“May you live in interesting times,” is a popular expression attributable to myriad sources and derivations. But it’s safe to say, regardless of the source, the insurance industry is living in some interesting times, indeed.

On January 7th of this year, Insurance Journal published a post — “Moody’s Global P/C Outlook Now Stable Despite Past-Peak Commercial Pricing” — that began with this:

Moody’s Ratings changed the sector outlook for the global property/casualty insurance industry to stable from negative last month.

Nobody, of course, could have seen the month that was coming. But January did come. And it brought, among other things, the latest catastrophic fires in California. Losses from those fires were quickly estimated to be more than $20 billion. In addition to overwhelming California’s state-backed property/casualty insurance market, which was already fragile, rates have already been estimated to jump 40 to 50 percent, more carriers will likely refuse to write coverage in fire-prone areas, even more carriers may leave the state than have left already.

According to CalMatters:

The FAIR Plan, the insurer for many of those affected by the current blazes, will likely have to pay claims for tens of billions of dollars in damages … [Stephen Collier, professor of city and regional planning at UC Berkeley whose research focuses on insurance, climate change and urban planning] said that massive potential liability could make insurers “think twice” about whether they want to keep writing policies in the state. “Having all this risk transferred to the FAIR Plan doesn’t get insurers off the hook if they’re still writing in the California market,” he said. That’s because insurers in the state are on the hook to pay into the plan when it can’t cover all its claims.

In what may be even worse news for insurers with coverages already written, Reuters reported:

U.S. insurance stocks slid on Friday as analysts estimated insured losses from the wildfires menacing Los Angeles could reach as high as $20 billion, potentially making it the costliest disaster in California’s history … Analysts are evaluating the financial impact of the disaster, with J.P.Morgan doubling its forecast of insured losses to over $20 billion. Wells Fargo also expects similar insured losses and said the total economic hit from the disaster could be well above $60 billion. To help provide critical stability amid the devastation caused by the fires, California Insurance Commissioner Ricardo Lara invoked moratorium powers to suspend all policy non-renewals and cancellations from insurance companies for one year.

Plan vs. Prepare

No one imagines or believes disasters like this can — or should — be planned for. But we can — and should — do what we can to be prepared. Is that a distinction without a difference? No. Here’s why:

• Planning involves creating a detailed outline or scheme of how to achieve a goal, often based on assumptions about how the future will unfold. (See “Strategy, Hope is Not a.”) It presumes control.
• Preparation involves mustering the resources, the skills, the training, and the mindsets needed to adapt to various scenarios, recognizing the future is unpredictable. It presumes uncertainty.

We can’t plan for everything. But we should do our best to be prepared for anything.