The brutal winter weather that has impacted much of the U.S. is damaging the results of property/casualty insurance companies through large losses in early 2014, according to a new report from Fitch Ratings, although no rating impact is expected.
The severe winter weather from Jan. 1 to Feb. 21 has generated the fifth costliest year in the last 34 for insured losses with $1.5 billion of losses from approximately 175,000 claims, according to estimates of the Insurance Information Institute.
The I.I.I. said insured losses include roof collapses, downed tree limbs and power lines, burst pipes from freezing and auto accidents. Many companies have also sustained business interruption and supply chain losses due to severe travel and transportation delays and business closings.
“While most winter storm losses occur in northern and mountainous regions of the United States, this spate of severe cold has also affected millions of home and business owners in the south, many of whom were unprepared for such extreme conditions,” said Dr. Robert Hartwig, president of the I.I.I. and an economist.
Dr. Hartwig added that despite the severity of this winter, losses are well within the magnitude planned for by insurers, noting that the insurance industry entered 2014 in rock solid financial condition, with record claims paying capital.
Most claims experience is derived from the upper Midwest and New England regions. However, record cold temperatures in many regions and widespread snowfall have expanded the scope of weather-related losses this season. It will take some time for insurers to completely tally the losses from this prolonged period of heavy snow and extreme cold, though a few companies have provided some loss estimates.
Allstate announced estimated pre-tax losses related to six catastrophes for January 2014 of $277 million while
Chubb reported a preliminary estimate of $150 million to $200 million of pre-tax losses from two declared catastrophe events impacting 19 states in early January. Also, Cincinnati Financial estimated catastrophe losses of $65 to $85 million as a function of these events.
Allstate’s Feb. 20 announcement notes a “catastrophe” is defined as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or an event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event.
Fitch will monitor individual company results to see if rating actions will be necessary, but at this time said it does not anticipate any ratings will be impacted.
