|USAA Casualty Insurance Company|
|Property & Casualty|
Does the company have a plan to assess, reduce or mitigate its emissions in its operations or organizations?
Yes - The company has a plan to assess and reduce or mitigate emissions in our operations or organizations.
No - The company does not have a plan to assess and reduce or mitigate emissions in our operations or organizations.
|At USAA, we care for the environment because it is the right thing to do. Our commitment to sustainability is for the long term. We are committed to conducting business as good stewards of our natural resources and dedicated to finding sensible solutions that reduce our impact on the environment while maintaining our focus on serving the needs of our members. |
Energy - At USAA we care about energy conservation and have made significant strides, including the following:
USAA has reduced electrical consumption by almost 18% across our owned and operated facilities since 2008 by improving the efficiency of escalators, lighting, and heating and cooling systems, and automating "sleep modes" for PCs and monitors.
In 2016, to supplement its electricity resources, USAA purchased or self-generated more than 23% of the San Antonio and Phoenix campuses’ electrical power from renewable energy. This amount is roughly equal to the energy needed to power more than 2,300 average-sized San Antonio homes.
In 2015, nearly one-fourth of USAA’s electricity usage came from purchased or generated renewable energy sources, including wind power. This includes a 1 MW solar array that we built at our Phoenix campus.
The San Antonio, Phoenix, Tampa, and Colorado Springs office facilities have all earned the prestigious ENERGY STAR rating from the EPA for more than 10 years.
Our San Antonio, Phoenix, Tampa, and Colorado Springs office facilities, as well as our West Point Financial Center have all received certificates for Leadership in Energy and Environmental Design (LEED). The LEED Green Building Rating System™ is the internationally recognized green building certification system for the design, construction and operation of high-performance green buildings. Two of our buildings have received Platinum certification and were the first office buildings in Arizona and Florida to be recognized with this level of certification.
Recycling - Our recycling program helps conserve energy and raw materials, reduces manufacturing pollution and also reduces the burden on landfills. Examples of the program include:
Recycling on average more than 65% of waste annually since 2008. In addition, USAA has reduced our overall landfill waste by an average of 25% annually.
Recycling paper and cardboard that has saved more than 149,000 trees and more than 24,000 cubic yards of landfill space since 2008.
Recycling more than 300 tons of obsolete electronic equipment and 11,000 tons of paper, wooden pallets and landscape material since 2008.
Composting on average 60 tons of food waste annually from our cafeterias since 2008.
Our use of electronic documentation has greatly reduced the use of paper. Since 2008, USAA has delivered more than 8 billion pages electronically to our members, an equivalent of more than 800,000 trees.
USAA has also reduced office print volume by more than 40% since 2008.
Air Quality - We work to limit our air quality impact in everything from the chemicals used in our facilities to employee commuting and fleet vehicle emissions. Examples include:
Increasing fleet miles per gallon by more than 15% since 2008 by switching to electric and more fuel efficient, low-emission fleet vehicles.
More than 3,200 USAA employees’ voluntary participate in alternative commuting programs. USAA also encourages carpooling, bike-riding, mass transit, and other alternatives, as well as providing a flexible work-at-home program, that have avoided more than 56 million commuter miles and prevented nearly 28,000 tons of carbon emissions from entering the atmosphere.
Avoiding use of grounds maintenance equipment and vehicles on Air Quality Health Alert days.
Using "green cleaning" products to protect health without harming the environment.
Water - USAA recognizes the role we play in conserving precious water resources. Examples include:
Reducing fresh-water consumption by more than 50 million gallons since 2008.
Replacing high-flow toilets and shower heads with low-flow fixtures and installing sink aerators to reduce fresh water use by more than six million gallons annually.
Using drought-tolerant plants and retention ponds to capture storm water.
Using recycled water for building cooling towers and 100% of landscape irrigation.
Does the company have a climate change policy with respect to risk management and investment management?
Yes - The company has a climate change policy with respect to risk management and investment management.
