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Eric Nordman
Director, Center for Insurance Policy & Research
816-783-8232

CIPR Staff
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Natural Catastrophe Response

Last Updated 7/28/17

The economic cost of natural disasters has an immense impact on the U.S. economy. The cost is growing steadily, particularly as the frequency and severity of natural disasters has increased due to changing climatic conditions. In terms of insured losses, if one were to look at the ten costliest disasters in United States history, eight were hurricanes, six of which have taken place since 2000—Hurricane Katrina ($41.1 billion in 2005); Hurricane Ike ($12.5 billion in 2008); Hurricane Wilma ($10.3 billion in 2005); Hurricane Charley ($7.5 billion in 2004); Hurricane Ivan ($7.1 billion in 2004); and Hurricane Rita ($5.6 billion in 2005) according to the Insurance Information Institute. Moreover, while the United States has not had a major land-falling hurricane since Wilma, or a major earthquake since Northridge ($12.5 billion in 1994), the rising likelihood of extreme and catastrophic weather events makes monitoring the frequency and impact of natural disasters a critical regulatory function.

U.S. insured losses from natural catastrophes totaled $23.8 billion in 2016, according to Munich Re. These losses are higher than the 2015 losses, which totalled $16.1 billion. According to Munich Re, the first quarter of 2017 was the costliest quarter in terms of losses for the property/casualty industry since 1994. Insured losses in the first quarter of 2017 totaled $7.3 billion dollars, $2.3 billion higher than first-quarter 2016, with 13 events including hail and tornadoes that accounted for $4.4 billion of these losses. PCS noted that hail and tornado losses continued at a high level through the second quarter of 2017.

2013 was one of the quietest hurricane seasons in the last 20 years, with the fewest hurricanes since 1982; while 2012 was an above-average year for U.S. insured catastrophe losses due to a series of severe weather-related catastrophes. Superstorm Sandy, which made landfall on the northeast coast on Oct. 29, 2012, was the third-costliest weather disaster in American history behind Hurricane Katrina and Hurricane Andrew, according the National Oceanic and Atmospheric Administration (NOAA).

The 2016 Atlantic hurricane season saw 15 named tropical storms, seven of which turned into hurricanes, and three major hurricanes. This was the most active season since 2012 and above the annual average of 12 named storms and six hurricanes. Hurricane Matthew eventually made landfall as a Category 1 hurricane, continuing the decade-long streak of no major hurricanes (Category 3 or stronger) making landfall in the United States, according to the National Oceanic and Atmospheric Administration (NOAA).

Insurance plays a large part in helping with the economic recovery following catastrophic events. The 2004 and 2005 hurricane seasons brought unprecedented devastation to the gulf coast causing over 1,200 deaths, seven million insurance claims, and almost $100 billion in insured losses. As hard as it is to imagine, future mega catastrophes could be even worse. A reactive response will not suffice. The NAIC and state insurance regulators have developed a comprehensive national plan for managing catastrophe risk that incorporates new risk management techniques with a solid foundation of solvency and consumer protection inherent in state insurance regulation. Parallel to these efforts, Congress has indicated renewed interest, as well. Currently, there are several bills and resolutions pending in Congress that deal with various aspects of catastrophe risk management. A list of some of the pending legislation can be found here.

NAIC members have taken an active role in educating Congress and providing technical feedback on various proposals regarding natural catastrophes. Over the last several years, NAIC members have met with members of Congress and have regularly testified on these important issues, stressing the important role of the states in effectively managing a natural disaster response. In addition, the NAIC has developed consumer resources specific to preparing for disaster. The Free Mobile Home Inventory app helps consumers create a home inventory, which is one of the best ways consumers can insure adequate coverage on their home and belongings, as well as to make filing an accurate claim easier.

 

Disaster response video thumbnail 2016
2016
Regulators Respond to Disasters – NAIC Fall National Meeting 2016

This video shows disasters and response to wildfires in Tennessee, a tornado in Alabama and earthquakes in Oklahoma. It features NAIC President-Elect and Tennessee Insurance Commissioner Julie Mix McPeak.
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Disaster response video thumbnail 2015
2015
Regulators Respond to Disasters – NAIC Fall National Meeting 2015

NAIC members representing South Carolina, California, Texas and Washington discuss devastating floods and fires in 2015.
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2013
Regulators Respond to Disasters in Arizona and Oklahoma

Arizona Insurance Director Germaine Marks and Oklahoma Insurance Commissioner John Doak discuss disasters impacting insurance consumers in their states and the response coordinated by their departments, fellow regulators and the National Association of Insurance Commissioners (NAIC).
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2012
Regulators Respond to Superstorm Sandy

Members of the NAIC discuss the impact of Superstorm Sandy in 2012. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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2011
Regulators Respond to Disasters

Members of the NAIC discuss the impacts of natural disasters in their states during 2011. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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