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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 Insurance 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.

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Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.