Paper Warns of Supply Chain Disruptions' Impact on Disaster Losses

Wildfire viewed at night from distance burning in hills and valleys

July 19, 2021

Wildfire viewed at night from distance burning in hills and valleys

A predicted above-average hurricane season and active wildfire season coupled with shortages in building supplies and global supply chain issues are setting the stage for a particularly challenging hurricane and wildfire season, according to a new white paper.

The paper, titled US Property Insurance Market Struggles To Balance Supply and Demand, from the American Property Casualty Insurance Association (APCIA), notes that construction materials face significant supply and demand imbalances with supply chains strained as the demand for goods and services is elevated above their normal levels.

"Materials and labor needed to reconstruct homes and businesses are strained following elevated catastrophe losses and impacts from COVID-19," the report says. "The pandemic shifted consumer demand to goods from services, drawing down inventories as manufacturing was cut. The imbalance between supply and demand has hit nearly every aspect of construction, lumber markets in particular, leading to significant material shortages and cost increases. The industry has struggled to rebalance supply, as global supply chains encounter numerous challenges in a post-COVID world and demand remains elevated."

The paper notes that the insurance industry is encouraging property owners in high-risk areas to take steps to mitigate potential losses by hardening homes and businesses. Property owners who do experience losses from hurricanes, wildfires, or other disasters should expect higher-than-normal costs and longer-than-normal rebuilding timelines, according to the APCIA paper.

Backlogs in ports are another concern, adding pressure and leading to higher costs and lead times, the paper says, and the shortage of materials due to manufacturing slowdowns and shipping delays has had an impact on nearly every aspect of construction.

July 19, 2021