From Crisis to Coverage: How Natural Disasters Are Impacting the Insurance Industry

Date of Submission

5-7-2026

Document Type

Thesis

Department

Finance

Advisor

Saad Mouti, Ph.D.

Keywords

Climate Risk, National Flood Insurance Program (NFIP), Premium Pricing, Natural Disasters, Insurance Claims, Property and Casualty

MeSH

Climatic changes--Risk management, Flood insurance--Law and legislation, Flood insurance claims, Natural disasters, Casualty insurance policies

Abstract

As global climate change intensifies, the frequency and severity of natural disasters have risen substantially, creating significant challenges for the insurance industry, particularly the Property and Casualty sector. This study examined the relationship between climate risks and National Flood Insurance Program (NFIP) premium pricing using four publicly available federal datasets spanning up to 70 years of disaster declarations, 38 years of billion-dollar weather events, 48 years of flood insurance claims, and 12 years of NFIP policy transactions totaling over 50 million records. Spearman's rank correlation analysis revealed that climate events were strongly and significantly correlated with insurance claim payouts. With flood and storm declarations showing the strongest association, with 𝜌=0.767,𝑝< 0.001, and 𝑛=45. A significant link was also found between mean building claim amounts and mean policy costs, with 𝜌=0.580,𝑝< 0.048, and 𝑛=12. However, direct correlations between climate event measures and premium pricing did not reach statistical significance. These results indicate that climate risk influences premium pricing indirectly through a mediated pathway: climate events drive claims payouts, which in turn correspond to premium adjustments. The indirect nature of this relationship reflects the regulatory and legislative structure of the NFIP, where pricing changes lag behind disaster events. Average policy costs rose 58.6% from 2099 to 209, while NFIP participation declined by 37%, highlighting a growing affordability crisis. The study contributes to understanding the mechanisms through which climate risk translates into insurance costs and underscores the need for policy reforms addressing premium responsiveness and program sustainability.

This document is currently not available here.

Share

COinS