Bones Insurance

Japanese Hole-In-One Insurance: Over The Top Insurance?

2012-01-23T06:39:00.001-08:00

To those folks knowledgeable about Japan’s golfing scene, would you consider Japanese golfers – even casual ones – paying for a monthly premium for a hole-in-one insurance rather over the top?

By: Ringo Bones

Question: “Why do Japanese golfers, even casual ones, buy and pay monthly premiums for a hole-in-one insurance?” The answer is, is that established Japanese golfing tradition requires them to share their good luck when they get that rather rare hole-in-one shot by giving gifts to all their golfing buddies. It is a Japanese tradition that can cost the (un) fortunate hole-in-one shooter as much as 10,000 US dollars or around one million yen depending on the prevailing FOREX rate of the US dollar to the Japanese yen. Is this dedication to the game or what?

When it comes to their dedication of Western-sourced hobbies and pursuits, the Japanese have always been blessed (or is it cursed?) with a healthy disdain for – as Robert Frost puts it: “Playing tennis without a net”. The Japanese understands and appreciate the challenge of creating something within a strict set of guidelines. You know someone really enjoys a hobby when they are willing to pay (a somewhat steep?) monthly insurance premium to afford to give gifts to friends – as in golfing buddies.

By contrast, golfers in America who hit a hole-in-one are traditionally supposed to buy drinks for everyone in the clubhouse, and this seldom cost more than 500 US dollars. At Cherokee County golf tournaments, a golfer can often win a new car by making a hole-in-one on a specific hole. And it is the car dealers who provide the insurance to pay the cost of giving away the brand new car to the lucky golfer who is lucky enough to have made that hole-in-one shot.

Sometimes I do wonder what a Japanese golfer actually gets for the (mis) fortune of getting a hole-in-one shot? A better afterlife? If it doesn’t equal or exceed the 10,000 US dollars that he or she gives away in gifts, then: “What’s really the point other that sharing their good fortune from a golfer’s perspective?” Probably you have to be Japanese too to answer such an existential question satisfactorily? Golfing insurance, anyone?

Can Computer-Aided Driving Lower One’s Car Insurance Premiums?

2011-10-10T03:36:00.000-07:00

Given that the steepness of one’s car insurance premiums is directly proportional to their accident risk, can computer-aided driving result in a more equitable policy?

By: Ringo Bones

Given that there is now a near ubiquity of GPS navigation in the latest car models, the world’s leading automotive manufacturers have now engaged themselves in a toe-in-the-water exercise on the commercial viability of automotive computers that help improve ones driving skills – safety wise. As of late, lane-departure warning devices – computer-based smart devices that use the white lines on the road as a guide - have been tried out in order to improve the road safety aspect of one’s driving skills. They emit an audible warning to the driver whenever he or she deviates from the straight path, given that less-than-sober drivers swerve in and out of their designated lane.

Andrew Yeoman, managing director of Trimble – an in-car mini computer that collects data of one’s driving performance and also provides driving tips – could allow a driver’s insurance premiums to go down by making him or her into a less accident-prone driver. As of the late, the Trimble system had received good reviews by those who tried it out. Unfortunately, as with similar in-car driving aid computers, they don’t work reliably in not-so-well-maintained roadways where the white dividing lines are already faded off. If computer-aided driving becomes commonplace, will in-car computers that drives our cars more safely than us be the next big thing in automotive accessories?

Wellness Insurance Fraud: The Bane of Health Insurance Providers?

2011-08-08T02:04:00.000-07:00

With the advent of therapeutic vacations, medical tourism and wellness holidays now payable by established health insurance providers, are these so-called outsourced medical procedures the new target of insurance fraud?

By: Ringo Bones

Recently, health insurance provider ERGO Insurance Group of Düsseldorf, Germany, experienced a rude awakening first hand on how it feels to be fleeced by some of their unscrupulous health insurance policy holders through wellness insurance fraud. During the past few years, a growing number of unscrupulous clients had been defrauding various health insurance providers by bogus medical tourism and wellness vacation bills and claims designed to enrich themselves and their complicit co-conspirators. Could this unscrupulous criminal enterprise over time eventually defraud health insurance providers out of business?

Most health insurance providers in Europe - not just in Germany - became a target of health insurance fraudsters due to their relative lack of due diligence procedures when it comes to processing policyholders' claims whether they are genuine or fraudulent. Phony doctors' bills / falsified documents propped up by local medical practitioners during the policyholders' wellness vacation and medical tourism procedures - which have recently been found out by the ERGO Insurance Group's ongoing investigation in Sri Lanka and other top medical tourism and wellness vacation spots around the world - are fast becoming de rigueur in recent health insurance fraud schemes. Even corrupt high-level local pfficials involved in the regulation of their own medical tourism industry are sometimes involved.

Sadly, 95% or more of the suspected cases of propped-up medical bills turned out to be bona fide cases of insurance fraud. Unfortunately, most court decisions involving health insurance fraud cases in the European Union tend to favor the suspected swindlers, making prosecution of health insurance fraud perpetrators very difficult on European soil. Could this make the wellness vacation insurance and medical tourism fraud cases the new bread-and-butter of local private investigation companies?

Should There Be Cyber War Risk Insurance?

2011-04-11T03:11:00.000-07:00

Given that the money-earning side of the world wide web had recently become indispensable to the 7-billion or so people of planet Earth and cyber attacks are on the rise, should the need for a cyber war risk insurance be nigh?

By: Ringo Bones

During the very tail-end of the 20th Century – i.e. the very late 1990s – the very idea that a few billion people earning their very livelihood via the globalized infrastructure of the world wide web seems almost inconceivable, so too are the very concept of cyber attacks that could cripple a major chunk of a sovereign country’s economic lifeblood – not to mention life-savings of a few billion people being siphoned off by cyber terrorists. Given that high profile cyber attacks via directed denial of service or DDOS attacks are on the rise since 2005, should insurance providers be offering cyber war risk insurance schemes?

Ordinary or conventional war risk insurance that has now become de rigueur for major insurance companies is defined as a type of insurance that covers damage due to attacks of war including invasion, insurrection, rebellion and hijacking. Some policies also cover damage resulting from use of weapons of mass destruction. At present, conventional war risk insurance is most commonly used in the shipping and the aviation industries.

Earlier this year, the cyber attack issue had been raised in the 2011 Munich Cyber Security Conference noting the previous high profile attacks of the 21st Century like the 2007 cyber attack on Estonia’s internet infrastructure due to the country’s dispute with Russia over a Soviet era memorial of the Great Patriotic War – though no proof whatsoever was found if the alleged 2007 DDOS attack on Estonia was actively sponsored by the Kremlin. And even though there has seemed to be a lack of urgency – even political will – of tackling cyber attacks, never mind establishing a Geneva Convention or Hague Convention style rules of war governing cyber warfare like designating hospitals and microfinance banking systems’ internet infrastructure non-combatant status during a cyber war.

Even though there are already UN Security Council Resolution provisions in existence that dish out punitive sanctions on states and governments that sponsor terrorism, the UN Security Council has yet to issue one directed at states and governments that actively sponsor cyber terrorist organizations – which could cause problems for insurance companies on how to equitably compensate victims / casualties of cyber attacks. Could a lack of political will of the international community in defining and tackling cyber terrorists and reaching a consensus on the establishment of cyber warfare conventions eventually make cyber war insurance – at present – an economic red herring?

Nuclear Energy Insurance: Economic Red Herring?

2011-04-03T06:51:00.000-07:00

Ever since the earthquake and tsunami damaged Fukushima nuclear power plant in Japan started dominating the headlines, could nuclear energy insurance be proven nothing more than an economic red herring?

By: Ringo Bones

Throughout its 50-plus year history, the nuclear fission power industry seems to have been run by folks accepting the truism of the relativity of truth and the supposed vanity of truth-tellers. A case in point was the series of press conferences done by the administrative staff of the quake and tsunami stricken Fukushima power plant in Japan supposedly posing absolutely no danger to the nearby residents. Neither did they provide the full extent of the hazards posed by a possible reactor meltdown immediately after the devastating March 11, 2011 earthquake and tsunami that struck the north-west portion of Japan; Thus fuelling yet again the general public’s cynicism over the safety of nuclear fission power generation since the Three Mile Island and Chernobyl nuclear power plant accidents. But could this eventually make nuclear energy insurance an economic red herring?

In America, the nuclear fission power industry was always seen as an economic red herring by most concerned American taxpayers because the American nuclear fission power industry’s very existence is largely due to the exorbitant government subsidies via taxpayer money in which the true extent of the American nuclear fission power industry seems to defy ordinary economic valuation benchmarks. With nuclear fission power plant accidents no longer a matter of “if” but “when” they occur, can existing nuclear energy insurance clauses really provide not only an economically viable means of settlements but also of equitable financial compensation?

Unfortunately, an overwhelming number of fire risk insurance policies – which houses and buildings situated close to nuclear fission power plants generally have – more often than not, have a nuclear accident exclusion clause. Ever since the post World War II development and commercialization of nuclear fission electric power generation industry and the possibility of loses due to nuclear reaction, various policies – including fire insurance – have been amended so that the insurance companies will not be responsible for the loss resulting from nuclear reaction, nuclear radiation or radioactive contamination or to any act or condition incident to any of the foregoing. Special coverage to meet these hazards is only available on the rarest of cases.

The post World War II industrial scale development of nuclear materials means that overexposure to radiation may cause bodily injury or death or cause the radioactive contamination of property, which could last up to several million years if radioisotopes of long half-lives – like neptunium-239 – are part of the radioactive contamination. Since these hazards involve tremendous potential losses, various insurance companies have joined to form pools since the start of the nuclear fission power generation industry to afford coverage for these perils of direct damages and also liability of others.

A special feature of the nuclear energy liability policy makes the insurance company liable for the insured’s property located away from the insured facility provided the insured would have been liable for the damage as though the property belonged to others. Maybe the compensation of insured property and residents living close to the Fukushima nuclear power plant will provide a precedent to gauge the economic viability of nuclear energy insurance in practice.

Life Partner Insurance, Anyone?

2011-02-21T00:51:00.000-08:00

Even though full legal status of same-sex couples has yet to be universally accepted, is life partner insurance or insurance for same-sex couples already reached commercial viability?

By: Ringo Bones

Unfortunately, diversity in sexual orientation has yet to gain universal acceptance the world over as some “unenlightened” regions still engage in foot-dragging when it comes to full legal recognition of same-sex couples. But some insurance companies – like Insurance 360 for example – are already offering term life insurance for same-sex couples at very reasonable rates squarely aimed at regions were same-sex couples legally recognized.

As stated in their official website at www.insurance360.net, rates as low as US$18 per month are advertised which seems only to rove that if one major insurance company is already dipping their toes on providing term life insurance for same-sex couples at very attractive rates, then other insurance companies probably already have their versions already on offer or in the works. But given that the legal status of same-sex couples still vary from state to state in the US and from region to region elsewhere in the world, is life partner insurance or term life insurance for gay / same-sex couples even economically viable at present?

Even though the legal status of same-sex couples is still in limbo in some parts of the world, in areas and regions where it has gained full legal status thanks to the more enlightened citizenry’s political will it makes real economic sense. Not only because places that recognize gay or same-sex marriage have a strong and prosperous economy the resident’s in such regions had also benefited fro the prevailing economic prosperity. Thus making life partner insurance offered in such places a very lucrative business proposition.

According to insurance actuaries, term life insurance is the least expensive way of providing financial security for your partner and family in case of untimely or premature death. Unlike most health insurance companies, many life insurance companies already allow same-sex partners to acquire life insurance with their life partner as their beneficiary. Most life partner insurance policies already in existence are simple and provide rates that are guaranteed for 10, 15, 20, or even 30 years. So does this mean that life partner insurance might soon become de rigueur in a typical insurance company’s portfolio?

Due to plain ignorance or just a lack of political will by the local powers-that-be, there are still some parts of the world that still don’t recognize and some are even vehemently opposed in the legal recognition of gay or same-sex couples. But since the younger generation are becoming more politically-correct in tackling such issues, it would probably be only a matter of time that same-sex couples and life partner insurance will become just another ubiquitous aspect of our social fabric.

German Chancellor Angela Merkel: Risk Averse?

2010-12-01T00:45:00.000-08:00

Given that the recent WikiLeaks revelation has allegedly revealed Chancellor Merkel as “risk-averse”, can she eventually use this “cloak-and-dagger-gossip” to her advantage?

By: Ringo Bones

The worlds leading insurance providers are all probably very busy at this very moment trying to “monetize” the damage made by those pesky WikiLeaks on-line revelations. Around November 29, 2010 the most “unusual” of these revelations is probably on German Chancellor Angela Merkel on her being “risk-averse” as uploaded by a Wikileaks whistleblower from top secret US Diplomatic Cables. Even though being risk-averse has never been a disparaging trait in established German cultural norms, can Chancellor Merkel eventually use this rather pesky cloak-and-dagger gossip to her advantage?

Even though the risk-averse accusation of Chancellor Merkel is speculative at best, after all she managed to okay “less-than-business-friendly” climate bills / greenhouse gas reduction bills during her first term in office that wasn’t really business friendly and she managed to secure a second term. And they call her risk-averse? After her term ends, Angela Merkel could probably earn a lucrative living in the speaking circuit like speaking in seminars of graduating college students slated to work in the insurance industry given her risk-averse nature. Merkel’s advise to prospective claims adjusters and insurance brokers who will soon be very busy leaning into a team of insurance underwriters in the underwriters’ box at Lloyd’s is probably good as gold if she embraces her “risk-averse” personality.

During the past few years, former US President Bill Clinton had made a “killing” in the speaking circuit when it was revealed that Cushman & Wakefield had paid the former US president rather handsomely in one of his famous speaking gigs. At the end of her term as Germany’s chancellor, Angela Merkel would probably become a guest speaker of choice in various Eurozone insurance company functions thanks to WikiLeaks. At least the current German chancellor has never resorted to mangling the English language in order to advance her own political ends like that former Alaska governor named Sarah Palin.

Rental Value Insurance in a Post Subprime Mortgage Crisis World

2010-10-31T02:14:00.000-07:00

Given that the “American Dream” of home ownership had turned into a mortgage nightmare, has rental value insurance economically indispensable in our post subprime mortgage crisis world?

By: Ringo Bones

Born out of the need of a standard fire insurance policy protection to deal with indirect losses by endorsement, rental value insurance has now been seen as an economically indispensable policy in our post subprime mortgage crisis world. Given that fires could occur regardless of the prevailing financial climate, rental value insurance allows the tenant not to be required to pay rent depending on his or her lease or because of the operation of state law.

Protection against loss of rent on account of fire may be obtained through rental value forms. One of these forms provides that the company is liable for the loss of rent whether the premises are rented or not. However, there is no coverage for any portion of the premises which the insured could not have rented when the loss occurred because the season of the year or any other valid reason.

A special rental value policy is available for seasonal risk where the property has been leased to others subject to a written lease. Should the insured occupy a portion of the building, the form would also provide coverage for such premises in case of inability to occupy on account of fire.

Ever since it went global, the subprime mortgage crisis had shattered everyone’s dreams of home ownership and / or commercially lucrative real estate property ownership by sending home and real property equity down 50%, thus, turning the “American Dream” of home ownership into a mortgage nightmare. But can rental value insurance really prove economically indispensable in our post subprime mortgage crisis world?

In practice, such insurance policies only makes economic sense in locales where fire codes are sensibly enforced and fire control systems in buildings – like fire extinguishers and automatic fire sprinkler systems – are mandatorily installed. Or at least our 50% down home equity won’t go up in smoke without us being justly compensated. At least situating your own business in a property you don’t own seems economically sensible now thanks to rental value insurance.

Insurance Standardization Sells: But Who’s Buying?

2010-10-20T01:33:00.000-07:00

Even though we – the policyholder – are eternally at an economic disadvantage, are existing standardized insurance policies just a mere triumph of clever marketing?

