Can Insurtech elevate nat cat preparedness?  October 24th 2024

Can Insurtech elevate nat cat preparedness?

AI could hold the key to speeding up disaster response

Still grappling with the devastation left in the wake of Hurricane Milton, another named storm, Hurricane Oscar, is now swirling its way through the Bahamas. As the severity and frequency of natural disasters is only expected to rise, the insurance industry is faced with an urgent need to enhance its resilience.

A potential solution to this challenge lies in the opportunity to leverage cutting-edge insurance technology, which can play a critical role in both predicting and responding to natural disasters.

Robert Pick (pictured), EVP and CIO at Tokio Marine North America, spoke with Insurance Business about how digital tools can empower insurers and brokers to better manage these risks, while also maintaining the human connections that define the industry.

Transforming risk assessment through AI

Just a few years ago, many insurtechs lacked a deep understanding of the insurance industry, but Pick has noted a marked improvement in this area.

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With the storm’s losses looking more favourable, questions over rates and gross/net strategies will arise

With less than a week since Hurricane Milton’s landfall on Florida, naturally the industry’s biggest question around the event is still what the insured losses will be.

As we reported, early expectations for industry losses late last week were coalescing around the $40bn-$50bn range.

However, this began to look overly cautious another day into the loss assessment process, with some sources now discussing $20bn-$30bn losses.

Questions over the loss will be heightened by early modelled loss scenarios from Moody’s RMS suggesting sub-$12bn mean projections for wind losses, though it is important to note that this is not their loss estimate in itself, and Aon’s $25bn-$40bn range given to clients.

This early into the loss assessment, the ranges for insured losses are still wide, reflecting the highly uncertain situation and sources interpreting limited information in different ways.

The favourable signs include lower levels of storm surge, the slowing of windspeeds over inland Florida, and greater resilience in Sarasota housing stock, along with legal changes brought in to restrict litigation fraud.

However, complicating factors include the potential for loss amplification from Hurricane Helene, for leakage of flood claims, general caution over Florida’s ability to manage loss creep, high pre-landfall tornado activity involving lower deductibles and the fact winds and rain did impact more highly populated areas, even at lower levels.

However, a wider range of, say, $30bn-$50bn would not significantly alter where the loss falls, although it would move the balance further towards the primary markets. At the low end, treaty reinsurers would be very little impacted, and Florida’s state reinsurer given more headroom to struggle on through 2025.

At the high end, minor reinsured losses would still be an earnings event that would not largely drive major retro/ILS recoveries, so while reinsurers would be impacted it would be in a manageable way.