Pennsylvania Bar Institute

Most of the time, insurers do a good job of underwriting and risk evaluation and, if the market is not too competitive, make an underwriting profit. However, periodically, disaster strikes and the magnitude of loss reaches virtually unforeseen levels and both policyholders and insurers suffer. Three such disasters in the last twelve years include the Northridge earthquake of 1994, the terrorist attack on the World Trade Center in 2001, and Hurricane Katrina in 2005. While each of these disasters occurred in completely different parts of the country and had completely different root causes, the scope of loss and the effect on the area of damage was similar. In addition, there are certain common lessons which were learned and can still be learned. Examine these lessons and the impact of major disasters on such areas as risk assessment, underwriting decisions, claims handling, litigation and beyond.