Lloyd’s has proposed several measures for re/insurers to better prepare themselves to respond to unforeseen natural catastrophe risks following 2017’s record-breaking hurricane season.
Lloyd’s ‘After the Storms’ report observed that 2017 was the costliest year on record for U.S natural catastrophes, and exposed several oversights in the way re/insurers model and respond to hurricanes.
For example, companies had not accounted for the widespread flooding caused by Hurricane Harvey, and were caught off-guard by having to deal with three major events within a matter of weeks.
In the aftermath of the hurricanes, these factors led to a shortage of building materials, driving up costs and causing delays in rebuilding, and Lloyd’s suggests these possibilities should be more closely considered when underwriting risks in the future.
Lloyd’s also called for greater private sector participation in the U.S flood insurance market, which it claims will lead to higher resilience and increased insurance penetration.
Of the $200 billion of total economic losses from last year’s Harvey, Irma, and Maria hurricanes, only half is expected to be covered by insurance, with only 20% of residents in Houston possessing flood insurance.
Closing this protection gap will require a more equitable balance between public and private markets, and further improvements in flood modelling, as these risks are often difficult to price due to outdated risk maps.
Last year’s hurricanes also highlighted the need for faster deployment of resources and specialist personnel following a disaster, which proved difficult and slowed recovery in remote regions such as the Caribbean and Puerto Rico, which still remains without power.
Lloyd’s proposed that re/insurers should further explore technology as an avenue for settling claims more efficiently and speeding up the payment and recovery process.
For example, satellite imaging can now be used to assess damage in remote or hard to access areas, and better communications technology can allow insurers to augment their loss data and get up-to-date information about what is happening on the ground.
Finally, Lloyd’s stressed that re/insurers may need to reconsider the safety procedures they endorse, pointing to insured losses on yachts in the Caribbean and Florida during 2017’s hurricanes, which suffered damage even when moored in supposedly safe marinas.
