News
![The New Normal: $100 Billion in Insured Nat Cat Damages](https://dxj7eshgz03ln.cloudfront.net/production/link/image/925013/original_ratio_extra_large_d1489c46-655e-4830-96b6-cfd4ab7c9de9.png)
The New Normal: $100 Billion in Insured Nat Cat Damages
It has become clear that the protection gap is ever present; such losses are becoming the norm, not the exception. This is according to the latest Natural Catastrophe Review.
The review offers insight into recent events, lessons learned and the outlook for the future. From analysing the aftermath of 2023’s severe weather in the US and detailing North Atlantic hurricane activity in a changing climate, to exploring how the Panama Canal drought has disrupted global shipping, the review includes commentary from WTW experts and leading researchers from the WTW Research Network.
Key findings include:
Secondary perils in focus: the economic and societal impacts of secondary perils were a focal point for risk managers in 2023 following a year dominated by severe convective storms, wildfires, droughts, and floods
Record breaking storms: insurers in the US saw the costliest severe convective storms (SCS) year on record, with total claims exceeding $50 billion
Reassessing thresholds: in recent years, insurers have viewed annualised losses in the region of $20 billion to $30 billion from US convective storms as indicative of a challenging year. But this threshold should now be reevaluated after the unprecedented damage seen in 2023 and the continued growth of property exposures.
Cameron Rye, head of modelling research and innovation, WTW Research Network, said: “In a world increasingly shaped by aging infrastructure, climate change, and urban growth into risk-prone areas, we are now facing disasters that were either not anticipated or deemed unlikely just a few years ago. Beyond economic damages, 2023 highlighted the need for a proactive approach to risk identification, mitigation and adaptation.”
After $70 Billion Hit, Insurers Wake Up to Growing Risks of Severe Convective Storms
The insurance industry is grappling with a new kind of weather risk that’s increasingly driving its biggest loss category.
While no single weather event caused more than $10 billion in losses for insurers last year, there were 37 thunderstorms that each cost at least $1 billion, according to a report by Aon Plc. That’s more than ever before and way above the average of 14 such storms in a single year, the insurance broker said.
The development is forcing the industry to rethink some of its risk assumptions amid a clear uptick in the number of thunderstorms across Europe and the U.S. Severe so-called convective storms, which are characterized by heavy rain and intense winds, accounted for about $70 billion of insured losses globally last year, Aon estimates. That’s equivalent to 59 percent of losses from all natural disasters, according to its report.
“The increase in severe convective storms surprised us,” Michal Lorinc, head of catastrophe insight at Aon, said in an interview. “It means that companies need to evaluate their portfolios, and to look at future scenarios.”
California to Get Drenched From Fast-Moving Atmospheric River
A fast-moving atmospheric river coming off the Pacific Ocean will drench northern and central California on Wednesday and then head for the the southern half of the state.
Northwest California will likely get the worst of the storm, with as much as 3 to 6 inches of rain, according to Bob Oravec, a senior branch forecaster at the US Weather Prediction Center. The central and southern portions of the state will receive 1.5 to 2 inches. The storm will blow through most areas in about 6 hours, limiting total rainfall.
“The one beneficial thing is that it’s moving quick and won’t be a multi-day event. It should be in and out in less than a day,” he said. “That’s something that will keep the precipitation totals from being super heavy.”
However, California is already close to being saturated from previous storms, so there’s a danger from landslides and flooding, according to the National Weather Service.
Creeks and streams may rise quickly as the rain comes down, especially in in Sonoma and Santa Cruz counties, the agency said in a hydrologic outlook. Steep hillsides in the San Francisco Bay area will be at risk of mudslides, and the storms will also bring the danger of power outages as they roar through.
Heavy rain will shift into Southern California Thursday and then push east, Oravec said. The system will deliver heavy rain to Texas and parts of the South over the weekend, the same region that’s faced flooding from other recent storms.
![Florida's insurer of last resort to continue offloading policies in 2024](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924793/original_ratio_extra_large_9ffa8321-3e99-41a5-88a3-fe26656412b6.jpg)
Florida's insurer of last resort to continue offloading policies in 2024
CEO says Citizens will be shedding thousands of policies this month
Citizens, Florida’s insurer of last resort, has projected that it will be transferring around 76,000 policies to various private insurance companies this month.
That is according to Citizens CEO and president Tim Cerio, who shared the details to the House Insurance & Banking Subcommittee last week.
Cerio also noted that approximately 338,000 policies will be transferred to private insurers over the course of the year.
Citizens currently holds a market share of around 18% and has been looking to shed policies amid threats of insolvency.
