Up and Running Again

Although Hurricanes Katrina and Rita are behind us, hurricane season continues through the end of November. And while it does, residents on the Gulf and Atlantic Coasts are picking up the pieces and rebuilding their lives, while praying that the worst of the season is behind them

A new report by Celent examines the immediate- and long-term effects of Hurricane Katrina on the insurance industry. The report noted that, in the near term, insurers will raise rates and tighten terms, and public insurance programs will expand.

In the long term, there may be fundamental changes to the insurance industry’s business model including: transforming capital requirements, new pricing methods, and a different approach to underwriting and claims. The report also describes the role that technology can play to support these changes and outlines the implications for insurers and technology vendors.

Celent analyst Donald Light said “The human and economic consequences of Hurricane Katrina are still unfolding, but what is already clear is that Katrina is not just another big storm. Even in these early days, the unprecedented scale of Katrina and its aftermath demands a look at the longer-term implications for the insurance industry.”

“… Katrina also has brought tough but meetable challenges for insurers, and real business opportunities for certain technology vendors,” he added.

Lewis Mandell, a professor of finance and managerial economics at the University at Buffalo School of Management in New York, offered hope for the economic recovery of New Orleans. He said that the demand for unskilled labor to clean up after Hurricane Katrina will be the main driving force in the economic recovery in New Orleans.

“If there is a positive aspect of this terrible catastrophe, it’s that it creates a huge demand for local unskilled labor, and there are very few unskilled jobs in America,” Mandell said in a press release.

“The huge clean-up effort alone is going to create a lot of jobs–much of them paid for by private insurance, some of them paid for by government–and with the jobs will come income for people who want to rebuild their lives.”

This is good news as residents begin to trickle back in to the city. While the rebuilding effort will take years, over time the city will revitalize itself, and the emotional wounds will heal.

In closing, I’d like to tell you that this is my last issue as Managing Editor for Insurance Journal West. I am moving on into the nonprofit sector where I can utilize my communication skills to help others in need. Thank you for extending your time, expertise, and hospitality to me–it has been a pleasure working with all of you over the past several years.

Best wishes,

Topics Hurricane Market