On Eve of Solstice, Insurers Projecting Gloom
The summer solstice, which begins Tuesday, has historically been a cause of celebration for cultures throughout the Northern Hemisphere.
But various catastrophe projections released in recent weeks are making the insurance industry’s midsummer night’s dream look like a nightmare.
Analysts are projecting an above-average number of storms during the Atlantic hurricane season, for the sixth year in a row. The 2022 fire season is projected to be just as destructive as the previous two record-setting years as much of the western United States remains in severe drought. Rising sea levels are swamping coastal areas that remain targets for urban development. A war between Russia and Ukraine has disrupted food and energy supplies around the world and civil unrest in previously tranquil liberal democracies is a growing property risk.
Verisk kicked off the hurricane season with a webinar on June 13 with experts sharing their projections for hurricane and wildfire losses.
Jeffrey Strong, with Verisk Extreme Solutions, said all of the organizations that project storm activity in the Atlantic predicted another above average season, again. He said the number of storms has exceeded the 30-year mean in each of the past six years.
Strong said two conditions are spurring the predictions for another abnormal year. Cool water associated with La Niña conditions in the Pacific Ocean reduces the amount of wind shear over the Atlantic that can interfere with the development of tropical storms. Also, water temperatures in the Atlantic are “quite warm.”
“Having every warm water under a storm is significant because hurricanes are essentially heat engines,” he said.
Strong said the average of all estimates issued for the Atlantic hurricane season is 18 to 19 storms and high hurricanes. That compares to the 30-year mean of 14 storms and seven hurricanes.
The Celts celebrated the summer solstice with hilltop bonfires and dancing. That’s not a good idea in most of the US West, where wildfires have already burned 2 million acres this year and appear well on their way toward setting another record amount of destruction.
Zesty.ai, a company that provides fire risk estimates for individual properties, said in a June 14 report that large tracts of New Mexico, Oregon and Texas were experiencing “exceptional” drought, the most hazardous level possible.
Conditions in California and Colorado improved from exceptional drought levels in 2021 to extreme and severe conditions this year, but the state is still on track to repeat the destruction experienced in the previous two years, Zesty.ai said. That was 4.3 million acres burned and 11,116 structures damaged or destroyed in 2020 and 2.5 million acres burned and 3,629 structures damaged or destroyed in 2021.
Zesty.ai said eight of the 20 largest California wildfires on record occurred from 2020 to 2021.
Verisk also touched on wildfires in its catastrophe webinar. Arindam Samanta, director of product management, said Verisk has identified 4.5 million US properties at high or extreme risk of wildfire. He said already in 2022, already more than 2 million acres and 1,000 structures have burned — much of that from a complex of fires that burned in Arizona and New Mexico.
“This year could be another significant year for wildfire damages,” he said.
The longest day of Ra marked the new year in ancient Egypt. The beginning of summer was celebrated because it brought annual floods along the Nile River that nourished crops.
Nowadays, flooding is hardly a cause for celebration.
A research report by the University of Bristol predicted that flood losses will increase by 26%, from an average annual total of $32 billion currently to $40.6 billion in the next 30 years.
The National Oceanic and Atmospheric Administration issued a separate report that said the U.S. will experience as much sea level rise from now to 2050 as it has in the previous 100 years.
Swiss Re said in 2021, 50 severe flood events caused $20 million in insured losses. The reinsurer said flood events are likely to increase in frequency and severity due to climate change, urbanization and inadequate flood-protection infrastructure.
Pagans throughout Europe wore flowered garlands around their heads to mark the summer solstice. Maybe the zeitgeist has changed. The summer of 2021 erupted in violence throughout much of the United States, with damages from civil unrest reaching a projected $2 billion after the police murder of George Floyd, according to projections by Verisk’s Property Claim Services.
Allianz Global Corporate and Specialty said in a report released earlier this month that businesses should prepare for more civil unrest incidents as the cost-of-living crisis follows the COVID pandemic. Citing Verisk’s Civil Unrest Index Projections, the insurer said 75 countries will likely see an increase in protests by late this year.
“The unifying and galvanizing effect of social media on such protests is not a particularly recent phenomenon, but during the COVID crisis it combined with other potentially inflammatory factors to create a perfect storm of discontent,” stated Srdjan Todorovic, Head of Crisis Management, Regional Unit London, at AGCS.
A report released by London-based insurer Beazley on June 13 said that world events have shaken business leader’s perceptions about geopolitical risks. Russia’s war on Ukraine and ensuing Western sanctions have disrupted fuel supplies. The invasion also cut off distribution of grain from a region known as Europe’s bread basket.
A Beazley survey found that only 37% of business leaders in the United States and United Kingdom felt they were “very prepared” for political risk, down from 39% in the prior year. Only 34% of business leaders felt very prepared for war and terror, down from 38% the year before.
“It does seem like the world is not going to go back to what it was or had been since probably the end of the Cold World,” a very understated Roddy Barnett, head of political risks and trade credit for Beazley, said during a brief video snippet attached to the report. “There is a different sort of power structure at the top. That creates a lot more uncertainty about countries’ behaviors.”
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