Natural Disasters, Insurance Catastrophes

Added: (Thu Feb 02 2012)

Pressbox (Press Release) - Disasters have far-reaching consequences—even for insurance it seems. The profitability of U.S. property and casualty insurers nosedived last year (its lowest level since 2008), following huge losses resulting from natural disasters, which nullified gains in sales and investment income.

No stranger to natural disasters, Texas, which just suffered a catastrophic wildfire outbreak in late 2011, has seen its Texas insurance license holders and those who have finished their mandatory Texas insurance continuing education going on overdrive to help affected homeowners settle claims.

The Property Casualty Insurers Association of America reported this January that insurers posted a 1.9 percent annualized rate of return on policyholders’ surplus through Sept. 30, the lowest the rate has been since the 1.2 percent return in 2008, when the industry faced losses from Hurricane Ike and on investments.

To compensate for the losses, Travelers Cos. (TRV) and Allstate Corp. (ALL) are leading the way for other insurers in raising prices for coverage to boost shareholder returns after claims from storms and low interest rates weighed down results.

Disasters, including the catastrophic Hurricane Irene, cost the industry $9.5 billion in the third quarter, a full $6.6 billion higher than last year’s losses.

Travelers CEO Jay Fishman informed an investor conference this January that his company is driving “for improved rate and terms” across its business. Tornadoes in April and May obliterated Traveler’s second- quarter profit. Irene pulled down net income in the third quarter.
Confirming what is already widely known or has long been expected in the wake of a number of huge natural disasters worldwide in 2011, insurance companies are now on the verge of paying more for their own policies, the so-called reinsurance, and causing higher property insurance rates for policyholders almost everywhere this year.

When a natural calamity occurs in disaster-prone places such as Texas, years of premium profits—courtesy of Texas insurance license holders and those who have finished their mandatory Texas insurance continuing education—are wiped out in a matter of hours.

Reinsurance America Inc. and the Insurance Information Institute reported this January that insured losses worldwide in 2011 totaled $105 billion, supplanting the $101 billion posted in 2005. The giant earthquake that spawned the catastrophic tsunami in Japan and the temblor that shook New Zealand made up half of those losses.

Locally, tornadoes emerged as the most expensive disasters. They, in fact, accounted for the fourth highest cost for insured losses in United States history at $21.3 billion, bested only by 9/11, Hurricane Andrew, and Hurricane Katrina.

Insurance Information Institute warned that property insurance rates should be expected to increase, especially in hurricane-prone areas such as the Mississippi Coast and Florida. Mississippi Insurance Commissioner Mike Chaney, however, chafed at the warning. “We have to look at rate increases based on their merit. I'm not opposed to granting small increases, but I don't like huge rate increases."

LearnInsurance.com, a portal of e-learning hub 360training.com, offers Texas insurance continuing education and Texas adjusters license online program to insurance agents.