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State of the Property Market

August 30, 2019 Janina Flores

This is the first in a series of articles to bring awareness about the property market conditions that can impact costs associated with your insurance or risk management coverage.

It’s hailing in Montana – so what?

On August 11, 2019, the city of Molts, Montana experienced over 70 mph winds with three-inch diameter hail. This caused havoc for homeowners and surrounding populations of migrating birds. So, why does this matter for Texas schools? No matter where they occur, weather events influence the property insurance market, which eventually impacts businesses, homeowners, and local governments, including school districts.

The 2018 World Economic Forum, which represents approximately 2,500 global business and government leaders, has identified extreme weather and natural disasters as the top two global risks. Cyber-attacks and data fraud rank next as the most pressing issues.

Global climate change

Highlights from the U.S. Global Change Research Program show that the earth’s surface temperature has risen by about 1.8 degrees Fahrenheit in the last century, with the most significant changes occurring in the past 20 years. In addition, the global sea level has risen between seven and eight inches in the last century, with almost half of that rise occurring since 1993. NASA defines this fluctuation of long-term averages of daily weather as climate change.

Global climate change, as well as other forces, can result in severe weather. For example, the extra moisture in the atmosphere adds another component to the weather pattern, which can lead to extreme weather. Extreme weather events include severe thunderstorms, hurricanes, drought, hail, and flash floods.

Claims and losses

There are concerns that climate change may make affordable insurance challenging. With the increase of severe weather events, insurance carriers have experienced a surge in property claims. Munich Reinsurance Company says U.S. weather-related losses have increased fourfold since 1980. 

In addition, according to Aon’s Weather, Climate and Catastrophe Insight report, six of 2018’s top 10 global insured events occurred in the U.S. The California Camp Fire wildfire is not only the costliest insured event in 2018 at $12 billion dollars, but was also the deadliest and most destructive wildfire in California history. The second costliest insured event in 2018 was Hurricane Michael, which was the first category five hurricane to hit the contiguous U.S. since Andrew in 1992. The number and severity of these billion-dollar events continue to increase. For example, in the past 20 years, the number of billion-dollar insured events has almost doubled, from 42 billion loss events between 2000-2009 to 76 billion events between 2010-2018.

Global coverage cost increases due to weather

Insurance premiums are expected to rise in regions of the country where significant weather activity occurs. Unfortunately, Texas has led the nation in insured catastrophe losses six times in the last 10 years. Catastrophic losses are considered events that cause $25 million or more in property losses. In addition, Texas has led the nation in hail events five out of the last six years. According to the National Weather Service, the number of hail events, as well as the diameter size of the hail, has increased. 

Extreme weather events, including the August 2019 hail event in Montana, may become more regular. Therefore, it is not surprising that insurance carriers will require more information from building owners concerning the preparedness of their buildings. The selection of materials has become very important in determining if an insurance carrier is willing to offer coverage and at what price. Throughout Texas, higher premiums, larger deductibles, and reduced coverage are expected. To better prepare for these weather events, property owners should consider options to make their buildings more resistant to extreme weather.

How we can help

The Fund offers education resources and training on roofs and the property market at no additional cost to Property members. This year, the Fund launched online roof maintenance training to help extend the lifecycle of their roofs and a Roof Summit to help superintendents and school business officials make the best decisions for their roofs. TASB staff has also been meeting with architects, roof consultants, and roof manufacturers to collaborate on the best ways to provide schools with information to make their buildings more resistant to extreme weather. Contact your risk solutions consultant for more information about risk prevention services and education that can help you with roof maintenance.

Get informed

The Fund is here to support our members through all property market conditions. The more informed you are, the better prepared you will be to navigate the hard market. We encourage you to explore the other articles in our Fund 101 series:

About the author

As TASB Risk Management Services Director of Risk Solutions, Janina Flores leads a team of professionals who provide a variety of services to Fund members to help prevent losses and be aware of and prepared for emerging risks.

Tagged: "preventative maintenance", "severe weather"