No - The company does not have a climate change policy with respect to risk management and investment management.
|USAA assesses the potential impact of climate public policy on various industries, businesses, and municipalities when considering individual investments and overall enterprise risk management, as part of a due diligence process. For example, in the investment decision-making process, USAA considers, among other things, the regulatory environment with respect to changing weather patterns that could impact various industries such as energy and manufacturing. Municipal bond investments are evaluated for any impact that these trends or regulation may have on a given city, state, or region. Potential real estate and mortgage loan investments undergo vigorous environmental risk assessments, and geographic concentrations are avoided. USAA regularly invests in government-sponsored renewable energy projects, and affordable housing programs that often have significant rehabilitation and/or energy efficient components in their construction. |
As part of the internal risk management process, changes in global weather patterns are considered in USAA’s broader catastrophe management process, which is defined specifically within USAA’s P&C Catastrophe Risk Policy, which is reviewed and approved by the USAA Board of Directors.
Additionally, within the Enterprise Risk Management Framework (ERM), climate change is considered in execution of Stress Testing and Emerging Risk programs. Extreme weather events are regularly modeled as part of our stress scenarios to gauge the impact to capital and liquidity adequacy. Climate change conditions have also been identified as an Emerging Risk and are being monitored and assessed in accordance with enterprise guidelines.
Describe your company's process for identifying climate change-related risks and assessing the degree that they could affect your business, including financial implications.
Yes - The company has a process for identifying climate change-related risks and assessing the degree that it could affect our business including financial implications.
No - The company does not have a process for identifying climate change-related risks and assessing the degree that it could affect our business including financial implications.
|USAA monitors the latest scientific research regarding climate change and evaluates findings for possible inclusion in internal and external modeling processes. This is ultimately used as part of determining our risk profile and adjusting exposures accordingly. Enterprise Capital and Liquidity requirements are based in part on these catastrophe models. The following categories have been identified as significant risks for USAA: |
(1) Hurricanes represent USAA’s largest catastrophe risk exposure. In 2017, Hurricane Harvey in Texas once again proved the devastating impact that intense hurricanes can have on communities as well as the risk exposure for insurers. Various hurricane models and research suggest that storm intensity may increase due to changing weather patterns, leading to higher societal costs. This is exacerbated when combined with increasing property values and population growth in catastrophe-prone areas. USAA is committed to preserving its financial strength over the long-term, and we take the uncertainties surrounding natural catastrophes into consideration when setting conservative capital requirements. For example, USAA’s capital requirements are more conservative than levels set by regulatory and rating agencies. As a result, the company is prepared to withstand a 1-in-1,000 year catastrophe event and maintains a much more conservative premium-to-surplus ratio than standards set by regulators or rating agencies.
(2) Storm Surge and Flood - scientific research has demonstrated a rise in global sea levels, increasing the impacts of storm surge. USAA’s current exposure to storm surge risk is greatly mitigated through the use of coastal underwriting requirements. Areas with high storm surge exposures are only written when members meet exceptional requirements, such as an Institute for Business and Home Safety (IBHS) fortified home. Flood risk represents less than 1% of USAA’s catastrophe exposure – the majority of which corresponds to renters and automobiles (the federal government provides coverage for homeowners and other property products through the National Flood Insurance Program).
