Risky Business
“The world’s not a less risky place.”
“We’re clearly in historical hard market conditions for property and casualty.”
“I don’t think we’re going to see anywhere near the same level of flow back into the admitted market.”
These are the words of top leaders in the excess and surplus lines industry who believe today’s risk is more complex and riskier than ever before. And the world of E&S is changed forever as a result.
What could be more telling than new research by Deep Sky Research, a Montreal-based carbon removal project developer, that revealed the frequency of deadly hurricane weather has jumped 300%, showing what used to be the 100-year hurricane will now happen every 25 years.
The new report analyzed data within the U.S. via its Hurricane Rainfall Model to examine how hurricane risk is changing due to climate change. Deep Sky Research’s model found that in addition to more deadly hurricane weather, the probability of smaller storms has doubled. The severity of extreme hurricane rainfall has grown 33% and hurricanes could cost more than $450 billion in the next five years (a 50% increase).
Florida is expected to have the greatest losses due to hurricanes, with Texas a close second.
States along the Gulf Coast including Texas, Louisiana and Mississippi should expect the greatest increases in rainfall while those on the Atlantic coast such as North Carolina and South Carolina will see smaller increases, the analysis found.
That rainfall will lead to more flash flooding in South Atlantic counties in the U.S. every year, according to Deep Sky’s proprietary machine learning model which revealed storm surge is worsening because hurricanes are getting stronger but also because sea levels are rising. This means that when a storm surge occurs, flooding is more severe.
Deep Sky Research analyzed millions of public data points to build a Hurricane Rainfall Model based on the past four decades of climate data to examine these trends, which found that the frequency and severity of extreme hurricane rainfall is climbing.
Flooding is most destructive in densely populated areas. For example, Miami’s three counties in particular are extremely vulnerable to flash flooding caused by hurricanes, Deep Sky said in its announcement. One storm per year is now expected, on average, to reach 2.5 feet of flooding in Miami Beach.
Many of the impacts of climate change are slow-moving, but some will be devastating in their rapid escalation. Deep Sky said the U.S. will see worsening hurricanes not in the next 50 years, but in the next five. This means for those in the E&S market, there’s never been a better time to shine.
A special thank you to Ryan Specialty, sponsor of this issue of Insurance Journal.