Winter Storms and Hurricane Season: How Insurers Are Adapting to Increasing Losses

Winter Storms: A Record-Breaking Event

The winter storms that swept through the southern United States in February 2021 caused unprecedented damage, with estimates of losses ranging from $10 billion to $20 billion. This makes it the costliest winter storm in U.S. history. The storms brought snow, ice, and record-low temperatures that paralyzed parts of the South, especially Texas. According to S&P Global, ten of the 20 largest property and casualty (P&C) insurers are expected to record revenue decreases, while nine are expected to log lower earnings per share year over year.

Severe Convective Storms: Another Threat

In addition to the winter storms, southern states were also pummeled by severe convective storms during the first quarter of 2021. These storms featured destructive tornadoes, flooding, and hail, adding to the already significant losses faced by P&C insurers. The combination of extreme weather events and populations shifting into coastal and other disaster-prone areas is a major driver of increasing storm losses in the United States.

Hurricane Season: A Growing Concern

As states work to recover from these events, they will barely have time to breathe before contending with another above-average hurricane season. The Colorado State University Tropical Meteorology Project team, led by Triple-I non-resident scholar Dr. Phil Klotzbach, predicts 17 named storms during the 2021 Atlantic hurricane season. Of those, the researchers expect eight to become hurricanes and four to reach major hurricane strength, with sustained winds of 111 miles per hour or greater. This growing concern underscores the importance of adopting a resilience mindset that focuses on pre-emptive mitigation and rapid recovery from natural disasters.

To adapt to these increasing losses, insurers are moving beyond the traditional emphasis on insurance as a risk-transfer mechanism. They are becoming risk-management partners to help communities and businesses get out in front of perils to ensure swift recovery. This shift is crucial as the frequency and severity of extreme weather events continue to rise.

For readers, it is important to stay informed about the changing climate and its impact on insurance. Consider reviewing your insurance policies to ensure they adequately cover potential risks, and consider investing in mitigation measures to reduce the impact of future disasters.