Helene Should Trigger a National Rethink of Home Insurance  October 5th 2024

Helene Should Trigger a National Rethink of Home Insurance

As people across the Southeast continue to pick up the pieces from Hurricane Helene, many will continue to face a rude awakening: that they—or their landlords—don’t have flood insurance. Those facing damages from winds or mudslides are more likely to be covered, since that type of damage is included in many basic home insurance packages. But policyholders shelling out potentially record sums for that coverage may still only see a fraction of what repairs, replacement, and rebuilding will actually cost.

Hurricane Helene crashed into an insurance sector facing a series of potentially existential questions, and a policy landscape in which the United States has left key decisions about how communities prepare for and recover from disasters in the hands of companies that exist to turn a profit—not provide protection.

“Right now, we’re essentially leaving all of these decisions about land use and where risk mitigation happens up to insurance companies,” says Moira Birss, a longtime organizer and fellow at the Climate & Community Institute.

Preventative risk reduction—for example, raising low-lying coastal homes up on on stilts—can offer as much as $13 in savings on disaster losses for every dollar spent, according to one 2019 study from the National Institute of Building Sciences. The burden of making those sorts of changes often falls largely on individual homeowners.

“Maybe your insurance company tells you directly, or your prices are rising and you get the message to put on a new roof or trim the trees around your house,” Birss told me. The problem is that a lot of people don’t have the money up-front to make those kinds of changes.”

IINTERVIEW -- Can Insurers Take the Lead on Climate Resiliency? | Insurance Thought Leadership

Insurers have the best data on where losses occur and what interventions could have prevented them, so they can play a key role in improving climate resiliency.

Climate risk is yet again front-page news. Early estimates of total economic loss from Hurricane Helene and its aftermath amount to $145 billion to $160 billion. However, the early estimates of insured losses for the event are significantly lower, at $5 billion to $10 billion. If these estimates turn out to be accurate, this would make the ratio of insured loss to economic loss the smallest among U.S.-landfalling hurricanes in recent decades and point to a significant protection gap.

With that context, ITL Editor-in-Chief Paul Carroll talked with Veronika Torarp, a partner with PwC, about how insurers can help improve climate resiliency.

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S&P anticipates US insurers' earnings to take a hit from Helene 

Early insured loss estimates from hurricane Helene currently sit in the mid-single to low-double-digit billions of dollars, however rating agency S&P Global believes that the losses will be an earnings event, rather than a capital event, for the primary US property & casualty (P&C) insurers that the agency rates.

Helene made landfall on September 26 in Northern Florida as a Category 4 storm with 140 mph winds.

The hurricane caused a large storm surge along various parts of the coast, while destructive wind gusts damaged properties from northern Florida to the Carolinas.

It’s important to highlight that Helene is the deadliest event to strike the US since the Hawaii wildfires in August 2023.

The hurricane claimed the lives of 215 people, making it one of the deadliest US hurricanes this century.

S&P noted that economic loss estimates of the Helene vary widely, depending on how measured, but current estimates are substantial.

As for insured losses, early estimates currently range between the mid-single to low-double-digit billions of USD.

The insurance response to ESG pressure in 2024

Whether you call it ESG (short for environmental, social, and governance), sustainability, or corporate responsibility, there is a growing pressure on today's companies to focus their impact on communities, the environment, and society as a whole.

Hamilton, Bermuda-based Aspen Insurance recently published its 2023 Sustainability report about its efforts in response to the current corporate environment surrounding ESG initiatives.

"Our report demonstrates Aspen's focus on strengthening the building blocks for a committed and progressive sustainability strategy," says Giselle Yeung, vice president of environmental, social and corporate governance, Aspen.

"In 2023, we created dedicated ESG roles in Governance and Investments, and formed a Sustainability Committee, which reports to our Group Executive Committee, believing that these strong foundations will guide us and keep us true to our values for years to come. The Aspen values and strong culture are a driving force for our activity in the sustainability space."

Donna Szatkowski-Zych, audit and assurance partner, Deloitte & Touche, is seeing that more organizations prioritize ESG capacity building, due in part to the increase in disclosure requirements from global regulatory bodies. In fact, Deloitte & Touche's 2024 Sustainability Action Report found an uptick in the prevalence of cross-functional ESG working groups, chief sustainability officers (CSOs), and ESG controller roles, indicating there is a greater appetite at the C-suite level to embed ESG governance and priorities into broader organizational strategies.

AXA Climate introduces new Altitude platform to aid business adaptation to climate change

AXA Climate, a division of the global insurance group AXA, has launched Altitude, an innovative platform aimed at helping businesses measure the impact of climate risks, create effective adaptation strategies, and comply with the Corporate Sustainability Reporting Directive (CSRD).

According to Théophile Bellouard, Director of Altitude by AXA Climate, the platform is powered by proprietary data derived from the latest IPCC report.

It provides companies with medium- and long-term climate risk assessments, taking into account local characteristics, industry specifics, and biodiversity to help organisations understand how climate risks affect their operations.

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Severe Weather's Effects on Auto Claims

On July 2, 2024, Hurricane Beryl became the earliest Category 5 hurricane observed in the Atlantic Ocean on record, and only the second Category 5 hurricane to occur in July since 2005. Four hurricanes have now made landfall in the U.S. this year, including last week's devastating Hurricane Helene.

Weather has become more unpredictable in recent years, and weather events are affecting a much larger geographical footprint than they have historically. In our industry, preparations for these events, be they hurricanes, rain, heat, hail, etc., can be as nuanced as the events themselves.

Carriers and repair shops usually plan months, sometimes years, in advance of these events, analyzing historical storm data and predictive models to forecast potential impacts. Based on these insights, carriers may adjust underwriting guidelines and secure reinsurance, while repair facilities may collaborate with suppliers to ensure a steady supply of parts to minimize repair delays and staff up to manage the increased volume.

A Look Back - Hurricane Ian

To grasp the true impact of a hurricane, let’s dive into the impact of 2022's Hurricane Ian. CCC's monthly comprehensive estimate volumes were relatively consistent and predictable – at least until the hurricane made landfall in Florida, Georgia, and South Carolina in late September. Comprehensive estimates jumped 3X for the three states and almost 7X for Florida, alone.

With the mass influx of claims comes the immediate need to effectively triage, assign, appraise, and move vehicles. One of the most noticeable shifts is in who performs the initial appraisal. Because of the higher proportion of potential total losses and the sheer volume of inspections that need to be completed, carriers increase their reliance on staff appraisers – many of whom are part of a catastrophe team – and independent appraisers (IAs).

After Hurricane Ian, there was also a significant increase in the time it took for vehicles needing repairs to start the repair process after initial claims were assigned to a shop.

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Kyle Krumlauf and Erik Bahnsen, CCC Intelligent Solutions