(3) Wildfires - Due to the effects of drought, untamed vegetation, and land development, wildfires have been increasing in terms of frequency and severity. Wildfire exposure continues to grow in the United States, and USAA is working on more robust wildfire risk assessment, including modeling capabilities. In addition, prevention efforts are being expanded to further protect our members. For example, USAA provides members with access to multiple programs and services to help them mitigate wildfire-related property loss. We offer many members in high-risk wildfire areas:
• Wildfire Response Program: One of the great benefits we offer to our members in 14 states most susceptible to wildfires is a wildfire response program through Wildfire Defense Systems (WDS). Members in those states who have a USAA homeowners or rental insurance policy can enroll in the program at no additional cost. WDS monitors wildfire activity and takes proactive mitigation measures to help protect a USAA member’s property when an active wildfire looms nearby. In the program, WDS uses certified wild land firefighters to safely go behind fire lines (with permission from the Incident Commander) to assess potential risk and assist with mitigation efforts. WDS can go into an evacuation zone and to member homes before a fire reaches them and take measures to help prevent a loss (reinforcing mitigations actions members should also do, such as closing windows and garage doors, moving wood piles away from the homes, clearing debris from under wood decks, clearing gutters, and removing debris from rooftops). After the fire sweeps through the area, WDS may go back to member homes and make sure no spot fires are smoldering that still could cause damage.
• USAA’s Property Risk Assessment Tool: Too often, homebuyers purchase a property only to learn later that it is in an area prone to natural disasters. USAA’s Property Risk Assessment Tool helps members eliminate those unpleasant surprises. The online tool enables members to plug in the address of any U.S. home and get information about the property’s general exposure to various natural disasters, such as wildfire and flood. It also offers tips on how to reduce the likelihood or impact of loss.
• Firewise Communities: USAA actively supports the development of recognized Firewise Communities, which decrease the risk of losses due to wildfires. USAA is the only major national insurance carrier to offer a discount for communities who are recognized with the NFPA Firewise designation. USAA also actively partners with many state and local government agencies to promote Firewise principles and help communities learn best practices in taking steps towards living in harmony with the local fire ecology that prevails in their geographic location. USAA also actively supports research to determine what factors most influence social behavior to motivate communities to choose to become Firewise.
• WDSpro app: WDSpro is a free mobile app available for members who reside in pre-selected single family homes in/near high wildfire risk areas and are insured with USAA. It empowers members to capture key information about their property along with photos of their home’s exterior and surroundings and send this information to experts for a wildfire risk assessment. The risk assessment provides step-by-step advice on actions they can take to minimize fire risks. The information members provide in the app will not affect their insurance policy or premiums.
Summarize the current or anticipated risks that climate change poses to your company. Explain the ways that these risks could affect your business. Include identification of the geographical areas affected by these risks.
Yes - The company has identified current or anticipated risks that climate change poses to our company - Explain the ways that these risks could affect your business - Include identification of the geographical areas affected by these risks.
No - The company has not identified current or anticipated risks that climate change will pose to our company.
|USAA has identified three primary areas of risk posed by changing global climate conditions: (1) weather-related risks, (2) regulatory risks and (3) business operation risks.|
(1) Weather-related risks
USAA provides a full range of highly competitive financial products and services to facilitate the financial security of its members, associates, and their families, including personal lines insurance products principally in the United States. Weather-related catastrophes affect a significant portion of USAA’s portfolio. USAA uses state-of-the-art catastrophe and economic-capital models to identify and quantify extreme catastrophe risks based on the latest scientific research. The potential impacts of changing climate conditions present a challenge for current catastrophe models since there is much uncertainty surrounding its impact on hurricanes, severe thunderstorms, wildfires and winter storms. Any model has risk of model-error due to the complexity of assumptions, limited prediction power and random error associated with statistical modeling. The assessment of changing weather patterns leads to more uncertainty in model results. USAA takes these model-error risks into account when conservatively setting capital requirements. These conservative capital requirements drive our underwriting, pricing, and reinsurance-purchase decisions and will cover potential impacts of changing weather patterns.
Because many USAA members reside in catastrophe-prone areas, changing global weather-patterns add complexity to (1) the estimates of actuarially-sound rates in catastrophe-prone areas, especially coastal regions, and (2) the estimates of capital requirements for low-frequency, high-severity events. A 2014 Report issued by the Intergovernmental Panel on Climate Change (IPCC), along with other scientific studies published within the last few years, predict more severe droughts and floods, and possibly more intense hurricanes. USAA is committed to preserving its financial strength and to be there for its members over the long-term and, as such, is taking the uncertainties surrounding natural catastrophes into consideration when setting conservative capital requirements. For example, USAA’s capital requirements are more conservative than levels set by regulatory and rating agencies. The company is prepared to withstand a 1-in-1,000 years catastrophe event and maintains a much more conservative premium-to-surplus ratio than the standards set by regulators or rating agencies. USAA’s capital requirements are taken into account when setting geographic and financial growth strategies.
