Natural Catastrophe Response
Last updated 7/23/14

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.

In the first half of 2014, U.S. insured losses totaled $9.1 billion, far below the 2000 to 2013 average loss of $11 billion, according to Munich Re. Insurers faced losses from winter storms, tornados and wildfires. Last year was one of the quietest hurricane seasons in the last 20 years, with the fewest hurricanes since 1982; however, , 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. The National Oceanic and Atmospheric Administration (NOAA) recently released their forecast for the 2014 Atlantic hurricane season which began on June 1. The NOAA is predicting a near-normal or below-normal 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, 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).

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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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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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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
Testimony and Speeches
Managing Extremes in 2014 Forum
(2/27/14 – Sen. Ben Nelson)
 
Additional Resources
NAIC Consumer Alert: Disaster Preparedness - Act now to make filing a claim easier after the storm

Anatomy of a Disaster
January 2013, CIPR Newsletter

Property and Casualty Insurance (C) Committee Public Hearing on Catastrophe Issues
December 2012

The Impact of Hurricane Sandy on the Financial Markets
11/16/12, NAIC Capital Markets Special Report

CIPR Topic: Climate Change
CIPR Topic: National Flood Insurance Program
Natural Catastrophe Risk:
Creating a Comprehensive National Plan

Disaster Recovery Playbook: A Guide to Residential Recovery

Guiding Principles for Consideration of Federal Catastrophe Insurance
 
Contact

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

CIPR Staff
CIPRNews@naic.org