Articles Posted in Weather-related claims

The insurance industry is feeling the pain from this year’s devastating hurricane season. According to a November 22 piece on the website Insurance Journal, the natural disasters during the second half of 2017 are expected to cost the insurance industry nearly $100 billion this year. The 2017 hurricane season is tied for the fifth most active in history; it includes not only hurricanes Harvey, Irma and Maria, but also 14 other named storms and an earthquake in Mexico.

 The Insurance Journal piece cites a report by the Swiss Re Institute that predicts substantial rate hikes for 2018 and 2019, particularly in the hardest hit segments of the insurance business. Swiss Re’s chief economist says it isn’t just the extensive natural disasters that have cost the industry money, but also soft underwriting conditions and low investment yields. He expects conditions to improve in 2018 as rates harden and premiums rise.

According to the National Oceanic and Atmospheric Administration, the United States as thus far endured a total of 12 natural disasters causing at least $1 billion in damage each in 2016. Included in that number are four major flooding events and eight severe storms.  By comparison, from 1980 through 2000, the average annual number of billion-dollar natural disasters, as measured using CPI-adjusted figures,  was merely 3.7.

NOAA’s numbers indicate that we have entered an era in which costly weather-related disasters are troublingly commonplace.  While 2016 has been a devastating year for such events, it is hardly an outlier.  In 2015, we saw 10 billion-dollar disasters; in 2011, NOAA recorded 16.  All told, from 2001 through the present, the average number of such disasters per year jumped to 7.7.

The increasing frequency of large-scale weather-related disasters is hardly a surprise. See the federal government’s 2014 National Climate Assessment, which predicted this increase in dire terms.  Insurers and their commercial clients, not to mention government agencies at all levels, will be forced to cope — through increased premiums for insurance lines, risk-mitigation measures, improved infrastructure, and disaster preparedness.