I recently read that this year’s storms, together with the earthquakes in Japan and New Zealand have caused $55 billion in insured losses.* That amount is twice the Cat losses of the first half of 2010 and four times the 10-year average.
And this estimate does not yet include the recent devastating losses throughout east coast states from nasty hurricane Irene. What’s more, hurricane season is far from over.
While weather models have gotten better, no one predicted the events in 2011 so far. The weather has seemingly gone crazy. Way too much heat. Far too many storms. I sometimes wonder if earth’s orbit or axis has shifted and the scientists just aren’t telling us. Is the 100-year cycle now the norm?
Talking with a P&C insurer recently, he told me his company used to look at weather patterns back 25 years as it compiled its rate analysis. They now only look back five years.
So how do you steel yourself against the extreme weather? Obviously you can’t control the weather, and you can’t stop writing business wherever it storms. But you can better prepare.
Understanding your book of business in great detail will help. Check for geographic dispersion overlaid with weather patterns. Negotiate reinsurance differently. Get more granular in your analysis. Take advantage of today’s hardware and software tools to support your efforts at analysis.
BI, analytics, whatever term you use is all the rage in P&C insurance. But it’s the insight and application of that analysis that will separate the best from the rest.
David
*A.M. Best’s Best Week, August 2, 2011