It's always amusing to read articles or postings about emerging trends or exposures that will affect the insurance industry. Some of them are accurate (but predictable), and other times, we really miss the mark — as with the COVID-19 pandemic. So, here is a look at two different concerns — one of which, if correct, can significantly impact the industry. The second, while seen as a disrupting threat by some, may make the industry more efficient and effective.

More severe, protracted weather-related losses

• According to the National Oceanic and Atmospheric Administration (NOAA), 2020 turned out to be the most active hurricane season on record, with 30 named storms. Six were Category 3 or higher, which are considered major hurricanes. What may be more alarming is that 2020 is the fifth consecutive year with an above-normal hurricane season. In fact, 18 of the past 26 years were above normal. AccuWeather estimates the total damage and economic loss caused by U.S. named storms that made landfall in 2020 to be between $60 billion to $65 billion.
• Nineteen of the 20 warmest years on record have occurred since 2001, with 1998 the lone exception. 2016 ranks as the warmest on record (NOAA Global Climate Change, Vital Signs of the Planet). NOAA also points out that since 1993, there has been a 95.6 mm increase in sea level – about 3.8".
• Judging by acres burned, three of the most volatile years for California wildfire have occurred in 2017, 2018 and 2020 (Cal Fire).

What will be the insurance industry's likely reaction? In the short-term, expect the current prolonged hard market for property insurance (especially for risks with unfavorable loss experience or in catastrophic-prone areas) to continue. More carriers will refuse to write property coverage in affected areas and impose additional windstorm restrictions when they do extend coverage. This will result in greater FAIR plan participation and political pressure for government intervention. Entities retaining the property risk exposure will find it harder to get affordable excess property coverage at acceptable attachment points.