Property owners need to protect themselves against the increasing frequency of weather-related catastrophe losses.
According to Aon Benfield’s newly released 2016 Annual Global Climate and Catastrophe Report, just 26% of natural disaster economic losses were covered by insurance in 2016. This figure is down from 28% in 2015.
The report identifies 315 natural catastrophe events in 2016, which caused a total of $210 billion in economic losses. That makes 2016 the seventh highest year for losses on record.
Increasingly Severe and Frequent Natural Disasters
The three largest categories of perils in 2016 were flooding, earthquakes, and severe weather. Resulting in a whopping total of $62 billion in losses, flooding takes the number one spot for the fourth consecutive year. Climate change, intense weather events, increased coastal exposure, and population migration shifts have all contributed to the increasing cost of weather-related damages — and forecasts indicate that this trend will continue in coming years.
Aon produced a short film covering the highlights of their report in collaboration with meteorologist Steve Bowen. The film is set in St. Augustine, Florida, which was significantly impacted by Hurricane Matthew.
With weather-related events increasingly wreaking havoc nationwide, why do so many Americans lack flood insurance? For many policyholders, flood insurance does not include coverage for basements or any additional living expenses, and average premium costs of $700 annually create a barrier for many Americans living in high-risk regions.
Fortunately, the NFIP recently acquired reinsurance funding which will consolidate American flood risk and improve access to flood insurance policies for U.S. homeowners. Insurance agents should capitalize on the reauthorization of the NFIP to ensure that clients have the information and resources they need, protecting the homes and livelihoods of those who live in high-risk areas. In particular, prospects or clients who own high-value properties (such as waterfront residencies) may be uncertain about the coverage options available to them, so agents should strive to educate them on this topic.
Catastrophe Risk Analysis
In addition to pursuing conversations with prospects and answering client questions, agents and agencies should invest in predictive risk management analysis tools. Following the trends of global catastrophes helps insurers accurately analyze and consolidate risk, which in turn permits them to better serve their clientele. Insurtech startups and technological branches of traditional insurers alike are already using these tools to track trends and regional characteristics to calculate regional losses.
Finally, some innovative insurers and reinsurers have made recent forays into providing coverage for emerging markets. Because homeowners and business owners in poorer regions of the world often lack the funds to purchase traditional insurance policies, alternative microinsurance models have begun to emerge to meet their needs.
Moving forward, insurers and agents must leverage technology to ensure that the global tally of those who are insured against natural disasters does not decrease in 2017.