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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, Nebraska April 30, CEO Warren Buffet said the company would likely post its first full-year loss in insurance underwriting in nine years.
And insurance stocks have lagged the broader market because of investor worries about catastrophic losses.
The S&P Insurance Index is flat since the beginning of the year, lagging the broader S&P 500 Index, which has risen 4.7 percent.
ROUGH WEATHER
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.
“It has been a particularly devastating year,” said Aman.
Over a six-week period this spring, tornadoes ripped through Southeastern and Midwestern states flattening neighborhoods in large Southern cities such as Raleigh, North Carolina and Tuscaloosa, Alabama.
So far, tornadoes have killed 365 people in the United States, a figure nearly six times higher than the three-year average of 64 deaths, according to the National Weather Service.
Already, 1,151 tornadoes have occurred in the United States this year, nearing the 1,282 reported in all of 2010, but below the all-time high of 1,820 in 2004.
The increase in spring storms has insurers preparing for the worst.
In a recent interview with Reuters, Hartford Financial Services Group IncChief Executive Liam McGee said the company expected second quarter catastrophic losses to rise.
“I don’t think there’s any question that there will be a bit more to handle,” McGee said May 2 after Hartford reported first quarter results.
Others are increasing the disclosure of their losses. The nation’s largest home insurer, Allstate Corp., said last week 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.
Miranda said insurers avoided large losses last year, despite a record number of hurricanes, because none made landfall in the United States, a lucky break that is unlikely to be repeated.
“Chances of that happening again are definitely slim,” he added
http://www.claimsjournal.com/news/na.../24/186172.htm
from the 'tulip post -The I in FIRE Slips Into Shadowland
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, Nebraska April 30, CEO Warren Buffet said the company would likely post its first full-year loss in insurance underwriting in nine years.
And insurance stocks have lagged the broader market because of investor worries about catastrophic losses.
The S&P Insurance Index is flat since the beginning of the year, lagging the broader S&P 500 Index, which has risen 4.7 percent.
ROUGH WEATHER
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.
“It has been a particularly devastating year,” said Aman.
Over a six-week period this spring, tornadoes ripped through Southeastern and Midwestern states flattening neighborhoods in large Southern cities such as Raleigh, North Carolina and Tuscaloosa, Alabama.
So far, tornadoes have killed 365 people in the United States, a figure nearly six times higher than the three-year average of 64 deaths, according to the National Weather Service.
Already, 1,151 tornadoes have occurred in the United States this year, nearing the 1,282 reported in all of 2010, but below the all-time high of 1,820 in 2004.
The increase in spring storms has insurers preparing for the worst.
In a recent interview with Reuters, Hartford Financial Services Group IncChief Executive Liam McGee said the company expected second quarter catastrophic losses to rise.
“I don’t think there’s any question that there will be a bit more to handle,” McGee said May 2 after Hartford reported first quarter results.
Others are increasing the disclosure of their losses. The nation’s largest home insurer, Allstate Corp., said last week 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.
Miranda said insurers avoided large losses last year, despite a record number of hurricanes, because none made landfall in the United States, a lucky break that is unlikely to be repeated.
“Chances of that happening again are definitely slim,” he added
http://www.claimsjournal.com/news/na.../24/186172.htm
. . . while Insurance takes a big step into the Casino Economy . . .
Now some states make it just as easy. And they have broadened the definition of captives so that even insurance companies can create them. This has given rise to concern that a shadow insurance industry is emerging, with less regulation and more potential debt than policyholders know, raising the possibility that some companies will find themselves without enough money to pay future claims. Critics say this is much like the shadow banking system that contributed to the financial crisis.
Aetna recently used a subsidiary in Vermont to refinance a block of health insurance policies, reaping $150 million in savings, according to its chief financial officer, Joseph M. Zubretsky. The main reason is that the insurer did not need to maintain conventional reserves at the same level as would have been required by insurance regulators in Aetna’s home state of Connecticut.
In other big transactions, companies including MetLife, the Hartford Financial Services Group, Swiss Reinsurance, Genworth Financial and the American International Group, among others, have refinanced life, disability and long-term-care insurance policies, as well as annuities.
For the states, attracting these insurance deals promotes business travel and creates jobs for lawyers, actuaries and other white-collar workers, who pay taxes. States have also found that they can impose modest taxes on the premiums collectedby captives.
For insurers, these subsidiaries offer ways to unlock some of the money tied up in reserves, making millions available for dividends, acquisitions, bonuses and other projects. Three weeks after Aetna’s deal closed, the company announced it was increasing its dividend fifteenfold.
Aetna recently used a subsidiary in Vermont to refinance a block of health insurance policies, reaping $150 million in savings, according to its chief financial officer, Joseph M. Zubretsky. The main reason is that the insurer did not need to maintain conventional reserves at the same level as would have been required by insurance regulators in Aetna’s home state of Connecticut.
In other big transactions, companies including MetLife, the Hartford Financial Services Group, Swiss Reinsurance, Genworth Financial and the American International Group, among others, have refinanced life, disability and long-term-care insurance policies, as well as annuities.
For the states, attracting these insurance deals promotes business travel and creates jobs for lawyers, actuaries and other white-collar workers, who pay taxes. States have also found that they can impose modest taxes on the premiums collectedby captives.
For insurers, these subsidiaries offer ways to unlock some of the money tied up in reserves, making millions available for dividends, acquisitions, bonuses and other projects. Three weeks after Aetna’s deal closed, the company announced it was increasing its dividend fifteenfold.
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