According to a recent report by Moody’s, the P&C sector faced significant financial setbacks last year, primarily attributed to a series of severe convective storms (SCS) rather than major catastrophes.
These storms, encompassing hail, straight-line winds, and tornadoes, though individually less costly, collectively amassed considerable damages, surpassing $60 billion out of a total estimated $100 billion in insured losses.
In the wake of substantial losses incurred from severe convective storms in 2023, US Property & Casualty (P&C) insurers are bracing for further challenges and are taking proactive measures to mitigate risks and bolster resilience, the report noted.
Factors such as escalating insured exposures, rising property reconstruction costs, heightened litigation, and evolving claims settlement practices have all contributed to the uptick in weather-related losses for insurers.
Additionally, population growth in regions prone to convective storms, coupled with the aging infrastructure, has exacerbated the situation.
To cope with these challenges, insurers are resorting to several strategies. Many are seeking rate hikes and adjusting coverage levels to better reflect the heightened risks. Some are even considering exiting states where achieving targeted returns seems unfeasible.
Moreover, insurers are ramping up efforts to enhance their modeling capabilities specifically tailored to severe convective storms, a relatively nascent field compared to hurricane and earthquake modeling.
Incorporating recent experiences and updating models are seen as critical steps towards accurately assessing risks and pricing policies.
Despite these proactive measures, Moody’s anticipates slower premium growth in 2024 compared to previous years, and the pace of coverage level increases is expected to decelerate as well.
Nonetheless, insurers remain committed to strengthening their resilience in the face of evolving weather patterns and increasing climate variability, the report noted.
