<blockquote>
  <p>Is anything special expected of insurance companies after a natural disaster?</p>
</blockquote>

<p>Insurance providers in high-risk areas tend to increase the premiums, particularly for re-insurance (<a href="http://www.sciencedirect.com/science/article/pii/S0304405X01000526" rel="nofollow noreferrer">Froot, 2001</a>). Some insurers will also leave the market, with others coming in (<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2670910" rel="nofollow noreferrer">Grace, Klein &amp; Liu 2005</a>)</p>

<p>Semi-related: One paper with a 1970-2002 analysis of disasters and financial flows suggests that in poorer countries the migrant's remittances increase after the hurricanes covering $\frac 45$ of the damages, but in richer countries it only stimulates lending, not fully offsetting the losses (<a href="https://www.degruyter.com/view/j/bejeap.2008.8.1/bejeap.2008.8.1.1903/bejeap.2008.8.1.1903.xml" rel="nofollow noreferrer">Yang 2008</a>).</p>

<blockquote>
  <p>Are there ever concerns about insurance shortages? The insurance companies typically try to create a "healthy" risk pool, but if several natural disasters hit, are they still expected to function as normal?</p>
</blockquote>

<p>According to the <a href="https://www.cnbc.com/2017/09/06/insurance-group-says-industry-well-poised-to-withstand-hurricane-irma.html" rel="nofollow noreferrer">news</a> there wasn't shortage or bankruptcy concerns in the Hurrican Irma. The straight answer for that question is it depends on the impact of the damages. </p>

<p>About functioning as normal: they will probably increase the premiums, as stated above, and might implement lower compensation limits for future losses, or exemptions for certain kinds of damage (e.g. most insurances stopped covering terrorist attacks <a href="http://www.investopedia.com/ask/answers/050115/what-impact-have-terrorist-attacks-had-insurance-industry.asp" rel="nofollow noreferrer">after the 9/11, or priced it extremely high</a>).</p>

<blockquote>
  <p>Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of labor shortages that has stunted the rebuilding of some of the cities affected by the hurricane season of 2017. </p>
</blockquote>

<p>This is not the insurer's problem. If you suffered damages, you receive the previously agreed compensation. It is up to you to rebuild or not with the compensation you received, with whatever conditions the market has at the moment. </p>

CC BY-SA 3.0
2017-10-20T07:06:37.837Z
2017-10-20T07:18:51.713Z
2017-10-20T07:18:51.713Z
JoaoBotelho
<p>Is anything special expected of insurance companies after a natural disaster? Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of labor shortages that has stunted the rebuilding of some of the cities affected by the hurricane season of 2017. Likewise, I was wondering if there would also be a strain on the available insurance. Are there ever concerns about insurance shortages? The insurance companies typically try to create a "healthy" risk pool, but if several natural disasters hit, are they still expected to function as normal? Perhaps, insurance companies have policies in place for extremely uncommon events that are massive in scale, which may result in massive claims? Is there a historical precedent for how many natural disasters it takes for the insurance companies to "throw in the towel?" Let's assume the majority of victims have insurance (flood, house, ect).</p>

<p>I had in mind the case of the US/Caribbean in light of the recent hurricanes, but any country / case study will be acceptable as an answer as long as it is clearly explained. </p>

CC BY-SA 3.0
2017-10-17T07:43:45.910Z
I don't understand what you are asking. What do you mean by "special"?
 Are you asking about bankruptcy risks?
Giskard
CC BY-SA 3.0
2017-10-17T07:58:00.857Z
@denesp I didn't mean anything too nuanced by "special". I would say consider this word at its face value. I.e. are the insurers expected to behave/do anything differently after a natural disaster. There are many ways to approach this question. You may approach it from the morality/corporate responsibility aspect, business model aspect, ect.
Arash Howaida
<macroeconomics><finance>
Insurance Company's Role after Natural Distaster
Arash Howaida
# Insurance Company's Role after Natural Distaster

(Asked by: username_0 on 2017-10-17)

Is anything special expected of insurance companies after a natural disaster? Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of labor shortages that has stunted the rebuilding of some of the cities affected by the hurricane season of 2017. Likewise, I was wondering if there would also be a strain on the available insurance. Are there ever concerns about insurance shortages? The insurance companies typically try to create a "healthy" risk pool, but if several natural disasters hit, are they still expected to function as normal? Perhaps, insurance companies have policies in place for extremely uncommon events that are massive in scale, which may result in massive claims? Is there a historical precedent for how many natural disasters it takes for the insurance companies to "throw in the towel?" Let's assume the majority of victims have insurance (flood, house, ect).

I had in mind the case of the US/Caribbean in light of the recent hurricanes, but any country / case study will be acceptable as an answer as long as it is clearly explained.

**Tags:** macroeconomics, finance
> **Comments:**
> **username_1**: I don't understand what you are asking. What do you mean by "special"?  Are you asking about bankruptcy risks?  
> **username_0**: @denesp I didn't mean anything too nuanced by "special". I would say consider this word at its face value. I.e. are the insurers expected to behave/do anything differently after a natural disaster. There are many ways to approach this question. You may approach it from the morality/corporate responsibility aspect, business model aspect, ect.  

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## 1 answers

### Answer by username_2 on 2017-10-20. Score: 1 | Accepted answer

> Is anything special expected of insurance companies after a natural disaster?

Insurance providers in high-risk areas tend to increase the premiums, particularly for re-insurance ([Froot, 2001](http://www.sciencedirect.com/science/article/pii/S0304405X01000526)). Some insurers will also leave the market, with others coming in ([Grace, Klein & Liu 2005](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2670910))

Semi-related: One paper with a 1970-2002 analysis of disasters and financial flows suggests that in poorer countries the migrant's remittances increase after the hurricanes covering $\frac 45$ of the damages, but in richer countries it only stimulates lending, not fully offsetting the losses ([Yang 2008](https://www.degruyter.com/view/j/bejeap.2008.8.1/bejeap.2008.8.1.1903/bejeap.2008.8.1.1903.xml)).

> Are there ever concerns about insurance shortages? The insurance companies typically try to create a "healthy" risk pool, but if several natural disasters hit, are they still expected to function as normal?

According to the [news](https://www.cnbc.com/2017/09/06/insurance-group-says-industry-well-poised-to-withstand-hurricane-irma.html) there wasn't shortage or bankruptcy concerns in the Hurrican Irma. The straight answer for that question is it depends on the impact of the damages.

About functioning as normal: they will probably increase the premiums, as stated above, and might implement lower compensation limits for future losses, or exemptions for certain kinds of damage (e.g. most insurances stopped covering terrorist attacks [after the 9/11, or priced it extremely high](http://www.investopedia.com/ask/answers/050115/what-impact-have-terrorist-attacks-had-insurance-industry.asp)).

> Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of labor shortages that has stunted the rebuilding of some of the cities affected by the hurricane season of 2017.

This is not the insurer's problem. If you suffered damages, you receive the previously agreed compensation. It is up to you to rebuild or not with the compensation you received, with whatever conditions the market has at the moment.


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