Natural Catastrophe Response
Last updated 4/8/14

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. In addition, the NAIC has developed consumer resources specific to preparing for disaster. The MyHome Scr.APP.book 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

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).

Watch Video

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.

Watch Video

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.

Watch Video

 

Committees Active on This Topic
Property and Casualty Insurance(C) Committee
Catastrophe Insurance (C) Working Group
News Releases
NAIC Leads Catastrophe Discussion
02/27/2014
Regulators Attend Post-Tornado Forum in Oklahoma
06/13/13
NAIC Sets Up Consumer Call Center In Aftermath Of Superstorm Sandy
11/15/12
Insurance Regulators Adopt Climate Change Risk Disclosure
03/17/09
Nearly Half of Americans Unprepared for Disasters, New Survey Reveals
05/13/08
NAIC Working Group Takes Step Toward Multi-State Catastrophe Fund
02/20/07
Legislative Information
Congressional Testimony
Testimony before the House Subcommittee on Housing and Community Opportunity regarding All-Perils Insurance Coverage
(7/17/07 - Sandy Praeger)
Testimony before the Senate Committee on Banking, Housing and Urban Affairs regarding The Availability of Property Insurance in Coastal Areas
(4/11/07 - Walter Bell)
Testimony Before the Subcommittee on Housing and Community Opportunity Of the House Committee on Financial Services Regarding: Perspectives on Natural Disaster Insurance
(03/27/07 - Kevin McCarty)
Additional Resources
Disaster Preparedness - NAIC Insure U Special Section

Anatomy of a Disaster
January 2013, CIPR Newsletter

Property and Casualty Insurance (C) Committee Public Hearing on Catastrophe Issues
December 2012
CIPR Topic: Climate Change
CIPR Topic: National Flood Insurance Program
Natural Catastrophe Risk:
Creating a Comprehensive National Plan
Guiding Principles for Consideration of Federal Catastrophe Insurance
NAIC Library Bibliographic Subject File for Disaster Insurance
Contact

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

CIPR Staff
CIPRNews@naic.org