Hurricane Harvey brought “500-year” rainfall and flood conditions to Southeastern Texas for the third time in three years, according to the Washington Post. According to Moody’s Analytics, estimates of the combined Texas and Florida impacts of Hurricanes Harvey and Irma range between $150 billion to $200 billion. Hurricane devastation is still being calculated. How can insurers and reinsurers prepare for the next unprecedented storm?
Look to the Climate Risk Survey, developed by the National Association of Insurance Commissioners (NAIC). This survey, designed to assess insurers’ responsiveness to climate change, was developed in 2009. Companies are evaluated on five core themes, including governance, climate risk management, the use of catastrophe modeling or other modeling to evaluate and manage risk, greenhouse gas management and stakeholder engagement. Recently, insurance regulators in California, Connecticut, Minnesota, New Mexico, New York and Washington have mandated completion of the survey by insurers writing in excess of $100 million in premiums.
Disclosure of climate risk is important because of the potential impacts on insurer solvency and the availability and affordability of insurance across all sectors. In Connecticut, Insurance Commissioner Wade was appointed a member of the Governor’s Council on Climate Change (GC3), a group of state agencies and other stakeholders that are examining the effectiveness of existing policies and regulations designed to reduce greenhouse gas emissions. GC3 is also charged with identifying new strategies to meet Connecticut’s greenhouse gas emissions reduction target of 80% below 2001 levels by 2050. In remarks at the first GC3 meeting in July 2015, Commissioner Wade recounted that insurance companies paid nearly $1 billion as a result of storms in 2011 and 2012 for over 200,000 covered claims for properties along the Connecticut coastline collectively valued at over $570 billion.
How insurers and reinsurers respond will continue to be an emerging and evolving issue. At the 2017 NAIC Summer National Meeting, the Climate Change and Global Warming (C) Working Group reviewed enterprise risk management efforts by carriers and discussed how they could be impacted by climate change and global warming. The Working Group also discussed the use of modeling by carriers and their reinsurers and reviewed innovative insurer solutions to climate change, including new insurance products through presentations by interested parties.