Which storms happened in 2017

Natural disaster year 2017 was a wake-up call - new coverage concepts from insurers in demand

Insurers and reinsurers would do well to take into account events in their risk management that statistically only occur very rarely. The torrential rains following Hurricane Harvey, which caused severe flooding around Houston, were such a rare occurrence. The consequence of three extreme hurricanes within a few weeks - Harvey, Irma and Maria - is rare, but always possible. Experts expect that climate change will increase extreme events in certain weather disasters. In a sense, 2017 therefore provided a glimpse into the future.

Once again, significantly less than half of the total losses were covered by risk transfer solutions: the proportion of insured losses was higher than in the previous year, but at 41 percent it was still below the 50 percent mark. And this despite the fact that more than four fifths of the total losses occurred in North America with a comparatively high insurance density.

I think these facts do not just point to business opportunities for insurers. They also show that affected individuals, companies or public institutions face enormous economic challenges in dealing with the consequences of the disaster. And they are almost an obligation for insurers to develop new coverages that are closer to customer needs. With data from sensors and satellites and the development of systems with elements of “artificial intelligence”, completely different insurance concepts can be calculated than in the past. An example: crop insurance for farmers in regions where damage assessment based on classic damage reports is difficult. A positive side effect is that funds can be paid out more quickly and help the injured party to get back on their feet sooner after a disaster. Studies have shown that emerging economies in particular recover more quickly after extreme disasters if the insurance density is high. The international insurance industry then bears a higher proportion of the risks, which means that they are spread over many shoulders.
Experts expect that climate change will increase extreme events in certain weather disasters. In a sense, 2017 therefore provided a glimpse into the future.
In order to be able to continue developing new coverings, it is essential for us to have a deep knowledge of the risks and their changes. For several decades we have been concerned with the consequences of climate change on severe weather events. Above all, we currently want to better understand in which regions and with which weather hazards changed risk patterns are already emerging. And we investigate how risk prevention can limit damage. With all our knowledge, we want to help ensure that insurance can play an even broader social role than before, in particular to help developing and emerging countries get back on their feet financially faster after disasters.