AM Best: NOAA database decommissioning will impede insurers’ tracking of secondary peril losses

By Michael Loney

May 22 - (The Insurer) - The National Oceanic and Atmospheric Administration’s removal of the billion-dollar weather disaster database could impede insurance companies’ ability to track losses due to secondary perils, AM Best has warned.

The NOAA disasters database will be archived but no longer updated beyond 2024. The database was created in 1980 to track catastrophes that caused at least $1 billion in economic damage.

AM Best highlighted that secondary perils have become a major cause of loss for U.S. insurers in the past five years predominantly because of weather patterns, effects of inflation and exposure growth from population migration.

The rating agency expects secondary perils to continue to increase in frequency and severity, and said that the heightened exposure is illustrated by the recent tornado outbreak in the central U.S.

“Having a common and agreed-upon data source would help insurers trend these losses in their modelling and use the data for pricing, reinsurance and risk management, as well as help assess the gap between insured losses and economic losses and see how insurance can work to minimize the gap,” said Sridhar Manyem, senior director, industry research and analytics at AM Best.

This decommissioning follows 27 weather event losses causing damages of $1 billion or higher in 2024, and 28 in 2023, compared with an average of 15 events in 2010 to 2022.

“Additionally, if more of these data sources were to disappear, parametric triggers within catastrophe bonds, which depend on measurements by the NOAA, may need to be redesigned,” Manyem said.

“While some other countries have governmental agencies that track similar data, private companies may have to step in to fill the void and it could take some years to build credibility and trust among market participants.”

NOAA announced on May 8 that it would no longer update the database "in alignment with evolving priorities, statutory mandates, and staffing changes”.

As The Insurer reported last week, the database contains information on 403 disasters from 1980 to 2024 where overall damages and costs reached or exceeded $1 billion.

It pulls information from the Federal Emergency Management Agency, insurance organisations, state agencies and others.

Mark Friedlander, senior director of media relations at the Insurance Information Institute, said that while the database provides valuable information about the impact of natural disasters, insurers have other mechanisms to track this information.

"(The) property/casualty industry has its own mechanisms to track insurance-covered losses for weather and climate disaster events," Friedlander said.

The federal government has taken steps to cut climate initiatives, including to remove an entire wing of NOAA in its April budget plan, slashing agency funding by around $1.67 billion, or 27%.