While much of south Louisiana was battening down the hatches today in preparation for potentially severe weather, a new study on global insurance losses finds “small to midsize events”—which include torrential rainfalls—are increasingly common and doing more damage than in the past.
The study, by the Swiss Re Institute, found that for 2017 and 2018 combined, global insured losses from natural catastrophes reached $219 billion, a record high over a two-year period.
Perhaps more significantly for this area, the study found more than half the damage was caused by so-called secondary perils, which include small to midsize events like droughts, wildfires, and torrential rainfall, or secondary effects of a primary peril such as storm surges or tsunamis.
Center for Planning Excellence Executive Director Camille Manning Broome says the study is a wakeup call, both for the insurance industry and also for the planning and development communities in Louisiana.
“It’s flooding more than usual and insurers have noticed,” Manning Broome says. “Insurers are changing their accounting methods to one that is more driven by the frequency of events than the severity, meaning in Louisiana we can’t just prepare for the big one, we need to plan and develop with these smaller events in mind, too.”
That’s especially important given that the National Flood Insurance Program is proposing changes to its premium pricing beginning in October 2020. As proposed, the new system would tie premiums to the actual flood risk facing individual homes—whereas the current system sets prices based largely on whether a home is inside a 100-year flood plain.
“When you take these two developments together, it’s clear that Louisiana communities will certainly have to consider the long-term costs of how and where they build.”