Insurers must debate weather-related losses: Lloyd’s chairman

The insurance industry must “face up to the growth in weather-related losses over the past four decades,” and lead debate about whether future weather-related catastrophes will be insurable, Lloyd’s chairman Lord Levene says.
He made his remarks in a Jan. 11 speech to the Downtown Association and Insurance Brokers Association of New York.
Levene offered his “2006 report card” after Hurricanes Katrina, Rita, and Wilma caused devastating, record-breaking insurance losses in the United States. Levene cited UN research that suggests weather-related catastrophes will occur more frequently in the future.
“Will these trends continue?” he asked. “The United Nations thinks so. By 2050, mega-catastrophes, which used to occur every 100 years, are predicted to happen once every 25 years, according to a recent United Nations report.
“The UN adds that losses will then be nine times higher than they are today.”
Levene stopped short of saying future weather-related catastrophes will become uninsurable. But he said insurers must lead the debate on this issue.
“Will natural catastrophes become uninsurable and is there a role for state and federal catastrophe funds to cover the costs of future disasters?” he asked. “I have been the first to say that natural catastrophes are becoming more widespread and their effects more severe. So it is right that there is debate about how those risks are covered.
“Based on long experience, Lloyd’s believes that the vast majority of natural perils are currently insurable. And we are confident that the global insurance market is well equipped to respond as long as it is free to price risk adequately, and constantly refines its risk models.”