Last Updated 9/19/19

Issue: The economic cost of natural disasters has an immense impact on the U.S. economy. Natural catastrophes reached $91 billion in total costs 2018, the 4th highest total costs only behind the years 2017, 2005 and 2012. In 2017, economic losses reached a record $307 billion, largely due to wildfire and hurricane losses. In terms of insured losses, ten of the nation's costliest catastrophes have occurred in the past two decades. Eight of these where hurricanes.¹ Insurance plays a large part in helping with the economic recovery following catastrophic events. However, according to a recent Aon report, the portion of economic losses not covered by insurance (insurance gap) was 60 percent in 2018*.²

Background: Flood damage is a major source of uninsured losses. This is because standard homeowners' policies do not cover flood and many people do not purchase a separate policy. Rising flood risks and the uncertain financial future of the National Flood Insurance Policy (NFIP) underscore the importance of growing the private flood insurance market.

Beyond reducing the insurance gap, the growing frequency and severity of natural catastrophes warrant greater focus on resiliency. For this reason, there has been increased global engagement in the insurance sector on resiliency to climate-related risks. The Financial Stability Board's industry-led Task Force on Climate-related Financial Disclosures (TCFD) released its final recommendation in 2017 for a framework to identify, manage and disclose climate risks and opportunities. In 2018, the European Commission presented its Action Plan on Sustainable Finance, underlining the importance of involving the finance industry in climate change mitigation. Insurance supervisors began examining the impact of climate change through the Sustainability Insurance Forum (SIF) in 2016. In 2017, the SIF released a statement in support of the TCFD recommendations and implemented a survey process for supervisors to share their efforts to address climate risks. In 2018, the SIF and IAIS worked to develop guidance on climate change and insurance supervision.

Status: The rising likelihood of extreme and catastrophic weather events makes monitoring the frequency and impact of natural disasters a critical regulatory function. NAIC members have taken an active role in educating Congress and providing technical feedback on various proposals regarding natural catastrophes. Over the last several years, NAIC members have met with members of Congress and have regularly testified on these important issues, stressing the important role of the states in effectively managing a natural disaster response.

The Property and Casualty Insurance (C) Committee's Catastrophe Insurance Working Group and Climate Risk and Resiliency Working Group oversee the NAIC's efforts in this area. The Catastrophe Insurance Working Group is charged with evaluating potential state, regional and national programs to increase capacity for (re)insurance related catastrophe perils. It is also charged with monitoring and assessing proposals that address disaster insurance issues at the federal and state levels. This includes assessing state efforts to foster private flood insurance and protect consumers, pressing for a long-term NFIP program and partnering with the Federal Emergency Management Agency (FEMA) and others to close the gap. The Climate Risk and Resiliency Working Group is charged with investigating sustainability issues and solutions related to the insurance industry. This includes the feasibility of public-private partnerships, financial mechanisms and mitigation measures to protect infrastructure and reduce exposure to the public. It is also charged with engaging domestically and internationally on climate-related risks and resiliency.

2016
Regulators Respond to Disasters – NAIC Fall National Meeting 2016

This video shows disasters and response to wildfires in Tennessee, a tornado in Alabama and earthquakes in Oklahoma. It features NAIC President-Elect and Tennessee Insurance Commissioner Julie Mix McPeak. 
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2015
Regulators Respond to Disasters – NAIC Fall National Meeting 2015

NAIC members representing South Carolina, California, Texas and Washington discuss devastating floods and fires in 2015. 
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2013
Regulators Respond to Disasters in Arizona and Oklahoma

Arizona Insurance Director Germaine Marks and Oklahoma Insurance Commissioner John Doak discuss disasters impacting insurance consumers in their states and the response coordinated by their departments, fellow regulators and the National Association of Insurance Commissioners (NAIC).
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2012
Regulators Respond to Superstorm Sandy

Members of the NAIC discuss the impact of Superstorm Sandy in 2012. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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2011
Regulators Respond to Disasters

Members of the NAIC discuss the impacts of natural disasters in their states during 2011. They describe efforts of state regulators to address the needs of insurance consumers and the market in the wake of historic losses.
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¹ https://www.kiplinger.com/article/insurance/T028-C000-S001-10-costliest-catastrophes-in-the-u-s.html
² http://thoughtleadership.aonbenfield.com/Documents/20190122-ab-if-annual-weather-climate-report-2018.pdf