Triple whammy: American insurance sector records heaviest losses since 2000 as disasters, inflation and population rise

Rising population in disaster-prone areas is making it harder for insurers to operate in the United States
Usually, in America, it is the hurricanes that wreak maximum havoc on real estate and cause huge losses.
Usually, in America, it is the hurricanes that wreak maximum havoc on real estate and cause huge losses. iStock/Stefan Siems
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It’s not been a good season for insurance companies in the United States. Last year, they lost $15.2 billion net underwriting as per a US-based rating agency named AM Best. These losses are the worst ever posted since 2000 and more than twice the losses in 2022. 

These companies owe their losses to a troika of adversaries — rising incidence of natural disasters, a soaring inflation and an increasing population in the disaster-prone geographies. 

As a result, the insurance companies are either increasing the cost of insurance packages or are exiting the sector in the vulnerable areas.

Also Read: Floods, tornadoes, landslides: This January was the 6th-warmest on record for United States

Robert Gordon, senior vice-president of policy, research and international at the American Property Casualty Insurance Association, a trade body, was quoted by the press as saying that the insurance industry is facing rapidly escalating coverage demands while the insured losses continue to surge.  

“Not only are more homes being built in areas that are at high risk for natural disasters, but these homes are increasingly more expensive to repair and rebuild as inflation has driven up the cost of construction labour and materials,” Gordon added.

Usually, in America, it is the hurricanes that wreak maximum havoc on real estate and cause huge losses. However, last year was comparatively peaceful in terms of the incidence and intensity of hurricanes. 

Also Read: This winter was United States’ 6th warmest: NOAA

Despite this, increasing incidence of severe rainfall, flooding and other climate change-related adverse weather events which the insurance companies refer to as ‘secondary’ contribute to the heavy losses. 

A record 37 isolated events globally left more than $1 billion in insured losses. 

It has been widely reported that global warming is making storms, floods and wildfires more extreme and destructive.

Also Read: States and private firms are implementing insurance schemes to protect livestock rearers 

Sridhar Manyem, senior director of industry research and analytics at AM Best, was quoted as saying — “...increasing frequency and severity of weather-driven losses is a major uncertainty that is influencing both insurance and reinsurance markets”. 

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