San Diego – Hurricanes pose the greatest “act of nature” risk to the U.S. insurance industry for 2008, according to EMB, a San Diego-based actuarial consulting firm. In order to stay ahead, P&C companies must develop detailed enterprise risk management (ERM) strategies and processes that account for the risks in a shifting climate, the company says.
"We've seen the devastating effects of hurricanes - homes and other property completely destroyed. Insurance companies are still struggling to recover from Katrina," says Alice Gannon, senior consultant, EMB America. "The past two years have been quieter for insurers, but meteorological research indicates that we still experienced an uptick in North Atlantic hurricane activity. This is a trend that is likely to continue for several years, so insurers must prepare themselves to withstand losses in the event of another catastrophic landfall."
With the events surrounding Hurricane Katrina in 2005, and multiple land-falling hurricanes in 2004, U.S. insurers have experienced the implications of the increased frequency and severity of hurricanes nationwide. However, EMB cautions insurers not to be lulled into a false sense of security based on the relative calm of the past two years.
While hurricanes top the list of P&C insurance risk, other “acts of nature,” including tornadoes, earthquakes, winter storms, fire and hail, must also be accounted for when insurers assess their pricing strategies. The recent Atlanta tornado, which caused an estimated $250 million in damage, and the 2007 California wildfires, which cost insurers over $1.5 billion, have made this clear. The overall catastrophe potential in a location as geographically diverse as the U.S. means that no insurer is completely safe, the company says.
Source: EMB
