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Secondary Perils on the Rise, Responsible for Growing Share of Disaster Claims

May 5, 2022

Natural catastrophes in 2021.

Historically, primary perils 鈥 like earthquakes 鈥 have been weather events with the highest loss potentials, but secondary perils 鈥 including wildfires, rainstorms, and floods 鈥 have become more frequent in recent years and are responsible for a growing share of insurance claims. Secondary perils are small to mid-sized events and often follow a primary peril, such as hurricane-induced flooding or a fire following an earthquake. The increased frequency of secondary peril events is generating significantly more insurance losses, and losses from secondary perils now often losses from primary peril events.

The number of weather-related disasters has over the last 50 years, due in large part to climate change consequences, such as sea level rise, warmer temperatures, and more extreme weather. Trends 鈥 such as population growth in high-risk geographies 鈥 are also leading to more property damage and insurance claims from secondary perils.

Consider Hurricane Ida, one of the U.S. hurricanes on record, costing insurance companies an estimated $30.3 to $42.5 billion in claims. This storm caused wind and storm surge losses in the Gulf of Mexico, as well as rain-induced flooding from the Gulf to the Ohio Valley, mid-Atlantic and Northeast. There was tremendous and widespread residential, commercial, automobile, and watercraft property damage as a result of this storm. Additionally, strong winds damaged power lines, causing prolonged power outages 鈥 and business interruption 鈥 along the storm鈥檚 path. To make matters worse, Hurricane Ida occurred during the COVID-19 pandemic, amid supply chain disruptions, increased construction and materials costs, and labor shortages, causing greater delays, costs, and hassles during recovery efforts.

Other natural catastrophes in 2021 included winter storm Uri in Texas, which caused widespread blackouts and extensive damage, making it the most expensive winter storm on record. The prolonged freezing temperatures and power outages resulted in extensive property damage from freezing pipes, fallen tree limbs, and the weight of ice, sleet, and snow. More than were filed because of this storm.

Although secondary peril events happen globally, the US experiences more related insurance than anywhere else in the world. Population growth in coastal areas and other catastrophe-prone regions, such as wildfire-prone Colorado, has also increased the severity and expense of these insurance claims.

Losses stemming from 2021鈥檚 natural disasters are, continuing a trend of 5-6% annual increases in catastrophe losses. In fact, it has become common for one secondary peril event, such as a wildfire, storm, or flood, to cause losses that exceed. Since these events may occur in heavily populated areas, such as Hurricane Ida鈥檚 damage in New Orleans, secondary perils have become a major threat for homeowners and business owners alike.

Several insurance companies have exceeded their catastrophe budgets for the last decade by Therefore, it鈥檚 critical for them to understand the associated risk factors and apply the appropriate rates by line of business to better achieve their profit targets.

The global climate change impact and associated weather-related trends impact every single facet of the insurance industry. 麻豆放映免费鈥檚 specialized brokers have in-depth knowledge on not just the landscape of the marketplace today, but always have their eye on the future to partner with you and your clients鈥 and plan accordingly. Contact 麻豆放映免费 to properly protect your clients鈥 most valued assets today.

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麻豆放映免费鈥檚 property teams have extensive experience with all manner of occupancies and have unparalleled specialization in designing, implementing, and servicing complex property insurance and reinsurance programs. Our team welcomes the challenges presented by CAT-exposed properties, vacant buildings, offensive claims history, new ventures, and everything in between!
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