“With headlines predicting the collapse of the US home insurance market and questioning our capacity to address climate change, we can be our own worst enemy,” Karen Clark, chief executive officer of Karen Clark and Company (KCC), told Monte Carlo Today.

Clark underscored the importance of the industry understanding the complex factors driving rising costs—whether due to systematic underestimation, climate change, or increasing property values—and reclaiming control over its messaging. 

“It is imperative for the public to recognise that the insurance industry is capable of accurately quantifying and managing these risks,” she asserted.

According to Clark, misinformation surrounding rising property losses is pervasive, often obscuring the true drivers behind these increases. These can include demographics, construction costs, and building in high-risk areas. She added that a closer examination of historical hurricanes using today’s property values reveals no clear trend linking losses to climate change. 

“For example, the 1926 Great Miami Hurricane would cause losses of approximately $250 billion today, far exceeding losses from recent events,” she said.

Disentangling misinformation

Clark argues that when adjusted for property value growth, there’s no significant upward trend in hurricane losses. In areas such as Florida, where property values can double every decade, the potential for amplified losses is high. 

“Through detailed analyses and investigations, KCC scientists have quantified the impact of climate change since 1900 on current hurricane losses is about 11 percent which pales in comparison to rising property values,” she explained. However, she notes, wildfires tell a different story, with climate change doubling their impact since 1985 according to KCC analyses, although property growth still plays a significant role.

Secondary perils, such as severe convective storms, also face misconceptions. Despite appearances, there’s no scientific consensus linking these losses to climate change. 

“Many reinsurers still use first-generation catastrophe models that underestimate losses,” Clark said. “When actual losses surpass these outdated projections, it’s incorrectly attributed to climate change rather than model limitations.”

Catastrophe modelling companies, Clark stated, play a crucial role in the insurance industry by integrating robust climate science into risk models. 

“This is where KCC steps in. Our mission is to untangle the complexities behind loss drivers, delivering clear and transparent insights that empower companies to grasp the realities of their risks,” she said. 

“We are committed to sharing key findings, such as the 11 percent impact of climate change on hurricanes and the doubling effect on wildfires, to ensure the industry has accurate information.”

Clark said that scientific consensus indicates that while there’s no trend in hurricane frequency, hurricane severity is increasing, with higher wind speeds and rapid intensification becoming more common. Yet, even under worst-case climate scenarios, the annual increase in hurricane loss potential due to climate change is less than 1 percent—a figure dwarfed by the nearly doubling property values every decade.

Wildfires present a different narrative, with future losses projected to rise significantly in regions such as the Southwest and Plains, where vapour pressure deficits could lead to a 4 to 5 percent annual increase in losses. In contrast, some areas in California may experience slower growth.

Secondary perils, severe convective storms and winter storms appear to be causing rising losses, but a lack of clear trends in meteorological data suggests many of these perceptions stem from outdated models that underestimate risk. 

“Our models deliver robust, credible insights that help companies prepare for the future.” Karen Clark

Upgrading modelling capabilities

Clark says that for reinsurers to offer additional capacity for frequency perils, they must first have confidence in the tools they use to quantify and price risk. She adds an important underwriting adage: “There’s no such thing as a bad risk, only a bad price.”

KCC is dedicated to educating regulators, rating agencies, and the industry on these vital nuances, she said. “While climate projections may carry some uncertainty, our models deliver robust, credible insights that help companies prepare for the future. The industry’s primary concern is not just understanding climate change but ensuring that external stakeholders do not misinterpret or overly rely on uncertain forecasts,” she explained.

Clark says the insurance industry must embrace advanced models, which leverage current data and sophisticated techniques to address complex perils such as severe convective storms. Upgrading modelling capabilities is essential to prevent the systemic underestimations that have caused significant disruptions in the past.

As homeowners grapple with issues of affordability and availability, they are left in the dark about the true state of their risks. Meanwhile, sensational media coverage can exacerbate the situation with alarmist predictions. 

“It’s time for the industry to reclaim control of the narrative,” Clark insisted. “We must communicate clearly and confidently that we’re not merely responding to these challenges—we are proactively addressing them.”

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