A recent Risk Perspective blog from Swiss Re’s Mohit Pande has outlined the hurricane risks that the industry and economy currently face.
According to CoreLogic, nearly 33 million homes on or near the Atlantic and Gulf coasts are at risk of hurricane-force wind damage, the estimated cost to replace them is $10.5 trillion.
The impact of secondary perils like flooding continues to grow as well, says Pande, as it would cost more than $2.3 trillion to replace the estimated 7.8 million homes that are vulnerable to storm surges.
The blog notes many of those homes are uninsured or underinsured, and this protection gap grows larger as storms become more extreme.
By failing to make enough use of the forward-looking elements in modelling, the industry would only exacerbate the problem, says Pande.
“When a hurricane strikes, residents without insurance or with insufficient coverage have to abandon their homes or cut corners and build back to a lower standard. As a result the local economy suffers and the community is more vulnerable to the next major weather event,” he writes.
In 2021 the World Meteorological Organization used all its 21 names for hurricanes for the second year in a row and just the third time in history.
Meteorologists are doubling down on their predictions of another above-average hurricane season this year following several years of increased activity and losses.
Pande notes that in just the past five years, there have been four hurricanes with insured losses above $20bn each: Ida, Harvey, Irma and Maria.
He adds, “This could very well become the new normal, and our industry needs to look at hurricanes through a different, evolved perspective.”
“At Swiss Re we’re changing our focus – from relying less on historical experience to adopting more of a forward-looking view that accounts for current conditions and climate change.”
“Our North Atlantic Tropical Cyclone (TCNA) model continuously undergoes revisions and updates to incorporate new learnings, improved scientific understanding and additional loss experience.”
Swiss Re state that their hurricane model is a better representation of the scientific community’s view of the future state of the climate combined with learnings from recent events.
A forward-looking view of tropical cyclone risks and a unified, evolving front from insurers is imperative for the future of communities living in these high-risk areas.
Mohit Pande is Head of Property Underwriting for the US & Canada and Chief Property Underwriter. He is responsible for a team of 35 people and the underwriting performance of a large premium portfolio of property fire and natural catastrophe business.
