Property/casualty insurance companies may be in for larger losses than usual this hurricane season.
A prediction from the Weather Company released Friday is the third such report this month to suggest the most active storm season in years, as the effects of a fading El Nino continue to influence the global climate.
The forecast expects 14 named storms and eight hurricanes this season, including three major hurrianes of Category 3 or higher. It also includes Hurricane Alex, which formed in January.
This reflects a slightly more active season than usual; the average hurricane period has 12 named storms and six hurricanes, including three major hurricanes.
“Bottom line: The US is due for another hurricane strike sooner rather than later, but it’s impossible to know if that will occur this season,” The Weather Company wrote.
Insurance agents may want to inform clients of this fact, as the storms are likely to catch many of the state’s residents unaware. The state has not been hit by a hurricane since Wilma in 2005; that represents a more than decade-long streak unprecedented in the history of known storms.
In that period, many have dropped necessary forms of insurance – particularly flood insurance.
Flood is among the most uninsured natural disasters in the United States, with 10% fewer home and business owners carrying a policy in 2015 than in 2014. Now, a whopping 86% of Americans lack flood insurance.
It’s a large fall, but in the opinion of Robert Hartwig, economist and president of the Insurance Information Institute, it is one that’s only going to get larger.
“It’s sad to say, but that gap is going to increase,” Hartwig said during a recent webinar on uninsured risk with
Swiss Re. “People are reacting to price increases that have been put in place because [NFIP] is broke.”
Reacting to price increases enacted through the Biggert-Waters Act, policyholders have been dropping coverage in an attempt to save money on insurance they deem non-essential.
Also contributing to consumer reticence toward insurance is that 10-year period since Wilma.
“Memories are short,” he said. “It’s been nearly 10 years since the last major hurricane in Florida – the longest span in history. And it does not take long for a gap between events for people to start questioning why they need this coverage.”
