Insurability crisis looming
AccuWeather ups its Atlantic hurricane season forecast, Gallagher Re warns of a looming insurability crisis due to a big increase in storm losses, plus a new report says hurricanes are getting wetter – and costlier for insurance companies. It’s all in this week’s Disaster Management Digest.
Hurricane Predication Update: AccuWeather is now forecasting 13 to 17 named storms this year, higher than the initial forecast of 11 to 15 storms issued in March. It still predicts that four to eight of those named storms will become hurricanes, one to three of them major hurricanes, and two to four with a direct U.S. impact. The reason for the update is a lag between weather influencers La Niña and El Niño. This hurricane season could be the eighth in a row, with the number of named storms being at or above the historical average of 14. The last time a season ended below this benchmark was in 2015 when only 11 named systems developed.
Aggregate Storm Losses Growing: The first half of 2023 has seen above-average natural catastrophe insured losses. Reinsurance broker and analyst Gallaher Re in its H1 2023 Natural Catastrophe Report estimates economic losses from natural hazards were $138 billion, with $52 billion of that cost covered by private insurance or public insurance entities. Seven US storms accounted for 65% of those insured losses, breaking the previous record of five storms in 2020 and 2021.
Gallagher Re’s Chief Science Officer Steve Bowen told AM Best the greater number of storms is changing the equation. “We are reaching a crossroads in terms of insurability. Losses and claims continue to accelerate. There have to be fundamental changes” in areas including risk modeling and zoning, Bowen said. “Everyone recognizes this is a problem. We need to start talking to work this out,” or more states could be forced to create insurers of last resort.
Wetter, Costlier Hurricanes: The Insurance Information Institute is out with new data showing that increased rainfall in recent storms coupled with more people living in hurricane-prone states such as Florida have increased insurance claim payouts for wind and flood damage. Its report, Hurricanes: State of the Risk, says that inland flooding is now significantly contributing to the cost.
Triple-I found the biggest increase in federal flood insurance claim payouts over the past 20 years occurred on the Texas coast and inland Louisiana; coastal communities of northern Florida, Georgia, and the Carolinas; and inland northern New York, Vermont, and New Hampshire.
“When adjusted for inflation, nine of the 10 costliest hurricanes in U.S. history have struck since 2005,” according to the report. “This is due mainly to the fact that more people have been moving into harm’s way since the 1940s, and Census Bureau data show that homes being built are bigger and more expensive than before.”
LMA Newsletter of 8-7-23
