World's First All-Speed Crash Detection  October 26th 2023

P&C insurance’s role in the White House’s climate framework

In the first 8 months of 2023, the United States experienced 23 separate billion-dollar climate and weather disasters – a new, unfortunate record. In response to the increasing frequency of these weather events, as well as looking ahead at the long-term effects of climate change, the White House released a National Climate Resilience Framework at the end of September.

The framework identifies six core objectives that aim to strengthen the U.S. against the effects of climate change. These six objectives are:

• To embed climate resilience into planning and management.

• To increase resilience of the built environment to both acute climate shocks and chronic stressors.

• To mobilize capital, investment and innovation to advance climate resilience at scale.

• To equip communities with information and resources needed to assess their climate risks and develop the climate resilience solutions most appropriate for them.

• To protect and sustainably manage lands and waters to enhance resilience while providing numerous other benefits.

And to help communities become not only more resilient, but also more safe, healthy, equitable and economically strong.

The framework also directly references the role that property and casualty insurance has to play in climate risk resiliency. To break down what that role really looks like, we were joined for this episode of the Insurance Speak podcast by Charlie Sidoti, the executive director of InnSure.

Tornadoes in the U.S: More than a regional concern

This year’s weather news has included various headlines about tornado sightings and subsequent losses caused by twisters that touched down around the United States.

Insurance professionals can expect to see more tornado-related claims come from different areas of the country along with significant structural damages from these events.

Events outside of “Tornado Alley”

Even places where tornadoes aren’t common often see a couple each year.

The notion of Tornado Alley as a designated area for tornadoes is misleading, according to the National Oceanic Atmospheric Administration National Severe Storms Laboratory. Tornadoes have been reported in all 50 states. The central plains region is often referred to as Tornado Alley because of the prevalence of these catastrophic events where the cold, dry air from the north meets warm, moist air from the Gulf Coast. Tornadoes are common in the area during the spring and summer months. However, the threat of tornadoes still exists in the Southeast, the southern and central plains, and the northern Plains and Midwest.

The study Spatial Trends in United States Tornado Frequency also evaluated whether tornadoes are occurring more often. Findings included a decrease in tornadoes in Tornado Alley and an increase in the Southeast area, coined Dixie Alley. This analysis and others like it noted upward trends in the frequency of tornadoes in the Southeast, Midwest and Northeast.

More than 1,300 tornadoes occurred in 2022, with the most being recorded in Mississippi, Texas and Alabama, according to the Insurance Information Institute. Regardless of how many tornadoes occur annually or where, residential losses from even just one can be substantial.

US P&C carried reserves at year-end 2022 redundant by $4.7bn of reported surplus: AM Best

According to global ratings agency AM Best, the US property & casualty (P&C) segment reported its 17th consecutive year of favorable reserve development based on 2022 calendar year results, however, the $3.6 billion in favorable reserve development reported for last year was nearly one-third of the level reported in 2021.

The agency explains that the P&C industry’s carried reserves at year-end 2022 are redundant by $4.7 billion, or 0.5% of its reported surplus.

This amount includes $7.5 billion of asbestos & environmental (A&E) deficiency, as well as $18.1 billion of statutory discount, which is treated as a deficiency from the full value reserves.

Moreover, from a historical standpoint, the most recent accident year usually contributes the largest portion of total favorable runoff. But, during calendar year 2022, the largest contribution came from the 2020 accident year, the year that was most impacted by the COVID-19 pandemic, while a much smaller contribution came from the 2021 accident year.

Best noted that after removing the effects of A&E and discounting, the agency estimates the industry’s core undiscounted reserves to be redundant by $30.3 billion at year-end 2022.

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At the same time, overall industry reserves as of year-end 2022 are estimated to be $13.3 billion stronger than reserves reported as of year-end 2021.