The Effect of Natural Weather Phenomenon on Homeowners Insurance in Coastal Counties

This thesis explores windstorm insurance in its current form. The paper begins by defining key terms related the insurance and the management of risk followed by an explanation of why insurance is needed in a free market. Then, the current windstorm situation is analyzed with an emphasis on the recent increase in exposure due to increases in population as well as increases in the frequency and severity of hurricanes. Graphs are used to help depict and emphasize the substantial increases. The next section addressing insurance in the hazard management reaches the conclusion that those in hazard-prone areas need to bear a substantial cost of making their communities safer and should be responsible for most of the losses after a disaster occurs (Kunreuther, 3). Then, there is a further discussion of the history of windstorm insurance, its evolution and the current legislation governing windstorm insurance. This legislation considers a particular company who has dramatically reduced its exposure as well as the ways in which different states along the coast are implementing laws to protect against windstorm damage. The main purpose of the paper is to provide insight as to why insurance companies have started handling windstorm insurance differently than in the past