Dealing with climate change | Insurance business America
As weather disasters become more common, airlines must keep up with the new reality
Disaster and flood
By Emily Douglas
Hurricane season began June 1 and 200,000 people in several U.S. states suffered power outages after deadly tornadoes and thunderstorms struck the region in recent weeks.
The storm killed at least 23 people, injured hundreds and left widespread destruction over Memorial Day weekend – and forecasters say this hurricane season could be America’s worst ever.
According to Gallagher, the U.S. paid a record $60 billion in insured losses from severe convective storm events (SCS) in 2023, at a total economic cost of $78 billion.
Natural disasters are occurring with disturbing frequency, prompting Alison Green (pictured above), broker director at Atlanta-headquartered wholesale broker Capitol Special Risks (CSRisks), to paint a stark picture of the insurance world grappling with climate change. As an insurance broker, she advises architectural, engineering and home inspection clients on how to adapt their policies to this new reality. However, she points out that many insurance carriers still have some catching up to do.
“I don’t know if a lot of the airlines have really caught up,” Green said. “I think what they’re seeing is the damage activity, and they’re particularly slow to recognize the emerging risks in areas that aren’t consistently hit by disasters.”
Some communities are doing what they can to protect their residents – in New Orleans, for example, a flood-ravaged city, residents can apply for government funding to upgrade their homes. This proactive measure highlights the growing awareness of ongoing issues.
“We have good business in New Orleans,” Green said. “They do things like build houses; The Flood Mitigation Assistance grant program provides residents with money to build their homes to protect them from flooding, knowing it will continue to be a problem.”
This sentiment underscores the need for insurance policies to provide comprehensive protection against a variety of risks, from water damage to structural wind impacts – and finding coverage could become even more difficult than it is now.
“I think insurers are getting to the point where it’s uninsurable because the losses continue to mount,” Green said.
And as losses mount, the role of home inspectors is critical in this evolving scenario. Green said that as damage frequency increases, the quality of inspections can come into question.
“If you’re a home inspector, you really need to do your due diligence beyond the superficial level,” Green said. “When we see home inspectors reporting frequent claims, it shows us that they are not doing a good job because problems continue to exist. Being in vulnerable areas makes their work more difficult and problems can be difficult to detect. [However]I think it’s important at this point to have the highest level of professional liability insurance you can afford because with [issues] As with social inflation, some of these judgments are getting higher and higher.
“There is a lot of capacity in the professional insurance market,” she said. One of Green’s other areas of expertise is also changing: Architecture, engineering and real estate liability, once considered risky, are now attracting more insurance carriers.
“This is an area that not many airlines have always wanted to write into because it is risky, but we are seeing more companies willing to write into these risks,” she said.
Despite these positive trends, Green noted that the insurance industry’s response to new technologies and cyber risks remains volatile.
“We underwrite a lot of cyber insurance, and that is an area that I think will be heavily impacted by AI,” she said. “Artificial intelligence will have a huge impact on the cyber market. Healthcare will always be one because of the valuable data it contains.”
Schools and communities continue to be targeted by cyber threats, and incidents are increasing worldwide. According to Comparitech, there were 954 data breaches in US schools – almost seven times as many as in 2022 (139).
“They are very vulnerable, they have limited resources and limited security, and bad actors can do so much damage,” Green said.
Given these challenges, the insurance industry must evolve to ensure comprehensive insurance coverage while managing the complexities of a changing world. Green’s findings highlight the importance of proactive measures, regional expertise and the ability to adapt to new technologies and risks.
“The key is to always be one step ahead,” she said. “We must be prepared for the uncertainties ahead.”
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2024-06-21 15:08:28
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