Preparing For And Responding To A Major Weather Event Or Catastrophe

The recent flooding in Houston in the wake of Hurricane Harvey serves as a vivid reminder that losses caused by weather events and natural disasters are becoming all too familiar sights. According to numbers compiled by Munich Re, insured losses due to natural disasters in the United States in 2016 totaled $23.8 billion, a nearly 48 percent increase over the $16.1 billion total for 2015. The number of catastrophes (43) was the highest number of catastrophes in the 10 years from 2007 to 2016.

Results for 2017 remain uncertain based on Munich Re's reporting so far this year. After a first quarter with record losses, the total at the half-way mark of 2017 was significantly below historical levels. The Houston flooding has caused wide spread damage with loss estimates in the tens of billions, but it remains to be seen how many of those losses are insured.

Interestingly, the insured portion of total losses was up substantially in the first half of this year. This is because most losses were from thunderstorms and other insured events, rather than named storms and hurricanes (where the insurance industry has language in place to protect its exposures). U.S. severe thunderstorm events were responsible for three of the five costliest loss events around the globe in the first half of 2017, with each event causing economic losses of over $2 billion. The total economic loss from these storms reached $18.5 billion, of which $13.5 billion was insured. That is good news for policyholders, but watch out for rate increases and tighter claim handling as insurers attempt to control their exposures.

Add America's aging infrastructure to these weather events and the potential for large-scale property damage and other losses becomes even greater. The American Society of Civil Engineers 2017 Infrastructure Report Card gives a grade of D+ to America's current infrastructure. This includes grades of D for dams and levees, which could be the greatest source of potential damage over the next several decades. More than 180,000 people were evacuated earlier this year when the Oroville Dam in Northern California threatened to break.

Also out West, the region has barely begun to see the impact of the record snows this past winter. The last time the Sierra Nevada snowpack reached levels like those seen this year, the resulting flooding caused nearly $2 billion (in today's dollars) in damage. California agencies, businesses and residents have been working feverishly and...