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“Bad weather has cost U.S. property insurers more than $5 billion so
far in second-quarter catastrophe-related claims — equal to about
three-quarters of all catastrophe claims during 2007 — and could
push the industry to an underwriting loss.”
“The Insurance Services Office defines a catastrophe as an event that causes
more than $25 million in insured losses and causes a major disruption.”
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The Wall Street Journal
June 30, 2008
Property Insurers Confront Rising Catastrophe Losses
By LAVONNE KUYKENDALL
Bad weather has cost U.S. property insurers more than $5 billion so
far in second-quarter catastrophe-related claims — equal to about
three-quarters of all catastrophe claims during 2007 — and could
push the industry to an underwriting loss.
The claims are occurring even as insurers continue to reduce prices,
which gives them fewer resources for paying the claims.
“It has been busy,” said Allstate Corp. spokesman Rich Halberg.
According to the property-claims services division of the Insurance
Services Office, an insurance-service provider, there have been 15
weather-related catastrophes since April 1, resulting in more than
one million claims for a total of around $5.5 billion. For the year,
there have been total claims of $8.9 billion for 24 catastrophe
events. Claims for all of 2007 amounted to $6.7 billion.
The Insurance Services Office defines a catastrophe as an event that
causes more than $25 million in insured losses and causes a major
disruption. So far this year, problems have included tornadoes,
severe storms, hail, flooding and wildfires. It is usually the third
quarter, not the second, that poses problems due to the potentially
huge cost of hurricanes.
At the same time, a soft pricing cycle over the past two years has
pushed some insurance policy premiums down by double-digit rates,
putting a squeeze on insurers’ profit margins. The rising losses
could also help slow the rate of price-cutting.
The Property Casualty Insurers Association of America, which
represents around 40% of insurers, reported an industrywide combined
ratio of 99.9% for the first quarter, which means that losses and
expenses ate up virtually all the premiums collected for the quarter.
Don Griffin, vice president of personal lines insurance for insurers
association, said that preliminary loss estimates for recent
catastrophes are likely to be revised upward, and that insurers may
take reserves based on what they expect eventual claims to be. That
could boost second-quarter loss reserves even more.
Write to Lavonne Kuykendall at lavonne.kuykendall@dowjones.com1
URL for this article:
http://online.wsj.com/article/SB121478498855014559.html
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