Extreme Weather Is the Top Risk for 2024 – Are Your Clients Protected?

Extreme weather has already led to losses in 2024, with more events expected. Although policyholders can’t control the weather, they can take steps to reduce their risks. Brokers can provide value by helping them prepare.

Severe Weather Is a Top Concern

The World Economic Forum’s 2024 Global Risk Report named extreme weather as a critical challenge facing humanity. It also cited critical changes to Earth systems and biodiversity loss as major risks.

The European Commission warns that climate change will have far-reaching consequences, including more droughts and wildfires, rising sea levels, less predictable rainfall patterns, and more intense storms. Climate change also represents a threat to business due to its risk to infrastructure and buildings and its impact on various industries, such as agriculture and energy.

The Costs Are Mounting

The World Economic Forum says extreme weather events are becoming less predictable, more common, and more expensive. Over the past five decades, the average cost per event has increased by approximately 77%. As an example of what severe weather can do, flooding in Germany, Belgium, Luxembourg, and the Netherlands in July 2021 killed 200 people and caused $43 billion in damages.

Recent storms in the UK haven’t caused that level of damage, but they’ve still been destructive. According to Insurance Journal, Storm Henk damaged around 2,000 properties and caused approximately £150 million in insured losses.

Worse storms are possible. PwC warns that intense flooding may cause insured losses of up to £1.6 billion in the UK.

Property Owners May Be Unprepared

Property owners may not be keeping up with rising risks. Some property owners may underestimate their exposures because they’re basing their assessments on historical losses. As climate change leads to more losses, they may be caught off guard. Even property owners who understand that risks are growing may lack the insurance protection they need, either because they don’t understand the exclusions in their policies or because they don’t know how to access the correct coverage.

For instance, according to PwC, many UK property owners have obtained more affordable flood insurance through Flood Re. However, Flood Re does not insure homes built after 2009, blocks of more than three residential flats, or commercial properties, which leaves many properties exposed, without coverage.

Are Your Clients Protected?

Brokers are in the perfect position to help property owners prepare for extreme weather losses.

• Help your clients understand their exposures. Some property and business owners may incorrectly think they don’t have to worry about flooding or storms because they haven’t experienced major problems in the past. As storms become more severe and unpredictable, more properties will be in harm’s way. Gov.UK has a service that lets anyone check the flood risk of an area.

• Encourage clients to consider property improvements that reduce extreme weather risks. For example, Gov.UK says property owners may be able to reduce flood damage by installing non-return valves and flood doors, moving electrical sockets higher up, and laying tiles instead of carpet.

• Provide tips when flooding is imminent. According to Gov.UK, if a property is about to be flooded, you should turn off the gas, electricity, and water supplies, as long as it is safe to do so. (Don’t touch any electrical switches if you’re standing in water.) You should also use any flood protection products you have, such as flood barriers or air brick covers, and then move people, pets, vehicles, and important items to safety.

• Provide resources to help clients create an emergency plan. After a severe weather event, the recovery begins. Brokers should help their clients navigate insurance and repair issues. For businesses, an emergency response plan will reduce the amount of business disruption caused by the disaster.

• Review your clients’ insurance needs. Your clients may think they have coverage, but if a severe storm hits, they may find out they were less protected than they thought. Brokers should help clients avoid unpleasant surprises by looking for coverage gaps before a storm occurs. Do they have coverage for flood losses? Are the limits high enough? Are there any other gaps or exclusions that may cause issues?

• Consider alternative insurance options. For clients who are having trouble accessing flood insurance, parametric insurance may be the solution. Since parametric policies pay claims based on triggering events and not actual losses, the claims process tends to be fast. However, since underwriting may take longer, don’t wait until the last minute to secure coverage for your clients.

Do you need help finding property and flood coverage for your clients? Costero offers parametric insurance policies and other creative solutions to help you ensure your clients are protected. Contact us.