The recent catastrophic wildfires in Los Angeles, claiming at least 29 lives and destroying over 18,000 structures, underscore the growing peril of natural disasters. As climate change exacerbates these risks, insurance companies have become hesitant to cover damages associated with such events. Despite paying out over $140 billion in claims last year, the industry is now challenged to model future risks effectively. The shift began post-Hurricane Andrew in 1992, leading insurers to adopt advanced catastrophe modeling to better predict damages, yet the increased frequency and intensity of disasters complicate these assessments.
In recent years, insurers worldwide faced over $140 billion in claims from natural catastrophes, highlighting the increasing risk posed by climate change.
Insurers' reliance on past claims to estimate future risks has been undermined, particularly after major events like Hurricane Andrew that revealed their predictive limitations.
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