By: Ringo Bones

For all intents and purposes, an insurance agreement is normally just a contract of adhesion. That is, one that’s not open to individual negotiations. Policy forms are often standardized – except for the opportunity of selection among various basic forms and endorsements, the buyer – i.e. you and me – in most instances has only the choice of taking insurance on the insurer’s terms or declining it altogether.

Ever since the start of the modern insurance industry, the average insurance buyer has always been at a bargaining disadvantage due to his or her limited range of choice, his or her inferior economic position and his or her inferior understanding of insurance in comparison to the insurance provider. Ordinary freedom-of-contract principles have, therefore, been qualified in ways favourable to the insured. For example, in cases of ambiguity, which the courts have been assiduous in finding, the contract is usually interpreted against the insurer.

Standardization of insurance contracts was accomplished mainly by the initiative of the insurers, singly or in cooperation. Such private initiative is still a very important factor, but the methods by which standardization is now achieved include legislative adoption of policy provisions under legislative authorization, administrative approval or disapproval of forms presented by insurers, and legislative or administrative disapproval of particular policy provisions.

Standardization cuts down the range of choice of the individual buyer of insurance, but has compensating benefits. It provides an approximation of the insurance needs of most persons based on accumulated underwriting experience, makes it easier to find an appropriate basis for premiums and – most important of all – makes possible the economy of mass marketing.

Insurers are often held liable for a loss occurring to the insured before his or her receipt of a formal insurance policy. Believe it or not, oral contracts of insurance are valid in most circumstances, though seldom used except in the in the form of an oral binder for a brief period pending preparation of a written policy. A temporary contract that’s good until a permanent policy is issued may also be made in writing. An agent who purports to make a temporary contract, oral or written, but is without power to bind the insurer he or she pretends to represent, is held liable personally as if he or she were the insurer in the event of loss. Another basis on which many courts have imposed liability is unreasonable delay by the insurer in acting on an application.

Customarily, the terms of a life insurance policy make it effective only upon delivery of the policy, unless a binding receipt for temporary insurance has been issued. In some instances, however, delivery is found to have taken place when the policy has reached the hands of another, often the agent, to be held for the insured. This is true despite the fact that the insured has not received it.

So what does this all mean to the average insurance policy holder – i.e. you and me? Given that we are for all intents and purposes at an economic disadvantage, the wide choices available out there by competing insurance providers now places the average consumer at a better economic advantage – even when compared a few years ago due to the wide variety of policies being offered. Some are even seem to be tailor made to what we're looking for while being offered at mass market policy holder prices.

A Surfeit of Natural Disasters: Good for Insurance Companies?

2010-10-07T01:24:00.000-07:00

It might seem counter-intuitive, but does the recent increase in the number of natural disasters provide profit opportunities for insurance companies?

By: Ringo Bones

Insurance company Lloyds had recently dubbed 2010 as “The Year of Natural Disasters”. In retrospect, even before the year is out, it does seem that 2010 could be the year of natural disasters. Like the tragic earthquake in Haiti at the start of the year, followed by months later a much stronger earthquake in Chile and the more recent one in New Zealand. Not to mention the extreme monsoon floods in Pakistan back in July and the wildfires brought about by a prolonged drought in Russia. Thus making 2010 a year of natural disasters, but how is this good for insurance companies?

The earthquakes in Haiti, Chile and New Zealand, the extreme monsoon floods in Pakistan and the prolonged drought that started a fire in Russia might have resulted in a 57% drop in forecasted profits this year for Lloyds of London due to insurance payouts. But the famed insurance company’s ability to pay it’s policyholders through thick and thin had resulted in more corporations availing themselves of more insurance policies against natural disasters. Doesn’t more policies – in other words capital input – usually translate to more potential profit?

Anyway you look at it, most of the existing insurance companies – if they play their cards right – could probably profit from the opportunities provided by the “Year of Natural Disasters” through increased capital input in the form of new clients / new policyholders. Corporations that avail themselves of natural disaster policies with guaranteed payouts can be one sure way to hedge their assets against potential risks. It is only logical that more issued policies usually translate themselves to more profits for the insurance company providing them.

Self –Insurance: Insurance of Choice of Big Corporations?

2010-10-04T02:05:00.000-07:00

Currently made famous during the course of the BP Gulf of Mexico oil spill investigation, is self-insurance the primary insurance of choice of big corporations?

By: Ringo Bones

With the scope of the catastrophic oil spill necessitating in the replacement of British born chief executive Tony Hayward with the American born Bob Dudley, BP had recently thrust into the media limelight the concept of self-insurance – albeit for all the wrong reasons. Given the billions in payouts BP will eventually give away to one of the most litigious countries in the world affected by the catastrophic April 20, 2010 Gulf of Mexico oil spill, is self-insurance still the ideal primary insurance of choice of big corporations?

As far as it became available, everyone in the insurance business already have a consensus view that self-insurance is practical only for large organizations and / or corporations with widely separated risks – as in multi-national corporate firms. Very useful when the firm using self-insurance must be prepared to pay losses as they currently occur. A firm wanting to avail themselves of self-insurance may purchase excess insurance so as to avoid the effect of catastrophic losses. Although large corporations can handle the relatively higher-cost premiums of self-insurance, will there be any unforeseen pitfalls if they elect to avail themselves to this sort of insurance?

Given the risks and the certainty of catastrophic losses that the oil company BP faces on its day-to-day operation must be important enough to warrant self-insurance, the steep premiums of such insurance has recently made everyone closely watching the BP Gulf of Mexico oil spill investigation wonder whether BP diverted their safety budget to pay for self-insurance premiums in order to save money; Even if such a move have resulted in catastrophic accidents to occur, like the 2005 Texas City BP Oil Refinery explosion.

From spending millions in PR adverts that could have been more useful being used to compensate fishing industry workers affected by the catastrophic April 20, 2010 oil spill to whether slashing their safety budget to prop-up their bottom line, BP’s current economic viability might still be in doubt. Only time will tell if the company’s choice for self-insurance will actually pay-off so that they can be profitable again as they move on from the catastrophic Gulf of Mexico oil spill – which now has overtaken the Exxon Valdez spill of 1989 as the worst oil spill disaster to occur in US territory. If BP manages to stay afloat despite of the billions in pay-outs, then self-insurance could be the best profitable choice for big corporations.

Basel III: An Effective Banking Insurance Policy?

2010-09-16T07:47:00.000-07:00

As the latest incarnation of Basel Accords primarily designed for insuring the financial risks of banks, will it finally prevent the reoccurrence of another global financial crisis?

By: Ringo Bones

Touted as the financial risk reduction proposal that could one and for all reduce the occurrence of the financial crisis that plague our global economy back in 2008, Basel III – the latest version of Basel Accords aimed at reducing financial risks of banks by finding out the adequate amount of Core Tier 1 Capital a bank has to maintain in reserve – is seen by most bankers as mere management-related rigmarole rather than a truly effective financial tool to hedge risks. But in truth, it is much more than that.

All of the three Basel Accords grew out of the consensus of the Basel Committee of the Bank for International Settlements in Basel, Switzerland. The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervision matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.

The Basel Committee seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. At times, the Committee was this be-all-end-all of common understanding to develop guidelines and supervisory standards in areas where they are considered desirable. In this regard, the Committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordant on cross-border banking supervision.

The Basel Committee’s members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Countries are represented by their central banks and also by the authority with formal responsibility for the prudent supervision of banking business that is not the central bank.

The latest capital requirement revamp primarily grew out of various governments’ decision to avoid using taxpayers’ money to prop-up failing banks. And could – in theory at least – allow banks better cope even if large numbers of borrowers default on their debts, triggering a subprime mortgage crisis. But most bankers have reservations over the new capital requirement reforms because it could hurt their potential future earnings by making less money available for potential borrowers.

The latest Basel III agreement now requires central banks to triple the size of its capital reserve. This ratio will “supposedly” protect against another banking crisis, the 7 % ratio includes a “conservation buffer”. And failure to maintain the ratio could result in penalizing the banks by cutting bonuses of bank executives. The new rules will be submitted to the upcoming G-20 meeting in South Korea. The question now is, will the new Basel Accord really work in preventing another global financial crisis?

Given that banks do need to earn a profit, the issue of lowered potential earnings will probably dominate the discussion in implementing the latest version of the Basel Accord. Adequate capital ratio verification process could also prove tricky – remember the 2001 era currency swap that the Greek central bank did with Goldman Sachs that eventually lead to the current Greek debt crisis? With all its promised insurance against financial risks, Basel III might prove to be a hard sell. Sad, after all a healthy business environment has always been the be-all-end –all of the insurance industry, isn’t it?

Are Insurance Companies Currently Engaged In War Profiteering?

2010-08-10T18:57:00.000-07:00

With their ability to sell war risk insurance that’s akin to selling ice cubes to Eskimos, are insurance companies virtually engaged in war profiteering in our post 9/11 world?

By: Ringo Bones

From the aftermath of the September 11, 2001 terror attacks to the ever increasing scourge of maritime piracy off the coast of Somalia, war risk insurance had managed to turn itself almost into a household name – albeit for all the wrong reasons. Such insurance policies do provide a service to corporate entities that allows them to hedge their risks in the brave new word after the 9/11 terror attacks. Despite of its “apparent” usefulness in our post 9/11 world, isn’t war risk insurance just another name for war profiteering?

A war profiteer is often defined as someone who makes what is considered an unreasonable profit on the sale of essential goods during times of war and / or conflict. War risk insurance may not – or will ever be – classified under “essential goods” by ordinary folks like us, yet ever since the 9/11 terror attacks – and especially the rise of piracy targeting maritime commerce of the coast of Somalia – premium rates of war risk insurance has been on the rise, and making insurance companies who flog them unreasonable profit from our perspective. If things go on as they are, the time would come that premium rates of even the most basic of war risk insurance policies will no longer be deemed economically viable by corporate entities that need them the most.

So, are insurance companies engaging themselves in war profiteering when it comes to providing war risk insurance in a post 9/11 world? It is best to be pragmatic when it comes to such matters, but corporate entities finding ways to hedge their risks against the next 9/11 or just coping with the inherent risk involved doing maritime commerce in the pirate infested waters of the Somali coast are prone to financial exploitation by insurance companies. Given that the risk dynamic of terror attacks and piracy seems to defy the somewhat relatively "static" mathematical models used in most risk assessment tools, a re-evaluation of war risk insurance premiums would not be that much unreasonable - unless of course insurance companies are truly engaged in war profiteering in our brave new post 9/11 world.

Should There Be A Nuclear War Risk Insurance?

2010-07-12T18:34:00.000-07:00

With the growing concern and diplomatic tension of rogue states with nuclear capability, does the establishment of a nuclear war risk insurance now a commercially viable enterprise?

By: Ringo Bones

The Cold War may be a distant memory for most of us but the threat of Nuclear Armageddon has and is always been still at a moment’s notice – especially now with the tensions between North and South Korea are on an all time high due to the sinking of a South Korean warship under suspicious circumstances that resulted in the death of 46 South Korean sailors. Not to mention Iran’s clandestine nuclear weapons program that has raised serious concerns on every UN Security Council sessions. Add to that Taiwan’s desire to be fully independent from Beijing and loose nukes falling to the hands of extremist groups making it still a safe bet that the possibility of a nuclear war is still not zero. It really seems that the Doomsday Clock at the headquarters of the Bulletin of the Atomic Scientists is stuck at two minutes to midnight. Given that the threat of nuclear annihilation today is probably no more or no less of a possibility as it was at the height of the Cold War, does the establishment of nuclear war risk insurance still economically viable?

Ordinary war risk insurance came into being when the need for an affordable marine insurance arose during the threat of submarine warfare back in World War II. The US Congress then passed the War Risk Insurance Act, which provided insurance protection for cargo and crew ships supplying for the Allies. Since private underwriters at that time did not dare insure civilian ships engaged in commerce except at premiums far above those which could be paid. The War Shipping Administration – much to the relief of the private underwriters – offered premiums far below commercial rates which only the US government has the revenue to afford to take such risks at that time. Given that the legal precedents for establishing war risk insurance are already in place, is there one needed for the establishment for nuclear war risk insurance?

At least for mail in the United States that is, back in the early 1950s, the US Postal Service developed an emergency planning manual, outlining procedures that would still allow mail delivery following a nuclear attack. These plans were regularly updated and a complete revision was undertaken back in1981. In addition, Executive Order 11490, dated October 28, 1969, as amended by Executive Order 11921, dated June 11, 1976, assigned the post office responsibility for emergency mail service and other duties associated with civil defense programs of the time. Detailed instructions were also stockpiled, telling people how to fill up forms and account for any missing persons – and for postal officials, how to test cards for radioactivity before processing them.

Among the actions outlined in the 1981 revisions state the authorization of local postmasters to burn stamps to prevent them from falling into enemy hands. Restrict mail sent after a nuclear attack to first class letters and to place an immediate ban on the issuance of money orders for payment in the country that attacked the United States. At a 1982 congressional hearing, a post office official acknowledged that a massive nuclear attack would – at the very least – make implementing the agency’s plans very difficult. But he then defended them by saying that the agency must be prepared.

Given that today’s US Congress are currently embroiled in immigration and healthcare than in revising Executive Order 11490 and Executive Order 11921 in order for a better tailored emergency response against nuclear attacks from rogue states and extremist groups. Or better yet serve as a legal precedent for equitably structured nuclear war risk insurance. The establishment of a nuclear war risk insurance – as it seems – has become as dubious a concept as personal meteorite strike insurance - a catastrophic risk whose possibility of happening is exceedingly small from a statistical standpoint, reminiscent of the concept behind the Partitioned Multi-objective Risk Method developed by Yacov Haimes when it comes to the risk assessment rationale behind nuclear war risk insurance. Maybe insurance company brokers better consult their underwriters’ box and loss adjusters whether nuclear war risk insurance is a sound business model before their competitors beat them to an increasingly lucrative niche insurance market. It could be a very Dr. Strangeloveian way to make a profit.

Musical Instrument Insurance, Anyone?

2010-06-30T18:40:00.000-07:00

With the mishandled guitar debacle between country musician Dave Carroll and United Airlines a year or so ago becoming headline news in certain circles, is the musical instrument insurance biz still economically viable?

By: Ringo Bones

Back in July 2009, the conflict between country musician Dave Carroll and United Airlines over mishandled guitars might have gained Carroll a new fanbase, but other touring musicians might be wondering whether it is high time for them to get musical instrument insurance. After all, not all touring musicians – especially after the age of Napsterization – are fortunate enough to have their own touring planes or be able to buy one in the foreseeable future.

Compared to homeowner’s insurance, musical instrument insurance are probably about as common as hen’s teeth. But that still doesn’t mean that this “niche market insurance” has been immune from the admen’s charms. “Real World Coverage” has been the recent buzzword being branded about in the musical instrument insurance market and your typical touring musician still managed to eke out a commercially viable living in today’s world were on-line music piracy is the norm rather than the exception. Thus guaranteeing the demand for such insurance given Dave Carroll’s recent high-profile guitar debacle with United Airlines.

When a touring musician who’s still at the mercy of big airline companies consults their nearest insurance agent about musical instrument insurance, they are usually told that the current musical instrument policy they are about to avail provides about the same coverage as their competitors. Not to mention the oft cliché pitch that theirs provide “real world coverage”.

Ten years ago, musical instrument insurance coverage was pretty basic when compared to today’s typical coverage policies. Which now includes: Thirty days free coverage for borrowed instruments – which is a must in today’s free online download generation were a touring musician can seldom afford quality musical instruments commensurate with his or her skill level. The right to keep undamaged parts of any instrument suffering a loss – a must for us who still harbor that emotion called sentiment. Right to repurchase – permitting you, the owner, to repurchase recovered instruments at the price paid for the claim regardless of the increase in market value of the instrument during that time. Loss of market value coverage that pays you the difference in market value for instruments that had been damaged and / or repaired. No exclusion for instruments in a motor vehicle – for those still touring in a run-of-the-mill tour bus. Inflation Guard policy that provides insurance beyond policy limits. And most of all free transferable coverage for replacement instruments – i.e. “loaners” – while yours is still being repaired for a claim.