(2) Regulatory risks
Currently, rate regulation in the United States typically limits the amount USAA can charge in catastrophe-prone areas to the range of rates indicated by historically-calibrated models. Therefore, USAA sets rates based on state-of-the-art modeling software. USAA will continue to keep models updated with the latest scientific research incorporated into model assumptions and grow cautiously in catastrophe-prone areas. USAA also works with federal, state, and local authorities, and non-profits as well as insurance related organizations, such as: IBHS, and the Federal Alliance for Safe Homes (FLASH), to promote wise geographical growth and building code standards for new construction.
(3) Business Operation risks
An increase in the frequency and/or severity of catastrophic tropical storms or wild fires could have an impact on USAA’s operations. The Gulf Coast region and western states which are prone to wildfire could be most significantly impacted. USAA has regional offices in both of these areas of the United States, and has contingency plans in place to continue world-class service to members even if a regional office is damaged. Claims adjusters have mobile equipment and extensive training to enable USAA to personally respond to members’ needs quickly and professionally after major catastrophes anywhere in the U.S. USAA also encourages flexible work-at-home program, which may allow employees to work from any location.
Has the company considered the impact of climate change on its investment portfolio? Has it altered its investment strategy in response to these considerations? If so, please summarize steps you have taken.
Yes - The company has considered the impact of climate change on its investment portfolio.
No - The company has not considered the impact of climate change on its investment portfolio.
Yes - The company has altered its investment strategy in response to these considerations.
No - The company has not altered its investment strategy in response to these considerations.
|USAA has considered the impact of changing climate conditions on the management of our investment portfolio. Like most highly-rated insurance companies, USAA operations include managing sizable invested assets composed of predominately fixed income securities of high credit quality and medium duration, aligned to USAA’s investment objectives of investment income, liquidity, and capital growth. As such, potential impacts from changing climate trends are not a significant near-term risk factor in the overall portfolio construction. USAA’s investment management view is that any potential impacts will happen over a period of time well in excess of portfolio duration and strategic investment horizon, affording ample time and flexibility to respond to any consequences from changing climate conditions as they become more certain.|
Summarize steps the company has taken to encourage policyholders to reduce the losses caused by climate change-influenced events.
Yes - The company has taken steps to encourage policyholders to reduce the losses caused by climate change-influenced events.
No - The company has not taken steps to encourage policyholders to reduce the losses caused by climate change-influenced events.
|USAA, through our membership in several disaster-mitigation and community resiliency focused organizations and coalitions, including IBHS, FLASH, and the BuildStrong Coalition, has been a vocal supporter to encourage the industry to enact stronger building codes to save lives and protect property. Our corporate social responsibility work also ties into helping to rebuild military communities post-disaster while we partner with community leaders, military leadership, and non-profit volunteer organizations such as Team Rubicon and the American Red Cross to respond. |
USAA is concerned with the safety and financial security of our members wherever they are located around the world. We monitor, track, and research economic conditions and regional weather events (such as Superstorm Sandy) that could directly or indirectly impact our members.
USAA is well prepared to handle weather-related or economic catastrophes financially and we will continue on this fiscally conservative trajectory in order to facilitate the financial security of our members and protect our Association.
Our world-class service helps our members recover quickly. Our focus is to provide world-class service and competitive products and services that help members before, during and after an event.
For example, USAA provides our members with access to multiple programs and services to help them mitigate wildfire-related property loss, including the WDSpro app, WDS Systems Response Program, USAA’s Property Risk Assessment Tool and our support for FireWise communities discussed above in response to question 3.
