Weather-related disasters cost insurers a record amount, having paid out a total of $135 billion in 2017, a historic year for hurricanes, wildfires and the like. Climate-related damages exceeded $300 billion in the US, breaking 2005’s record – when Hurricanes Katrina and Rita – led to damages to the tune of $214.8 billion, according to Triple Pundit.
Insurance companies should view 2017 as a wake-up call to take climate-related risk more seriously and consider the potential impact severe weather events can have on their portfolios, according to the article. In fact, says sustainability nonprofit Ceres, insurance companies could be in for a huge shock if they do not incorporate climate change risks more fully into their long-term strategic planning.
“The sheer number of Americans affected by extreme weather this past year, and the broad geographical spread of those disasters, means that national insurance brands may not be able to meaningfully reduce their risk exposures without dropping many customers from their rolls and potentially sacrificing crucial market share,” Cynthia McHale, director of Insurance at Ceres, told TriplePundit.
Indeed, insurers are beginning to take heed, at least according to California Insurance Commissioner Dave Jones. “Insurers are using more and more sophisticated (computer) models to determine risk factors,” he said in an interview (via The Union).
This is leading to some insurance companies backing off from offering coverage in wildfire high-risk areas. Wildfires in the state caused more than $10 billion in insurance claims last year, according to R Street.