American Geological Institute

Government Affairs Program

UCAR Briefing "Extreme Weather and the Insurance Industry"

In response to the escalating losses from natural disasters -- now averaging $1 billion per week in the United States -- the University Corporation for Atmospheric Research (UCAR) held a congressional briefing on September 17. Three speakers, in a panel moderated by Roger Pielke, Jr. of the National Center for Atmospheric Research, provided insight into key dimensions of the issue.

Stanley Changnon, professor of Geography and Atmospheric Sciences at the University of Illinois, presented the results of a study on the weather-caused insured losses of the 1990s. Five highlights of this study were:

Storm losses and intensities, when adjusted for financial and societal changes, were as great in the late 1950s through the early 1960s as they were in late 1980-1990.
Regional differences exist, with the largest increases in storm damage occurring in the southeast coastal regions and heavily-populated urban areas.
Weather-induced insured losses reached an all-time high in the 1990s due to a series of societal-based factors.
The recent upsurge is not related to climate change, but rather the return of several major hurricanes after a 20 year absence.
The absence of major events in the last few decades shifted concerns away from risks associated with major storm events.

Bob Sheets, former director, National Hurricane Center, spoke about the effect of hurricanes and simple mitigation strategies to alleviate damage. For example, adding metal reinforcements to hold on house shingles only costs several hundred dollars, but p rovides an enormous amount of protection. He cited a FEMA report that showed the failure of wood-frame houses as well as the damage through doors and windows that were not properly boarded before the storm. Wind travels through these fixtures then peels off the roof. He also used slides to illustrate the type of homes that should not be built in a high-wind, hurricane-prone environment.

Franklin Nutter, president, Reinsurance Association of America gave several causes for the increase in catastrophic losses:

Population growth in high risk areas
Dramatic increases in insured values
Insurance industry's expansion of coverage
Government policy which has endorsed weak building codes or failed to enforce existing codes
Climate change

He continued by explaining that the success of the insurance sector depends on its ability to estimate these events. Nutter stated that most insurance coverage is based on historical records, but that paradigm is changing as companies realize that climat e change is affecting the pattern of storms. The insurance industry is addressing this change in several ways. It broadening the options for policyholders so that coverage is commensurate with the risks and type of coverage selected. The industry has a lso lobbied in support of scientific research and climate modeling programs, such as NASA's Mission to Planet Earth. Finally, insurance agencies have worked through the Institute fo r Business and Home Safety to increase hazard mitigation and building design safety.

Please send any comments or requests for information to the AGI Government Affairs Program at govt@agiweb.org.

Contributed by Kasey Shewey, AGI Government Affairs.
Last updated December 5, 1997

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