USAA is also committed to promoting resilient construction throughout the United States and in coastal areas in particular. We offer exceptions to our coastal underwriting guidelines for homes built to the IBHS Fortified Gold and Silver standards in all states outside of Florida.
In the state of Florida, we offer exceptions to our coastal underwriting guidelines for homes built to the IBHS Fortified Gold standard. We also have partnered on a new and innovative program that provides windstorm safety inspections to members at a discounted rate to assess whether their homes meet one or more of the criteria to receive Florida Building Code credits. These credits are mandated by the state of Florida to consumers who have home features that are more likely to withstand the impact of a tropical event. If members choose to take action to retrofit their homes to obtain additional FBC credits within one year of their initial assessment, a follow-up inspection is available at no cost to verify that the work was done properly. Members can then submit this inspection form to USAA to receive savings on their insurance homeowner’s policy.
Additionally, to help affected members get back on their feet during a wide-scale catastrophic event, we draw upon our resources as an integrated financial services company to offer products and services. Some of our offers for eligible members could include lower rates on loans and credit cards, forgiveness of banking and insurance late fees and flexible payment arrangements, free financial advice and car rental discounts.
USAA’s mission will continue, as it has since 1922, to be there for our every day and when members need us most.
Discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change.
Yes - The company has taken steps to engage key constituencies on the topic of climate change.
No - The company has not taken steps to engage key constituencies on the topic of climate change.
|USAA regularly communicates to our members and key influencers (including military organizations such as The American Legion), the many programs we have available to help protect our members’ homes, autos and lives. We also promote weather related loss prevention and safety advice through member communications such as articles on usaa.com, USAA Magazine, our eNewsletter for members, content marketing and social media promotion. We also regularly promote weather related loss prevention and safety topics to the communities we live and serve through public relations efforts via the news media. |
Additionally, in 2017, USAA became the title sponsor of two conferences, StormCenterLive and the National Tropical Weather Conference, both of which seek to provide updates to the meteorological and emergency management community as well as other interested parties on the latest technological and scientific findings on the causes and behavior of severe weather and apply that knowledge towards better communicating risks to the public and encouraging them to take concrete steps to mitigating their exposure to loss from severe weather events.
As discussed above, USAA is also a member of many disaster-mitigation and community resiliency-focused organizations and coalitions. USAA was a founding member of IBHS and continues to support its mission “to conduct objective scientific research to identify and promote the most effective ways to strengthen homes, businesses and communities against natural disasters and other causes of loss.” In 2016, IBHS research and programs were highlighted as part of many events focused on increasing resilience to weather-related events, including:
• A conference emphasizing the critical role that building codes and standards (such as Fortified) play in creating more resilient communities.
• A wildfire roundtable to discuss the many challenges related to increasing development in vulnerable areas.
• A forum on “Smart Finance for Disaster Resilience” focused on insurance, mortgage financing, bonds, tax incentives, and various innovative programs.
• A roundtable devoted to maximizing the resilience [return on investment or] ROI.
• An insurance resilience briefing designed to create a lasting connection between the resilience activities of the Obama and Trump Administrations.
USAA was also a founding member of FLASH and continues to support its mission “[t]o promote life safety, property protection and resiliency by empowering the community with knowledge and resources for strengthening homes and safeguarding families from natural and man-made disasters. In 2016, in partnership with USAA, FLASH joined the Federal Emergency Management Agency (FEMA), the National Oceanic and Atmospheric Agency (NOAA) and The Weather Channel to create #HurricaneStrong, a national hurricane resilience initiative that won the Outstanding Achievement in Public Awareness Award at the National Hurricane Conference. The outreach campaign, which has been extended through 2017, seeks to increase public safety and reduce damages from hurricanes by educating millions of Americans in hurricane-exposed areas with five key messages:
• Personal Safety - Know your evacuation zone
• Family Preparedness - Build a disaster supply kit
• Financial Security - Have an insurance checkup
• Damage Prevention - Strengthen your home
• Community Service - Help your neighbor
In addition, USAA is a member of the BuildStrong Coalition; a group of firefighters, emergency responders, insurers, engineers, architects, contractors and manufacturers, as well as consumer organizations, code specialists, and many other groups committed to building a more resilient America. The coalition is dedicated to raising awareness on how disaster preparedness can help minimize risk and reduce losses to communities, businesses and families. As part of the coalition, USAA advocates for federal legislation to create a national mitigation investment strategy and incentivize mitigation on a broad scale. Decades of research has shown that investments in pre-disaster mitigation have significant advantages over post-disaster spending. However, the federal government continues to allocate only a fraction of its total disaster spending on pre-disaster mitigation.
