Superstorm Sandy & the Insurance Industry

Superstorm Sandy & the Insurance Industry

Recent weather events: Superstorm Sandy in the East, Hurricane Katrina in the South, and extreme drought in the Midwest have had staggering price tags in terms of claims cost. But how much do these extreme weather events factor into the insurance industry? And how will that affect you?

Property and Casualty 360 recently released a report examining possible impacts climate change could have on the insurance industry. Of the over thirty insurance executives interviewed for P&C 360’s report, including insurers, agents, brokers, re-insurers, risk managers, and association executives, all agreed that the climate was changing. Global warming debate aside, there is one common trend; extreme weather events are growing in frequency and severity.

Superstorm Sandy saw losses estimated around $25 billion- and they are still being tallied. At the worst, doom and gloom predictions are that the extreme weather trends will be so severe they will overwhelm insurance carriers with catastrophic claims, bankrupting them. However, most estimates aren’t quite that extreme.

Extreme weather events can include anything from high winds, to hurricanes, tornados, flooding and drought. And it isn’t just specific to one geographic area. The New York Times recently ran a piece detailing the extreme weather patterns worldwide. Colorado’s thin snowpack this winter ominously predicts a summer of extreme drought. Rising waters and below-sea level towns make areas of Europe particularly susceptible to flooding.

The trend carries several implications for the insurance industry. Underwriting has typically been based on historical data. But how can you apply the same formula when the extreme weather events are completely out of the norm?

Risk-management is one alternative approach, an attempt to adapt to changes and mitigate risks of a large scale extreme disaster. Constructing and retrofitting buildings so they are more equipped to withstand natural catastrophes. Placing new buildings in areas outside of hazard zones. Changing roofing materials and clearing brush around buildings to minimize liability risk in high risk wildfire zones.  Not foolproof, but designed to minimize risk and help withstand freak weather events.

There are multiple steps that business owners can take every day to minimize their insurance risk, despite industry changes. Contact us at Newman Crane today for more information. (407) 859-3691

At Newman Crane, we have Orlando, Florida business insurance plans to protect your commercial operation from a number of potential losses, including liability and property damage.