Guy Carpenter’s Kim Roberts and Cara Drago on managing catastrophe exposures in emerging “sleeper” regions
For P&C insurers across North America, one of the defining challenges of this decade is anticipating how the risk landscape will evolve. Climate change, rapid population growth and shifting severe weather patterns are creating new “sleeper” regions where catastrophe exposures rise faster than traditional models or pricing assumptions reflect.
The implications for companies are profound. Large and small players in the industry must identify tomorrow’s hotspots today – before loss experience forces reactive change. The path forward lies in leveraging proprietary analytics, emerging data sources and climate-informed insights to sharpen underwriting, strengthen portfolio strategy and protect capital.
Historically, the focus has been on well-known hotspots: California wildfires, Gulf Coast hurricanes and Tornado Alley severe storms. But vulnerabilities are spreading beyond these zones. Rapidly growing exurban communities in the Mountain West and Southeast face wildfire threats once unique to California. Cities in the Ohio and Tennessee valleys are seeing severe convective storm losses escalate. Coastal communities on the Eastern Seaboard are experiencing measurable impacts from sea-level rise and chronic tidal flooding, which can worsen storm surge flooding and decrease property values.
These sleeper regions are not fully priced into market catastrophe models, creating exposure gaps and unrecognized portfolio volatility. Early identification is critical to maintain underwriting discipline, ensure regulatory confidence and gain competitive advantage.
Guy Carpenter’s proprietary tools help insurers uncover and quantify risks often missed by standard catastrophe models:
- Urban Conflagration Index: Identifies areas with high structure density in proximity to areas of elevated wildfire risk. This quantifies the growing vulnerability of densely populated neighborhoods that may lack traditional vegetated fuels but face significant loss from structure-to-structure burning under extreme fire conditions.
- GCAT Severe Thunderstorm Hazard Score: Measures hail, straight-line wind and tornado risk at the county level using data from the National Weather Service, Storm Prediction Center and academic partnerships. Unlike most catastrophe models, GCAT Severe Thunderstorm Hazard Score utilizes hazard data as recent as 2023, providing an up-to-date view of severe convective storm frequency and intensity to support accurate underwriting and pricing.
- Climate change analytics suite: Incorporates forward-looking climate science to assess natural hazard risk through bespoke vendor catastrophe model adjustments and forward-looking risk scores. The suite supports regulatory compliance, profitable long-term underwriting and identification of sleeper regions.
Data augmentation and resiliency: Advances in remote imagery and artificial intelligence enable identification of key data to build more resilient communities. Guy Carpenter’s partnership with the Insurance Institute for Business and Home Safety highlights the industry’s role in promoting resilience and reducing risk.
Together, these analytics enable companies to not only respond to change but also anticipate it – translating scientific insights into business strategy.
Strategic implications span the enterprise:
- Portfolio planning: Pinpointing sleeper regions enables balanced geographic diversification and helps prevent concentrated catastrophe losses.
- Underwriting guidelines: Bespoke scores and indices empower underwriters with granular data to refine terms, conditions and pricing in a competitive, volatile market.
- Capital allocation: Climate-informed analytics enhance reinsurance purchasing and capital planning, ensuring solvency and resilience under stress.
- Regulatory and stakeholder confidence: Demonstrating integration of forward-looking risk tools supports compliance with evolving regulations and builds confidence with boards, rating agencies and investors.
As we survey the current industry landscape, one theme is clear: tomorrow’s risk frontlines won’t look like yesterday’s. Insurers relying solely on historical data risk falling behind as exposures shift. Those integrating next-generation analytics are better positioned to navigate uncertainty, protect capital and seize growth opportunities.
At Guy Carpenter, our goal is to help clients see around the corner. Through bespoke, science-informed tools and our climate change analytics suite, we illuminate tomorrow’s hotspots today – so companies can lead in building a more resilient marketplace.