Lets just hope that the provider’s real world coverage policies work in the real world of your typical touring musician and should provide every touring musician adequate financial compensation. Whenever he or she encounters a problem like that of Dave Carroll when he boarded United Airlines with his musical instruments back in July 2009. The days of the multi-millionaire Rock-Star might be long gone, but it still makes good fiscal sense for touring musicians to be protected from the real world perils of their occupation.

Of Therapeutic Vacations and Travel Insurance

2010-05-19T05:11:00.000-07:00

Even though the therapeutic vacation side of the travel industry remains very much an unexplored niche market, will travel insurance providers’ policies on preexisting conditions hinder its economic viability?

By: Ringo Bones

Before being called as such, the concept behind therapeutic vacations and / or therapeutic holidays probably predates the invention of the wheel. When prehistoric men and women set off in pilgrimages – religious or otherwise – for the travel destinations supposed feel-good factor. These days, there are a myriad or more travel destinations that seems to offer therapeutic effects – whether via religious miracles or well-established hagiographic pedigree – just waiting to be tapped by the post-credit crunch travel industry. Sadly, the concept of therapeutic vacations may well remain just a dream due to an overwhelming majority of travel insurance providers’ preoccupation with their policyholders’ preexisting conditions.

The issue of insurance providers somewhat unhealthy fetish over their policyholders’ preexisting conditions became a cause célèbre during the height of President Obama’s campaign for healthcare reform in America. Cancer survivors being recommended by their doctors for therapeutic vacations or therapeutic holidays at present usually can’t afford it due to the fact that their insurance providers provide them with travel insurance policies as expensive as or even more expensive than their planned therapeutic vacations.

Knowledgeable individuals involved in such quandary are now questioning whether insurance underwriters and risk assessors under the tenure of big insurance companies truly understand the true nature of risks faced by cancer survivors. Blatantly so when the hike in travel insurance premiums doesn’t seem to mathematically coincide with the perceived risks using the latest risk assessment analytical tools at our disposal. Looks like your planned trip to visit the Dalai Lama in Dharmsala, India just to be grateful after your ordeal of a decade-long battle with leukemia might be a very expensive proposition from a travel insurance perspective.

Iceland’s Volcanic Eruption: A Nightmare for Air Travel Insurance Providers?

2010-04-19T05:03:00.000-07:00

Given that the ongoing Icelandic volcanic eruption had disrupted air travel over one of the world’s most lucrative airspace, could this “inconvenience” eventually bankrupt travel insurance providers?

By: Ringo Bones

Fortunately, no loss of life has yet been reported on the ongoing Icelandic volcanic eruption of the Eyjafjallajokull Glacier Volcano, but it seems to me that the insurance pay-outs from such “inconvenience” has a high probability of rivaling that of the insurance pay-outs of the 1906 San Francisco Earthquake. According to IATA, the resulting ash cloud that lead to the suspension of commercial air travel over the affected European airspace had been costing major airline companies on average 200-million US dollars a day.

British Airways and other major European air carriers have had their share prices go down due to the resulting air travel chaos. Millions of dollars have already been lost when perishables destined for European markets that had to be air freighted never got to their intended customers, like flowers from Kenya. Not only did the Icelandic volcanic eruption did a number on European commerce, it also disrupted the travel plans of European VIPs – even US President Barack Obama – indefinitely postponing their plans to attend the State Funeral of the late Polish president Lech Kaczynski.

Volcanic ash is especially damaging to modern jet engines because the ash is primarily composed of very fine glass particles that can gunk up as it melts within the turbines in the high temperature interior of jet engines. The ongoing eruption of the Icelandic volcano also produces a greater quantity of ash because it is situated in a glacier. Unfortunately, the last time the volcano erupted was in 1820s and Victorian era gentleman-scientists probably overlooked it due to its remote location. Thus making predictions on when it erupts that much difficult.

From an insurance company’s perspective, the air travel chaos caused by the volcanic eruption to one of the world’s most lucrative airspace can be a travel insurance provider’s and airfreight insurance provider’s liability nightmare. Especially those who are obligated to pay damages that includes care and loss of services, not to mention those that still pay for any mental anguish incurred by their policyholders. Given the austere fiscal environment of our post global credit crunch world, British Airways had even stated that they don’t have enough insurance money to refund stranded passengers.

Will the over 17,000 flights cancelled across European airspace – not to mention incoming Transatlantic air traffic from America - eventually drive airline companies with insufficient financial backing to the brink of bankruptcy? Only time will tell since Iceland’s geologist have forecasted that the volcanic eruptions will probably continue until the 21st of April. And if it does continue until mid July, tourists around the world planning their European summer vacation will certainly have their travel itineraries rescheduled. Ruining Europe’s still-recovering tourism industry and becoming every insurance company’s worst nightmare.

The Fault-Tree Analysis: Still A Relevant Risk Assessment Tool?

2010-02-11T01:52:00.000-08:00

First formulated in order to assess the probability of failure of fairly complex systems over thirty years ago is the fault-tree analysis still applicable in current assessment of today’s complex systems?

By: Ringo Bones

Even though there’s a growing perception of the general public’s declining trust in risk management since the September 11, 2001 terror attacks, it is quite ironic to ponder that risk assessment has further matured since that tragic event. As long as they had been around or had been tenured by insurance companies, risk analysts often start by dividing hazards into two parts – namely exposure and effect. Even though they’ve had it down to a science, insurance companies cannot yet predict whether any single driver will be killed or injured in an accident, even though they can estimate the annual number of crash-related deaths and injuries in the United States with considerable precision. With the salient point in the development of risk assessment during the past three decades had been in large part the search of ways to determine the extent of risks that have very little precedent. Like the link between cellular phone / mobile phone use and brain tumor risks and a more objective assessment of catastrophic global warming risks.

Risk assessments of complex systems are more often than not defined by the enumeration of failure modes. A common technique called failure mode and effect analysis where risk analysts try to identify all the events that might lead to a system breakdown. Usually when all the failure modes have been enumerated, the fault-tree analysis has been routinely used since the last 35 years or so, as an aid to estimate the likelihood of failure of any given mode.

First utilized on a large scale by Norman C. Rasmussen of the Massachusetts Institute of Technology back in 1975 to study nuclear reactor safety. Although specific details of his risk assessment estimates were disputed under peer review, fault-tree analyses are now routinely used in the nuclear industry. As a rule, a fault tree graphically represents how the subsystems of a larger system depend on one another and how a failure of one part affects key operations. Once a particular fault tree of a particular system is constructed, one need to only estimate the probability that once individual elements do fail, the same probability governs the set of circumstances that lead to the entire system’s failure to function.

Due to the method’s good track record of formulating more effective risk mitigation while reducing costs in its implementation, the plane-maker Boeing had been for sometime now been applying fault-tree analysis in the design of large aircraft. Company engineers have identified and remedied a number of potential problems in passenger aircraft design. Such as vulnerabilities caused by routing multiple control lines through the same area, which can be a recipe for disaster during a bird-strike incident. Even though it is already too late for their chemical plant in Bhopal, India, Union Carbide had also employed the technique in designing processes for chemical plants. Particularly in deciding where to situate their plants and in evaluating the risks of transporting particular chemicals. But as a risk assessment tool, is fault-tree analysis still relevant today?

Maybe Barbara Ehrenreich was right for lambasting the overly-optimistic and cavalier attitude of Wall Street when it comes to risk assessment because the fat-cats had never discussed using fault-tree analysis to examine the vulnerability of the global financial system’s propensity to failure. As a fairly complex system, fault-tree analysis could have been used to examine the global financial system’s failure modes that could have averted the widespread collapse of banks and other financial institutions deemed to big to fail back in 2008.

In our eternal struggle for the search for an effective carbon neutral energy source, fault-tree analysis could be used to assess the risks of constructing more nuclear fission power plants in comparison to the global warming risks posed by coal-fired power plants. As the only feasible carbon neutral electricity generating power plant that is here right now, a renewed risk assessment of nuclear fission technology deserves reevaluation until we can find something better that truly works.

Reputational Risk Insurance for Celebrity Product Endorsement

2009-12-21T02:28:00.000-08:00

Given the recent “transgressions” of Tiger Woods had made his sponsors backing away en masse, would a reputational risk insurance of celebrities endorsing their sponsors’ products be a good idea?

By: Ringo Bones

The recent high-profile “transgressions” of G-Rated family-friendly golf megastar Tiger Woods not only sent the tabloid press community into their trademarked coverage frenzy, but also made Tiger Woods’ sponsors – whose products he’s been so busy endorsing for more than ten years – backing away en masse. As one of the golfing world’s top cash cow who managed to earn over a billion dollars during his career that might yet still to reach its prime. Is Tiger Woods not only unnecessarily endangering his own golfing career, but also the long-term economic viability of the sport of golf as well?

High-profile celebrity product endorsers whose reputation leaves much to be desired has been de rigueur in the Rock and Pop music world for a long time now. Remember W. Axl Rose, the mercurial frontman of Hair Metal era Rock outfit Guns N’ Roses? Despite of his reputation, Axl’s “unique” singing style made every live concert sound engineer notice the frequency response band limitations of Shure SM57 Beta microphones that made them better “plan” on how to use these idiosyncratic microphones on stage in live Rock concerts. Thus making such dynamic microphones a mainstay in Shure’s product lineup despite of a non-flat frequency response. Even someone like Paris Hilton, who’s name is unlikely to be ever used with the phrase “moral turpitude” on the same sentence manages to endorse top of the line beauty products from the world’s top cosmetics manufacturers.

Although in the multi million dollar endorsement contracts world of professional sports, the established “overlords” are not so forgiving when it comes to “transgressions” and “improprieties”. A few years ago, a promising basketball superstar named Kobe Bryant who’s sporting career has yet to reach its prime also has his sponsors moving away en masse after his own “transgressions” became supermarket tabloid fodder. And now, the problem plaguing Tiger Woods not only threaten the famed golfer’s bottom line, but also the bottom line of the golfing world whom his golfing career has seemed to prop-up since 1996. Can the establishment of a form of reputational risk insurance be of help on the fiscal aspect of this debacle?

Reputational risk insurance could be modeled after occupational health insurance or permanent health insurance where a reputational risk policy provides the policyholder with a source of income akin to “disability benefits” when the policyholder can no longer make money from the high-profile celebrity who endorses their products. Instead of just “abruptly” terminating their fiscal obligation with the celebrity endorsee in a fiscally unjust manner.

Reputational risk insurance might also be used to provide benefits when the high-profile celebrity is no longer able to perform substantially all of the contractual acts that he or she signed when endorsing the product(s) of his or her main sponsor. This could be either due to marital “transgressions” or other “impropriety” of reputational nature. Maybe it is high time that the product endorsement world should find ways to insure themselves against vagaries such as these in order to maintain fiscal stability.

Creativity Disability Insurance

2009-12-17T01:32:00.000-08:00

As a viable part of the global economy, should folks with creativity related jobs be provided an insurance system against creativity disability?

By: Ringo Bones

Picture this scenario: a very lucrative crime fiction writer whose works so far – lets say 20 of them – managed to crack the top 5 of the New York Times bestseller list, eleven of them even reached the number one spot. Not only that, his or her books managed to become a required reading of every major law enforcement agency around the world – akin to Tom Clancy’s The Hunt for Red October becoming a required reading for US Navy’s cadets-in-training. Thus making the writer a veritable cash cow. Then imagine our writer out of whim joining some “maverick” Evangelical cult that made him or her no longer able to write those gristly but fictional ways of committing murder. Thus resulting in the loss of his or her multi-million dollar a year livelihood. If this happens, what does his or her financial estate do? Sue the cult or collect some form of insurance?

Even though there might have been a legal precedent with regards to this scenario, as of late, I’ve been too lazy to check out the current US Supreme Court docket about legal and / or financial liabilities when it comes to persons affected by creativity disability. Especially if creativity is the main source of livelihood of that person in question. But the question now is, is some kind of creativity disability insurance economically viable enough to be underwritten by today’s insurance providers?

After checking on existing insurance policies on offer, I think for it to be economically viable, creativity disability insurance could be modeled after occupational disability insurance. Unfortunately, occupational disability insurance – also called permanent health insurance – is quite a complicated subject that often grabs the news headlines upon claims refusals. Your typical occupational disability insurance policy provides the policyholder with a source of income in the form of disability benefits when the policyholder is no longer able to perform substantially all of the material acts of his or her occupation, as designated in the policy. Should disability benefits also be applicable for those working in the creative fields like novelists and songwriters?

But it can easily get complicated from the point of view of the disabled – even the creatively disabled – claimant. Imagine the claimant having a firm belief of the Protestant Work Ethic and has a moral perception that receiving easy money is morally reprehensible. In other words, the claimant wants to retain the ability to engage in a sure form of employment while collecting disability insurance benefits. Might this prove in the end to be economically essential, in which the insurance company could make a creativity disability insurance with such proviso at a much lower premium – thus making it widely available?

Returning to the scenario I’ve mentioned, could this be resolved or eased by the existence of some form of creativity disability insurance; or is the existing civil court systems around the world could easily handle this as a “mere” torts and damages compensation settlement case? Given the rarity of such cases, its safe to say that I don’t know – yet. Maybe, the only really viable solution to this dilemma is for anyone who works in the creativity fields to become more empowered with the assistance of their friendly neighborhood broker in selecting the right insurance products. Thus, enabling them to make appropriate decisions with respect to benefit design, understand the policy’s wording and how it will impact them in the event of a claim arises.

Do Pessimists Make Good Insurance Company CEOs?

2009-12-04T01:38:00.000-08:00

Given that the primary business of insurance companies has been on dwelling on what’s the worst that could happen, does this make pessimist prime candidates for insurance company CEOs?

By: Ringo Bones

Maybe that bloke named Murphy who they named Murphy’s Law should have started his own insurance company, who knows, he could have made a bundle – or what about Friedrich Nietzsche? Just a few historically famous “pessimists” who would have made top notch CEOs for today’s insurance companies. A will to power ones investment portfolio? Or is it just a routine risk management as usual?

After reading Bright-Sided by Barbara Ehrenreich, a pet theory of mine has been renewed once again. A theory pertaining to why people with a naturally pessimistic disposition are better suited to be insurance company CEOs compared to their cheery, chirpy counterparts – especially ones that practice unnecessary discrimination when it suits them while maintaining a happy disposition. Despite the howls of protest of those cheery CEOs that ran their company to the ground during the Bush Administration over the accuracy of Barbara Ehrenreich’s pet theories on why Wall Street buckled only proves Ehrenreich’s insights on this contentious issue to be self-evident. Even though recent findings in cultural anthropology and archeology had always tried to tell us that too much positive thinking – especially when combined with leaving things to chance – could be humanity’s undoing.

Humanity’s earliest ancestors manage to survive through a series of supposedly insurmountable challenges like climactic extremes, super-volcanic eruptions and earthquakes that would make those catastrophic tragedies that happened within our living memory seem tame in comparison. Thanks to humanity’s intelligence and wit – largely driven by constantly worrying about the worst that’s yet to come. In other words - pessimism. Could it be that Natural Selection is Mother Nature’s very own risk assessment strategy? If humanity manages to survive through the worst aspects of climate change that is yet to come, it is safe to bet that it is because we finally took action on the most pessimistic ramblings of Al Gore over the dangers of climate change.

Unfortunately, corporate America has a habit of firing overtly cautious employees with pessimistic disposition. The very same people who could have warned the impending subprime mortgage crisis that can trace its roots back in 2006. The Wall Street overlords have no use for such folks, favoring instead to “yes men” too spineless to point out to their very own mistakes and shortcomings. Sadder still, this corporate oversight grew in popularity during the time when Ronald Reagan ruled the Free World where Wall Street amassed huge profits during the “Decade of Greed” of the 1980s.

Bright-Sided by Barbara Ehrenreich really did point out the culture of a “happiness delusion” that undermined the true potential of corporate America. An overtly positive thinking without a safety net, or worse still – using the ideology of happiness delusion as a safety net, really did almost destroy America. During the 1980s, this happiness delusion became an industry in itself with books, office accessories, posters, etc. and it did become mandatory in the corporate world – especially Wall Street. I just hope that an overtly positive thinking won’t be used as a fairy-dust against failure anymore. Folks that worry so much in working out solutions in making good out of worst situations now need the much-deserved commendation they were once ignored. Maybe somebody should hire Barbara Ehrenreich as a risk assessor.