Insurance Institute for Business & Home Safety, 2016 ANNUAL HIGHLIGHTS, Pg. 5, available at: http://disastersafety.org/wp-content/uploads/2017/02/annual-highlights-2016_IBHS-member-download.pdf.
Federal Alliance for Safe Homes (FLASH)®Launches 2017 #HurricaneStrong, available at: http://newsroom.flash.org/news/federal-alliance-for-safe-homes-flash-launches-2017-hurricanestrong.htm.
Describe actions the company is taking to manage the risks climate change poses to your business including, in general terms, the use of computer modeling.
Yes - The company is taking actions to manage the risks climate change poses to the business.
No - The company is not taking actions to manage the risks climate change poses to the business.
|USAA has a dedicated Catastrophe Risk Management unit to understand and manage risks posed by natural catastrophes, including the long-term impact climate trends could have on natural catastrophes. USAA uses an extensive suite of catastrophe models purchased from well-known and well-respected vendors. The Catastrophe Risk Management unit has dedicated computing resources and trained personnel to run these models internally. Catastrophe model results are refreshed and evaluated monthly to track the impact of exposure changes on projected losses (Average Annual Loss, Tail Value-At-Risk, and Probable Maximum Loss). An extensive refresh of model parameters, assumptions and input data is performed annually to shape underwriting and pricing guidelines in catastrophe-prone areas. In addition to internally-run vendor models, external research is also used to validate and inform underwriting, pricing and business decisions related to these risks.|
USAA uses state-of-the-art modeling software to measure hurricane, wildfire, winter storm and severe thunderstorm (including tornado) risk. The selection of model parameters can produce a wide range of possible exceedance probability curves, so parameter estimation is calibrated with the purpose of any given model run. For example, USAA uses a subset of historical years with higher than average sea surface temperatures that can be used to parameterize the computer model as a proxy for estimating hurricanes under global warming conditions.
External Models, Research and Validation
In addition to the models maintained internally, USAA works closely with its reinsurance brokers to validate model parameters and results. . This allows us to improve quantification of the range of risks posed by natural catastrophes, including estimating future impact.
USAA monitors scientific research on climate issues, including findings of the IPCC, the U.S. Department of Defense, the National Climate Assessment of the U.S. Global Research Program, the Actuaries Climate Index Research Project, and various actuarial and scientific journals. This research shapes assessment of weather-related, regulatory and business operation risks, and informs model validation and parameterization.
This assessment and research leads to more uncertainty in model results. As a result of model uncertainty, USAA has set conservative capital requirements. These conservative capital requirements drive our underwriting, pricing, and reinsurance-purchase decisions. Growth in catastrophe-prone areas is managed in light of these risks, and USAA purchases enough reinsurance and holds enough capital to cover potential impacts of changing weather patterns. USAA also realizes that it is insufficient to be prepared for only the types of catastrophes experienced in the past 100 years. Consequently, USAA performs annual stress tests to simulate the impact of extremely rare catastrophe losses on business operations, claims settlements, and overall financial strength. USAA uses these stress tests to understand its strengths and weaknesses, so that we can adapt to new conditions and continue to provide excellent service and remain financially sound even if an unprecedented event happens.