A Firm Foundation: How Insurance Supports the Economy

Defraying the economic costs of disasters

The insurance industry plays a vital role in helping individuals and businesses prepare for and recover from the potentially devastating effects of a disaster such as a catastrophic hurricane, tornado or wildfire.

Individually, insurers are taking steps to mitigate damage from extreme weather, and many sponsor programs for their customers to fortify their homes and sometimes offer premium discounts for certain features, such as fire-resistive construction. To help homeowners following a loss, many also offer ordinance or law coverage, which covers any increased costs a homeowner incurs for having to bring a building up to municipal code or ordinances following a covered loss. Insurers also are working together to help build resilience in the United States. Many of them fund the Insurance Institute for Building and Home Safety, dedicated to reducing and preventing losses that disrupt the lives of millions of home and business owners each year.

Natural Catastrophe Losses In The United States, 2019

(Based on perils; US$ millions)

Source: © 2020 Munich Re, NatCatSERVICE; Property Claim Services (PCS®)*, a Verisk Analytics® business. As of June 2020.

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Catastrophes in the United States

Property Claim Services (PCS®), a Verisk Analytics® business, defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of property/casualty (P/C) policyholders and insurers. PCS estimates represent anticipated insured losses from catastrophes on an industrywide basis, reflecting insurance payments before salvage, subrogation or reinsurance for personal and commercial property lines of insurance covering fixed property, vehicles, boats, related-property items, business interruption and additional living expenses. PCS estimates do not include loss adjustment expenses.

P/C insurance industry catastrophes losses in the United States in 2018 dropped by more than half (53 percent) to $47.5 billion from $101.9 billion in 2017, according to PCS. Insured losses in 2017 were the highest since PCS began collecting insured loss data in 1949. There were 55 catastrophes in 2018, compared with 46 in 2017.

Top 10 Costliest Natural Catastrophes, United States (1)

($ millions)

      Estimated insured property loss
Rank Year Peril Dollars when occurred In 2020 dollars (2)
1 2005 Hurricane Katrina $65,000 $85,570
2 2012 Hurricane Sandy 30,000 33,530
3 2017 Hurricane Harvey 30,000 31,590
4 2017 Hurricane Irma 29,900 31,320
5 2017 Hurricane Maria 29,670 31,100
6 1992 Hurricane Andrew 16,000 29,360
7 1994 Northridge Earthquake 15,300 27,060
8 2008 Hurricane Ike 18,200 21,510
9 2012 Drought loss 14,390 16,420
10 2005 Hurricane Wilma 10,670 13,840

(1) Natural disasters that cause at least $25 million in insured losses; or 10 deaths; or 50 people injured; or 2,000 filed claims or homes and structures damaged. Includes Puerto Rico and the U.S. Virgin Islands. Includes losses sustained by private insurers and government-sponsored programs such as the National Flood Insurance Program. Subject to change as loss estimates are further developed. As of November 25, 2020.
(2) Adjusted for inflation by Aon using the U.S. Consumer Price Index.

Source: Aon.

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Estimated Insured Property Losses, U.S. Natural Catastrophes, 2010-2019 (1)

 

Year In dollars when occurred In 2020 dollars (2)
2010 $19.2 $22.7
2011 48.4 55.7
2012 63.5 71.5
2013 24.1 26.8
2014 23.2 25.3
2015 22.9 25.0
2016 31.6 34.1
2017 130.8 137.4
2018 60.4 62.0
2019 39.2 39.6

(1) Natural disasters that cause at least $25 million in insured losses; or 10 deaths; or 50 people injured; or 2,000 filed claims or homes and structures damaged. Includes Puerto Rico and the U.S. Virgin Islands. Includes losses sustained by private insurers and government-sponsored programs such as the National Flood Insurance Program. Subject to change as loss estimates are further developed. As of November 25, 2020.
(2) Adjusted for inflation by Aon using the U.S. Consumer Price Index.

Source: Aon.

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