ISO Says Need for Strong Building Codes Highlighted by Severity of Catastrophe Claims

August 4, 2003

Hurricane Claudette in the gulf region, damaging thunderstorms and tornadoes in the Midwest and several wildfires in the West have reportedly made 2003 one of the more costly years for natural disasters.

According to the Insurance Services Office (ISO), over $6.3 billion in damages has occurred in the first half of 2003 compared with $3.4 billion in 2002 and $6.9 billion in 2001.

“As we review the claims data being reported, it is clear that 2003 is shaping up to be a significant year for catastrophic losses. When all of the claims are tallied from Hurricane Claudette, we would not be surprised to see losses mount to over $100 million,” said Donald Griffin, assistant vice president for business and personal lines for the National Association of Independent Insurers (NAII).

“Claims due to natural disasters could continue to grow as we enter the peak of hurricane season. Forecasters have predicted a more active than normal year for hurricanes, but insurers know all too well that it only takes one major storm hitting a large U.S. city to create havoc for citizens, government and the insurance industry. This is why it is so critical that homeowners, lawmakers and insurers take the necessary steps to reduce the potential for losses by being prepared just in case a storm does occur.”

Now more than ever before, the U.S. population lives and works in coastal regions, flood plains and wilderness areas. The significant increase in the number of homes and businesses as well as the value of the property being insured in these catastrophe-prone areas has compounded the severity of losses caused by natural disasters.

However, polling conducted for the Insurance Research Council (IRC) reportedly points out that fewer than half of homeowners who believe that damage to homes in their area from lightning or hail, tornadoes or wind, earthquakes, hurricanes, or floods is likely, have taken steps to protect their home from these natural disasters.

“Over the years, insurers have encouraged home and business owners to put in place safety materials that would improve the survivability of buildings against storms and other perils. In addition, insurers have joined forces with groups such as the Institute for Business & Home Safety (IBHS) to help promote consumer demand for new homes that incorporate the latest disaster-resistant construction methods and the adoption of stronger building codes,” said Griffin.

Although over 20 states still do not have statewide minimum building codes, the IRC survey reportedly found wide support for disaster-resistant requirements for new housing construction. Three-fourths of homeowners say building codes are a good or excellent idea and almost two-thirds say they would be willing to pay an additional 6 percent for a new home to meet the requirements. The report
showed that support for building codes transcends geographic regions but is especially strong in the South, which has experienced significant hurricane damage in the past.

“Building codes play an important role in saving lives and reducing property losses. In today’s home building boom, with the lowest interest rates in a generation, there is no better time for the public to build in an extra measure of safety and security by taking the steps to protect their family and home from disaster. In addition, these statistics from the IRC should give confidence to lawmakers and building code commissioners who are considering strengthening existing or adopting new building codes. Homeowners are not
only willing to support the concept of safer construction but are willing to pay the cost associated with protecting their property,” added Griffin.

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