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Insurance on the Rise Due to Weather-Related Claims

2 min read

Nationally, insurance premium increases have outpaced even record inflation. There are parts of the country where basic property and casualty coverage has become difficult to purchase at all. Rising construction costs and increases in storm-related payouts are both contributing to the problem.

In the first half of 2023, more than two-thirds of weather-related losses nationally were from “severe convective storms” such as thunderstorms, tornadoes and hailstorms. This represented a $35 billion financial impact.

Closer to home, the March 31, 2023 tornado had an impact of almost $500 million. Singular events like that in one market are catastrophically disruptive. A January 2024 report from the Arkansas Insurance Commission to the Arkansas Legislature outlined the current insurance landscape:

Rising Insurance Rates in Arkansas: Arkansas is tackling rising property insurance costs, influenced by severe weather events in 2023. These events pushed some insurers toward financial instability.

Insurer Insolvency: Some carriers in Arkansas were forced into financial receivership by the March tornadoes. This led to state intervention and payouts from Arkansas’ guaranty fund. One carrier ceased offering coverage citing risk associated with recent weather patterns. Other companies are limiting the number of new customers in Arkansas to limit risk.

Regulatory Adjustments for Premium Relief: Arkansas has implemented policy changes such as allowing separate deductibles for wind/hail damage and adjusting settlement terms for roof damage to mitigate premium hikes for consumers.

Strategic Market Stabilization Efforts: The introduction of justified rate increases and coverage limitations is part of a consolidated strategy to have a competitive pool of insurers offering diverse insurance options for Arkansans.

A Path to Market Normalization by 2025: With efforts to manage external pressures, including weather-related damages and inflation, there’s an anticipation of improved insurance market conditions within the next year.

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