The cold snap that gripped much of the country this January rudely interrupted a period of low catastrophic insurance losses that led to high profits for insurers in 2013.
According to a new report from Aon Benfield Group, insurers expect to pay out roughly $1.6bn in claims that were filed during four separate stretches of severe winter weather last month. It appears that extreme traffic backup and the widespread closure of businesses led to the majority of insured losses.
“Business interruption losses were elevated due to severely delayed transport and/or closed commerce,” Aon said in the report. “The wintry conditions paralyzed travel in several Southeastern states, with the city of Atlanta, Georgia particularly affected.”
The January 5 to January 8 storm in the Midwest, Northeast and Southeast was by far the most costly weather-related event, Aon found. The storm caused economic losses of more than $3bn, and 21 people lost their lives.
The January 1 to January 5 storm affecting the Midwest, Ohio Valley and Northeast was the second-mostly costly, with 10,000 structures affected, 16 deaths and economic loss of more than $200mn.
The losses account for what Steve Bowen, a meteorologist with Impact Forecasting in London, calls “the costliest year for winter weather peril since 2011.”
“With higher-than-average snow totals, ice and some of the coldest temperatures in nearly two decades affecting much of the country during January, the combination of physical damages and business interruption costs have quickly aggregated into direct economic losses well into the billions of dollars,” Bowen said. “The elevated losses this year are a reminder to insurers that risks associated with the winter weather peril remain significant.”
Indeed, producers are already counting on this winter’s extreme weather to be a cautionary tale when pushing additional coverage.
“People aren’t really excited about talking about insurance, so it is when things like this happen, they start to pay more attention,” said Cory Young, chief operating officer with Rhodes & Williams Insurance Brokers. “It is our job to get the information out to them when we can. We do our best to keep the lines of communication open.”
Doug Johnson, a producer in Fargo, N.D., added that warning clients against “crazier” methods of escaping the cold is a duty he feels as an insurance professional.
“Typically the losses that we’ll see in the cold weather are space heater-related, especially in mobile homes,” said Johnson, whose hometown experienced -30 degree weather last month. “If you’re not used to it, there’s a lot of crazy things people do to try and stay warm.”