The economic cost of natural disasters has an immense impact on the U.S. economy. The cost is growing steadily, particularly as natural disasters become more frequent 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 while six 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.
The year 2013 was one of the quietest hurricane seasons in the last 20 years, with the fewest hurricanes since 1982, according to Munich Re. Of the 13 cyclones that formed in the tropical North Atlantic last year, only two (Ingrid and Humberto) reached hurricane strength, and those storms were only category 1. Although 2013 was an unusually quiet year, insurers faced claims from severe tornadoes and thunderstorms. In comparison, 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, is expected to be one of the top costliest disasters in U.S. history.
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, 7 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 pending in Congress that deal with various aspects of catastrophe risk management.
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