Insurance – issues for the Moore recovery

The Wall Street Journal had an article and a video clip this past week about how the insurance companies that cover hurricane and tornado damage are finding ways not to pay out as much or as often as had been true in the past.  Since I do not subscribe to the WSJ, I cannot provide any additional details.  The net result is more personal hardship for property owners in Moore, however.

Here is some additional information about insurance from CNBC, and this article is not kind to the U.S. insurance industry.  See:  Why Insurers May Be Unprepared for the Next Big Storm. Some excerpts follow:

Hurricanes, droughts, tornadoes, wildfires … extreme weather is threatening to take bigger chunks out of insurance companies and yet the industry, in the eyes of experts and consumer advocates, isn’t making any preparations … other than raising rates.

“I can’t think of another industry that’s more directly affected by the weather changes,” said Professor Anant Sundaram of Dartmouth’s Tuck School of Business. “They need to get out in front of this. It comes down to more than just raising premiums on customers. It’s being pro-active and thinking ahead.”

Eleven extreme weather events each caused at least a billion dollars in losses last year in the United States. Loss estimates for Hurricane Sandy alone are at $50 billion, of which insurance company damage payouts are said to be close to $20 billion.

 Insurers acknowledge that extreme weather or climate change has become the new normal. But a new survey says that many firms are not prepared for future super storms that could affect their industry, while homeowners and businesses suffer raising premium rates.

According to an industry wide report from Ceres, a non-profit group that works toward better business practices, only 23 of 184 U.S. insurance companies have comprehensive climate change strategies that could help mitigate the damaging costs from extreme weather to the industry and consumers. (Read More: World’s Best Places to Live)

“Insurers are starting to think about climate change from their losses but I’m not sure they realize how much of a financial threat it is to them,” said Peyton Fleming, a spokesman for Ceres.

2 thoughts on “Insurance – issues for the Moore recovery

  1. Two things wrong with this analysis.

    1. No one knows whether or not “climate change” will do anything at all to insurance claims. In spite of the many studies that have shown no increase in either the severity or the intensity of extreme storms, we still hear the canard that climate change is going to result in all kinds of new catastrophes. For example, the only unusual aspect to the insurance claims after Sandy was the abnormally high number of auto damage claims, primarily due to the low rate of evacuation.

    2. The insurance industry IS looking at the potential impacts. Within the past few months, Munich Re published their take on the impacts of climate change. Two weeks ago, I participated in a “Leadership Forum” in Charlotte sponsored by Renaissance Re and FLASH, focused on many of these same issues. The current and a former Director of the National Hurricane Center both pointed out that there was really very little that was “unprecedented” about Hurricane Sandy. The upshot is – the very real migration toward the coasts over the last fifty years, and the very real subsidence affecting some of our major cities (e.g., NOLA is sinking at least 3X faster than the hypothetical sea level rise claimed by climate change acolytes), and the known historical probabilities of storms and other perils in every locale, and, and … mean that there are very real reasons to take action NOW. I just can’t see the need to invoke the climate change boogeyman whenever severe weather events occur.

    For those interested in the presentations from the Leadership Forum, they are available at mitigationleadership.com. Well worth looking at – some very candid presentations on what has worked and what hasn’t by folks from hurricane-prone states. They remind us that there are practices out there that we can adopt that can mitigate our risks.

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