Reforms to US Disaster Aid Expose Growing Home Insurance Gap
When disaster hits in the US, the federal government gives aid to states and counties, but also to individuals. In 2022, the Federal Emergency Management Agency delivered $3.25 billion to nearly 1.4 million households recovering from damaging floods and fires. The aid money helps cover things as large as home repairs and as small as diapers, drinking water, food and other necessities.
This aid regime was created by Congress: The Stafford Act of 1988 threw a lifeline to Americans who were not covered by private insurance, a group assumed to be small. But that can no longer be taken for granted. Insurance rates are rising as costly disasters become more frequent, and with more and more people living in higher-risk areas such as coastal Florida and wildfire-prone parts of the West. Insurance companies are now stepping back from some markets. Just earlier this week, The Hartford announced it would become the latest major insurer to stop writing new policies in California.
“I am starting to see the insurance model breaking down faster,” said Craig Fugate, FEMA’s administrator during the Obama administration. “There are more people that, probably 15 or 20 years ago, had adequate insurance that today are either underinsured, or not even able to afford insurance or get coverage.”
Commentary/Opinion
![The market is gradually progressing towards adequacy and normalising: CEO, AXA XL Re](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924925/original_ratio_extra_large_b0494d17-88cb-4e41-85b2-d9194ac92e4d.jpg)
The market is gradually progressing towards adequacy and normalising: CEO, AXA XL Re
Reflecting on the 1/1 2024 renewals, AXA XL Reinsurance’s Chief Executive Officer (CEO), Renaud Guidée says that the market is “gradually progressing towards adequacy and normalising.”
In a report posted by the organisation, he explained that it is extremely important that the industry is getting back to a clearer and more sound positioning between insurers and reinsurers, “where insurers have to bear the frequency, attritional risks, while reinsurers are there to support them in case of large losses and beyond.”
He continued: “It’s really a division of labour between insurers and reinsurers. This is how I see the market shaping going forward. It’s not just a matter of the 2024 renewals. It’s not cyclical, it’s really secular, and it’s how the industry should operate.
“In terms of capacity, the players that have a robust balance sheet will be able to continue to deploy capacity. However, it’s true that the market may become more selective and more discriminating and some players with less solid balance sheets which were relying on a delusional, permanent low-interest-rate regime might have trouble providing capacity at the same level as they did over the past few renewals and the past few years.”
Research
![Here’s Why Your Car Insurance Bill Has Never Been More Expensive](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924803/original_ratio_extra_large_892f5ef1-7be3-445a-a3c8-c3fd285e041c.jpg)
Here’s Why Your Car Insurance Bill Has Never Been More Expensive
Not that long ago, repairing a car after a crash was pretty straightforward: Replace damaged parts, pound bent metal back into shape, touch up the paint and send the driver on their way in a vehicle that looks new. But today’s autos are so loaded with technology and built with such specialized materials that repairing even a minor fender bender can be a tedious and expensive exercise in both computer science and engineering.
“It’s the complexity of vehicles these days,” says Ben Clymer, who co-owns a chain of body shops in Southern California. “Repairing a base model Kia is nothing like it was just a few years ago. It might have 10 different computers and all kinds of sensors.” All that complexity, combined with rising prices for parts, Clymer says, “really creates the perfect storm for higher repair costs.” It’s driving up auto insurance rates at the fastest pace in almost a half-century.
The average repair bill for a traditional vehicle today runs $4,437, according to auto insurance processing company CCC Intelligent Solutions. For an electric vehicle, the average fix is 49% higher, or $6,618, thanks to their added tech gadgetry and the special handling required to work with their electric powertrains.
Insurers—who watched the average collision insurance claim soar 64% from 2018 to 2022, to $5,992, according to the Insurance Information Institute—have moved to offset the higher repair costs by aggressively hiking drivers’ premiums.
The cost of auto insurance in the US rose more than 20% in 2023, the biggest annual jump since 1976, data from the US Bureau of Labor Statistics show. Rates are up 37% since January 2020, adding to an affordability crisis caused in part by the price of cars surging about 30% in that same time frame, to almost $49,000 on average, according to research group Cox Automotive Inc
Loyalty Indicator & Shopping Trends (LIST) | J.D. Power
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![CEOs forecast increase in revenues, profits and deal making in 2024, as business transformation moves up the agenda | EY - Global](https://dxj7eshgz03ln.cloudfront.net/production/link/image/925014/original_ratio_extra_large_b1725ce6-5fe4-469b-af6f-6838ddba4d59.jpg)
CEOs forecast increase in revenues, profits and deal making in 2024, as business transformation moves up the agenda | EY - Global
Almost two-thirds of CEOs globally anticipate a rise in their revenues and profits, despite the challenging global economic environment
58% accelerating their transformation plans, almost tripling since July 2023, and transformative megadeals predicted to return in 2024
Election super-cycle, political uncertainty and artificial intelligence (AI) misinformation cause for concerns, as over half of the global population heads for the polls
CEOs are optimistic about their ability to drive revenue growth and profitability in 2024 despite global economic headwinds, according to the latest EY CEO Outlook Pulse survey.
