect corporate assets, which the agency says SolarWinds failed to do. SEC’s Enforcement Director Gurbir Grewal said at a conference this month that there is a disconnect between what SolarWinds said publicly and what executives said internally. ‘Swiss Army Statute’ In the wake of the assault, the SEC wrote to a wide range of companies it believed were affected, to determine whether they had made appropriate disclosures to investors, if there was suspicious trading related to the cyberassault and whether private data had been compromised. The letter came from the enforcement division, which is responsible for investigating and punishing companies, but to encourage cooperation the agency signaled it wouldn’t penalize those that shared data voluntarily. The lawsuit, filed two years later, sparked a furor in the cybersecurity industry, as some argued it could deter future cooperation with the government. Grewal countered that view at the Securities Industry and Financial Markets Association conference. “No one is asking you to give the blueprint of how hackers got in, where hackers got in,” he said. The business leaders point to skepticism of the enforcement strategy within the SEC’s own ranks. In 2020 energy company Andeavor agreed to pay $20 million to resolve claims over stock buybacks. Three years later Charter Communications Inc. paid $25 million in a similar case. Each case drew dissents from two SEC commissioners, who expressed concern aboutthe use of the legal tool. They called it the “Swiss Army statute,” after the famous multi-purpose knife.
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March 27, 2024

Progressive Insurance Begins Dropping Homeowners Policies in Florida

It was a sinking feeling the moment Bradenton resident Ira Kasdan got the letter last month that he was being dropped by Progressive Insurance.

DROPPED BY PROGRESSIVE

"Dear Policyholder, your policy will expire at 12:01 on July 1st , 2024, for the following reasons. After careful consideration we are unable to offer you a renewal policy due to a reduction in our hurricane exposure. Please contact your agent to find replacement coverage," the letter read. Last fall Progressive confirmed to ABC Action News that they will not renew policies in Florida beginning in May of 2024 to "rebalance our exposure" they told us in a statement. "I was shocked, I was stunned," Kasdan said. "There may be a time where as much as we love Florida we may not be able to stay here."

DIFFICULT FINDING A NEW INSURANCE COMPANY

As a retiree on social security, his fears don't stop there. He said finding information on potential new companies is not easy. He emailed ABC Action News for help. "These are no-name carriers, companies you have never heard of. Or they have been around 2 to 7 years and in some cases, they seem to be off-shoots of bankrupt carrier or carriers who left the state," Kasdan said. "I'm afraid we spend a lot of money to buy coverage and all we have is a promise of coverage that might not be any good if we need it." He sent a list of things he'd like to see on a centralized website, urging the state to put together a one-stop shop online tool to help consumers shopping for new coverage. "I really wish the state would be proactive," he said. "Put up a website with metrics of all the carrier's doing business in the state: How long have you done business? How many homeowners do they insure? What is the percentage of claims being paid? How long did it take you to pay them?"

SOME INFORMATION IS NOT MADE PUBLIC

ABC Action News spoke with the Chief Financial Officer Jimmy Patronis' office who offered a long list of resources available to consumers, but data this detailed and broken down by company is not available for the public a spokesperson said, citing much of the information is trade secrets, propriety to the insurance companies to keep the property insurance market competitive. "The idea that customer satisfaction ratings are a trade secret sounds like baloney," Kasdan said. "The information on how these new carriers handle claims and how happy or unhappy the customers are shouldn't be a secret. That is what people need to be able to decide which company they want to do business with." Mark Friedlander with the Insurance Information Institute said there is no one-stop shop for consumers looking for a new insurance company. "It's not to hide information from consumers, it's to hide information from competitors. It's very common," Friedlander said. "The consumers insurance agent needs to be the advocate in this process." Friedlander recommended consumers use third-party sites that independently rate insurance companies. He provided a list for consumers to start.      
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March 27, 2024

Tennessee Grows Captive Count in 2023

Tennessee licensed 25 new captives in 2023, as well as 66 new cell captives, bringing its captive count to 164 active captives and 555 active cell captives, marking a 37 percent overall rise in its number of risk-bearing entities. Moreover, the state witnessed growth in its number of pure or single-parent captives, which grew by nearly 12 percent to 163. Premiums rose in 2023 to $2.41 billion compared to $2.12 billion that was collected in 2022. "The growth we saw in Tennessee in 2023 is a direct result of fantastic team of analysts, our focus on customer service, and connecting with prospective customers," said Mark Wiedeman, captive insurance section director at the Tennessee Department of Commerce and Insurance (TDCI) in Nashville. "Taken together with our central location and our network of first-class service providers, Tennessee continues to prove to the world why we are a first choice when establishing a captive insurance domicile," added TDCI Commissioner Carter Lawrence. Tennessee is one of the older US captive domiciles. Its captive law was enacted in 1978. Since then, the law has been updated many times.    
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March 27, 2024

