Climate Smart & Climate Ready Conference Business Track #1 on April 20, 2013 at Tompkins County Public Library in Ithaca, NY. David Ferris, PW Wood & Son Insurance. Climate Change, Extreme Weather Events: Insurance Issues for Business and Other Organizations.

1. Climate Change, Extreme Weather Risks
Insurance Issues for Business
&
Other Organizations
ClimateChange & Climate Smart
Conference April 20, 2013
Business Track Session
J. David Ferris, Ph.D., CPCU, ARM
J. David Ferris, Ph.D. 1

2. Today’s program
• Part I: Overview of how climate change is
impacting the insurance industry
• Part II: Some things to consider when looking
into your property insurance coverage
J. David Ferris, Ph.D. 2

3. A Billion Here A Billion There
• In 2012 Eleven Extreme Weather Events
occurred in the U. S. killing thousands of
people and causing 100’s of billions of dollars
in damage
• This was a follow up to 2011 when there
were 14 Extreme Weather Events
– Including Hurricane Irene in excess of $8 billion
• An Extreme Weather Event is on that causes
at least a billion in damage
J. David Ferris, Ph.D. 3

4. Super Storm Sandy
• Super Storm Sandy alone damaged or
destroyed 450,000 businesses in New York &
New Jersey
• 8.5 million were left without power
extending over several weeks
• More than 1200 claims are still unresolved
• Some properties will never be rebuilt
• $80 billion in damages $60 billion in insured
losses
J. David Ferris, Ph.D. 4

5. Other 2012 Events
• Heat & drought in 2012 caused over $35 Billion in crop
damage
• 9.2 million acres burned in wild fires with the loss of or
damage to thousands of properties
• 70 Tornadoes crisscrossed the country causing billions in
damage & killing dozens of people
• 38 Severe thunderstorms caused billions in damage
• Severe winter storms caused over $100 billion in damages
J. David Ferris, Ph.D. 5

6. 2013 Extreme Events Projections
• 72% chance of hurricanes hitting entire east
coast up from 52%
• Increase in Midwest droughts
• Increase in wildfires
• Increase in violent storms
• Increase in flooding
J. David Ferris, Ph.D. 6

7. Insurance company finances
• Insurance companies only have 2 ways to
make money
– Premiums they charge for the insurance
– Investment income on net reserves after paying
administrative costs and claims.
• Insurance regulators are requiring very
stringent capital and solvency requirements
• 2011 & 2012 put an enormous economic
strain on insurance companies
J. David Ferris, Ph.D. 7

8. Extreme weather events
Impact on Insurance policies
• The majority of insurance contracts impacted by
extreme weather events are contracts providing
insurance coverage for damage to or loss of:
– Personal property insurance contracts
• Homeowners, Tenants, condominiums, etc.
– Commercial/business property insurance contracts
– Loss of income related to the direct damage to property: part of
property insurance
– Loss of contingent income related to direct damage to property of
suppliers, vendors, key customers, etc.: part of property insurance
– Flood Insurance
J. David Ferris, Ph.D. 8

9. Impact on Insurance
• Significant changes in underwriting
philosophy and practice
– Tougher guidelines for underwriters
– Territorial restrictions
• Significant changes in insurance policy
language and coverage
• Significant changes in claims handling
J. David Ferris, Ph.D. 9

10. What might this mean to you?
• You may find that the process of renewing your property
insurance could involve:
– Coverage restrictions
– Higher deductibles
– Higher premiums
• If you have a claim it could result in:
– Disputes over the coverage terms & conditions in the
insurance contract language after a loss
– Disputes with respect to claims handling
• Disputes with claims adjusters
• Adjusters working for or hired by the insurance company
• Disputes with public adjusters: Adjusters you may hire to
represent you in the claims process
J. David Ferris, Ph.D. 10

11. Red Flag Issues
• Insurance companies trying to shift certain types of wind
and water damage claims to the flood insurance
• Business owner disputes with claims adjusters in
establishing the value of a business interruption loss of
income or contingent loss of income claim.
• Disputes between insurance company claims adjusters and
the contractor(s) hired to repair or rebuild damaged
property
J. David Ferris, Ph.D. 11

12. Things to consider
• Should you purchase flood insurance?
– Just because you are not in a federal flood zone
doesn’t mean you are not exposed to flooding
• If you are a business have you accurately
calculated your loss of income limit?
– Do you really know how the Business Income &
Extra Expense coverage works
J. David Ferris, Ph.D. 12

13. If you have a claim
• Have clear understanding of what your
responsibilities are in reporting the claim to
your agent and insurance company.
– Know your responsibilities in settling the claim
• Do not automatically jump at hiring a public
adjuster
– Do you really need one?
– Check out references, like all professions there are
the good, the bad and the ugly
– Have attorney review contract
J. David Ferris, Ph.D. 13

14. Questions & Wrap up
Thankyou!
J. David Ferris, Ph.D. 14