It’s an ill wind…… How the world’s windstorm losses may affect your insurance costs in 2018

Posted on by Anthony Wakefield

2017 has been the worst year in monetary terms for windstorm damage since 2005. That was the year when Hurricane Katrina caused so much devastation.

In 2017 the insurance costs of Hurricanes Irma and Maria alone in the United States are estimated to exceed US$100 billion. In total more than US$ 350 billion of windstorm losses will be paid by insurers over the next two years.

There is no question that most insurers will be able to absorb these losses, because there was excess catastrophe reinsurance capacity available this year.

However, there is only one way for insurers and reinsurers to pay their claims and to reserve for future losses and that is to spread premium increases across the whole of their insurance book. While the bulk of the increases will fall in those areas of the world that have been worst affected by the storms, premiums for general business elsewhere will have to rise to persuade insurers to continue to provide cover for risks where the returns on capital have historically been small or negative.

Motor business is always a soft target, because without it we cannot drive our cars. But other forms of personal and commercial insurance, where insurance companies have been scrambling over themselves to provide as low premiums as they can, have effectively been subsidised by the past profits of catastrophe insurance.

Early estimates are that most premiums will rise next year by between 10% and 15% and for some budget policies the increases are likely to be more.

Comparison sites are largely geared towards offering clients the best price. Some insurers are likely to cut back on the benefits of their policies in order to continue to appear competitive.

When thinking about renewing with your existing insurer or choosing a different policy at your next renewal, please do not simply concentrate on what it will cost you, but on how adequate the cover will be for your needs. A good insurance broker will advise you how to get the best value from your insurance policy and give you quality protection as well.