Should Rock Stars Get Professional Indemnity Insurance?

2009-11-20T00:32:00.000-08:00

As our contemporary society gets more and more litigious, should Rock Stars – scapegoats du jour since Ronald Reagan ruled the free world – have professional indemnity insurance?

By: Ringo Bones

For those of us old enough to remember the PMRC Rock Music censorship debacle and the “frivolous” wrongful death lawsuit against Judas Priest, We – the music loving public - managed to reach a consensus back then that Tipper Gore’s PMRC is nothing more than a US Government scheme to misdirect the American public’s ire against Sen. John McCain, Charles Keating and the rest of the folks that brought us the Lincoln Savings & Loan Scandal of 1989. But does the “Parental Advisory Explicit Lyrics” warning label still hold enough political clout to protect Rock Stars against any liability pertaining to professional indemnity related lawsuits? After all, as professional singers / musicians they do fall under the legalese purview of professional indemnity, right?

Professional indemnity insurance is usually used to protect you – the practitioner of your chosen profession – from legal action taken for losses incurred as a result of your professional advice – i.e. what you say regardless of whether it is based on opinion or fact. Under existing law, professional indemnity insurance provides indemnity cover if your client (do fans and audience members count?) suffers a loss - either - material, financial or physical – directly attributed to negligent acts. Frivolous lawsuit or not, does this mean that Rock stars should be held accountable for what they say / preach?

But this does raise problems – especially when it comes to the fidelity of the playback medium that the artistic works of these so-called Rock Stars are delivered. Did Lady Gaga really said “F-F-F_ Her Face” when heard through a lo-fi audio playback system – especially when the medium is a highly compressed and somewhat not-so-pristine MP3 download? This is probably the reason why an overwhelming majority of record label executives are not so gaga when it comes to sound quality. Maybe it is all down to liability? – enough said.

Should Audio Gear Manufacturers Get Product Liability Insurance?

2009-11-20T00:08:00.000-08:00

Given everyone’s much greater awareness of the health of our hearing, should audio gear manufacturers avail themselves of product liability insurance in case of future class action lawsuits?

By: Ringo Bones

For some years now, the tobacco industry had been experiencing it first hand after a series of class action lawsuits put forth by cigarette smokers now suffering from lung cancer and other related diseases. Suing them for failing to fully warn against the full extent of the dangers of tobacco use. Given the relative ”success” of these lawsuits from the standpoint of the plaintiffs, will similar class action lawsuits will soon be besetting audio gear manufacturers after legions of Generation X-ers figure out why they can’t hear anymore?

If you happen to sell, supply or deliver goods – even in the form of repair service – you may need coverage against claims of goods causing injury, death or damage. Product liability insurance covers you if any of these events happen to another business or person by the failure of your product or the product you are selling. From a legalese standpoint, product liability is the area of the law in which manufacturers, distributors, suppliers, retailers, and the rest who make products available to the public are held responsible for the injuries those products cause. Usually, there are three major types of product liability claims: manufacturing defect, design defect, and the failure to warn – also known as marketing defect.

While the tobacco industry – more often than not – had always resorted to that legal gray area of knowing only the harmful effects - i.e. health risks - of their product only several centuries after they started selling tobacco products to their customers, the warning signs of hearing loss usually manifest itself in very obvious ways. As in pain - hence the threshold of pain part of our hearing. But is this self-evident truth be enough to protect hi-fi and public-address systems manufacturers against future class-action lawsuits pertaining to hearing loss?

Warning signs and legal disclaimers are seldom – if ever – banded about by audio gear manufacturers in their adverts. The only audio gear manufacturer that I know of that warns their potential customers of the dangers of using their products at very high decibel levels is Polk Audio. On the advert of their SRT System, Polk Audio clearly warned that this audio system is capable of extreme sound pressure levels. The said advert even states that SRT Systems are supplied with a sound pressure level meter to help you – their prized client – determine safe listening levels. In my opinion, this is like a cigarette manufacturer providing their loyal customers with a great healthcare package.

As an avid Rock concert patron and sometimes performer, it is probably the sound reinforcement / public-address system side of audio gear manufacturing that should be availing themselves of product liability insurance. Given that contemporary Rock concert sound reinforcement systems can easily deliver clean and continuous 120 to 130-dB sound pressure levels to a relatively large number of people is a recipe for a large-scale hearing loss – not to mention the health-related class action lawsuit.

Will audio gear manufacturers do a Winchester House-like descent into superstition in the face of an impending class action lawsuit? I hope not. After all, the 19th Century firearm magnate William Wirth Winchester managed to ply his wares long before the American society became the litigious entity that it is today. With the use of contemporary American Rock music as a torture device in Guantànamo Bay Prison – i.e. playing American Rock music to terror suspect detainees, I think audio gear manufacturers must now have product liability insurance or get one as soon as possible. Thanks to the malfeasant way that the Bush-Cheney consortium conducted America’s “War on Terror”.

Hi-Fi and Audio Video Equipment Insurance Anyone?

2009-11-10T04:20:00.000-08:00

Given the recent rise of insurance providers offering coverage of your precious hi-fi, AV, and even Internet-connected computer equipment, is it wise to avail yourself of this type of insurance?

By: Ringo Bones

In my neck of the woods, the electric power, cable and telephone utility companies are recently diversifying their business by offering very reasonably-priced insurance policies that cover hi-fi, audio-video, and even Internet-connected computers against fire, lightning, and damage via electrical surges. With premiums that average at just pennies-per-day, is it wise to get hold of such insurance policies?

Given that most homeowner’s insurance policies – even though they provide coverage against fires – these seldom, if ever, provide coverage against destruction by fire of your irreplaceable high-end hi-fi and other electronic equipment. So it is definitely wise to obtain a separate insurance policy for your hi-fi and other electronic equipment - especially if they are very hard to replace like vintage vacuum tube-based audio gear. Obtaining a separate coverage is far from easy, which is the reason why most people opt not to get one. But for those who decides that their audio-video gear are important enough to warrant insurance coverage, there are tips to follow to allow one smooth processing of their application for them to insure their AV gear.

The problem of proper insurance coverage for high-end hard-to-replace hi-fi, AV, Internet-connected computer and other electronic equipment is rather easily solved. Specifically:
1. Keep a file with all your purchases of the hi-fi, AV, and other electronic gear that you’ve acquired over the years. One usually assumes such a file exists for tax write off purposes, but it is never safe to say never and probably equally unsafe to assume anything!
2. Using a film and / or digital camera (preferably both types of camera), photograph everything you intend to be insured. This serves as a photo documentation of all the hi-fi and other electronic equipment that you own and intend to be covered by insurance.
3. Using a high-quality copier, copy all your receipts and color copy all your photos – especially your digital photos - and keep them in a bank safe deposit box. That way you’ll have records and documentation that will survive any untoward occurrence. I mean what is the point in keeping records in your house - especially if it gets burned together with those items you intend to insure in case of fire. And if possible, have these items notarized by a qualified attorney.
4. Bring in a qualified estimator who will identify the replacement value of your hi-fi and other equipment you intend to insure if the amount and / or scale of your investment demand’s it.
5. You can now safely go to your insurance underwriter armed will all of the information collected above safe in the knowledge of a smooth and speedy processing.
6. Always insure your equipment for “full replacement value” rather than settle for a depreciated figure. Usually the insurance company will tell you that depreciation coverage allows them to sell you a less expensive policy and that you are taking a form of tax write off anyway. However, individual owners of up-market vintage hi-fi gear or other AV equipment seldom, if ever, employ chartered Certified Public Accountants from their local top accounting firms and "bank" their depreciation funds for future replacement. It makes more sense to try and obtain the most complete replacement coverage available to you.

Of all the tips cited above, proper documentation of all the gear that you own that’s intended to be insured is probably the most important. Especially now that insurance adjusters no longer respond as if they are born yesterday concerning privately-owned hi-fi, AV and other electronic equipment. But let us not forget that loss adjustment is still a very difficult matter and requires technical training in which a special group of persons known as loss adjusters perform this work. Loss adjusters typically work for the insured or for the insurance company. Also, if several insurance companies are involved in one loss, it is advantageous to have a single adjustment bureau handle the entire matter.

While many fire insurance policies also have endorsement for extended coverage like vandalism and malicious mischief, nevertheless the properties are only protected for specific perils. Like damage due to lightning strikes and / or the resulting electrical surge / damaging electrical spikes.

There are after all millions of up-marked high-end hi-fi gear around the world that had suffered some kind of calamity. Fortunately, no one I know was unlucky enough to have lost his or her vintage 1950s era Quad II amplifier with the oft-partnered Quad ESL 57 in a fire, flood or a freak electrical surge caused by a lightning strike. If the worst ever comes, it’s nice to know that we can insure our really expensive and hard-to-replace hi-fi, AV and other electronic gear. Especially if they cost on average 10,000 US dollars or more.

The Great Health Insurance Coverage Debate

2009-10-31T07:18:00.000-07:00

Health insurance providers have recently used the flimsiest excuse to deny coverage of their policyholders. Will proposed reforms finally end the injustice?

By: Ringo Bones

Ever since Rocky Mountain Health Plans managed to get themselves in hot water after denying coverage of one of Colorado’s youngest citizens. A four month-old infant, whom Rocky Mountain Health Plans point out as overweight. Thanks to extensive media coverage – thanks to the baby’s father being very influential in their local media / TV network – Rocky Mountain Health Plans later reversed their decision - Not to mention a doctor’s examination which later confirmed that the four month-old baby to have a normal body mass index.

Back in May 2008, a law was passed in the United States that prohibits the firing of employees and insurance providers choosing to hike insurance premiums if genetic testing reveals a certain employee or policyholder to have a higher health risk than the norm. From our perspective, the passing of this law - which the late, great Senator Ted Kennedy was one of the main proponents – might seem like the great health insurance coverage reform that will finally save us all. And also, the former US Supreme Court Justice Sandra Day O’Connor was also very vocal on her campaign against any genetic testing that will be used to disadvantage any health insurance policy holder and employee. Especially if the test data could result him or her having to pay higher insurance premiums just to retain coverage or getting fired from the job due to being a “health risk”.

Unfortunately, unscrupulous health insurance companies – and their numbers are growing – have used the flimsiest excuses to deny their policyholders coverage. One of the flimsiest excuses getting media attention these days is the health insurance company claim – though not all of them fortunately – is that spousal abuse is a preexisting condition that could result in some policyholders a denial of coverage.

From overweight and underweight infants to spousal abuse, as 2009 draws to a close, we’ll probably be seeing more flimsy excuses that would be used by health insurance companies as a reason to deny coverage. Maybe one day, they’ll consider being too smart for your own good a preexisting condition thus leaving you high and dry in your time of need. I mean do we actually lose our value every time we see a doctor if health insurance providers consider us nothing more than “assets”?

Will US Bank Closures Bankrupt the FDIC?

2009-10-27T05:52:00.000-07:00

As American bank closures now reached the 100 mark, will this eventually bankrupt the Federal Deposit Insurance Corporation?

By: Ringo Bones

As bank after bank in the US are forced to close after stress-test failure compliance which at currently at the 100 mark is the most it had been since the fallout of the Savings & Loan scandal of 1989. But will this eventually lead to the bankruptcy and / or collapse of the Federal Deposit Insurance Corporation or FDIC? After all, if the FDIC gets its funding from the American taxpayer, it can never run out of money because it has always relied on revenues collected from taxes, right?

The Federal Deposit Insurance Corporation (FDIC) began life in January 1934 as part of President Franklin D. Roosevelt’s “New Deal” to make bank deposits – especially savings accounts – as secure as the US Government itself. Banks might and could still fail but depositors will never be left high and dry. All US banks, whether or not they are members of the Federal Reserve System, are eligible for deposit insurance if they meet the FDIC requirements usually by submitting to FDIC examinations and pay an annual assessment based on their total deposits. Virtually all of the American banks now participate in this system of deposit insurance.

Before a new bank can begin operations, it must satisfy the chartering authority on certain essentials. There must be a legitimate need for the bank’s services, it must be adequately capitalized, and it must be under competent management. Banks may not later open branches or change its capital structure without approval by the proper authority. And banks are required to submit regular reports on their condition. Banks are not allowed to pay interest on demand deposits, and the maximum rate it may pay on time deposits are set by the FDIC. It may not underwrite, that is, buy for resale or distribution, security issues other than those of the federal or state governments or their agencies. The bank must maintain reserves against its depositors equal to a specific percentage of its deposits. It may not continue operation if its capital has been impaired. If the book value of the stock (the capital and surplus in back of it) is below the par value, stockholders must pay an assessment to wipe out the deficiency or the bank will be closed.

The elaborately detailed control of banks today – that eventually lead to the rise of the Basel Accord / Basel II regulations about how much capital banks need to mitigate financial and operational risks – gives banking management less room than it once had for the exercise of its own discretion. But these regulations – that date back after the great economist John Maynard Keynes and his team was consulted by President Roosevelt in formulating a “New Deal” – have made an important contribution to the sound condition of modern commercial banking.

The recent American economic crisis has been largely defined by large financial institutions that are supposedly too big to fail that are taking excessive financial risk. Unfortunately, when they eventually – and do – fail, they take usually a number of smaller banks down with them. Thus causing the FDIC to provide pay outs to bank savings account holders. Even though the FDIC only has to pay up to a maximum set account, given the number of bank failures – now and in the near future – this could reach in the hundreds of billions of dollars. Given that American financial firms had always been too profitable thanks to the overly-generous US Government subsidies provided to them from the time when Ronald Reagan ruled the free world, will these financial institutions be always taking excessive financial risks with scant regard of whether it might bankrupt the FDIC? After all, the American taxpayer has always been their insurance underwriter of last resort, right?

Well-formulated financial reforms and regulations – especially ones with teeth – can become harder to legislate the further we seem to move away from the current crisis and into the “apparent (?)” state of economic recovery. Although recently the DOW reaching above 10,000 points is by no means an irrefutable indicator of true economic recovery. As some American financial institutions that are recently bailed out by American taxpayer money readily returned to they’re previous status quo of excessive executive bonuses and risk taking. Especially as the big fat profits slowly rolled in. Most of us will probably be asking who are these financial institutions responsible to - The companies’ shareholders or the state? Given that the US Government is now for all intents and purposes beholden to Chinese bond holders thanks to the Bush-Cheney consortium’s policy of using Chinese money to buy Arab crude oil, legislating effective financial regulations will now be at the whim and whimsy of corporation-owned lobbyists of Capitol Hill.

Can Takaful Insurance Improve Western-Style Insurance Schemes?

2009-09-07T17:45:00.000-07:00

Given that Islamic financial institutions had weathered better than their Western counterparts, can Takaful insurance concepts help improve Western-style insurance schemes?

By: Ringo Bones

Just recently, many financial analysts based in London and New York City’s Wall Street were somewhat amazed to find out that financial institutions that practiced Shariah Banking Laws weathered better during our current global credit crunch in comparison to their credit derivatives obsessed Western counterparts. If this is true, then are there any benefits if Western-style insurance underwriters learn and adapt concepts of Takaful Insurance?

Believe it or not, many concepts behind our contemporary Western insurance underwriting schemes have their origins in the ancient civilizations that flourished in the Middle East. Ancient Babylonian artifacts had been found portraying King Hammurabi receiving the Code of Laws from the Sun God in 1800 BC. These laws contained early references to various types of insurance – namely marine, robbery, crop, and adoption. Back then it is declared by law that an adopted child reared by a family would in return provide for the family in his or her adulthood. Otherwise, the penalties for the failure to care for his or her foster parents are execution or slavery.

