EXTREME WEATHER: RECORD HEAT, STORMS, FLOODS, LANDSLIDES  July 12th 2023

Flash Floods Rage in Vermont, New York; 50 Rescued by Swift Boat

Torrential downpours unleashed flash floods on the U.S. Northeast on Monday that washed out roadways, overwhelmed rivers, prompted 50 swift boat rescues and killed a woman who was swept away in front of her fiancé, officials said.

More than 13 million Americans were under flood watches and warnings from Eastern New York state to Boston and Western Maine to the northeast, the National Weather Service said in its forecast Monday, after storms that began over the weekend inundated rivers and streams.

Private forecaster AccuWeather estimated damages and economic loss at $3 billion to $5 billion, preliminarily, based on its own method of evaluation.

US severe weather causes 'historic' insurance losses in first half of 2023: BMS Re

According to BMS Re, a specialised reinsurance broker, in the first half of 2023, severe weather events wreaked havoc across multiple states in the US, leading to historic losses for the insurance industry.

Texas, in particular, has suffered the most, with insurance losses exceeding $7.2 billion. Other states, including Illinois, Kentucky, Colorado, Tennessee, Arkansas, and Missouri, have also experienced insured severe weather losses surpassing $1 billion. Contributing to the higher losses are severe weather events in California at the beginning of the year, driven by numerous atmospheric river occurrences.

The severity and frequency of these weather events have surpassed historical records, raising concerns about the impact on insurance companies. While factors like socioeconomic elements and inflationary pressures contribute to higher losses, it is crucial to analyse the weather patterns and understand the uniqueness of this season.

Insured cat losses in Q223 estimated to reach ~$17bn: Goldman Sachs

Insured losses from major natural catastrophes in the second quarter of 2023 are estimated to reach ~$17 billion, Goldman Sachs has revealed.

Thunderstorm imageThis includes ~$13 billion from the US, driven by hail and severe convective storms over southern states and Texas.

The ~$17 billion loss is modestly above the 10-year Q2 average, analysts noted.

Goldman Sachs’ estimate is considerably higher than JP Morgan’s, who previously estimated that insured cat losses in Q223 will be less than $10 billion.

According to analysts, losses from hail storms impact personal lines carriers to a more “significant degree” as the impacts are generally to cars and the roofs of homes. This has already been demonstrated by the monthly catastrophe releases from both ALL and PGR, which pointed to CAT losses above average through April and May 2023.

Of the data used to aggregate catastrophe loss estimates, analysts stated that they have noticed the overall dollar value borne by insurers has increased majorly despite the count of weather events (accumulated by NOAA data) which implies a lower than average year.

Goldman Sachs attributed this towards two main factors: increased severity and rising loss costs contributing to larger payouts on claims from these storms, as well as changes in retention of secondary perils where reinsurers have borne the bulk of the losses over the past few years.

In addition, NOAA data indicates below quarter impacts for severe weather frequency for Q223, while April and June 2023 flag as higher than the five-year historical average impacts due to elevated hail, and both tornado and wind.

12 Billion-Dollar Weather Disasters In US In 2023

At a Glance - NOAA estimates 12 U.S. weather disasters with damage of at least $1 billion have happened already in 2023. - Ten of those events were from severe thunderstorms and tornadoes. - One was California flooding while the other was a cold outbreak around Groundhog Day.

Major insurance company abandons homeowners in two key states

In response to escalating costs associated with natural disasters and legal proceedings, Farmers Insurance has joined the ranks of prominent insurers scaling back their operations in hurricane- and wildfire-prone states. The move is expected to have significant implications for homeowners in these regions, potentially leading to higher prices and limited coverage options.

Farmers Insurance has announced the discontinuation of sales for home, auto, and umbrella insurance policies under its own brand in Florida. These policies represent approximately 30% of the company's total sales in the state. However, insurance coverage will continue to be available through other brands, including those catering to high-risk drivers. The decision affects around 89,000 policies, according to sources familiar with the matter.

Similarly, in California, Farmers Insurance will not fill the void left by rivals State Farm and Allstate, who recently ceased selling new home insurance policies. Instead, Farmers will limit new policies for one of its branded home insurance products to approximately 7,000 policies per month. This reduction aligns with the insurer's projected monthly volume prior to recent market changes. Furthermore, earlier this year, Farmers had already halted new sales of another of its Farmers-branded home policies.

Farmers Insurance has attributed these changes to the need for risk exposure management amid rising inflation, severe weather events, and escalating reconstruction costs.

Nuclear verdicts raise alarm: Preventing legal system abuse

An award of $222 million was granted in a lawsuit against a power company; $440 million in a case involving a constructive termination case; and $730 million in a truck collision lawsuit…plus more.

Jury awards of $10 million+ — commonly referred to as nuclear verdicts because of their widespread destructive impact not only on insurers but on consumers as well — are increasing in both amount and frequency, as reported by the U.S. Chamber of Commerce Institute for Legal Reform (ILR) last year. In 2019, there was a 300% rise in nuclear verdicts, compared to the annual average from 2001 to 2010. The ILR report found that the median verdict grew from $19.3 million in 2010 to $24.6 million in 2019, a 27.5% increase.

Today, amounts are skyrocketing so much that a new term, “thermonuclear,” is being used to describe verdicts that far exceed the $10 million threshold. According to cases reported to VerdictSearch in 2022, jury verdicts were as high as $7.38 billion (in Texas), $2.04 billion (in Virginia), and $1.72 billion (in Georgia). These verdicts may be the result of “legal system abuse,” which is generally understood to mean tactics the plaintiff’s bar uses to escalate these unsupportable verdicts.

Legal system abuse includes tactics to initiate more lawsuits, drive up litigation expenses and settlements for defendants, and secure higher verdicts. Personal injury firms may frequently use aggressive marketing and advertising techniques to attract potential plaintiffs.

Plaintiff attorneys are skilled at tapping into jurors’ emotions in the courtroom to make their arguments resonate, in pursuit of successful decisions that can often lead to large jury verdicts. Some practices they may deploy include:

• Forum shopping: Filing lawsuits in specific jurisdictions where cases tend to result in more favorable verdicts.

• Jury anchoring: Setting a specific reference point or “anchor” on the value of the damages (even when numbers are arbitrary or have no correlation to the actual value) at the beginning of a proceeding to artificially influence the jury’s estimation of value. In other words, the more plaintiff attorneys ask for, the more they get.

• Reptile strategy: Efforts to appeal to jurors’ emotions that could trigger feelings of danger to influence their decision-making. Jurors may make decisions based on the feeling they are keeping themselves and their communities safe by holding a defendant accountable. This tactic can often be reinforced by shifting societal attitudes toward corporate defendants.

Q2 Commercial P/C Rates Hold; Personal Lines Slightly Decrease: MarketScout

Like the first quarter of 2023, the composite rate for U.S. commercial property/casualty lines increased 5% in the second quarter, according to MarketScout’s Market Barometer.

The Dallas-based distribution and underwriting company, a division of Novatae, said most lines of coverage softened a bit but rates for commercial property, business interruption, general liability, and umbrella/excess increased. Commercial property was up 10.7%. The line was up 9.3% in the first quarter.

General liability rates were up 7% after softening somewhat in Q1, up 4.3%.