AI Makes Voice Cloning Scams More Convincing

With the rise of artificial intelligence (AI)-fueled scams, how do you know if the person on the other end of a phone call is a friend or foe? Voice cloning scams have been around for years. However, the cons continue to evolve as AI improves and becomes more accessible and easier to use. A recent high-profile voice cloning scam happened when New Hampshire residents received AI-generated robocalls mimicking U.S. President Joe Biden’s voice asking voters to “save your vote for the November election.” A more extreme example involves a business in Asia where cybercriminals used real-time voice cloning and deep fake video technology to stage a Zoom call where executives instructed a team member to wire $25 million. Not only can AI be used to clone celebrities and public figures, but it can also be used in everyday voice cloning scams that claim to be from friends, family members or co-workers. These AI-fueled scams have many variations, ranging from election misinformation to kidnapping for ransom scams.

Who Are the Targets?

Identity criminals are not interested in attacking individuals unless they have a high net worth or they are an employee with access to business information or systems. Cybercriminals prefer to launch attacks they can automate and can be used against large groups of individuals – like automated phishing attacks. Voice cloning scams are the exact opposite of an automated attack on a large scale. That’s why businesses are more likely to be targeted, along with people with a high profile and obvious financial resources. Identity criminals increasingly find their targets using AI programs to search the internet for information about people and businesses, including audio or video posts on social media or the web, as well as for details that can be used to make compelling calls to victims.

What is the Scam?

Scammers use AI tools to clone the voices of individuals they target on social media or the web to make calls to family, friends or co-workers. AI tools require as little as three seconds of a voice to create a realistic (enough) clone. Criminals can also spoof a phone number so it looks like a known caller. Using AI tools, criminals add sounds like laughter, fear and other emotions into the cloned voice, as well as sound effects like a subway station, an airport or a car crash. The technology is so advanced that scammers can also add accents and age ranges.

What they Want

Just like in traditional “Grandparent” or “Business Email Compromise (BEC)” scams, cybercriminals use a variety of tactics to create a sense of panic or urgency – like claiming a loved one is in danger, or an important vendor must be paid NOW! The criminals hope to scare people into sending money or sharing business or personal information that can be used in another identity crime.

How to Avoid Voice Cloning Scams

  • Hang up and don’t panic. Bad actors count on your fear or sense of duty to get you to take an action you otherwise would not. If you have any doubt about who is calling you and what they are asking you to do, hang up, collect your thoughts, and contact the person who supposedly called you and verify the situation. If you cannot reach them, connect with them through other family, friends or co-workers (if the call is business-related).
  • Be vigilant on all phone calls, even if you recognize the voice. Listen for odd statements, questions, or requests, especially for money or personal or business information. If you think something might not be right, ask questions that only the real person would know.
  • Avoid personalized voicemail messages. They can give bad actors easy access to your voice. Instead, use automated tools offered on mobile devices and office phone systems.
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March 26, 2024

Underwriting Losses Persist in U.S. P/C Industry, Total $21.2B in 2023

The U.S. property/casualty (P/C) industry recorded a $21.2 billion net underwriting loss in 2023, slightly improving upon the $24.9 billion loss recorded in the prior year, according to a new AM Best report. These preliminary results are detailed in a new Best’s Special Report, titled, “First Look: 2023 US Property/Casualty Financial Results,” and the data is derived from companies’ annual statutory statements received as of March 8, 2024, representing an estimated 97% of the total P/C industry’s net premiums written. According to the report, the P/C industry’s combined ratio improved slightly by 0.9 percentage points to 101.6 in 2023. Catastrophe losses accounted for an estimated 8.7 points on the combined ratio, up from 7.3 points in 2022, driven by record severe convective storm losses. The underwriting loss came despite a 9.9% growth in net earned premiums, as this was countered by a 10% increase in incurred losses and loss adjustment expenses, a 6.4% rise in other underwriting expenses and a 4.5% increase in policyholder dividends. With net investment income virtually unchanged from the prior year, the lower 2023 underwriting loss boosted pre-tax operating income by 4.8% to $50.0 billion. A $51.1 billion change in net realized capital gains at National Indemnity Company resulted in net income for the industry more than doubling to $90.1 billion. To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=341559.
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