Hurricane Rita Losses Not as High as Previous Storms

October 3, 2005

But destruction will add to totals from Dennis, Katrina and Ophelia.

While indications are that damages from Hurricane Rita won’t come close to equaling those of its immediate predecessor, Hurricane Katrina, that fact must be cold comfort to the ailing Gulf Coast communities hard hit by massive back-to-back storms.

A report released by Fitch Ratings said while Rita will strain insurers’ adjusting resources and represent losses to the insurance industry, it noted that no “significant insurer insolvencies” were expected in Rita’s wake. In addition, most insurance company ratings will not be greatly affected by the storm.

Fitch performed a preliminary analysis of the insured loss from Hurricane Rita based on public market share data by line of business for insurers writing business in Texas and Louisiana. Fitch noted that its analysis is conservative and does not consider the effect of any reinsurance that insurers may have purchased.

Adding estimated insured losses from Rita to those resulting from Hurricanes Dennis, Katrina and Ophelia, Fitch estimated the 2005 hurricane season could cost insurers as much as $70 billion if actual losses end up coming in on the high side of the estimates. That figure would represent approximately 17.5 percent of the U.S. insurance industry’s statutory surplus, or approximately two full years of statutory earnings, Fitch said.

Preliminary estimates by AIR Worldwide and other catastrophe modelers show insured losses from Hurricane Rita to be about $2.5 billion to $5 billion. While the storm, which made landfall near Sabine Pass, Texas, in the early morning hours of Sept. 24, had at one time been ranked as a Category 5 storm, it had weakened to a Category 3 on the Saffir-Simpson hurricane scale when it came ashore. Houston and Galveston were spared a direct hit, but the Beaumont and Port Arthur, Texas, and Lake Charles, La., areas suffered extensive damage from the storm.

Although Rita was a smaller storm than Hurricane Katrina, it was still a significant, Fitch said. To put the storm in perspective, the loss from Hurricane Rita is similar in magnitude to last year’s Hurricanes Frances and Ivan.

Fitch reported the approximate combined personal/commercial property insurance market share of the 20 largest insurers in Texas and Louisiana, excluding reinsurance, is as follows:

State Farm Mutual Group – 20.7%
Allstate Ins. Co. Group – 11.7%
Farmers Ins. Group – 7.6%
St Paul Travelers Cos. – 7.6%
USAA – 4.4%
Combined Federal Ins. Co. – 3.1%
Nationwide Group – 2.7%
Zurich Ins. Co. Group – 2.7%
Continental Casualty Group – 2.6%
Vesta Fire Ins. Corp. – 2.4%
Liberty Mutual Group – 2.3%
Hartford Fire Group – 2.3%
Texas Farm Bureau Underwriters – 1.6%
Safeco Insurance Co. Group – 1.4%
Firemans Fund Ins. Group – 1.0%
Ace American Ins. Co. – 1.0%
Republic Companies Inc. – 0.9%
FM Global – 0.9%
National Lloyds Ins. Co. – 0.8%
La. Farm Bureau Mut. Ins. Co. – 0.8%

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