The decommissioning of NOAA’s billion-dollar weather disaster database could force a rethink of parametric triggers used in catastrophe bonds and hamper insurers’ ability to model and price secondary perils, according to global ratings agency AM Best.
AM Best warns that the move could hinder insurers’ ability to monitor secondary perils and assess long-term risk trends.
This comes after back-to-back record-breaking loss years from secondary perils such as convective storms and hail in the US, with 27 billion-dollar events recorded in 2024, and 28 in 2023, despite the absence of any NOAA-named hurricanes in the latter year.
While the archive will remain accessible, its removal as a live dataset presents immediate challenges to insurers, reinsurers and ILS investors who rely on its metrics for modelling weather-linked risks and structuring parametric insurance and cat bond deals.
“Additionally, if more of these data sources were to disappear, parametric triggers within catastrophe bonds, which depend on measurements by the NOAA, may need to be redesigned,” said Sridhar Manyem, senior director, Industry Research and Analytics at AM Best.
“While some other countries have governmental agencies that track similar data, private companies may have to step in to fill the void and it could take some years to build credibility and trust among market participants,” Manyem continued.
In its commentary, AM Best warned that the loss of an authoritative and standardised dataset could also disrupt insurers’ ability to trend and price losses, particularly as secondary perils like wildfires, severe convective storms, and inland flooding rise in frequency and severity.
“Having a common and agreed-upon data source would help insurers trend these losses in their modeling and use the data for pricing, reinsurance and risk management, as well as help assess the gap between insured losses and economic losses and see how insurance can work to minimize the gap,” Manyem added.
This decision by the NOAA, comes amid mounting pressure being seen across the U.S. property & casualty market.
In 2024, major hurricanes Helene and Milton accounted for substantial insured losses, while severe wildfires in California and a series of destructive tornadoes across Central U.S. have highlighted the growing volatility and vulnerability of several regional markets.
NOAA’s billion-dollar disaster database has been a critical resource for understanding the scale and frequency of major U.S. climate-driven losses since it was established in 1980. The decommissioning could add further uncertainty for investors and underwriters at a time when accurate, transparent catastrophe data is more vital than ever.
While there are plenty of alternative and private data sources available, in the world of parametric triggers and catastrophe bonds being able to utilise a government data source has always been seen as beneficial for its trustworthiness and transparency.
At this stage, while the disaster database will no longer be updated and will have ramifications for insurance, reinsurance and ILS industry use of that specific data source, it’s important to note that currently we haven’t seen any specific threat to data sources used most prevalently in cat bond triggers, such as USGS earthquake report data or National Hurricane Center (NHC) tropical cyclone reports. That said, it’s worth being aware of the impacts to US government services that could impact the sector.
