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Managing Extremes in 2014 Forum
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Media queries should be directed to the NAIC Communications Division at 816-783-8909 or news@naic.org

Eric Nordman
Director, Center for Insurance Policy & Research
816-783-8232

CIPR Staff
CIPRNews@naic.org

Natural Catastrophe Response

Last Updated 6/1/16

The economic cost of natural disasters has an immense impact on the U.S. economy. The cost is growing steadily, particularly as the frequency and severity of natural disasters has increased due to changing climatic conditions. In terms of insured losses, if one were to look at the ten costliest disasters in United States history, eight were hurricanes, six of which have taken place since 2000—Hurricane Katrina ($41.1 billion in 2005); Hurricane Ike ($12.5 billion in 2008); Hurricane Wilma ($10.3 billion in 2005); Hurricane Charley ($7.5 billion in 2004); Hurricane Ivan ($7.1 billion in 2004); and Hurricane Rita ($5.6 billion in 2005). Moreover, while the United States has not had a major land-falling hurricane since Wilma, or a major earthquake since Northridge ($12.5 billion in 1994), the rising likelihood of extreme and catastrophic weather events makes monitoring the frequency and impact of natural disasters a critical regulatory function.

U.S. insured losses from natural catastrophes totaled $15 billion in 2015, according to Munich Re. The losses are slightly lower than the $17 billion last year due in part to El Niño climate conditions in the Pacific Ocean, which reduced hurricane activity in the North Atlantic. In comparison, the year 2013 was one of the quietest hurricane seasons in the last 20 years, with the fewest hurricanes since 1982; while 2012 was an above-average year for U.S. insured catastrophe losses due to a series of severe weather-related catastrophes. Superstorm Sandy, which made landfall on the northeast coast on Oct. 29, 2012, was the second-costliest weather disaster in American history behind Hurricane Katrina, according the National Oceanic and Atmospheric Administration (NOAA).

The Weather Company, a subsidiary of IBM, predicts the 2016 Atlantic hurricane season to be the most active since 2012. A total of 14 named storms (winds of 39 mph or higher), eight hurricanes (winds of 74 mph or higher) and three major hurricanes (defined as Category three, four, or five with winds of 111 mph or higher) are forecasted for the coming season.

Insurance plays a large part in helping with the economic recovery following catastrophic events. The 2004 and 2005 hurricane seasons brought unprecedented devastation to the gulf coast causing over 1,200 deaths, seven million insurance claims, and almost $100 billion in insured losses. As hard as it is to imagine, future mega catastrophes could be even worse. A reactive response will not suffice. The NAIC and state insurance regulators have developed a comprehensive national plan for managing catastrophe risk that incorporates new risk management techniques with a solid foundation of solvency and consumer protection inherent in state insurance regulation. Parallel to these efforts, Congress has indicated renewed interest, as well. Currently, there are several bills and resolutions pending in Congress that deal with various aspects of catastrophe risk management. A list of some of the pending legislation can be found here.

NAIC members have taken an active role in educating Congress and providing technical feedback on various proposals regarding natural catastrophes. Over the last several years, NAIC members have met with members of Congress and have regularly testified on these important issues, stressing the important role of the states in effectively managing a natural disaster response. In addition, the NAIC has developed consumer resources specific to preparing for disaster. The Free Mobile Home Inventory app helps consumers create a home inventory, which is one of the best ways consumers can insure adequate coverage on their home and belongings, as well as to make filing an accurate claim easier.

Key Issue

Disaster response video thumbnail 2015
2015
Regulators Respond to Disasters – NAIC Fall National Meeting 2015

NAIC members representing South Carolina, California, Texas and Washington discuss devastating floods and fires in 2015.
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2013
Regulators Respond to Disasters in Arizona and Oklahoma

Arizona Insurance Director Germaine Marks and Oklahoma Insurance Commissioner John Doak discuss disasters impacting insurance consumers in their states and the response coordinated by their departments, fellow regulators and the National Association of Insurance Commissioners (NAIC).
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2012
Regulators Respond to Superstorm Sandy

Members of the NAIC discuss the impact of Superstorm Sandy in 2012. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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2011
Regulators Respond to Disasters

Members of the NAIC discuss the impacts of natural disasters in their states during 2011. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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