Takaful – the idea behind Islamic insurance – is based on the concept of social solidarity, cooperation, and mutual indemnification of the losses of members. The Takaful contract so agreed usually involves the concepts of Mudarabah, Tabarru’ (to donate for the benefit of others) and mutual sharing of losses with the overall objective of eliminating the element of uncertainty. Takaful is by no means a new concept in Islamic Commercial Law. It has been practiced by the Muhajrin (émigrés) of Mecca and the Ansar (supporters or followers) of Medina following the Hijra 2 of the Prophet Muhammad over 1400 years ago as an early form of risk management. Even though it is already been a very profitable business reality for years now, Takaful Insurance – as a profitable business entity – is almost became stillborn.

An overwhelming majority of Shariah Law scholars believe that conventional Western-style insurance – especially life insurance – is unlawful or Haram. Even as recently – relatively speaking - as 1903, some prominent Shariah Law scholars of most Arab countries declared that Western-style conventional life insurance were unacceptable. In 1974, the National Religious Council issued a legal opinion that conventional life insurance is not permissible because it contains elements of risk and uncertainty or Gharar, gambling or Maisir, and interest or Riba. In 1985, the Grand Counsel of Islamic Scholars in Saudi Arabia called the Majma al-Fiqh eventually approved the Takaful system as the alternative form of insurance written and structured in compliance with Islamic Shariah Law. The rational being that the Takaful system is a concept of protection for the good of society, thus approved as a means of co-operation and mutual help by the Grand Counsel.

The first formally established Takaful Insurance company was the Islamic Insurance Company of Sudan that opened its doors for business back in 1979 – six years before the Grand Counsel in Saudi Arabia deemed it okey. Given that the crude oil business is already a very lucrative post World War II industry in the Middle East plus the need of capital to process the “black gold”. The inevitability of Shariah Law compliant insurance industry is too good to pass up – Grand Counsel approval or not – because it represents a good source of much needed revenue for infrastructure development.

The establishment and eventual success of the Takaful Insurance system took quite a long and hard road indeed. Despite of some criticisms of Western financial analysts over the Takaful system like Moody's Investor Service's concerns over unused surplus liquidity. Not to mention still gray area of Shariah Law compliance of the reinsurance version of Takaful – which has still been an area of much debate. It did managed to avoid much – if not all – of its Western counterparts risky financial behavior and excesses. Not to mention the Takaful systems concerns over the sustainability of investment banking, which many see as nothing more than making money out of thin air. In short, Takaful Insurance system could teach its Western counterpart to remember prudent financial practices and risk management .

Everyday PTSD Compensation: Mental Trauma Over Sense?

2009-08-31T01:39:00.000-07:00

As PTSD was redefined as something that could occur during peacetime work related activity, will falsified compensation claims be the rule, rather than the exception?

By: Ringo Bones

As Capitol Hill still ruminates over President Obama’s proposed healthcare reforms, the mental health side of healthcare insurance providers could face its toughest challenge yet ever since the DSM – IV definition of post traumatic stress disorder or PTSD as a psychological trauma that could also occur during peacetime related activity. Given the limit resources of most of the worlds mental health providers, could ordinary folks claiming PTSD compensation that they acquire during their 9 to 5 jobs deprive care to those who needed it most – like the returning veterans of our “Global War on Terror”?

Even though “everyday PTSD” or “9 to 5 PTSD” as it is being derogatorily called is still largely a phenomena of the working class of the affluent West. Due to the fact that cultures in other parts of the world that are staunchly clinging to their machismo still define seeking compensation for the “intangible” mental trauma that you got from work as a sissy act. These people’s views could change though given that the number of employees claiming work related PTSD that received monetary compensation is on the rise. Is the latest surfeit of gifted personal injury lawyers to blame?

Receiving a generous monetary compensation for peacetime work related PTSD is still not a piece of cake though due to the adversarial nature of the legal system that oversaw such claims proceedings. So a skilled personal injury lawyer is a must. The claims seeker often endures being presumed as a fraud in a court of law. But given that people who got a somewhat questionable PTSD compensation is on the rise while the true nature and level of trauma experienced in general peacetime society is still an unexamined phenomena. Should health insurance claims adjusters do their “homework” first before shelling out huge cash settlements to work related PTSD claims?

The problem with some overly generous cash compensation to peacetime work-related PTSD claimants - even though the funds are more often than not is doled out via structured settlements – is that there is no legal oversight whether the funds and resources are used to rehabilitate the PTSD claims seeker. Since these claimants are former valued personnel in the workforce, peacetime work-related PTSD claimants are better off undergoing a rehabilitation program – if they are genuinely suffering from PTSD. As opposed to just receiving monetary compensation to avoid being gainfully and responsibly employed, rather than being inebriated all day with their compensation money. Personal injury lawyers could also reacquaint themselves with the art of ethical practice.

Insuring Michael Jackson

2009-07-09T18:38:00.000-07:00

It is a well-known fact that Michael Jackson is one of the top money earners of the U.S. and the global music industry, but how easy – or difficult – is it to insure the King of Pop?

By: Ringo Bones

Since the untimely and tragic passing of Michael Jackson back in June 25, 2009, his planned This is It tour seems to have become an insurance company’s nightmare. But given the sums of money involved, will the parties involved in insuring Michael Jackson gain financially in the end? After all, Jackson’s musical talent is well backed by having the ability to earn millions.

Ever since his musical prowess enabled him to earn millions of dollars with relative ease, Michael Jackson has always been designated into the special coverage risk aisle as an insurance coverage client - Not to mention his lifestyle choice. The price of such coverage tends to be high because the broad statistical basis for computing most insurance rates – i.e. statistical analysis that applies to us ordinary folks – does not apply to Michael Jackson’s highly individual risk.

So when the broker who facilitated in insuring Michael Jackson’s This is It tour bends over an underwriter’s box at Lloyd’s of London to discuss an insurance risk tailored to Mr. Jackson’s particular case. It is safe to guarantee that such discussions will be a lengthy one. Although Lloyd’s has for years been famous it’s willingness to underwrite unique risks for which adequate tables of probability are not available. Such as the cancellation of a major event due to the untimely death of an apparently healthy 50 year old man still in the prime of health.

Michael Jackson’s cancelled tour could also become the biggest ticket refund in history add to that the tour promoter AEG Live may have trouble collecting on it’s insurance only complicates matters. Insurers had sold an 18 million US dollar policy through Lloyd’s the famous London-based insurance market that was intended to help AEG Live recoup costs if the concerts the company was staging with Mr. Jackson were cancelled due to accident, according to the insurance company’s actuaries.

The insurance policy also could have provided coverage in case of cancellation due to medical-related issues according to a Lloyd’s insurance actuary. But that part of the coverage was dependent on the results of a physical that Mr. Jackson was scheduled to take. Thus raising the possibility that the coverage might not apply. Although Randy Phillips CEO of AEG Live had witnessed Michael Jackson passing his physical exam with flying colors in preparation for the upcoming tour several weeks before Jackson’s tragic and untimely death.

According to Bermuda-based insurer Validus Holdings Ltd., a group of insurers were covering the This is It 50-date concert series through the Lloyd’s insurance market, including its subsidiary Talbot Holdings Ltd. But Validus said it had less than $3 million at risk. But no matter what the outcome of the insurance pay-outs will be, Michael Jackson’s estate can still manage to cash-in on the cancellation of the This is It tour slated for July 13, 2009. There are even plans to release the video coverage of Michael Jackson’s elaborate rehearsals and full run-through at the Staples Center on DVD. Including the rehearsal footage two days before he died. Thus making it a part of a very good insurance policy from a financial perspective.

Microinsurance: Credit Insurance for the Little Guy?

2009-05-07T20:39:00.000-07:00

Introduced as part and parcel in the financial service of microfinance / microcredit clients, does microinsurance really protect the “Little Guys” – i.e. microcredit-funded entrepreneurs?

By: Ringo Bones

Ever since the runaway success of Dr. Muhammad Yunus’ Banking for the Poor-inspired microcredit and microfinance programs across the globe, many microfinance institutions had began introducing microinsurance services in order to protect the financial successes of microfinance and microcredit clients against the onslaught of the global economic downturn. Given that some established “conventional” economist had always been skeptical of these “extremely subprime loans”, does microinsurance really protect these small business owners against the economic uncertainties of the global credit crisis circa 2009? Or is this just a “brilliant” financial instrument made to extract the maximum amount of profits from the poor microcredit and microfinance clients.

According to some official microcredit and microfinance service providers’ websites, microinsurance is defined as a system by which people, business, and other organizations funded by microcredit and microfinance programs make premium payments to share risks. Access to insurance with low premium rates enables microcredit funded entrepreneurs to concentrate more on growing their business – i.e. reinvesting a significant portion of their profits back into their business – while providing mechanisms that mitigate risks affecting property, health, and the ability to do work. Especially during the fiscal uncertainties of our current global economic downturn where every corporate and business entity of every size, shape or form are affected in a negative way.

The rationale behind microinsurance is to provide a system that will help poor people - especially microfinance and microcredit recipients – cope with sudden expenses associated with serious illness (current swine flu outbreak?) or loss of assets. Studies recently conducted on microfinance and microcredit recipients / clients have shown that merely having access to conventional savings accounts has also proved to be an incentive to save for that proverbial rainy day. Clients who join and stay in microfinance / microcredit programs have better economic conditions than non-clients do – at least from a cash-based / credit-based economic point of view.

The question now is does microinsurance – like it’s well established sibling, credit insurance had done to big business – really help microcredit / microfinance recipients? Though it is yet a relatively new financial scheme, microinsurance – at least on paper – could theoretically provide microcredit and microfinance institutions around the world the ability to provide financial security to their established clients. As an investor in our local microcredit / microfinance provider for almost five years, I’ve noticed that our local fish and fresh produce vendors had been enjoying relative financial security that can’t be found just ten years before. And this was the advent before microinsurance schemes were introduced. From my point of view, it is still way too soon to conclude that microinsurance – in actual practice – is just another useless business expense. Maybe we’ll check it out in a few months’ time.

Of Piracy and Occupational Disability Insurance

2009-04-27T17:48:00.000-07:00

Given the cost of the upkeep of the commercial maritime traffic through the dangerous waters of the Gulf of Aden, will sky-high insurance premiums make this area a no go zone someday?

By: Ringo Bones

Occupational disability insurance is a relatively complex issue that often grabs the news headlines whenever a claim refusal happens, but can the various insurance providers still maintain economic viability when their regular customers are increasingly involved in insuring their business activities in increasingly hostile locales. Like the sea-lanes off the coast of Somalia.

At present, it is still economically viable – in spite of the rising insurance premiums and risk of piracy – for commercial bulk carriers to ply through the treacherous pirate infested waters of the Gulf of Aden to deliver their cargo of low-wage Asian manufactured goods. In order to meet the insatiable demand in European markets. But will that fateful day eventually come that commercial shipping through the Gulf of Aden will become so risky and prohibitively costly. So risky and costly in insurance premium terms that maritime traffic will be rerouted via the Cape of Good Hope as they travel from East Asia to Europe in spite of the additional fuel expenditure and longer transit time?

Currently occupational disability insurance issued to commercial shipping traffic in high-risk areas, like the Gulf of Aden, only cover the risk of injury and death by acts of piracy. But eventually, the occupational disability insurance being issued might someday include proviso for hazardous toxic waste exposure given that on-going preliminary investigation have shown that the Gulf of Aden had been used as an illegal toxic waste dump for over 20 years. Although the proof of the illegal toxic waste dumps that had been contaminating the waters of the Gulf of Aden are yet to be fully vetted and peer approved. Given that there is a clear and present danger that scientists working for the United Nations Environmental Program (UNEP) might be abducted and held for ransom as they collect for evidence of hazardous toxic waste contamination in Somali waters. And with the preexisting United Nations-style bureaucracy, the investigation could take awhile, but in time, it will eventually be proven. But for now, the need for strengthening and legitimizing the Somali government so that it can solve the piracy problem on its own terms has been given top priority.

Occupational disability insurance – also called permanent health insurance – comes in 2 basic types: occupational disability and general disability. An occupational disability policy provides the insured with a source of income in the form of disability benefits when the insured is no longer able to perform substantially all of the material acts of his or her occupation as designated in the policy. While a general disability policy typically provides benefits when the insured is unable to perform substantially all of the material acts of any occupation. Whether an insured under general disability policy satisfies the definition of total disability depends on the policyholder’s training, experience and future ability to secure gainful employment.

Given that the recent high-profile rescue of the Maersk Alabama skipper Capt. Richard Phillips and the US Navy SEAL team that rescued him might or might have been exposed to hazardous toxic chemicals being illegally dumped in the Gulf of Aden. Hopefully their permanent health insurance is sufficient to cover any future ill-effects of their “ordeal” without their insurance providers being dragged into the media spotlight in the near future due to claim refusals because of the lack of evidence of hazardous toxic chemical and radiation exposure. Or perhaps that lone surviving Somali teen pirate currently under FBI custody – Abduwali Abdukhadir Muse – could plead not guilty due to diminished capacity because of his exposure to the illegal hazardous toxic waste dumps in the Gulf of Aden. Looks like Somali piracy won't end any time soon.

The 1906 San Francisco Earthquake: Biggest Insurance Fraud Ever?

2009-03-17T18:05:00.000-07:00

Given that the corrupt city officials at the time downplayed the actual damages and deaths, was the “famous”1906 San Francisco Earthquake the biggest case of insurance fraud ever?

By: Ringo Bones

It all started at 5:13 on the morning of April 18, 1906. The geological forces that shaped the San Andreas Fault for millions of years caused the ground beneath San Francisco to sway. The tremors of that terrible earthquake lasted for only 48 seconds, but – as widely documented at the time of the terrible tragedy – overturned stoves spilled out burning coal and fuel oil as the numerous wooden buildings collapsed. Thus fires were ignited almost simultaneously in a dozen - or so - place and soon much of the city was ablaze. The widespread fires took three days to burn themselves out, destroying more than four square miles of the center of the city. Even though graft indictments were later brought up against Mayor Eugene Schmitz, and political boss Abe Reuf plus the ousting of the board of supervisors in 1907, was the full extent of the insurance fraud – via fraudulent insurance claims of the 1906 San Francisco Earthquake ever documented?

Though archival evidenced has surfaced years later that “hints” the true extent of the corruption and fraud instigated by city officials during the 1906 San Francisco earthquake. It was common knowledge at the time that San Francisco’s mayor and various city officials instigated the “political spin” that would allow the city of San Francisco to recover in an economically and politically expedient way as to attract investors for the rebuilding effort as soon as possible. Evidence of the airbrushing / retouching of press photos of the disaster with the behest of the San Francisco City government surfaced years later. Proof that the 2005 Hurricane Katrina disaster relief fiasco is not the first incidence of ineptitude by the US Government when it comes to handling major natural disasters.

The assigning by San Francisco politicians of the US Military, local law enforcement and the local militia to protect against looting with shoot to kill orders reminiscent of the Hurricane Katrina aftermath is not the only US Government “shenanigans” committed during the aftermath of the 1906 San Francisco earthquake. The local politicians also actively aided their “rich” constituents to falsify building insurance claims via political spin that allowed them to claim for fire damages instead of earthquake damages. Which at the time established insurance providers didn’t yet issue proviso for insurance payouts due to building structural damage via earthquake. Due to the politically and economically expedient way in which San Francisco was rebuilt after the 1906 earthquake, local building planners lowered building standards with the behest of the city government by as much as 50%. Which the original rigid building standards established before the 1906 earthquake was restored only during the latter half of the 1950’s.

The shadow of the government ineptitude and shenanigans committed immediately after the 1906 earthquake still casts a long shadow until this day. San Francisco’s Geological Disclosure Act was made very easy to falsify and manipulate because of the 1906 earthquake. Some property owners – if not most of them – can easily falsify their insurance claims, especially if they are influential enough to have the proverbial “friends in high places”. Which can be a nightmare for insurance claims adjusters, risk assessors, and building inspectors.

Currently, the Geological Disclosure Act governing San Francisco remains largely unenforced. Especially on buildings built on soft sandy soil that are prone to liquefaction during earthquakes. Some parts of San Francisco still have row upon row of wooden buildings that could easily become a fire hazard during earthquakes. Even though a growing number of buildings are already retrofitted to make them earthquake-proof – including the Golden Gate Bridge and the Oakland Bay Bridge. Many buildings around San Francisco are still waiting to be retrofitted to make them more resistant to strong earthquakes.

