Extreme Weather Impacts the Insurance Industry

Are you prepared for the surge in extreme weather claims? Learn how 2023’s unprecedented natural disasters are reshaping the insurance landscape.

In recent years, the insurance industry has faced a surge in extreme weather. Climate change is making such events increasingly frequent, severe, and costly. From unprecedented wildfires to devastating hurricanes, natural phenomena are causing widespread destruction and imposing significant financial challenges on insurers.

Extreme Weather in 2023

A succession of extreme weather events marked the summer of 2023 in North America. In Canada, devastating wildfires spread across the country for the worst wildfire season ever recorded in North America. Major cities across the continent and even in Europe experienced poor air quality. Drought conditions gripped large parts of the nation, and a record-setting heatwave hit British Columbia. Halifax experienced one of its worst floods, with a single day’s rainfall equaling the three-month average. Meanwhile, the United States grappled with its own severe weather challenges. Here are just a few examples: mudslides and flooding occurred when tropical storm Hilary hit California; the deadliest U.S. wildfire in over a century ravaged Lahaina, Hawaii; Phoenix, Arizona, experienced a remarkable thirty-one consecutive days with temperatures above 110 °F (43.3 °C), nearly doubling the length of the previous record; and catastrophic flooding in Vermont in July 2023 caused widespread damage, with rainfall totals reaching up to 9.20 inches in a 48-hour period in some areas, leading to significant property losses and surpassing the impact of previous historic floods.

Impact on Insurance Industry

These events had a big impact on the insurance industry. To see this, you need look no further than major insurers’ financial reports. Intact Financial Corporation reported elevated catastrophe losses, mostly due to 14 weather events, including widespread floods and hailstorms in various Canadian provinces. Similarly, Definity Financial Corporation recorded an underwriting loss of $22.8 million, mainly from natural catastrophes, such as storms and wildfires. These insurers weren’t alone in reporting a major uptick in damages. According to a Swiss RE Institute report, severe convective storms in the southwestern U.S.—which bring hail, heavy rain, high winds, and sudden temperature shifts—caused USD 34 billion in insured losses during the first two quarters of 2023. This is the highest total loss ever within a six-month timeframe.

A Growing Trend

Last summer stands out but is part of an accelerating trend. A report from Climate Central highlights a concerning increase in natural disasters in the United States. In 2022, the country faced 18 weather and climate disasters, each exceeding a billion dollars in damages and totaling an estimated $165 billion. This number significantly exceeds the long-term average of 8 billion-dollar disasters yearly since 1980. Furthermore, the frequency of these costly events has intensified in recent years, with such disasters occurring every 18 days on average between 2018 and 2022, compared to 82 days in the 1980s. This shift underscores climate change’s growing economic impact. According to NOAA, this year the U.S. has seen an even higher toll and greater frequency, with 25 billion-dollar events to date.

Sinistar Helps Mitigate Relocation Costs

Damaging weather imposes a substantial financial strain on insurers, including greater expenditures in relocating customers. As more insureds need temporary housing, Sinistar can help control these costs. The company provides an innovative home-sharing digital platform specifically designed for the insurance industry. Launched in Canada in 2016 and now expanding into the United States, Sinistar offers an online marketplace connecting insurers with property owners. The home-sharing platform opens up an insurance housing sector previously dominated by a few major players. Moreover, its unique bidding technology allows prospective hosts to submit competing quotes for temporary accommodation contracts. The result? Lower costs for insurers.

Sinistar’s streamlined process saves time for adjusters and reduces relocation costs for insurance companies. The platform’s use of cutting-edge algorithms and AI to filter potential accommodations along with a 24/7 support team ensure a smooth, cost-effective process for both insurers and their policyholders. Sinistar harnesses the sharing economy and advanced technology to deliver more humane, efficient, cost-effective insurance housing that’s better adapted to upcoming challenges.