The insurance industry has experienced many challenges over the past few years that may be impacting the cost of insurance or even the ability to maintain insurance coverage for houses of worship. With this three-part series, we’ll explore those factors, including severe weather, inflation and social inflation. Let’s start with the weather.
The U.S. has seen an increased frequency and severity of catastrophic weather in recent years, leading to big losses for the insurance industry and the need for houses of worship to take greater responsibility to reduce their own risks. As insurers look to avoid incurring unnecessary losses, there are things leadership and/or board members can do to help ensure your church’s insurability.
Increased weather risks
The insurance industry defines a catastrophe as an event that causes at least $25 million in damages, impacting multiple properties and insurance companies. In the U.S., weather events involving tornadoes, wind, hail, and flood are the most common catastrophes, followed closely by hurricanes and tropical storms.
In the first quarter of 2024, NOAA had already reported two severe weather catastrophes with damages exceeding $1 billion each. In total, there have been $14 billion in severe convective storm losses this year, including an estimated $10 billion hail and wind event.
The 2024 Atlantic hurricane season is forecast to be “very active.” The CSU Tropical Meteorology Project is forecasting 23 named storms, 11 hurricanes and five major hurricanes during this year. By comparison, a typical Atlantic hurricane season has 14 named storms, seven hurricanes and three major hurricanes.
2023 was the costliest year ever for severe convective storms (include thunderstorms with lightning, hail, tornadoes and derechos) in the U.S., with insured losses exceeding $50 billion through the end of September. 2023 brought 18 severe convective storm events that each exceeded $1 billion in losses, the fourth-highest number in modern history.
Changing weather patterns also contribute to wildfire seasons that start earlier and end later each year. The length of fire season is estimated to have increased by 75 days across the Sierras, with changes in climate considered a key driver of this trend.
Impact on the insurance industry
Increasing catastrophic weather events has led to huge losses for the insurance industry. Our changing climate is moving severe weather into areas that are not accustomed to those types of events. In 2021 and 2022, winter storms Uri and Elliott ranked among the top 10 costliest winter storms since 1950, with total insured losses estimated at more than $20 billion.
As severe weather events intensify, rising construction costs and other economic conditions are impacting insurers’ costs to settle claims. We’ll take a closer look at inflation in the second part of this series.
Insurance companies routinely review house of worhip policies prior to renewal. If the risk is deemed acceptable, they then determine an adequate premium rate to cover those risks. Every situation and religious organization are different, but after taking increasing weather-related losses, insurers are looking more carefully at more policies as they come up for renewal.
Insurance underwriters consider applications, surveys, inspections, websites and photos to determine whether your house of worship is an acceptable risk. Underwriters also check aerial views of the property and use a variety of systems and tools available to help them make informed decisions. Along with your loss history, underwriters look at historic weather patterns in your area, such as hail exposure and proximity to water, among many other factors.
As the cost of weather-related losses climbs, insurers are asking worship facilities to share more of the risks through higher rates and deductibles. In some areas of the country, insurers simply can’t charge enough to offset the potential for heavy losses. In those cases, insurers may decline to provide a quote to a prospective customer or make the difficult decision to not renew the policies of existing ones.
The location of your church and the corresponding likelihood of catastrophic weather in that specific area is the leading factor that affects the cost of your insurance. Building age, total insured value, the activities of your organization, and your loss history (number and value of past insurance claims) round out the top five. The care and condition of your property tops the list of factors insurers consider when deciding whether to offer insurance to your organization, followed by management, activities, location and building age.
An insurance company may also be hesitant to insure a church in areas where the company insures many other buildings in close proximity. Having too much insured value in a concentrated area puts the insurer at greater risk of a massive loss in the event of even a localized disaster.
Taking matters into your own hands
While there’s not much you can do about the weather patterns in your area, making sure your buildings are in good repair and well-maintained and being knowledgeable about your insurance policies is within your control.
Church buildings, especially those that are older and more ornate, are expensive to replace or repair after they’re struck by severe weather. Building replacement costs have risen more than 55% since 2019, so it’s important to review your policies annually with your insurance professional to ensure you have sufficient coverage to replace your buildings, should your church suffer a loss. Ask questions understand what is and isn’t covered by your policy.
With wind as a leading cause of damage, make your property more resilient by adding precautionary measures such as roof tie-downs, a wind-rated garage door and storm shutters. Have your roof inspected annually by a professional to make sure it can handle high winds and heavy rains. In areas susceptible to tornadoes or powerful winds, make sure any items you keep outdoors are secured so they can’t become airborne and injure people or damage other property.
Nearly 90% of natural disasters involve flooding, which is rarely covered under a multi-peril policy – neither are earthquakes, for that matter. If your property is in a flood plain or area subject to earthquakes, your insurance agent can assist you in obtaining coverage — either through an insurance company or through government programs.
If your insurance company offers risk mitigating practices or initiatives, you should take advantage of these programs, which could help control your cost of premiums. Keep in mind, general maintenance items are not covered by your insurance policy. It’s your responsibility to keep your property in good repair. When your insurer notes maintenance deficiencies, it’s important to take the appropriate corrective action.
In advance of an emergent weather disaster, your insurance company may want to reach you with tips to help minimize the impact on your worshippers, staff and property. To make sure the right people in your organization are receiving that information, always keep key contact emails and phone numbers up to date with your insurance company.
Keep your insurance policies and correspondence, along with pictures and lists of your worship facility contents, in a safe place away from your building. At least two people should have access to these important documents to help prevent delays in reporting claims and determining what coverage applies.
In this dynamic insurance market, it’s in your best interest to stay on top of the things you can control to help protect your house of worship and its members.
About the author
Pam Rushing is CPCU, President – Subsidiaries and Chief Underwriting Officer, for Church Mutual Insurance Company, S.I. (a Stock Insurer).