Every year, the correlation between rising average temperatures and the frequency and severity of hurricanes, winter storms and other weather-related events becomes clearer. Weather and climate disasters in the first nine months of 2021 alone generated more than $100 billion in property and infrastructure damage.1
"Over the past few year, we've seen increasing uncertainty around catastrophic events," observed Wes Robinson, National Property president at Risk Placement Services (RPS). "Climate change is now a strategic concern for many reinsurers as well as commercial property owners."
Two of the most expensive natural catastrophic events of 2021 happened in the United States: Hurricane Ida and winter storm Uri.
Hurricane Ida Cuts a Wide Swath
Hurricane Ida cost $64.5 billion in damage, out of a total of $105 billion in estimated damage for the entire U.S. 2021 hurricane season.2
Ida was so costly because of its larger-than-average geographic reach ¾ another climate-related change in catastrophic storms. The September hurricane made landfall in southern Louisiana and then traveled northward, triggering flash flooding in New York, New Jersey and Connecticut.
Winter Storm Uri Surprises Texas
Winter storm Uri was among the five most costly catastrophic events in the world in 2021, with estimated property damage losses of approximately $15 billion3. It is another example of the type of unanticipated catastrophic event that brokers refer as a shock loss.
"The problem with Uri was that none of the insurance companies had ever priced property in Texas for a significant winter ice storm, let alone a storm that caused the state's power grid to fail," explained David Novak, area president at RPS. "Insurance companies price for hurricanes in Houston and tornadoes and hail in Dallas, not for one of the deadliest and costliest winter storms we've ever seen."
While Uri was originally considered a one-off event, the February 2022 winter storm that hit Texas suggests that Uri might not be unique. Although this recent storm was briefer and milder than 2021's nine-day arctic blast, commercial property underwriters may need to rethink their assumptions about Texas and other states.
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Sources
1 National Oceanic and Atmospheric Administration (NOAA). "US Hit with More than 18 Billion-Dollar Disasters So Far This Year," Oct. 8, 2021, www.noaa.gov/news/us-hit-with-18-billion-dollar-disasters-so-far-year
2 National Oceanic and Atmospheric Administration (NOAA). "Billion-Dollar Weather and Climate Disasters," National Centers for Environmental Information, n.d., www.ncdc.noaa.gov/billions/events/US/2020-2021
3 "Expected Tornado Losses Not a US P/C (Re)Insurer Capital Event," Fitch Ratings, Dec. 14, 2021, www.fitchratings.com/research/insurance/expected-tornado-losses-not-us-p-c-re-insurer-capital-event-14-12-2021