RISING INSURANCE PREMIUMS

 

According to reinsurance provider Munich Re, insured catastrophic losses globally totaled a record $135 billion in 2017. Also notable about 2017 was the fact that 97% percent of losses were weather related, compared to an annual average of only 85% since 1980. Furthermore, these new highs are not anomalies--the previous two record losses occurred in 2011 and 2005 and appear as spikes on an otherwise rising trend line. [1]

Businesses with operations near flood- and fire-prone areas stand to see insurance premiums rise along with the increasing frequency of natural disasters. While reinsurance policies and the National Flood Insurance Program have helped protect private insurers from losses, premiums nonetheless have been rising. Global insurer Hiscox recently reported a 5% average rise in premiums—including increases reaching 50% for some sectors—after 2017 brought record increases in natural disasters. [2]  And as insurance companies increasingly use modeling software to assess risk according to geography, businesses adjoining coastal areas will see a disproportionate rise in premiums. [3]

[1] https://www.economist.com/news/finance-and-economics/21734467-reinsurance-industry-emerged-good-shape-natural-disasters-made-2017

[2] https://www.ft.com/content/71c2bb92-dd76-306f-ae5c-57d6c032eed3 

[3] https://hbr.org/2017/08/how-the-insurance-industry-can-push-us-to-prepare-for-climate-change

A simple equation: More frequent and intense extreme weather events result in increased property damage, leading to higher premiums.