Property Construction Dynamics Key To Understanding Increasing Potential For Insured Losses In Storm Landfall Locations Says Lockton Re Report

Lockton Re, the reinsurance business of the world’s largest privately held independent insurance broker, launched a new research report today as part of the Storm Dynamics and The Reinsurance Industry series: Exploring Property and Exposure Trends.

This new research focuses on ways in which property exposure dynamics are impacting the industry, with in-depth analysis on hurricanes and the fast-changing nature of home and building structures and their ability to withstand storms.

“Since 1992, seven hurricanes have broken Andrew’s inflation-adjusted loss record. Six of these have made landfall in the past seven years as changes in population, exposures, climate, inflation, and social factors have drastically increased losses,” said Claude Yoder, Global Head of Analytics, Lockton Re. “While severe hurricane frequency has increased, building construction changes have helped shield owners and (re)insurers from even greater losses,” Yoder added.

The report reveals that while population density has been increasing, other factors have also been influencing property value and potential repair costs: inflation, supply chain constraints, and wage growth have had a cumulative impact on the value of exposed property. Even as macroeconomic factors normalize and general inflation is lower than a year ago, sticky inflation persists and is still at its highest level since the early 1990s.

The impact of building codes in Florida are also a factor. Brendan McCann, Senior Catastrophe Modeler for Lockton Re, said, “Lockton Re tested a notional Florida portfolio, with losses decreasing significantly just from building code changes between 1990 and 2000. For more recent years, loss estimates continue to drop as building codes improved.”

While the attraction of coastal areas increases population density in hurricane prone areas, building codes are working as expected to lower property damageability. From a (re)insurance perspective, the composition of a portfolio of buildings and homes is critical to understand its risk profile.

Click here to read the full report. (opens a new window)