Property Insurance and the Evolution of Dinosaurs?

By: Dr. Gary Anderberg

Many long years ago, I gave a talk on then-recent changes in the insurance industry at a conference on underwriting. I began with: "In order to understand the insurance business, you have to know something about paleontology. Sixty-five million years ago when that asteroid hit Earth, not all of the dinosaurs went extinct. Some of them survived and became insurance companies." Everyone got the point. Ours is a conservative industry, as it needs to be when you think about the complexity of how many perils we have to address to offer serious protection to our clients. Consistency is both a virtue and a necessity.

But change, sometimes amazing change, does happen. A recent item in ITL that discussed, of all things, flood insurance offered a fascinating account of how some of the newest concepts in parametric insurance are making big waves* in providing enhanced levels of flood protection for both homes and businesses. This journal has noted in a number of articles over the years (see above) how climate change is impacting various lines of natural catastrophe (Nat Cat) coverage. The ITL interview with Adam Rimmer of FloodFlash insurance lays out the background of how flood insurance has become ever more difficult to procure at a reasonable cost, both in the US and in the UK. In 2023, the US alone experienced 25 flood events that caused over $1 billion in damages each.

New parametric policies are meeting this challenge in a demonstration of how careful rethinking and the incorporation of a few new concepts make apparently intractable problems solvable. The ITL piece makes for a fascinating read, and it's just the right length to read while you wolf down your luncheon salad and a couple of crackers. So, yeah, some of those dinosaurs who survived have become both agile and smart nowadays. Looks like Darwin was right.

* Yes, all puns are intended, however much they make you groan.