In the UK and Ireland, natural catastrophes are rare. However the impact of global events will inevitably be felt here following a year that has seen a number of significant natural disasters.
Hurricanes Harvey, Irma and Maria tore through the US and the Caribbean in quick succession, earthquakes in Mexico, wildfires in California and closer to home, storm Ophelia hit the west coast of Ireland as well as impacting on the rest of the British Isles.
According to the latest estimates the combined effect of these events will result in insurance claims of over $110 billion, a vast sum and an amount that will inevitably lead to several insurers reviewing their strategies for these types of events.
That said, the insurance industry has shown incredible resilience in recent times to major events like hurricane Katrina (US) in August 2005 and the Fukishima nuclear disaster (Japan) in March 2011, to name a couple.
So what is different this time?
The insurance industry has benefited from a wealth of capacity in recent times which, when paired with a benign claims environment globally, has resulted in increasingly competitive premiums.
What the events of 2017 have indicated is that maybe the pricing for natural catastrophes is now too low, with a number of insurers and reinsurers, including Beazley, Hannover Re, Swiss Re, Munich Re and Hiscox reviewing their pricing.
The scale and focus of any price changes is still to be seen, although it is likely to be focused on property and catastrophe reinsurance initially.
In addition to the above, a major concern that has now been expressed is how resilient the risk models insurers use are. Hurricane Irma was forecast to strike Miami and only changed direction as it weakened. IF that change of direction had not taken place, the already vast sums paid in insurance claims for these combined events would have been dwarfed.
The US Government are focused on controlling their budgets and this has led to an under-investment in some resilient infrastructure. Whilst this article concerns the US specifically, the same is likely to be true for many countries around the world.
As I mentioned earlier in this article, natural catastrophes are rare, but the impact of global events are likely to include disruptions to raw material production, manufacturing facilities, supply infrastructure or in the worst case, personal loss to key members of staff or contacts.
At Griffiths & Armour we work closely with our clients to fully understand their operations and every step along their supply chains to mitigate and protect them from these scenarios. If you would like to find out more, please contact Troy Johnson.