Spacecraft and Satellite Collision Insurance

2009-02-16T17:41:00.000-08:00

Does the recent incident of an active US commercial satellite colliding with an expired Russian military satellite necessitates the reevaluation of existing insurance of space-bound and space-based assets?

By: Vanessa Uy

Last Tuesday – February 10, 2009 – an active commercial US telecommunications satellite had the unlikely misfortune of colliding with an already expired – but still intact – Russian Cosmos military satellite 800 kilometers above Northern Siberia. Both Earth-orbiting satellites apparently tried to cross the same point in space at the same time as they are traveling at the standard orbital speed of 17,380 miles per hour. The collision of two still-intact satellites was the first known accident of its kind in the history of space exploration and commercialization.

The resulting collision created a debris field comprised of a little over 600 RADAR-trackable debris that has the potential of endangering other multi-billion dollar space-based assets. Like the Hubble Space Telescope and the International Space Station – which happens to travel within the same orbit window of the debris field of the recent satellite collision. Putting the long-term operations of these space-based assets in jeopardy.

As the first ever head-on crash of still-intact satellites in Earth orbit could also endanger other still active telecommunications satellites that make our current Internet and mobile phone / cellular phone systems possible. Given the existing and future risks, are existing insurance terms on space-based assets up to the task in providing equitable financial compensation when it comes to dealing with infrequent – but catastrophic – incidents such as these?

After reading Space Debris: Models and Risk Analysis by Heiner Klinkrad, the scientific data that could aid in providing equitable payouts for infrequent – but nonetheless catastrophic- satellite collisions such as these already exists. Klinkrad’s book did provide a comprehensive background in understanding the various sources of space debris and the assessment of associated risks of current and future space debris environment. While non-trackable objects – i.e. fragments too small to be “seen” by current RADAR technology - produced by historic on-orbit fragmentation events and several other sources of space debris are also discussed. Klinkrad’s book also discussed risk assessment models concerning with meteoroids when they turn into meteorite-strike hazards for both space-based assets and those back on Earth. Given that scientific data concerning the risk assessment of the impact and collision hazards of satellites and spacecraft already exists, will other academic research like that done by Heiner Klinkrad eventually shape the future structure of insurance products intended for our commercial and scientific space-based assets?

Currently, there are some 17,000 RADAR-trackable objects scrutinized by NORAD, which by the way also warns NASA’s manned missions of incoming space-debris – if their RADAR can “see” it – so as to take the necessary evasive maneuvers. Though the celestial mechanics of more than three bodies cannot be easily analyzed using the techniques developed by Victor Szebehely – make that the 600-plus orbital debris that resulted from the February 10, 2009 satellite collision. Especially if you take into account the gravitational influences of the major celestial bodies like the Earth, the Moon, the Sun, or whichever planet comes close to us at this time. Given that the cost of space assets from construction to launch can run into the millions, insuring them won’t be cheap.

But as the established insurance clauses on satellite and spacecraft are based on sound science, should the risk assessments be constantly reevaluated since orbital debris are steadily increasing as the years go by? Back in the early 1990’s, there were only 8,000 RADAR-trackable orbital debris in existence, now it is 17,000. Sooner or later, this would result in constant risk-assessment upgrades, or developed space-launch processes that produce lesser orbital debris than current ones.

Better Risk Assessment: Keeping Insurance Premiums Reasonable?

2009-01-26T17:53:00.000-08:00

One sure-fire way of selling insurance policies is to maximize your coverage while keeping premium rates reasonably low. Had we now got this down to a science?

By: Vanessa Uy

Back in the good old days – the previous 25 or more years to be exact – insurance company actuarial mathematicians used to statistically assess risk using a figure called the expected loss. They got it by multiplying the probability of an accident occurring times the damage done by the accident.

Henceforth, policymakers and statisticians of almost every insurance company around the world grown content in using the concept of expected loss as the sole measure of risk. But since insurance companies are always in a perpetual search of ways to “streamline” their economic “bottom line”, the quest is on to create policies that are more ambitious than the one that precedes it. An insurance policy that not only provides coverage for “catastrophes” other insurance providers won’t touch with the proverbial ten-foot pole but also can keep the client’s premium rates down to the absolute reasonable minimum (from the insurance providers perspective at least).

That fateful day came around in 1986, when a mathematician from the University of Virginia named Yacov Haimes and his team developed the partitioned multi-objective risk method or PMRM. Haimes and his team argue that insurance company actuarial mathematicians need to account for catastrophes separately from ordinary accidents in order to provide a better-structured insurance policy, one that maximizes coverage while minimizing premium rates. Rare but expensive (in monetary terms) accidents, the team pointed out could have a small-expected loss given their improbability of occurring.

In his book “Risk Modeling, Assessment and Management”, Yacov Haimes discusses the art of risk management after years of being acquainted and gaining expertise on the subject. Especially it’s important applications in such areas as engineering, science, and even the politically tinged vagaries of public policy. Haimes’ writing style equally covers the quantitative and qualitative aspects risk management by emphasizing how to quantify risk via construct probability together with real-world decision-making problems without ignoring the host of institutional, organizational, political and cultural considerations which these days often accompany such challenges.

Since developing his PMRM, Haimes has co-developed an even newer method of risk assessment called risk filtering, ranking and management or RFRM. The usefulness of RFRM in risk assessment is supported by several case studies cited in Haimes’ book. Given that Yacov Haimes has provided a new focus on minimizing the high cost associated with today’s more extensive risk management, how can all of this benefit us, the lowly policy holder, or for that matter, the whole global economy as a whole?

Ever since our on-going global economic downturn slowly – but inexorably – continues to drive all of us into an uncomfortable sense of fiscal austerity. Whoever can provide products that provide the maximum performance for the least amount of money will not only survive, but can even prosper during these times of economic hardship. If insurance companies can manage to provide us with insurance policies that offer more for less, then both – the insurance provider and the “mere” policy holder – can weather out the on-going global “financial storm” with a comfortable margin of confidence.

The Global Economic Downturn: Bad For Insurance Companies?

2008-12-22T06:38:00.000-08:00

While major insurance companies – like AIG – have recently felt the pinch of the global economic downturn big time, is the current global economic crisis really that bad for all insurance companies?

By: Ringo Bones

Even though times of economic austerity usually spells reduced profits for all sorts business activity, many in the insurance underwriting sector are now hard at work devising various schemes. Schemes not only on how to stay afloat during our on-going global economic downturn, but also ways for their company to “make a killing” despite other financial institutions failing on the left and right.

From the perspective of risk assessors, insurance companies had become very indispensable part of our modern economy. Everyone now knows that every economic unit is subject to risk. Various organizations for economic activities and business organizations may have their goals and raison d’être completely destroyed if protection by insurance doesn’t exist. Paradoxically, insurance is even more important for the small business organization than for larger business organizations - which can meet small losses without difficulty.

Financial stability can also be maintained through credit insurance. A business concern that suffers losses through the insolvency of customers can normally meet these conditions by a reserve for bad debts. However – especially during times of widespread economic crisis - a severe amount of loss due to insolvency of various customers may cause serious financial difficulties. This adverse situation may be minimized by credit insurance.

Even though credit insurance had became indispensable due to the fact that credit is already a vital part of our economy, but during times of widespread economic crisis, the consequence of unexpected losses has been inevitably turned into a model that develops slower than previously intended. I mean an insurance company won’t last very long if the funds it set aside for pay outs must be injected with funds reserved for other things. Like funds set aside to keep up with the latest Basel Accord Compliance rules, cost of running the company, etc.

By no means utterly dire, insurance companies could manage to keep themselves afloat during times of economic crisis if it is skillfully managed. But given that the Bull Market is already for all intents and purposes an extinct species for the foreseeable future, it is highly unlikely that most insurance companies can “make a killing” during times of economic austerity.

Private War Risk Insurance Providers: Bankrupted by Piracy?

2008-11-29T03:49:00.001-08:00

Since the incidence of maritime piracy off the Horn of Africa is on the rise, will this endanger the economic viability of private companies underwriting war risk insurance contracts?

By: Ringo Bones

Ever since that brazen act of piracy by Somali pirates that allowed them to successfully hijack a full-sized Saudi-owned oil tanker then held her for a “King’s Ransom” became headline news, many of those in the insurance industry have switched into panic mode. After all, the International Community have not even yet reached a consensus whether to classify piracy as an act of war under the Geneva Convention, or just a civil criminal act. Given the current legal debacle of Guantánamo, are war risk insurance contracts still an economically viable part of the insurance industry?

War risk insurance is defined as a type of insurance that covers damages due to acts of war. This usually includes invasion, insurrection, rebellion, and hijacking. Some war risk insurance policies cover damage incurred when weapons of mass destruction – like nuclear devices – were used. This type of insurance is mostly issued in the shipping and the aviation industry.

War risk insurance generally has two parts: War Risk Liability, which covers personnel and items within the craft and is calculated based on the indemnity amount; and War Risk Hull, which covers the craft itself and is calculated based on the value of the craft. War risk insurance premiums are usually based on the expected stability of the countries and territories to which the vessel will travel.

Back in September 11, 2001, policies for private war risk insurance were temporarily canceled but later reinstated with substantially reduced indemnities. In response to this cancellation, the US federal government set up a terror insurance to cover commercial airlines. Because of this, the International Air Transport Association has argued that airline companies operating in the United States which do not provide war risk insurance find themselves at a competitive disadvantage. Because war risk insurance is very dependent on the prevailing geopolitical climate, some insurance companies – like Lloyds for example – have even made adverts highlighting that their companies are very mindful about the prevailing global trends concerning geopolitical security and stability.

For all intents and purposes, and their actions caught on the international news media’s cameras. Somali pirates in most people’s eyes falls under the purview of the Geneva Convention Section I on Belligerents, Article 1. Stating that countries where militia or volunteer corps constitute the army, or form a part of it, they are included under the denomination “army”. So like the al-Qaeda operatives, Somali pirates are by definition enemy combatants waging a war with the Western civilization through piracy.

Given that the maritime industry is the lifeblood of our current global economy, will the threat of piracy make the shipping of goods by sea become prohibitively expensive due to security and insurance mark-ups? Piracy, like the one existing in the Gulf of Aden and the Straits of Malacca only received scant Foreign Policy prosecution by various members of the International Community. With this conundrum, insurance companies and their clients – especially the clients – who are at the sharp end of uncertain losses that’s ever increasing can finally call themselves as the “social group” claiming to be unable to pay for protection. Thus causing widespread social jeopardy to the maritime industry workers and their families, the roots of which can be traced to various governments around the world and their inaction in ending the scourge of piracy.

The American Taxpayer: Insurance Underwriters of Last Resort?

2008-10-16T07:58:00.000-07:00

The Bush Administration’s 700 billion-dollar bailout package is supposedly for increasing banking liquidity – i.e. make banks more confident in providing credit. But is it wise to use the American taxpayer’s money?

By: Ringo Bones

As a way of mitigating the worst effects of the US Credit Crisis - which has now become global, the Bush Administration gave the green light on the implementation of their 700 billion-dollar bailout plan. An overwhelming majority of American taxpayers now question the wisdom of using public funds to bail out the follies that was caused by Wall Street’s “Quixotic Adventurism” in pursuit of easy money. While many Americans are now beginning to understand that when major financial institutions are allowed to fail – like Lehman Brothers – the negative repercussions will surely be felt around the world. And the question now is the decision to use the American taxpayer’s money a wise choice? Those in the know will inevitably be saying: “But isn’t this tantamount to a nationalization that would inevitably transform the US banking system from a free market economy to a command socialist economy?” After all, this inevitability will surely undermine the ideological underpinnings of Wall Street’s perception of what free market capitalism should be – a paragon of the American Protestant Work Ethic.

Central banks around the world are now coordinating to implement a plan modeled after the Bush Administration’s 700 billion dollar economic bailout scheme – albeit at a more modest scale. This is due to the fact that the International Monetary Fund’s top brass’ praise of the Bush Administration’s economic bail out scheme as “the most sensible so far” in solving our current global economic crisis. Thus the taxpayers disdain of using public funds to bail out the excesses and adventurism of the banking sector is no longer confined to the United States.

If the taxpayers’ money ever becomes the financial too of choice by governments to bail out their ailing economies, then the majority of us taxpayers will inevitably be harboring resentment. Plus that ever increasing consensus that insurance companies make so much because they charge clients / their customers high premiums and then underplay or deny claims altogether. Some have even said that insurance companies are just daring us to fight back. Will incidence of insurers bad faith rear its ugly head on every government around the world attempts’ in alleviating our global financial crisis?

Tattoo and Piercing Insurance

2008-09-10T05:16:00.000-07:00

Even though this form of insurance has been regularly available across the United States for more than a decade, tattoo and piercing insurance is still an esoteric idea to some bemoaning how tattooing became popular. Is this insurance really useful?

By: Vanessa Uy

Toward the end of the 1980’s, when the rise of the Los Angeles Hair Metal Scene epitomized by bands like Mötley Crüe, Guns N’ Roses, LA Guns, and Poison started to made tattoos – even body piercings - a part of Madison Avenue’s “Fashion Ethic”. Tattoo insurance was virtually nonexistent. A few years later with the rise of the Seattle Grunge scene, the concept of a “Tattoo Insurance” began to take shape.

Many in the tattoo art world credit insurance agents Ray Pearson and Susan Preston for making tattoo insurance an economically viable product. Ray Pearson is the self-proclaimed “short, hairy, fat guy in a suit that you see at the conventions behind the Alliance of Professional Tattooists or APT booth” of O.S. Bruner. While Susan Preston of Professional Program Insurance Brokerage for their hard work during the mid-1990’s to make tattoo insurance a reality. Both Ray and Susan have tattoos themselves, which make them in a privileged position understand their respective clients’ point of view. At the time, Ray Pearson and Susan Preston were very busy in providing tattoo shops with coverage at a minimum cost. The coverage also includes piercing, since this body-modification artform has risen in popularity when the 1990’s began.

Tattoo insurance starts with two basic types of coverage. The first is general liability, which provides coverage similar to that of a standard homeowner’s policy – i.e. coverage against fire, flooding etc. General liability coverage is available to professional tattoo and piercing studios that meet the eligibility requirements.

Next is professional liability, which protects an individual tattooist or piercer much like the malpractice insurance that covers physicians. Professional liability has been proved very important in most cases since judging “artistic merit” is largely a matter of taste. This coverage mainly provides legal defense costs (which can be substantial) especially in cases when a client is not satisfied with his or her tattoo. Professional liability also covers various “mistake” claims, like the perennially publicized “Fighting Irish” debacle.

Insurance companies basically judge professional liability eligibility on the normal, commercial underwriting standards. Like the cleanliness of the shop? The type of neighborhood is the shop in since geographic profiling / gentrification / red lining can be an issue (Have you observed the 2008 US presidential hopeful Barack Obama’s Chicago South Side neighborhood’s “arrested development” via Machiavellian-style political machinations?). Are there any immediate hazardous exposures next door? (Like Monsanto’s undocumented PCB dump sites). Insurance companies also look for legitimate, professional, permanently located tattoo / piercing studios as opposed to an artist working out of his or her own basement.

Some insurance companies require a tattoo shop to routinely register their clients in a log to prove that the specific person were tattooed by them on a specific date. This is distinct from the paperwork of liability waivers most tattooists and piercers require their customers to sign. Courts have been recognizing the validity of these waivers and had been enforcing them for over a decade now. When an adult enters into another contract with another adult, signed with a full understanding and approval, the artist is free of responsibility. The cost to the tattooist is then limited to legal fees, which the insurance company pays for.

As the cornerstone of a good “beauty business” has always been repeat customers and referrals. Tattooists and piercers can be considered an excellent example of a beauty business for reasons previously described, but they also did a good job of policing themselves over the years by consistently and universally operating on a safe and professional level that there haven’t been many claims. This resulted in a business that operates on minimal loss and high profit margins that insurance costs by way of premiums can be considered minimal.

