I’d like to briefly preface this month’s "From the Fox Den" message for context. Due to limited bandwidth while focusing on Deft’s obligations related to Hurricanes Helene and Milton, I was unable to prepare an October article. Although I regretted breaking cadence, the knowledge gained during this 60-day period has been invaluable in further shaping our resiliency-first mindset. We’re already seeing significant improvements in building performance, customer satisfaction, and the bottom line, while feeding our observations back into the continuous cycle of post-loss diligence informing better underwriting.
One of the most important concepts I've learned from thousands of hours spent engaging with curated property insurance industry content and general business material over the past decade is the importance of identifying what will be certain 10 years into the future and building toward that reality (followed closely by the critical lesson of being willing to "kill one’s darlings," which I’ll discuss in a future article). Without revealing the secret recipe, what I’m confident will be true 10 years from now in the space Deft occupies can be summed up in two key points......
The climate is changing, and this change will continue, leading to increased event severity, regardless of frequency. Take, for example, the ongoing 2024 hurricane season. Two key factors—steering currents pushing open water systems away from the U.S. mainland and a significant delay in La Niña's formation—worked against pre-season forecasts that predicted a potentially record-setting year for the Atlantic Basin. Yet, we’ve still experienced one of the most active and costly seasons in recorded history, with rising ocean surface temperatures acting as the primary catalyst. In addition, we are seeing unprecedented year-over-year rain accumulation resulting in catastrophic flooding, increasingly severe hailstorms, and wildfires advancing faster than mitigation efforts can keep up. While the limited data available doesn’t yet allow me to definitively claim that the number of events is increasing, I am confident in stating that their severity is growing exponentially.
The cost of risk transfer will continue to increase, and the coverage afforded by the transferee (or insurance carrier) will inversely decrease so long as the mechanism is in the hands of the private markets. This certainty paves the way for a future where building and human resilience take precedent over outsourcing inadequacies in fortification and deferred maintenance to said market. There simply isn’t a workable option moving forward where the onus isn’t on the building owner to better monetize capital expenditures. Only through education and aggressive capitalization will risk transfer remain a viable option.
Back to the present: Hurricanes Helene and Milton had a significant impact on the Florida Peninsula, but thankfully, their paths and intensity did not reach the worst-case scenarios that had been forecasted at times. My hope is that, nonetheless, they have served as a catalyst for government officials, the public, and the insurance, real estate, and construction industries to adopt a resiliency-focused mindset. History teaches us that memories are short, so we must make the most of the lessons learned from these events. As we recover in the few months before the 2025 hurricane season, we must focus not only on rebuilding but also on educating and fortifying ourselves to be as resilient as possible before the cycle repeats. Given the certainties I’ve outlined, what other choice do we have?