Sustainability of Property Insurance

Background:

Extreme-weather events are becoming a crisis for property owners and insurers. The world has endured “more than $1 trillion in damages from more than 1,000 extreme-weather events in recent years.” The insurance industry saw claims for natural disasters in 2022 increase by “115% compared to the 30-year average.” Conditions are expected to get worse as losses from severe weather-related events are likely to increase due to floods, hurricanes, cyclones, droughts, and wildfires. Premiums for insurance coverage are rising quickly, with climate change fueling projected increases of 30-60% by 2040.

Property insurance is not only getting more expensive, but also harder to find, as insurance companies change how and where they are willing to underwrite policies. The weather-related occurrences propelling the cost of property insurance premiums look different depending on where you are in the world. Additionally, the insurance protection gap averages 57% worldwide and is increasing. This highlights the industry’s dilemma - the emerging crisis in profitability for the insurers and in affordability for the property owners.