Lately, it seems that the headlines are filled with natural
disasters – tornadoes in the Midwest, wildfires in the West and hurricanes in
the Southeast and Mid-Atlantic are some of the most recent examples. We’ll
leave the debate as to whether these events are happening in increasing
frequency to others, but one fact that is not debatable is the destruction that
these disasters leave behind. The aftermath can be devastating and, as always,
our thoughts and prayers go out to those impacted.
From a financial planning perspective, we often hear a
common question posed in light of these events: Is the insurance industry
financially sound? The simple answer is yes. Overall, the insurance industry is
on solid financial ground and has survived wars and conflicts, natural
disasters and financial crises (including the Great Depression and the Great
Recession). In an article from 2011 discussing the possible impact of a US
Treasury ratings downgrade, the Insurance Information Institute stated
insurance companies could not only meet their obligations, but had a cushion of
$500 billion, sufficient to cover 12 Hurricane Katrinas – the costliest
natural disaster in US history1.
