From the Editor's Desk
Catastrophes Generate Surprise Losses, Damage Renewable Energy Projects
This month’s issue also includes coverage of the LIBOR cessation, the outlook for fall events and the role of insurance in future pandemics.
- Patricia Vowinkel
- June 2021
Tornado Alley appears to be widening.
Meteorologists now often include Arkansas, Mississippi, Alabama and the western part of Tennessee in Tornado Alley, which has traditionally ranged from north Texas up to the Dakotas.
That expansion is starting to change the way insurance carriers see those Southeastern states, according to Wes Robinson, national property practice president, Risk Placement Services. He says, “They've been surprised by some of the losses that they've been paying, both in hail and tornado. Most famously, [the tornado] back in March in 2020 in Tennessee. It produced some pretty large, high-profile losses on some large accounts.”
Insurers are starting to see losses from catastrophes in places not traditionally known for their big losses. Derechos in Iowa, snowstorms in Texas, hail and tornadoes, floods, wildfires.
Karen Clark has a name for this. The co-founder and CEO of risk-modeling firm Karen Clark & Co. calls this type of catastrophe non-tail, large-loss or “not in the tail of the distribution.” Large, non-tail events occur more frequently than catastrophes such as major hurricanes, and sometimes in areas not typically associated with those perils.
As hurricane season gets underway, the June issue of Best's Review provides an overview of catastrophe issues facing the industry. “Winds of Change: Derechos, Snowstorms and Other Catastrophes Are Becoming a Growing Problem for Insurers” looks at these non-tail, large-loss catastrophes and their impact on insurers.
“Hail, Wind and Fire: Extreme Weather Drives Up Rates for Renewable Energy Insurance” looks at the effects of extreme weather on the insurance market for these projects.
The COVID-19 pandemic has been a different kind of catastrophe. The global death toll was more than 3 million in mid-May. People have lost their jobs and businesses have closed. Lloyd's of London has estimated that global insurance losses from the pandemic will be on a par with the $144 billion caused by three Atlantic hurricanes in 2017.
Howard Kunreuther and Jason Schupp address concerns of future pandemics in “A Framework to Assess the Role of Insurance in Future Pandemics.” Kunreuther is the James G. Dinan Professor Emeritus of Decision Sciences and Public Policy, and co-director of the Risk Management and Decision Processes Center at the Wharton School, University of Pennsylvania. Schupp is the founder and managing member of Centers for Better Insurance.
Asset management is also a focus in the June issue. With LIBOR on its way out, Best's Review examines the implications for insurers in “Insurers Scrambling to Switch Benchmarks Used for Setting Short-Term Interest Rates of Investments and Debt.”
Best's Review also wraps up its special presentation on environmental, social and governance issues with “Asset Managers See Rising Insurer Interest in Values-Based Investing.”
And “Conference Organizers Say Live Events Could Resume in Fall” reviews the potential for a return to in-person meetings.
Lastly, June 28 is National Insurance Awareness Day. It serves as an annual reminder for business owners to review their insurance policies and make sure they have appropriate coverage.