National Oceanic and Atmospheric Administration (NOAA) and National Science Foundation to create a research center focused on bringing climate change data to the insurance industry.  May 24th 2023

Climate change insurance research center launches

Climate-driven floods, hurricanes, wildfires and heat waves cause billions of dollars of damage every year in the United States. Federal scientists hope that better access to climate data will help one industry adapt: property insurers.

Insurance companies are on the hook to pay for repairs after disasters, and even to rebuild entire homes and businesses that are destroyed. The growing cost to insurers was on full display last year, when Hurricane Ian caused more than $100 billion of damage in Florida, at least half of which was insured.

As climate-driven extreme weather gets more common, insurance companies nationwide raise prices, or cancel policies altogether, leaving homeowners in the lurch. Florida, North Carolina, Louisiana, Colorado, Oregon and California have all seen insurers fold, cancel policies or leave the state after repeated floods, hurricanes and wildfires.

"More and more Americans are frankly having mother nature barge through their front door," says Roy Wright, who leads the Insurance Institute for Business and Home Safety, an insurance industry-backed research group. "That change in climate comes at a price."

Now, two federal science agencies are trying to help. The National Oceanic and Atmospheric Administration (NOAA) and the National Science Foundation (NSF) say they will create a research center that focuses on bringing climate change data to the insurance industry.

A Dire New Warning on Climate

A report projects that within five years the world will surpass the temperature threshold that we hoped to stay within for the next 25 years.

Efforts to slow climate change have for years focused on keeping global temperatures from rising more than 1.5°C above pre-industrial levels by 2050. But the World Meteorological Organization reported last week that there is a 66% chance we will exceed that 1.5°C limit in the next five years -- a quarter of a century before the date specified in the Paris Accords that went into effect just seven years ago.

The report shows that climate change isn't just a future problem. It's a now problem, posing major risks for insurers -- but also creating opportunities to better serve clients wrestling with a massive disruption. 

Paul Carroll, editor-in-chief, Insurance Thought Leadership

Travelers Data Shows Collisions, Weather Among Most Common Boating Claims

The Travelers Companies, Inc. (NYSE: TRV), in recognition of National Boating Safety Week (May 20-26), today announced the top causes of boat and yacht claims to help boaters avoid common and costly mishaps. Based on Travelers claims from 2018-2022, the top three causes of loss were collisions (38%), severe weather (19%) and mechanical breakdowns (11%).

“Whether you’re an experienced boater or newer to the marina, it’s important to remember basic risk mitigation and safety tips, which can help protect you and your passengers from injury, and also protect your vessel from suffering costly damage.”

“With an uptick in boating activity in recent years, we continue to see boat and yacht insurance claims that may be preventable,” said Todd Shasha, Assistant Vice President of Personal Insurance at Travelers. “Whether you’re an experienced boater or newer to the marina, it’s important to remember basic risk mitigation and safety tips, which can help protect you and your passengers from injury, and also protect your vessel from suffering costly damage.”

As the unofficial start of boating season approaches with the upcoming Memorial Day weekend, Travelers experts offer boaters the following tips to protect themselves, their passengers and their boats:

U.S. Is Ready for Parametric Flood Insurance

The insurance and wider markets have created the perfect conditions for parametric insurance to grow

KEY TAKEAWAYS: - A surge in property damage from natural catastrophes has made it nearly impossible to get adequate coverage at affordable prices, creating an opportunity for new approaches to risk transfer. - Economic pressures have created a perfect storm: Businesses need to cut costs, including on insurance, but insurers must make sure their prices are realistic. - Filling the gap in the market is a burst of investment of capital and expertise in parametric insurance, which will accelerate it from new entry to mass market in the years to come.

Mark Hara, CEO, FloodFlash North America

Seeing Differently with Aerial Imagery

To the average person, aerial imagery and satellite imagery are thought of as interchangeable technologies that have similar processes and produce similar end results. However, this could not be further from the truth.

Executive Summary

Opinion: Tony Agresta, an executive at Nearmap, a provider of high-resolution aerial imagery, artificial intelligence data sets and geospatial tools offers his take on why he believes aerial imagery provides better support than satellite imagery for the insurance underwriting process. Among his reasons, with aerial imagery insurers can “cherry pick” the day and time they want to fly a location. When we look at the results these technologies yield, there’s a clear difference and frontrunner when it comes to which provides higher quality images that align with the imperatives and demands of insurance companies. And in an industry founded on the need for accuracy, those distinctions make all the difference for insurers and their customers at every stage of the insurance lifecycle.

How aerial and satellite imagery compare

While aerial imagery and satellite imagery technologies can both secure visual assets from a vantage point in the sky, that’s where the similarities end. Satellite images typically cover a much larger expanse of land, generating large-scale scientific demand, whereas aerial imagery is taken from a lower altitude in the air which shrinks the amount of land it’s able to capture at any given point. But the level of detail on these images is leaps and bounds above that of satellite imagery—and that level of detail is what insurance companies have come to expect. As a result, insurers are able to leverage stronger insights to inform their work, including the creation of customer quotes, land assessments and property risk assessments.

Coverage innovation award to honor positive changes

In business in general and the P&C insurance world in particular, companies both small and large are reinventing themselves to stay ahead of the competition and provide policyholders with innovative coverage solutions.

Parametric insurance represents one such insurance coverage innovation. During a recent InsuranceSpeak podcast, Alex Kaplan, executive vice president for alternative risk, Amwins Group, explained the nuances of parametric insurance and its far-reaching benefits.

Parametric insurance is fundamentally different than traditional indemnity-based insurance, Kaplan explained. Think of it as event-based or index-based coverage.

“Some of the oldest forms of insurance, like life insurance, are parametric in nature,” Kaplan said. “There’s a predefined event that must occur, and when that predefined event occurs, the trigger is breached and the policy or the claim is paid. With a parametric structure, you’re most oftentimes using real time data, and you’re indemnifying the insured against the characteristics of an event.”

Revealed – global insurance premium income

Total global insurance premium income amounted to nearly €5.6 trillion (about $6.05 trillion) last year, according to a new report by Allianz Trade.

Life remained the largest insurance segment at €2.6 trillion, followed by property-casualty (€1.8 trillion) and health (€1.1 trillion). The premium pool grew by 4.9%, or €259 billion, amid a global inflation rate of 8.6%, Allianz Trade said.

The three segments fared quite differently when it came to growth. While P&C grew at a robust 8.7%, health grew by a more modest 4.9%. The life insurance market grew only 2.4% as households felt the squeeze of inflation on their incomes.

P&C growth

The rise in P&C premiums was driven by all regions of the world. However, more than half (€77.5 billion) of last year’s global increase came from North America alone. With premium income of €860 billion, North America remains the largest market in the world by a significant margin, Allianz Trade said.