ACE Bermuda released its “2013 Liability Limit Benchmarks and Large Loss Profile Report” this week, an annual compilation of some of the largest third-party liability losses occurring over the last decade for more than a dozen separate industries.
Starting the report with the auto and auto parts manufacturing sector, where losses ranged from a low of $13 million for a seatbelt malfunction in 2004 to a $1.1 billion high in 2009—for a loss described as “sudden unintended acceleration of vehicle engines resulting in injuries—each section of the ACE report also provides data on average liability limits that companies operating within the industry are purchasing.
The largest auto and auto parts makers, for example, with more than $100 billion in revenues, buy roughly $800 million in insurance limits on average.
For chemical companies, which had three separate liability losses in excess of $100 million over the past 10 years, limits purchases are smaller—with the smallest chemical companies (with less that $2.5 billion in assets) buying around $300 million programs, and the largest (with more than $15 billion in assets) buying double, or about $600 million in liability limits.
While construction companies had only one loss event over $1 billion during the past 10 years, those with over $15 billion in revenues buy roughly $1 billion in limits, on average, the report reveals. The large loss event that jumped out of the list relates to defective drywall, with the amount listed as $15-$25 billion.
Other big limits buyers—with losses to match—include exploration and production companies in the oil and gas sector, life sciences companies, and those involved in transportation by rail.
Explaining the impetus for the report in a statement, Judy Gonsalves, executive vice president of ACE Bermuda’s Excess Liability division said, “ACE Bermuda typically deploys its large-limit capacity at or near the top of a liability insurance program and clients often ask us for an indication of the total insurance limits their peers are purchasing.”
“This marks the third year we have produced this report,” she said, noting that customers use it as an additional tool for benchmarking their insurance purchasing decisions against peers, and to help them better understand the potential scope of large, unexpected losses they could experience.
The annual publication provides some useful insights into prevailing trends. For example, since the 2010 Gulf of Mexico oil spill, ACE Bermuda’s data shows there has been a meaningful uptick, of more than 50 percent, in terms of average total limits being purchased by Tier 2 and 3 companies engaged in the exploration, drilling and production of oil and gas.
By contrast, the lack of significant catastrophic losses experienced in the telecommunications industry over the last few years correlates to substantially reduced limits being purchased by the smaller asset-based companies in this sector.
ACE Bermuda generates its limits benchmarking data using a variety of exposure metrics that are unique to the industry in question. For example, “daily throughput capacity” has been considered in evaluating risk for a refining company, whereas “miles of track” has been used in analyzing railroad risk.
The report is available on the ACE Bermuda website, at www.acebermuda.com