P/C Insurers Facing Record Losses from Weather

By | June 6, 2011

Devastating tornadoes, floods, earthquakes overseas and a busier-than-usual hurricane season have U.S. insurance companies bracing for record losses in 2011.

Insurers could suffer as much as $10 billion from weather-related losses in the United States in 2011, which is up from the average of $2 billion to $4 billion, according to EQECAT Inc., which provides disaster and risk models to insurance companies.

On top of the potential U.S. losses, insurers are also reeling from disasters overseas, including large earthquakes across the Pacific Rim. And as if that was not enough, analysts now expect an above-average Atlantic hurricane season.

“This is not a black swan year that is an absolute worst case, but it is significant and it is close to that,” said Jose Miranda, director of client advocacy at EQECAT Inc., which provides disaster and risk models to insurance companies.

Globally – including the major earthquakes in New Zealand and Japan – U.S. and overseas insurers could post up to $55 billion in losses, EQECAT projects.

Some insurers have already posted large losses due to the Japan and New Zealand quakes.

Berkshire Hathaway Inc. lost $1.07 billion from the Japan earthquake and $412 million from the quake in New Zealand.

During the annual meeting in Omaha, Neb., April 30, CEO Warren Buffet said the company would likely post its first full-year loss in insurance underwriting in nine years.

In the United States, spring storms – and the billions of dollars in damage left behind – were the result of a rare confluence of more violent weather hitting densely populated areas, said James Aman, a senior meteorologist with Earth Networks Inc. – Weatherbug.

The increase in spring storms has insurers preparing for the worst.

The nation’s largest home insurer, Allstate Corp., said it would take the unusual step of disclosing any monthly catastrophic loss estimates that exceed $150 million. The company projected the April storms would cost $1.4 billion and totaled more than 100,000 claims.

As tornado season slows this summer, insurers will have to contend with a busy hurricane season, although less active than last year. The National Weather Service projects as many as 18 named storms this year, compared with the long-term historical average of about 11.

Topics USA Carriers Catastrophe Profit Loss Property Casualty Earthquake Japan

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