According to A.M. Best Co., the frequency of catastrophe weather events represents the “new normal” for the insurance industry.
“The insurance industry continues to be tested as catastrophic weather events have recently become more common and more severe,” Best said in a briefing.
Best described 2011 as producing an “uncharacteristic series of devastating natural disasters,” which has led to the year being dubbed the “year of the cat.”
Best said that, while many are expecting catastrophe events to return to a more normalized level in 2012, others are questioning what “normal” is.
“In addition, it is clear insurers should prepare for the possibility that the event frequency of 2011 may be repeated,” Best said.
Best pointed out that until 2011, tornadoes typically were not considered one of the larger risks for the insurance industry in total. It has been rare for a series of tornadoes to inflict more than $1 billion in losses.
But, according to insurers, tornadoes were the costliest type of U.S. natural disaster in 2011.
According to Swiss Re, insured losses for tornado and hail damage in the United States reached $14 billion in 2011.
“The impact of 2011’s increased tornado activity prompted many insurers to accelerate their pace of rate increases, reduced limits and policy exclusions,” said best. “Some insurers reconsidered what risks they were willing to write and withdrew from certain climate-change challenged markets altogether.”
Source: A.M. Best
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