2005 was a year that many people in the insurance industry will never forget. It remains a record year for catastrophe losses, led by Hurricane Katrina. Local communities’ recovery from that horrific event is still ongoing, but the insurance industry learned important lessons.
Katrina devastated the U.S. Gulf Coast from Louisiana to Alabama and is remembered for the astonishing amount of damage it caused, especially in New Orleans. I remember the storm intensifying into a Category 5 hurricane, with maximum sustained winds of 172 miles per hour in the Gulf. When Katrina’s eye came ashore in southern Louisiana on Aug. 29, 2005, its wind speeds had slowed down, and I recall feeling a little relieved that wind damage wouldn’t be as severe as we expected. Then we watched as the levees protecting New Orleans broke, and I knew we would be dealing with a whole new set of complexities.
More than 75% of New Orleans was inundated, claiming more than 1,000 lives and disrupting businesses for months. The loss tally was staggering: 1,800 lives lost; 1.7 million claims; $41.1 billion in insured losses, not counting losses under the National Flood 色多多视频 Program and some offshore energy installations; and economic damage exceeding $100 billion.
Katrina was a game-changer for the insurance industry. Many internal processes were discovered to be inadequate during an event of that magnitude, and they were further strained by Hurricanes Rita and Wilma later that same year. The public perception of the insurance industry was tarnished by Katrina, and the industry’s reputation for responding to catastrophic events that included flood took a beating. The fact is, underwriters’ appetites for insuring risks in high-hazard flood zones vary. Before Katrina, the insurability of catastrophic floods had not been fully considered. Policy language at the time generally did not contain sublimits on high-hazard flood areas. Policies do now, though, and there is much less ambiguity on the subject of wind vs. water damage.
Advances in technology have helped enormously in accelerating the industry’s response to claims
The global insurance industry is much better prepared today for another year like 2005 and is better able to respond quickly. At XL Catlin, we try to recognize in our planning the possibility of multiple occurrences in different parts of the world, a situation where the industry’s resources would be stretched to the maximum.
Advances in technology have helped enormously in accelerating the industry’s response to claims. From smartphones to handheld video to instantaneous reporting, adjusters and claims departments can both act much faster after an event. Loss forecasting and tools developed since Katrina also have helped the industry predict catastrophe losses much better – and help customers too. For instance, at XL Catlin we geocode our risks. This enables us to identify sources of risk and alert our policyholders in the projected path of a hurricane and to follow up with them after landfall, to make sure they’re OK.
I’ve worked in claims my entire career and have seen a lot of catastrophes. When kids ask me what I do for a living, I say, “I help people get back their lives.” Claims professionals take pride in being able to respond and come to people’s aid quickly. A proactive approach to claims after an event helps get people, businesses and communities back on their feet.
It’s a privilege for the insurance industry to provide financial resources at a time of need. I’m sure we will see other massive catastrophes like Hurricane Katrina in the future, and I’m confident that the industry will respond to help victims recover.
Richard J. Kuzmanoff is senior vice president and regional practice leader, Americas, for Property, Energy & Construction claims at XL Catlin. He has more than 35 years’ experience in claims and global catastrophe response, including many of the largest loss events in the United States and around the world.
