By MATTHEW BRODSKY, senior editor/Web editor
Hurricane Ike could have caused an estimated $9.8 billion in insured losses, according to the Insurance Information Institute.
ISO's Property Claims Service put out its own preliminary estimate for insured property damage, according to Gary Kerney, assistant vice president at PCS: $8.1 billion in 1,150,000 claims across Arkansas, Illinois, Indiana, Kentucky, Louisiana, Missouri, Ohio, Pennsylvania and Texas.
Additional losses of $2 billion to $3 billion could be seen in energy, according to Aon Impact Forecasting. Ike damaged an estimated 49 offshore platforms. Twelve refineries remained totally out of commission by the end of September, another nine operating at reduced performance.
The National Flood Insurance Program could be seeing between $3 billion and $6 billion in losses from more than 35,000 claims in Texas, Louisiana, Illinois and elsewhere, according to figures released a week after the storm.
"There have been a lot of states affected from Ike in terms of flooding," said Loretta L. Worters, vice president at the III.
Much of the storm surge damage, of course, affected the island of Galveston, where as many as 20,000 homes were leveled despite Ike not being the worst-case scenario feared only hours before landfall on Sept. 13.
The extent of damage was still severe enough to warrant total loss estimates, both insured and uninsured, at $20 billion to $40 billion, according to Aon Impact Forecasting, citing Houston Mayor Bill White.
Expect loss estimates to creep up as demand surge sets in, the post-CAT phenomenon whereby increased demand for reconstruction labor and supplies that cannot be met leads to high prices for everything in the damaged region.
Worters said that, at least at the time of this writing, she's seen no signs of demand surge yet, adding that, even before Ike, "the cost of building commercial and industrial buildings in the United States has increased 11 percent in the past 12 months."
THE SINGLE EVENT?
Within a month of the storm, individual insurers began releasing their loss estimates from hurricanes Ike and Gustav. Some gleaned from wire reports include: XL at $270 million; RenRe at $275 million; Swiss Re at $300 million.
Whatever they end up as, insurers seem to be handling the losses on their end. Ratings agency A.M. Best reported in a Sept. 24 webinar that it didn't foresee any ratings actions because of the hurricane, in part because of risk management strategies put into place since the 2004-2005 seasons.
Rich Attanasio, head of the P/C ratings team for U.S. personal lines segment, added, however, that because of hurricanes Ike and Gustav, as well as other catastrophe events such as tornadoes earlier in the year, many insurers might "have difficulty meeting their current 2008 full-year projections."
How will this affect the property insurance market? Is this the big event needed to halt the softening?
"In the short run, given the issues and turmoil that's out there with the losses from Ike, the losses in the investment community, where things are with AIG and their ability to compete in the marketplace, we do see a short-term stabilization in terms of pricing," said Matt Mosher, who heads A.M. Best's Global Ratings Team for the property/casualty nonlife insurance industry. "However, the long-term trends remain negative. There is no single event here that has occurred that will change the market."
For their part, reinsurers have also indicated that none of the hurricanes this season will lead to a hardening of prices for the upcoming Jan. 1, 2009, renewals.
The Ike event does not seem to have shocked insurers' claims operations either. Initial reports after the storm suggested that catastrophe adjusters, especially commercial ones, were in short supply in the region.
Yet Worters at the III reported that she has not heard of a tight supply of adjusters. The issue is more of adjusters being able to get into hard-hit areas.
Gary Brown, senior vice president for U.S. branch operations at global commercial claims adjusting firm McLarens Young International, said, "Overall, I think the industry is coping well and the response seems more orderly than other recent CATs. Perhaps that results from Houston being so large a metropolis that more infrastructure such as rental cars, hotels, etc. are available than normal."
November 1, 2008
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