March/April Volume 29, Number 2 | |||||
The Future of Insuring against DisasterMost companies aren’t insured for natural disaster and federal disaster relief is often too little and too late.
Even though the cost of natural disasters in 2017 was approximately $300 billion in the U.S., less than half — $130 billion — was insured, according to research by Swiss Re. The other $170 billion will be borne by taxpayers. What’s more, the cost of natural disasters has been increasing dramatically, quadrupling in the past decade, according to the U.S. Department of Commerce’s National Oceanic and Atmospheric Administration (NOAA). Better Forecasting Is Needed
The insurance industry needs to do more to take advantage of new technologies for assessing risk probabilities. Referring to Hurricane Harvey, Bill Churney, president of AIR Worldwide, said, “One of the things that I think the industry will have to come to grips with is this whole idea of the one-in-100-year flood zone FEMA (Federal Emergency Management Agency) map. It’s not a very good proxy for the risk, given that 40-50 percent of the loss in Harvey was outside of those areas.” The Cost of Federal Aid Is Becoming Unsustainable
Presidentially declared disasters during the Reagan administration averaged 28 per year; during Clinton’s it was 90 per year; in the first year of the Trump administration it was 137; and in 2011, during the Obama administration, it was 242.
Federal Disaster Relief Is Often Too late, Too Little
The other problem with federal disaster relief is that it’s slow, and its payouts are relatively small. It took Congress three months to pass supplemental relief for Hurricane Sandy and even one year after the disaster, only 25 percent of the funds had been dispersed. Most people don’t know that the largest check FEMA will write is $33,000. The Public Needs to Be Better Informed Attendees noted that the political climate is changing. More government entities are focusing on “the cost of risk and how to engage the private sector to shift more of the burden off of the back of taxpayers onto the balance sheet of the private market.” Leaders Foresee an Increased Emphasis on Mitigation “Hopefully, 2018 will be the year when the switch flips, and people start seeing that mitigation is an investment; it’s not an expense. Because that’s how we will change the culture of this country so that it is one of preparedness instead of just continued response and recovery,” said Julie Rochman, president and CEO at the Insurance Institute for Business & Home Safety (IBHS). |
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Five Ways to Protect Your Firm from Sexual Harassment Claims How a Business Income Worksheet Helps You Rebuild after Disaster The Future of Insuring against Disaster Four Insurance Policies That May Protect against a Sexual Harassment Claim
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