The Property Insurance Blog

A white paper from risk and financial management firm Towers Perrin released soon after the disaster predicted a number of outcomes. These included the rise of insurance prices in catastrophe-prone areas, effects on the reinsurance market, the pressure on insurance companies to raise capitalization, and new insurers being repelled from entering the market. Aside from these, there is an even greater impact on society in general: the need for better preparedness, planning and response to such large-scale risks. Another point raised in the paper highlighted the contentious separation of wind and flood damages, and the complex issue of mold growth. These factors do not only matter in the billions of dollars lost from Hurricane Katrina but also define the future of policy.

More than two years after Hurricane Katrina, its effects are still very much visible. The impact of the disaster on the insurance industry has likewise been unprecedented. In an online interview with Carolyn Gorman of the Insurance Information Institute, she mentioned that this was the “worst natural disaster” the industry has had to face. Ms. Gorman enumerated three common mistakes made by homeowners: not getting flood insurance, not insuring a house to its full value and not having a home inventory. With 60 percent of U.S. homes underinsured because of renovations which the insurance companies were not alerted of, many homeowners do not have enough insurance for rebuilding.

Image by Bart & Jill