Increasing Weather-Related Catastrophe Costs and Frequency = Changing Customer Needs

Approaching the end of the Atlantic hurricane season often comes with questions, concerns and comparisons. The first concern and utmost importance is always the lives impacted by the storms. However, the P&C industry would be remiss if it didn’t then start looking insured losses, response effectiveness, system performance, preparedness lessons learned and areas of improvement, especially as statistics show climate disasters are becoming more and more costly, with hurricanes being the most costly.

According to the National Centers for Environmental Information (NCEI), since 1980, the U.S. has sustained at least 250 weather and climate disasters where overall damages/costs reached or exceeded $1 billion (including Consumer Price Index adjustment to 2019). The total cost of these 250 events exceeds $1.7 trillion. With the addition of Hurricanes Florence and Michael, 42 tropical cyclones have caused a combined $934.6 billion in total damages—with an average of $22.3 billion per event, the NCEI reports.

2019 is shaping up to be another costly year when it comes to weather and climate disasters. The hurricane season has contained large-scale storms, and we still have a couple months to go in the United States. In early-August seasonal forecasters the National Oceanic and Atmospheric Administration increased the likelihood of an above-normal Atlantic hurricane season to 45% (up from 30% from their outlook issued in May). And, according to NCEI, 2019 has already brought two large-scale, inland flood events across many Midwestern and Southern Plains states. The scale of the damage is still being assessed, but may be comparable to the historic Midwestern flood in 1993.

As the frequency and costs of weather-related events rise, so do the needs of insurers and their insureds. North Carolina Joint Underwriting Association (NCJUA) had 100,000 policyholders impacted by 2018 Hurricane Florence, the largest event in the insurer’s history.

 

Scaling before and during Hurricane Florence enabled NCJUA to quickly respond to policyholders and closing 90% of the 100,000 claims in 60 days.