Professional Program Insurance Brokerage offer insurance premiums that start as low as $615 to insure a tattoo shop or individual artist. They usually charge 10% more if a shop does facial or cosmetic tattooing – like permanent eyebrows and lipcolor - which is considered riskier than regular body tattooing.

Some insurance companies offer group policies. O.S. Bruner offers such a policy to eligible Alliance of Professional Tattooists or APT members, which significantly lower the costs of availing one. Ray Pearson says O.S. Bruner’s average shop policy with $30,000 of contents coverage, a $500,000 limit of general liability, and special perils coverage - which is “all risk”, including theft - costs around $1,175, inclusive of taxes and other fees.

Most companies offer tattoo liability limits available from $100,000 to a million dollars. And property coverage can be scaled-up for basically whatever the client needs. Premiums can be paid in a lumped sum – i.e. all at once - or through a more manageable monthly financing. Looks like the tattoo and piercing insurance providers are really looking out for both the shops and their customers, how’s that for corporate social responsibility.

The short but crowded history of tattoo and piercing artform’s assault on the money driven media mainstream – from the late 1980’s Hair Metal scene to the mid 1990’s Riot Grrrl movement epitomized by Theo Kogan and the rest of Lunachicks. With anything that had gone before, between, or after has really popularized both tattoos and body piercings. Some might be jaded, but for better or for worse (I say better) tattooing might outlast anything – the US Navy, Bike Gangs / Enthusiasts, etc - that had helped it become popular in the first place.

Collaterized Debt Obligations: Instigating the Global Credit Crunch?

2008-08-29T05:12:00.000-07:00

Somewhat unfairly blamed as the instigating agent of the 2007 Global Credit Crunch, are collaterized debt obligations or CDO, really deserving of such infamy?

By: Ringo Bones

After reading the latest book by the billionaire investor guru George Soros titled “The New Paradigm for Financial Markets”, I recently had an epiphany that stability and equilibrium are not our Wall Street controlled global economy’s natural state of being. Instead, the quixotic adventurism in search of quick and easy profits undertaken under unacceptable levels of risk is the rule, rather than the exception. Thus explaining the inevitability of the global credit crunch and the current yo-yoing price of crude oil pegged against the US dollar. Even the rise of asset backed security based on synthetic constructs marketed as investments to anyone who likes to experience first-hand what it's like to be financially devastated by an Enron-type scheme.

Often referred to by everyone’s friendly neighborhood financial advisor as an asset backed security product that works just like a home insurance against losses from fire and theft. Except that it applies to big corporation’s credit insurance which you – a mere civilian – can easily get rich of off. By the start of the 21st Century, CDO s was being sold-off to with alarming frequency to financially ignorant civilians – i.e. people like you and me. Your friendly neighborhood financial advisor might – and it’s very likely – to have made ungodly amounts of money relatively easily. Surprisingly to you – the financially ignorant - through the sheer inherent complexity of structured financial transactions of CDO s that he or she –your financial advisor – might seem like a saint for helping you, the financially ignorant retail chump, to experience your friendly neighborhood financial advisors new found get-rich-quick scheme. Except your financial advisor forgot to mention one tiny but very important detail. You must sell – i.e. pass on / dump them – your CDO s once the financial markets turns into a “Bear”. But most of all, are collaterized debt obligations or CDO deserving of their infamy? But first, let us first explain what is a CDO.

Collaterized Debt Obligations or CDO s are often described by financial academics as a type of asset-backed security and structured credit product. CDO ’s are constructed from a portfolio of fixed-income assets. The assets are divided into different credit rating tranches: senior tranches which are rated AAA or “triple a”, mezzanine tranches which are lower on the credit rating “food chain” are rated AA to BB, and the equity tranches, which are unrated. The first CDO were issued back in 1987 by bankers of the now defunct Drexel Burnham Lambert Inc. for the Imperial Savings Association. A decade later, CDO s became the fastest growing sector of the asset-backed “synthetic” securities market.

A major factor for the further growth of CDO s at the start of the 21st Century was the 2001 introduction of Gaussian Copula Models by David X. Li. Which allowed the rapid pricing of CDO s. Because of this, Collaterized Debt Obligations became a major force in the so-called derivatives market were the value of the derivative is derived from the value of other assets. But unlike some fairly straightforward – i.e. “real” derivatives – such as stock options, calls and even the much-maligned Credit Default Swap, CDO s were nearly impossible for the average person to understand. To me at least, the higher mathematics used in creating synthetic securities constructs like Collaterized Debt Obligations and its related variants like Collaterized Insurance Obligations are better to be used in designing weapons systems that will allow a 250-gram projectile to be thrown at 2,700 feet per second. Most of all if anything goes terribly wrong, asset-backed synthetic securities are really worth less than the paper they are printed on, or the bits – one’s and zeroes – they are encoded on.

The complexity of CDO products – which the investor savvy swears by for making him or her earn easy money – is the reason why CDO s are often blamed by the mainstream news media for the 2007 credit crunch. This inherent complexity is often blamed for the failure of risk and recovery models used by credit rating agencies to value these products. Worst of all, CDO s and their ilk are just mere “financial constructs” – as opposed to concrete assets like gold or land. Complicating matters even more was that there was no market on which to sell the CDO s – i.e. CDO s aren’t traded on exchanges. Causing many CDO customers to be mauled by the impending Bear Market. Which is no Bull by the way.

Given that the math used for credit rating various CDO products is about as complex as the higher mathematics used to quantify the dynamics of certain complex sociological phenomena, its best to be pragmatic. It might lead some to some desperation in embracing Sharia Banking Laws in order to retain a semblance of financial stability in our post global credit crunch environment. Were the sobering fact fiscal austerity are forcing credit and bond insurance underwriters to finally remember what it means to be prudent in doing business.

Credit Default Swaps: Easy Money through Complexity?

2008-07-31T06:02:00.000-07:00

Often referred to as a sophisticated form of credit insurance that’s an easy source of big money for the financially savvy, that is until greedy speculators used them to cash in on the US subprime mortgage crisis. Green backs from Red Tape?

By: Vanessa Uy

Financial regulators now bemoan the existence of Credit Default Swaps or CDS. Some even say that trading in Credit Default Swaps ought to be crime because of the way it siphons the hard-earned money of less investment savvy folks into the coffers of greedy speculators. This almost criminal practice of earning big money easily was recently highlighted by the financially savvy purchasers of homeowners insurance who opted for Credit Default Swaps to hedge their risks, which unfortunately created a “domino-effect” that led into the US credit crunch and the subprime mortgage crisis. Because of this, majority of US banks and other financial institutions no longer trust the credit worthiness of their fellow “financial institutions” due to the effects of the unregulated trade in Credit Default Swaps. But in order for us to form a sound judgment over Credit Default Swaps, let us first define what it is.

A Credit Default Swap or CDS is a credit derivative – i.e. financial instruments of special nature – dealt between two counterparties. One party makes periodic payments – usually in the form of insurance premiums – to the other and receives the promise of a payoff if a third party defaults. The former party receives credit protection via credit insurance and is said to be the “purchaser”. The other party provides credit protection and is said to be the "seller”, while the third party is known as the “reference entity”. For all intents and purposes, Credit Default Swaps are nothing more than privately traded insurance contracts that let people bet on a certain company’s financial health.

When it comes to credit derivative products, Credit Default Swaps are the most widely traded. The usual term of maturity of a CDS contract is five years. But because it is a derivative that’s dealt over-the-counter, Credit Default Swaps of almost any maturity can be traded.

As credit derivatives go, Credit Default Swaps are a relatively recent development. Back in 1995, Blythe Masters of JP Morgan developed the first Credit Default Swap and Collaterized Debt Obligations even though other bond insurance products are already available since the 1970’s. When Blythe Masters was heading the Global Credit Derivatives group of JP Morgan, he introduced Credit Watch in April 2, 2007 as a regulatory measure and also to help evaluate credit swaps among other financial instruments. By the end of 2007, there is an estimated 45 trillion US dollars worth of Credit Default Swap contracts. But if the inherent regulatory measures are well established, then what’s the problem?

The problem with Credit Default Swaps occurs when they hit the market. Everyone knows that banks and insurance companies are regulated, while the credit swaps market is not. Because of this, contracts can be traded – or swapped – from investor to investor without any regulatory body overseeing the trades to ensure the buyer has the resources to cover the losses if the security defaults. The instruments can be bought and sold from both ends – the insured and the insurer – with nary an oversight. Thus your typical greedy speculator has now been granted “free reign” to prey upon the financially ignorant and those with gullibility for get rich quick schemes. For all intents and purposes, the current market in credit derivatives has now become Mephistopheles’ playground due to lack of regulation and oversight. Thus perpetuating our current financial crisis in which these forms of credit insurance were built to prevent in the first place.

Environmental Coverage: Corporations versus Mother Nature?

2008-06-27T05:44:00.000-07:00

Legislated environmental laws not only vary from country to country it is also evolving over time – in favor of the environment. Using this rationale, are existing environmental coverage clauses just a thinly veiled right for companies to pollute?

By: Vanessa Uy

Ever since the term Corporate Social Responsibility became the latest buzzword in the world, corporate leaders keeping their promises to shareholders and the company’s “bottom line” is no longer enough. Corporate leaders must also fulfil their promise to their employees and the community that their business practices are not placing our environment at risk. But when push comes to shove, how many of our so-called corporate leaders choose in favor of the environment instead of just “looking out for number one”? Especially when there are Environmental Coverage already available that not only turn “unforeseen disasters” that they create in the first place out of greed and ignorance – or a bit of both – into manageable situations. If you choose to define manageable situations as “immunity from prosecution” to “profiting from their own apathy”, which explains the popularity of every G8 summit to unruly teenagers.

There are now a number of insurance companies that offer environmental coverage with well-backed claims of underwriting authority for environmental risks. Some of them with reputations solidly backed by Triple-A-rated financial strength, the latest Basel Accord compliance and what have you. The question now is, are products like Cleanup Cost Cap and Pollution Legal Liability Select and their ilk nothing more than a thinly veiled rights for companies to pollute while avoiding the pay out of punitive damages?

The most commonly perceived truth states that this problem is either too complicated to the average layman or can be easily manipulated by the demagoguery of every environmentalist / vote-for-me politician come lately who favors passion over rational thought. Fortunately one can easily “hedge their bets” so to speak by utilizing the aid of one of the latest mathematical tools in assessing whether a corporations “green credentials” are nothing more than misspent PR – namely Quantitative Risk Assessment.

As of late, Quantitative Risk Assessment has been utilized by insurance companies I cited before that offer Cleanup Cost Cap and Pollution Legal Liability Select services as a form of corporate transparency. Stating that their products are not just thinly veiled provisos that allow corporations to pollute and ruin our environment with impunity. Insurance companies that provide environmental coverage always stay abreast with the latest Quantitative Risk Assessment findings especially ones pertaining to the protection of our environment. I just hope when insurance companies custom-tailor an environmental coverage policy to a certain company; it would be equitable to the needs of our environment and to the local economy. The world doesn’t need another corporate injustice like the still unresolved compensation claims of the victims of the 1984 Union Carbide insecticide plant disaster in Bhopal, India.

The Emergency Landing Brace Position: A Lethal Proposition?

2008-05-05T05:01:00.000-07:00

Conspiracy theorists reasoned out that the emergency landing brace position is really designed to kill airline passengers in a crash because its cheaper to pay wrongful death suits than medical injury compensation. Is there a truth to this?

By: Vanessa UY

Our technological ability to fly – make that heavier than air technology – is now well over 100 years old, and yet quite a large portion of our populace still harbor this irrational fear of flying even though statistically air travel is the safest way to go. This is probably the reason why unfounded myths and rumors pertaining to the airline industry have become so prevalent lately. But one of these somewhat controversial myth / rumor being spread around by conspiracy theorists is about the one pertaining to the brace position instructed to be performed by airline passengers in case of an emergency landing.

According to the conspiracy buffs, the brace position is intended to kill airline passengers by breaking their necks easily rather than saving their lives. This is so because it’s cheaper for airline companies to pay out to the wrongful death lawsuits than to pay for the surviving passengers’ medical treatment and rehabilitation which could last the survivors entire natural life. In wrongful death pay outs, the airline companies typically pays 3 to 5 million dollars while for survivors medical treatment and lifetime rehabilitation, it could reach 50 million dollars. The risk assessment in dollar terms alone is very scary, reinforcing the typical conspiracy theorists conjecture about insurance and underwriters companies in collusion with the airline industry. By placing profits first before the safety and lives of their passengers, conspiracy theorists never had a better excuse in thinking so. But is there any truth to this?

A very entertaining science program on the Discovery Channel called Mythbusters routinely dispel and test suspected myths like the one previously mentioned by performing visually extravagant but valid scientific experiments that had gained them a cult following – especially to the younger viewers who desperately needed scientific enlightenment. In one episode, they did an experiment to test the validity of the myth that the brace position is designed to kill airline passengers during an emergency landing. Their high tech sensor loaded (actually they used postal / parcel service shock measuring stickers) crash test dummy named “Buster” was used to substitute a human passenger in an emergency landing situation. Sure enough, Buster demonstrated that the brace position actually reduced the shock or G load to a typical passenger by as much as 20 G s. That’s 20 G s less shock compared to a passenger in a normal sitting position. That’s a very significant difference of an outcome between survival and death.

To evaluate the big picture on why this myth ever came about in the first place, let’s examine first the history of manned aviation. When the Wright Brothers first demonstrated their newfound prowess of manned flight, they spawned a host of barnstormers i.e. early aviation enthusiasts. Even though they are very much popular and widespread, most people back then were still deathly scared by flying. Even witnessing a plane flying 30 feet above their heads is enough to terrify them even though there’s also a large majority who are curious to experience themselves the magic of flight. So when business entrepreneurs started the airline business back then, they have to convince the people how safe their planes are – or at least they cared about the safety of their passengers. And since airline companies are still around till this day, then safety concerns did came hand and hand with profits.

Sadly, there’s this other thing that the conspiracy theorists overlook that was always part and parcel of profit generating enterprises – namely corporate social responsibility and ethical business governance. Even though these concepts only became unique selling points of customers quite recently. It’s only common sense that your customers and clients will only do business with you again if you treat them right. Even private security contractors are subscribing to the corporate social responsibility and ethical business governance fad by using the phrase “at least we’re not killing innocent civilians” as their unique selling point. Maybe conspiracy theorists need to study the history of aviation first. If these conspiracy theorists don’t find history or science as a “sexy subject” anymore, then they should blame the Board of Education, not the airline industry.

Risk Calculations: On the Mark or Missing by a Mile?

2008-04-23T05:23:00.000-07:00

Ever since it was mathematically proven that air travel is actually much safer than driving, risk calculations has become a perennial topic of discussion by anyone too worried to be worried. Are we being scared unnecessarily?

By: Vanessa Uy

There’s this very funny anecdote that I heard quite recently about how much air travel is safer compared to your typical “little girls bike”. You also probably heard it before. The punch line goes: “At least when my little girl falls from her bike, its not a 30,000 foot drop. This could very well serve as a rationale for the toy manufacturer Mattel to start competing with the jumbo jet manufacturer Boeing once the scandal over the high lead content of Mattel’s PROC-manufactured toy products eventually dies down.

Basing from such tales of perception and of opinion from the general public with regards to the risks that they face everyday, its no wonder that people who do risk assessment for a living harbor a pre-conceived notion. A notion that the general public is largely irrational when it comes to risk assessment, but there’s a kernel of truth regarding this matter.

Calculations used for risk assessment are based on averages, so they have limited value to the individual. Air travel, for instance, may be safe in terms of deaths per passenger mile. But that says little about the specific flight you are about to board. The very one that will subject you and your fellow passengers to a number of takeoffs and landings in bad weather, not to mention the flight crews’ forays into alcohol addled hedonism that previous night.

To define a certain risk implies that the risk assessor resorts to foretelling, but the accuracy of the math’s predictive power can be misleading. This is so because risk assessors’ calculations – by and large – always use historical data while adhering to the dubious assumption that the future will behave like the past. It seems like risk and uncertainty always goes hand in hand, even under mathematical scrutiny.