The EY quarterly survey of 1,200 global CEOs across 21 countries, on their prospects, challenges and opportunities, shows they are bullish on business performance even in a low growth environment. A significant majority of CEOs surveyed expect an increase in revenue growth (64%) and profitability (63%).
This optimism comes despite acknowledgement of a continued challenging macroeconomic environment with three-quarters (76%) of CEOs surveyed expecting the global economy to continue to endure low or no growth. While 78% are preparing for interest rates staying “higher for longer” due to ongoing inflationary pressures and over half (57%) are forecasting an increase in the cost of business.
Andrea Guerzoni, EY Global Vice Chair – Strategy and Transactions, says:
“Even though CEOs expect continued stagnation of the global economy, this hasn’t dampened their drive for profitability. Exhibiting a newfound resilience and confidence, CEOs are on the hunt for opportunities to drive efficiencies and transform their business for growth. Anticipating an upswing in the M&A market now showing signs of recovery, many are now meaningfully revisiting their business transformation plans, scanning for smart investments and laying groundwork for potential alliances.”
InsurTech/M&A/Finance💰/Collaboration
![High-Resolution Land Cover Data From Ecopia AI Now Publicly Available Through NOAA](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924799/original_ratio_extra_large_11d1de72-19a2-4904-8110-9ce943a3daf5.png)
High-Resolution Land Cover Data From Ecopia AI Now Publicly Available Through NOAA
Today, Ecopia AI (Ecopia) announces that its high-resolution land cover data is now available for use through the National Oceanic and Atmospheric Administration (NOAA)’s Digital Coast website. This data, funded with $8M from the Bipartisan Infrastructure Law, provides an unprecedented level of detail for more than 1.5M square miles of land cover across US coastal communities.
The traditional data offering from NOAA’s Coastal Change and Analysis Program (C-CAP) openly provided 30-meter resolution data to support a wide range of coastal management efforts, including stormwater planning, sea level rise modeling, and similar climate resilience workflows. Powered by Ecopia’s artificial intelligence (AI)-based mapping technology, NOAA’s new C-CAP data delivers a 900X increase in resolution. This new 1-meter resolution dataset enables coastal communities to analyze land cover features in more detail, fueling more precise models and stronger climate resilience decision-making.
Canada
![How accident claims hit rideshare drivers' personal auto policies](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924806/original_ratio_extra_large_94851641-e57e-4355-86d4-184492db035a.jpg)
How accident claims hit rideshare drivers' personal auto policies
There seems to be a disconnect between drivers and their insurers about the ability to access personal auto coverage when driving for food delivery or rideshare companies like Uber, Lyft and others.
While there’s no hard data to quantify a trend, Jesica Ryzynski, a claims specialist with Mitch Insurance, said she’s seeing more claims in this area, and is currently managing three.
The cases involve drivers working in food delivery or rideshare jobs who had accidents that led to claims against their personal auto coverage. Insurers may deem such claims fraudulent, but she said drivers she’s spoken with genuinely appear to not understand why.
“What I’m seeing [in these three claims] is the insureds sincerely did not seem to have any idea why this [had] gone into an investigative state,” Ryzynski told CU. “The insureds didn’t seem to connect that maybe there was something wrong with what they’d been doing.”
2024 PREDICTIONS
![CIECA: Collision industry trends to watch in 2024](https://dxj7eshgz03ln.cloudfront.net/production/link/image/924789/original_ratio_extra_large_35133c26-5831-43d1-bde6-3a97316c5c5a.jpg)
CIECA: Collision industry trends to watch in 2024
A possible new threat to the supply chain, stagnant interest rates through at least the summer, and increasing complexity in repairs are a few trends the collision industry needs to pay attention to in 2024, according to a presentation from the Collision Industry Electronic Commerce Association (CIECA) Thursday.
Ryan Mandell, Mitchell International director of claims performance, led the virtual presentation “Top Collision Industry Trends to Watch in 2024.”
He broke the trends into four major categories:
- Used Vehicle Market Dynamics,”
- “Complexity Drives Greater Costs,”
- “Supply Chains Incur Further Stress,” and
- “EV Growth will Continue.”
Mandell said the industry is experiencing numerous shifts, but the four categories are the “most impactful.”