Recent analyses appear to show that the Property-Casualty industry has sufficient cash reserves to sustain heavy insured losses in 2011, but its position had deteriorated slightly in 2010, according to analysis by Conning Research & Consulting. And what if 2011 continues on the pace it has set for insured looses?
"Our view of the property-casualty insurance industry reserve position is that it deteriorated slightly in 2010, when compared to our previous annual analyses," said Stephan Christiansen, director of research at Conning Research & Consulting.
"Overall, the industry continues to appear to have sufficient reserves, with a modest degree of safety, under assumptions that claims settlement patterns will continue apace. Some adverse developments in the most recent calendar year, Christiansen said, is providing a hint that beneficial trends may be turning."According to Conning, AIR has reported that the two major outbreaks of tornadoes this year -- the first was in late April -- are the costliest on record, amounting to $7.7 billion to $12.5 billion in insured losses.
Since 1989, there has been a rising trend in insured losses from severe thunderstorms and related weather events, attributed to rising property values, greater building density and more insurance coverage, according to a May 16 A.M. Best special report.
To further illustrate the impact of those tornado occurences, Travelers Cos. said it expects more than $1 billion in losses from multiple tornadoes and hailstorms that plagued the Midwest and Southeast United States. It's the largest tornado and storm loss the company's ever reported for a quarter, said Shane Boyd, a spokesman.
After dealing with a devastating start to the 2011 tornado season, the calendar has turned to June and the start of hurricane season. Having already seen unprecedented tornados, devastating wildfires, and tumultuous floods, it appears that the U.S is in for a more active hurricane season that seen in the recent past.
The start of hurricane season is precisely a major reason why the Texas Windstorm Insurance Association (TWIA) has purchased $636 million in reinsurance protection. TWIA says the policy will cover losses that exceed the $1.6 billion in funds estimated to be available from the Association's Catastrophe Reserve Trust Fund and bonds.
The Texas Windstorm Insurance Association (TWIA) acts as the state's insurer of last resort for wind and hail coverage in the 14 coastal counties and parts of Harris County (east of Highway 146). TWIA provides wind and hail coverage when insurance companies exclude it from their homeowners and other property policies sold to coastal residents.
Also related to the uncertainty and huge claims losses in the Property/ Casualty Industry, Alfa Mutual Group said Friday that it would not renew 73,000 property policies statewide as it tries to stabilize itself following the April 27 tornadoes.
While in the midst of one of the most devastating starts to a property/ casualty loss season, Congress is still grappling with legislation to renew the National Flood Insurance Program (NFIP).
The National Association of Mutual Insurance Companies (NAMIC) is so concerned it issued a press release exhorting Congress to act and shore up the NFIP long-term. The release stated, "Amidst recent flooding in the Midwest and the opening days of the 2011 Hurricane season, the National Association of Mutual Insurance Companies (NAMIC) calls on congressional leaders to act swiftly to reform the National Flood Insurance Program (NFIP).
"The need for the National Flood Insurance Program has rarely been more clear than it is now, and the responsibility for ensuring the NFIP will be there for homeowners across the country rests with Congress," said Jimi Grande, Senior vice President of Federal and Political Affairs for NAMIC.
Summary
2011 is not even half over, and we have seen disaster after disaster. So does the industry have enough reserves for another historic year of insurance claims and losses? What if the hurricane season spawns more devastating major hurricanes than is predicted. What if three or four major hurricanes make landfall and cause $2-3 billion damage. Could another result be more insurers leaving Southeast U.S. P&C market?
And even more dangerous, what if Congress again fails to act and does not shore up the National Flood Insurance Program? What then for the industry and a flood program that is already taking on water?
It is after all possible that the prediuctions are understated. Its possible the worst is yet to come as tropical storms start to form in the Carribean and head toward the U.S. coast. Could they also become dangerous hurricanes and head directly for the record books? Are you and your clients prepared?
