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 Catastrophes, United States (1)

($ millions)

        Estimated insured property loss
Rank Date Peril Location Dollars when occurred In 2019 dollars (2)
1 Aug. 2005 Hurricane Katrina AL, FL, GA, LA, MS, TN $41,100 $52,828
2 Sep. 2017 Hurricane Maria (3) PR, USVI 25,000-30,000 26,100-31,300
3 Sep. 2017 Hurricane Irma (3) AL, FL, GA, NC, PR, SC, USVI 25,000-30,000 26,100-31,300
4 Aug. 2017 Hurricane Harvey (3) AL, LA, MS, NC, TN, TX 18,000-20,000 18,800-20,800
5 Sep. 2001 September 11: Fire, Explosion: World Trade Center,
Pentagon terrorist attacks
NY, VA 18,779 26,431
6 Oct. 2012 Hurricane Sandy CT, DC, DE, MA, MD, ME, NC, NH,
NJ, NY, OH, PA, RI, VA, VT, WV
18,750 21,065
7 Aug. 1992 Hurricane Andrew FL, LA 15,500 25,867
8 Jan. 1994 Northridge, CA earthquake CA 12,500 19,952
9 Sep. 2008 Hurricane Ike AR, IL, IN, KY, LA, MO, OH, PA, TX 12,500 14,898
10 Oct. 2018 Hurricane Michael (3) AL, FL, GA, MD, NC, SC, VA 9,000-12,000 9,200-12,200

(1) Property losses only. Excludes flood damage covered by the federally administered National Flood Insurance Program. Ranked on dollars when occurred. As of April 17, 2020.
(2) Adjusted for inflation through 2019 by the Insurance Information Institute using the GDP implicit price deflator.
(3) Insurance Information Institute estimate based on data from catastrophe risk modelers, reinsurance companies, the Property Claims Services unit of Verisk Analytics, the Federal Emergency Management Agency of the U.S. Department of Homeland Security, and the Florida Office of Insurance Regulation. These estimates are preliminary because the organizations involved periodically resurvey the events, and the severity of losses and other factors create a high level of uncertainty surrounding the ultimate loss figures.

Source: Insurance Information Institute, catastrophe risk modelers, reinsurance companies, U.S. Department of Homeland Security, the Florida Office of Insurance Regulation,
the Property Claim Services® (PCS®) unit of ISO®, a Verisk Analytics® company, and the U.S. Bureau of Economic Analysis.

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

 

Year Number of
catastrophes
Number of claims
(millions)
Dollars when occurred
($ billions)
In 2019 dollars (2)
($ billions)
2010 34 2.4 $14.3 $16.7
2011 30 4.9 33.6 38.5
2012 26 4.0 35.0 39.3
2013 29 1.8 12.9 14.2
2014 32 2.1 15.5 16.8
2015 40 2.0 15.2 16.4
2016 43 3.0 21.7 23.0
2017 46 5.3 106.5 111.0
2018 55 3.0 50.0 50.9
2019 61 2.3 24.4 24.4

(1) Includes catastrophes causing insured property losses of at least $25 million in 1997 dollars and affecting a significant number of policyholders and insurers. Excludes losses covered by the federally administered National Flood Insurance Program. As of April 17, 2020.
(2) Adjusted for inflation through 2019 by the Insurance Information Institute using the GDP implicit price deflator.

Source: Property Claim Services® (PCS®), a unit of ISO®, a Verisk Analytics® company; Bureau of Economic Analysis.

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