What’s to Come in 2024: Hard Market, AI Expansion, More Catastrophes, Network Consolidation
No one can predict the future, but insurance professionals are likely the best qualified when it comes to predicting risk. For this special report, Insurance Journal asked industry thought leaders their predictions for the property/casualty world in 2024 and what they’d wish for if they could have what they wanted. Here’s what they had to say.
‘Only a Matter of Time’
A look back at the severe weather events in 2023 paints a somewhat unusual picture where many catastrophe events broke records in regions that are not historically prone to such disasters. Heat waves were hotter and longer, flash flooding was more devastating, and wildfires burned more acres than ever before.
Climate professionals maintain that climate change, evidenced by rising temperatures, is one cause of worsening catastrophe trends,” says Jerry Theodorou, policy director, at the free market think tank R Street Institute in Washington, D.C.,
“The implications of the trend of more numerous and more destructive catastrophes should send a message that more frequent, and more powerful catastrophes can be expected,” Theodorou wrote in a December report titled, The Truth About Catastrophes. “The knowledge that climate change is real and that it contributes to disasters means that individuals, communities, counties, states and the country must first recognize the risks, and then act to protect property, and — insofar as possible prevent losses.”
Theodorou, who has held leadership positions in or around the insurance industry since the mid-1980s, says memories are short in property/casualty insurance.
The severe events of 2023 show that tail events are not as rare as they used to be.
“While the focus of natural catastrophes has traditionally been on landfalling hurricanes in Florida and the Southeast United States, in 2023, we witnessed several rare disasters occurring in unexpected locations, including a California hurricane (Hilary) and Vermont flooding,” Theodorou said.
The torrential Sept. 30, 2023, New York flooding event was also a lesson in potential flood magnitude.
“And of course, who’s going to remember 1861, but in 1861 and into early 1862 in California, there was The Great California Flood where it rained for 40 consecutive days and nights,” Theodorou told Insurance Journal. “I mean, it sounds like something out of the Old Testament, The Great Flood,” he said. The event was so significant that it changed the economy of California from ranching to farming. The event covered 70% of the state and was so severe that Governor-elect Leland Stanford traveled to Sacramento in a rowboat to his inauguration.
“Scientists called that storm an ARK storm, ‘A’ for atmospheric, ‘R’ for river and ‘K’ for a thousand because it was thought that such a severe event could only happen once in a thousand years,” Theodorou said. “But we’re seeing more and more atmospheric rivers, and it’s only a matter of time before we have another storm of that kind of magnitude like we had in California.”
This is why Theodorou wishes that in 2024, at least in California and Florida, that there is a slowdown in building in the riskiest regions.
“What we need to see is a cessation of building in places that are catastrophe prone, such as those in the wildlife urban interface in California that’s exacerbated with wildfire losses,” he said. “And in Florida, which is a place that attracts people. Fort Myers, which was hit a couple of years ago by a hurricane, is attracting lots of new people. I mean, it’s lovely to see the ocean from your bedroom, what a beautiful sight it is. But when the ocean is actually in your bedroom or in your living room, it’s not so much fun.”