William White, left, speaks to his insurance agent Rick Anderson, from USAA, right, to asses the damage to his home and property that was destroyed by the tornado. White's truck, behind, was blown into their backyard. Photo: Amy E. Voigt / The Blade

BY Jon Chavez
14 April 2013 (The Blade) – As a meteorologist for FirstEnergy Corp., Pete Manousos’ job is to keep the electric utility informed about any upcoming extreme weather that might cause outages, or hamper repair crews’ ability to restore power. But the last two years, that job has gotten harder and harder. “You have to consider that part of the issue for FirstEnergy is our geographical footprint has gotten larger over the last decade. There’s more exposure to events as a result,” Mr. Manousos said. “That said, for the portions of FirstEnergy that have been impacted since 2011, the frequency of the extreme events have been notable,” he added. Whether the country is embarking on a pattern of annual extreme weather events, or merely going through a temporary phase, is impossible to know, the meteorologist said. But one segment that has a large financial stake in figuring out if the weather is growing more violent and extreme is the insurance industry. To be sure, the insurance industry knows more than a thing or two about calculating risk, and the industry has never been healthier financially, according to the New York-based Insurance Information Institute. However, the increasing frequency of catastrophic weather events over the last three years — including some that affected Ohio in general and northwest Ohio in particular — are causing some in the insurance industry to adjust their climate-risk models and consider establishing a new baseline for weather events in the future. It also is affecting some of the insurance policies that Ohio homeowners are purchasing and causing bigger increases in annual premiums, even though Ohioans continue to pay some of the lowest premiums in the nation for homeowner coverage. “While many are expecting catastrophe events to return to a more normalized level in 2012, it is questionable what ‘normal’ is. In addition, it is clear insurers should prepare for the possibility that the event frequency of 2011 may be repeated,” A.M. Best Co. stated in a March briefing last year while warning about increasing extreme weather. The firm rates the financial strength of insurance companies and measures their ability to pay claims. “There is no question the number of national disasters impacting the United States is trending upward, especially over the last 35 years or so. Those are mostly storm events, flooding events. drought, even wildfires,” said Robert Hartwig, president and an economist for the insurance institute. “It’s the case that the number of events is increasing and the total cost is increasing and that’s going to mean premiums will increase. It’s just a reality,” he said. Currently, Ohio homeowners enjoy some of the lowest costs in the nation for HO-3 policies, the most commonly purchased homeowners insurance policy. As of 2010, the Ohio average of $614 for a homeowners policy was sixth lowest in the United States — 48 percent lower than the U.S. average of $909. From 2004 through 2010, the average annual price increase in Ohio was just under 4 percent. But in 2011 it rose 6.2 percent to $652, and last year it rose 5 percent to $685. Part of those larger increases relate to weather claims. The question facing Ohio homeowners now is this: How much will rates go up annually in 2013 and beyond if volatile weather increases and insurers are forced to adjust for increased risk?
“Many years ago, it seemed like everybody wanted to write homeowners policies, because that’s where the money was, and not write auto coverage. Now, it’s a complete reversal,” said Ben Brown, vice president in charge of personal and professional insurance at Brooks Insurance Agency, one of Toledo’s largest independent insurance brokerages. “Many are making money on auto and losing money on homeowners policies,” he added. [more]

Extreme weather battering insurance firms’ bottom line