On the other end of the risk spectrum, examine for a moment the unthinkable scenario when almost all life on Earth – including humans - being wiped out by a catastrophic comet, meteorite or asteroid impact. Due to Hollywood cashing in the legitimate concerns of astronomers warning us of this “Doomsday Scenario”, the general public has been fascinated on what might happen as we prepare, during, and after a catastrophic asteroid or comet impact during the last ten years or so.

One asteroid that got famous after receiving it’s “15 Minutes of Fame” in the mainstream media spotlight is 99942 Apophis. This 320 meter wide asteroid was first discovered in 2004 and was supposedly calculated to hit our planet on April 13, 2029. Though by no means dead certain, estimates for the asteroid 99942 Apophis hitting us ranges from a “scary” 1 in 27 to NASA’s “somewhat reassuring” official estimate of 1 in 45,000.

As of late, NASA’s official estimate has recently recalculated by an “astronomically curious” high school student using off the shelf computer software. Using such modest resources, the student’s findings that the asteroid 99942 Apophis now has a probability of 1 in 459 in hitting our planet. The student’s findings were later proven by NASA to be correct. But for those who based their calculations via current geological evidence that catastrophic impacts that wiped out the dinosaurs 65 million years occur regularly at 13 million- year intervals. Therefore the chances of our planet being hit catastrophically by a comet or asteroid in a span of one year comes to about 1 in 20,000. Even though I’m worried, I do keep my worries to an absolute-minimum. Anymore than that is an unacceptable risk to my overall wellbeing.

Genetic Science and Life Insurance Companies: An Unholy Alliance?

2008-03-26T05:20:00.000-07:00

As the science of genetics advances to a level where someone’s future health status and life span can be calculated with unprecedented degrees of accuracy. As these tools will be utilized by life insurance companies. Will the establishment of a voluntary code of conduct in the rate - making procedures of life insurance providers be the norm rather than the exception?

By: Vanessa Uy

In a typical contemporary life insurance company, the actuary knows only that ultimately that the policyholder will die. The factors governing the event as they apply to any given individual-the when, the why, and the how-are still a mystery beyond casual prediction. Insurance experts must therefore draw up their actuarial tables entirely from death statistics, separating into categories of such subdivisions as age, sex and occupation. The expert thus starts with known statistics and from these, works out the probabilities. As always in the case of probability, the greater the sampling, the more accurate the resultant forecast will be.

Recent advances in genetic science can now allow scientists to predict with ever increasingly accurate forecasts of the probable characteristics of even the unborn. Characteristics such as height, weight, intelligence, even longevity. These tools now in use routinely by genetic science has become increasingly harder to be overlooked by life insurance actuaries. Surely, the element of gambling can be eliminated if the customer’s premiums are like the proverbial “money in the bank” since the life insurance company will now be less likely to pay out with most of their policyholders are now living as long as sequoia trees.

Will life insurance policies in the future be tailored to the individual customer’s “genetic endowment”? The sad news is that it will be a definite certainty despite the resulting resentment that will be harbored by a working underclass. To me, this is where a voluntary code of conduct should be adopted by “mainstream” life insurance companies to avoid the increased customer exclusion that would result if life insurance actuaries adopt a method that by all intents and purposes is unfair. But the bad news is life insurance companies primarily are a business entity that’s primarily concerned with their “bottom line”. If life insurance actuaries see that an unjust method of customer exclusion or insurance policies can fatten up their bottom line, then surely, they will accept it with open arms despite of the ensuing social turmoil.

Credit Insurance: A White Knight against Recession?

2008-02-08T04:39:00.000-08:00

As Bond Insurers loose their “triple A” credit ratings thanks to the US economic turbulence towards the end of 2007. Can Credit Insurance providers still be counted on as recession looms?

By: Vanessa Uy

In today’s world, credit has become a vital part of our modern economy. If large credit losses occur, profits may be totally lost. Manufacturing and wholesaling firms always have that looming threat that someone to whom they extend credit may become insolvent and will be unable to meet their obligations.

Ordinarily, it is possible to estimate probable losses caused by extending credit and to add this cost to the price of the goods. It is also possible to be very cautious about extending credit. However, one large loss may upset all plans and methods for meeting the losses, and if too restricted credit practice is followed sales and thus profits will be cut even greater than credit losses. Credit insurance was developed, therefore, to protect business against undue credit losses. This insurance does not cover credit transactions between retailers and customers. Credit insurance policies do not place any serious restrictions or limitations on the cause of the debtor’s insolvency and thus contain broad coverage after the title of the goods has passed to the various debtors.

The principal kinds of credit insurance policies are general coverage policies. With the general coverage policy, all customers are included subject to the limitation of the policy. The financial standing of the customers and their credit ratings determines whether he or she is to be covered and for what limit.

The Dun & Bradstreet, Inc., mercantile agency manual is generally relied upon for information concerning customers, although there are other approved agencies. The insurance companies require that the customers have a capital and credit rating in a recognized mercantile agency because of the nature of the fluctuating hazard of credit.

The mercantile agency books show the approximate amount of net worth and the promptness of meeting obligations of the various concerns. The better firms receive high or good credit ratings and are regarded as preferred ratings. Usually the much coveted “triple A” rating badge. Other, less secure enterprises are rated as fair and limited and are considered inferior ratings. Often credit – insurance policies do not cover concerns rated as limited as these firms represent great hazards. Under such circumstances credit afforded to customers in this class is extended at the insured own risk. The liability of the insurance company on any one loss is limited in relation to the credit and financial standing of the customer.

Credit insurance does not cover loss of profits involved in a failure of the customer to pay for the goods. An amount, representing the estimated profits, generally 10 per cent, is deducted from the total of the uncollected accounts for which indemnity is provided. This deduction of a stated percentage from provable losses is known as coinsurance. By payment of an additional premium the coinsurance clause will be eliminated.

Since all concerns normally expect to suffer some credit losses every year, an amount known as the normal loss, is deducted. This is done way before any of the losses be paid by the company. Generally the amount is based upon the total sales of the insured and the ratings on which coverage is required.

So in today’s financial climate that’s fast heading into uncertainty, do credit insurers help manufacturers and wholesalers from going under? Well, if one looks our global financial system from the perspective of “enlightened self interest” the answer is a big fat yes. This is so because manufacturers and wholesalers are the main customers of credit insurance providers. And credit insurance providers are not stupid enough to sacrifice their own “cash cows” just to protect their own interests. But when bad goes to worse especially if your specific credit insurance provider can’t reimburse you because it went bust. Then, this is surely a sign that a full blown economic recession is in progress. Just hope that a full blown economic depression doesn’t come next.

Does Anyone Need Climate Change Insurance?

2008-01-06T04:53:00.000-08:00

Should we all go out and purchase “Climate Change Insurance” –like Life and Car Insurance- to protect our beachfront properties of the inevitable if-and-when?

By: Vanessa Uy

Like the establishment of the US Environmental Protection Agency back in 1970, there -as of yet unless you exclude Munich Re's Climate Change Insurance proposal that's still under evaluation - no existing legal precedents that allow –let alone to regulate- the sale of “Climate Change Insurance” policies to the average homeowner. I mean average because how many of us could afford the insurance premiums of Lloyd’s of London style insurance companies that provides coverage to risk whose mathematical evaluation borders on the non-existent? Also, the existing conservative political climate in the United States could easily allow existing insurance companies to classify the negative effects resulting from climate change –like sea level rise and increased frequency of hurricanes- as “Acts of God” which almost all existing insurance companies around the world won’t settle. And finally, is it wise to use the funds generated from “Carbon Offsetting” that’s already slated to bankroll sustainable / green development programs in “poor” countries be used as funds to settle the damages resulting from Climate Change?

Ever since “modern” insurance companies were established, they declared that the first essential factor in insurance is that the element of gambling must not be present. Since then, insurance companies had been eliminating the “element of gambling” by making it possible –through mathematics- to make accurate and scientific calculations of the extent of the hazard, so as to charge a fair premium. This is why it is important to study all the available scientific data to properly gauge the extent of Climate Change –now and in the future. The study can also be used to gauge if the risk must be important enough to warrant insurance. To make such a venture economically viable, the insurance company must have a large number of risks –spread out geographically- so that it will not have a concentration of risks in one area. And finally, the cost of the insurance –i.e. premiums- must be within the reach of a large number of people.

A couple of leading authorities –namely Michael Schlesinger and Natalia Andronova- professors of atmospheric sciences at the University of Illinois at Urbana-Champaign says that low cost climate-change insurance could help ensure a better future. By implementing a “Carbon Tax” of five US cents per gallon of gasoline and gradually increasing the tax over the next 30 years is the optimal solution, the researchers report. “You can think of the tax as a low- cost insurance policy that protects against climate change,” said Michael Schlesinger. The policy premiums –according to Professor Schlesinger- could be used to develop alternative energy technologies. Doing a little now to mitigate long-term climate change would cost much less than doing nothing and making adjustments in the future.

Because mitigation would impose immediate costs, with any long –term benefit unknown, some scientists and policy-makers have argued that nothing should be done until the “uncertainty surrounding the climate issue” is substantially reduced. But Professor Schlesinger says:” By then, however, it may be too late to and we will have foreclosed certain options. Rather, the uncertainty is the very reason we should implement a climate policy in the near term.”

Professor Michael Schlesinger’s idea of a taxation-bankrolled Climate Change insurance is somewhat similar to a State Insurance where state funds –i.e. tax revenues- are organized for the insurance of the compensation risk. To me, this is more or less similar to Social Security insurance. Like state funds, a government controlled Climate Change insurance has the advantages of costing much less than that of private organizations because no commissions are paid to brokers or agents and the work is handled by state employees. Also, some state funds may not emphasize the prevention of losses. Finally, if the premiums collected are insufficient to pay losses, the state may have to make up the difference if permitted by law.

Despite of all the rigmarole and red tape surrounding the establishment of a Climate Change insurance, the lack of legal precedents is the greatest obstacle for providing a system to mitigate the damages that might be incurred by the effects of Climate Change / Global Warming / sea-level rise. And by increasing the tax on gasoline incrementally over the years for the next 30 years could cause an- uproar to all of the petrochemical companies around the world. But –to me at least- a binding legislation of a Climate Change insurance based on the established principles of the modern insurance company / industry is probably the best solution where conservationist and the corporate / industrial world can reach a common ground.

Meteorite Strike Insurance: Absolute Necessity or Needless Luxury?

2008-01-06T04:08:00.000-08:00

Will insurance companies provide a proviso on their personal risk insurance for a phenomenon that boarder on the “Act of God”?

By: Ringo Bones and Vanessa Uy

Throughout recorded history, only one person has been documented to having been hit by a meteorite from space. Fortunately, she survived. Because of this, opinions have always been divided in the insurance underwriters’ community whether the incident with Mrs. Hewlett Hodges should have been treated as a “freak occurrence.” She was extremely lucky though to have survived by being hit with a 10- pound fragment that pierced her roof and struck her left side. But first let us define which is which.

When the “rock” is still moving through the vacuum of space, it’s called a meteoroid. When the “rock” is glowing “pyrotechnically” as it enters the earth’s atmosphere, it’s called a meteor. When the said “rock” or “object” hits the earth surface, a house, or other unfortunate soul, it’s called a meteorite. These are the natural ones, while the increasingly commercial utilization of orbital space has created the problem of “space junk” that are the by - products of the launch of communication satellites which is also a possible source of meteorite strike hazard.

Concerns over the possibility of humans being injured or killed when hit by a meteorite strike usually becomes a topic of conversation during the annual meteor shower season that starts in August all through to mid –to- late November. These annual meteor showers occur in streams with established orbits. These meteor showers are named after the constellation from which they appear to radiate. Like the recent Perseid meteor shower that occurs in early August, which the one that occurred this year received heavy press coverage because of the ideal “viewing” conditions appear to radiate in the constellation Perseus. For those who missed it, don’t worry cause this coming late October the Orionid meteor shower will be radiating in the constellation of Orion. Though most of my buddies prefer the Leonid meteor shower because it’s occurrence from mid – to –late November in the constellation Leo are more likely to provide an ideal “viewing” conditions from our regular vantage point. Recent scientific studies have shown that that all recurrent meteor showers are mostly composed of debris left in the wake of comets, past or present.

Currently, Lloyds of London are the only known major insurance company that provides services on meteorite strike insurance policies. But the firm seriously advises anyone planning to purchase their meteorite strike “policies” to “think it over thoroughly” because these are somewhat expensive and meteorite strikes are statistically evaluated to a degree that their occurrence –in an average human lifetime- borders on the nonexistent. In the UK, meteor strikes (as written on their Webpage) are generally defined as an “Act of God.” According to the Website of Car Insurance in the UK (www.car-insurancefacts.co.uk) which defines “Act of God”; as an event not caused directly by an individual that causes damage to your vehicle. An example (albeit an unlikely one) would be a meteorite strike. More often than not, “Acts of God” are uninsurable.

While the “budget” side of the insurance industry doesn’t do business when it comes to insuring our person and property against meteorite strike insurance. There is also the rigmarole that they also fail to classify meteorites that are made by man i.e. spent rocket parts and other by-products of space travel and commerce (communication satellite launches) from those that are natural i.e. left over material from the creation of our solar system. Most of these insurance companies just classify these occurrences / incidents under the “Act of God” clause.

For all intents and purposes, its in the insurance companies of the world’s best interest to provide an insurance proviso on meteorite strikes, especially objects that are a product of the commercial utilization of space like the regular launching of communication satellites used for cellular phone and Internet data traffic. The profits generated by this activity has the mathematical equitability to make the meteorite insurance proviso economically viable to the average prospective client.

Divorce Insurance: Equitability in Marriage?

2008-01-06T04:02:00.000-08:00

In today’s post-modern society driven by capitalist consumerism, could a divorce insurance with really good provisos be the answer in keeping “modern love” equitable?

By: Vanessa Uy

Ever since Pope Gelasius declared February 14 as a Red Letter Day in honor of St. Valentine back in year 496, anyone from bards to scientists and even lawyers had lend a hand in gaining insight on this thing we call love. Although gaining insight means different things to different people, in this day and age, gaining insight on love usually means making the damned thing equitable to the parties involved. Love used to be the business between two loving couples, but in our present age, greeting card companies and those “weird people” who claim to be close to God by virtue of celibacy all lay claim to be the sole authority on love and marriage. I think these two camps are what’s been making Valentine’s Day a very interesting holiday for over a millennia.

When capitalist consumerism declared that it knew the price of everything – including devotion and obligation – did it made equitable ground rules? Or are we now so cynical that nothing free has value anymore? How could Calvinism put a price on one’s own devotion and obligation? Only the Anglo-Saxon God knows and He’s not talking. To me, this makes it a situation where only lawyers have free reign on arbitrarily deciding what’s equitable or not. I just hope that more prenuptial agreements be offered in pro bono flavor.

To me, it’s just sad that the thing we call money – whose value is backed up by our increasing materialism - is also the very thing that could get us out of this specific dilemma. In this day and age, divorce insurance with proviso for legal separation and prenuptial agreements really has existing demand. Divorce insurance really has legitimacy because the element of gambling – the first essential factor in insurance – is not present. This is so because countless people get married on a regular basis with the knowledge that over half of it will end in divorce and currently divorce proceedings are always messy affairs by judicial standards. Then, only a couple of things are left to be studied to make divorce insurance an integral part of most insurance companies’ / providers’ retinue. Like the possibility in making accurate and scientific calculations of the extent of the hazard, so as to charge a fair premium. Remember, irreconcilable differences causes stress and stress leads to ill health mental or otherwise. The other is the cost of divorce insurance must be within the reach of a large number of people.

Forgive me for being too cynical – even by “Michael Moore Documentary” standards – but divorce insurance, in my opinion, could really revolutionize how our present generation look at and approach “Romantic Love”. Divorce insurance could end once and for all the blatantly ithyphallic way young couple decide to get married – by whim – with utter disregard to the hardships that they will certainly encounter in marriage. Just something to think about during Valentine’s Day.