10 Burning Questions from 2012: What Happened?
5. How Will Catastrophes Affect Carrier Strategy?
What we saw in 2011: "It's likely that insurers will apply advanced analytics to be sure they are as prepared as possible for a multiyear cycle."
What happened in 2012? Hurricane Sandy happened, and now much of the conversation in the insurance industry is on the changing face of risk. But the Northeast has never been immune from hurricanes, according to Karen Clark, a risk modeling consultant — and paying for the high volume of valuable, insured property in the area is going to be a focus of insurance risk managers in 2013.
"We have seen this type of damage and worse in the Northeast from an earlier event—the 1938 Great New England hurricane—that wiped out all the towns along eastern Long Island, Rhode Island and parts of the Connecticut and Massachusetts coastlines," Clark says. "A recurrence of this storm today would cause losses three times those of Sandy. Worse still, if this type of storm takes a track like Irene, the insured losses will be over $100 billion and economic losses close to $300 billion. There will no doubt be underwriting adjustments after Sandy—particularly with respect to flood and business interruption coverages—but not wholesale disruption in the market."