ISO Estimates Insurers to Pay $2B for Second-Quarter Claims

July 29, 2002

Insurers are expected to pay $1.97 billion to homeowners and businesses for insured-property losses from 10 catastrophe events in the second quarter of this year, according to preliminary estimates by the Insurance Services Office Inc.’s (ISO) Property Claim Services (PCS) unit.

Except for the late-June Arizona wild land fire, all second-quarter events were caused by the wind, hail, tornadoes and flooding that accompanied strong thunderstorms. A severe weather system, between April 27 and May 3, created the largest catastrophe of the quarter and nearly half the total loss for the period. These storms produced nearly 250,000 claims in 17 states, with a total insured loss estimated at $855 million.

The estimated second-quarter insured loss dropped dramatically from last year’s exceptionally high total of more than $6 billion, which was driven by Tropical Storm Allison and a second storm system that produced widespread damage, particularly around St. Louis. Both of those storms are among the top 10 costliest catastrophes.

Four catastrophes in April, three in May and three in June caused damage in 29 states. Six events occurred in Texas, and four in Missouri. Illinois and Kansas both had three catastrophes. Texas incurred the largest amount of insured damage, currently estimated at $455 million. Illinois was second, with an estimated $205 million. Maryland sustained $170 million in insured property loss, and Kentucky $130 million. Arizona, Tennessee and Virginia each had property damage totaling $120 million.

PCS estimates the 10 second-quarter catastrophes generated approximately 550,000 claims, including 290,000 personal losses, 50,000 commercial losses and 210,000 vehicle losses. The second quarter is typically active, averaging 12 catastrophes over the past 10 years.

Following is a recap of second-quarter catastrophe losses since 1993:

Year
Catastrophes
Insured Losses ($)
Number of Claims
1993
12
$1.12 billion
1994
10
$1.08 billion
1995
16
$3.02 billion
1996
12
$1.70 billion
880,000
1997
9
$0.98 billion
480,000
1998
16
$4.52 billion
1,690,000
1999
12
$3.50 billion
1,400,000
2000
10
$1.46 billion
550,000
2001
9
$6.24 billion
1,030,500
2002
10
$1.97 billion
550,000

ISO’s PCS unit defines a catastrophe as an event within a particular territory that causes $25 million or more in insured-property losses and affects a significant number of property and casualty policyholders and insurers.

PCS estimates represent anticipated insured loss on an industry wide basis arising from catastrophes, reflecting the total net insurance payment for personal and commercial property lines of insurance covering fixed property, personal property, vehicles, boats, related property items and business-interruption losses. The estimates exclude loss-adjustment expenses.

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