ISO Reports Insurers Expected to Pay $4.9B for Q2 Catastrophe Losses

U.S. property/casualty insurers are expected to pay policyholders an estimated $4.9 billion for insured property-loss claims from four catastrophic events in the second quarter ― the second-highest second quarter in losses since 1994 ― according to estimates by Insurance Services Office, Inc.’s (ISO) Property Claim Services (PCS) unit.

Second-quarter 2001 topped the list for insured property damage with $6.2 billion from nine events. Catastrophe losses during first-quarter 2002 were $2.8 billion from 10 events.

Catastrophe losses for first-half 2003 now stand at $6.3 billion, compared with $3.4 billion for the first six months of 2002 and $6.9 billion in first-half 2001.

At an estimated 1.1 million, the second quarter produced a near-record number of auto, residential and commercial policy claims, said PCS. Catastrophe claims frequency from policyholders in 23 affected states was the fourth highest for a second quarter since 1998, the year a severe hailstorm struck Minnesota.

The spike in second-quarter losses was caused by severe thunderstorms and tornadoes that ravaged 18 states from May 2 to 11. Insured losses from those storms now stand at $3.13 billion, up $1.58 billion following PCS’s resurvey of its preliminary $1.55 billion estimate in May.

PCS resurveys catastrophe losses about 60 days after issuing its preliminary estimate whenever losses exceed $250 million or the specific circumstances relating to a catastrophe require additional analysis.

At $1.18 billion, Texas topped the list for insured losses in the quarter, followed by Oklahoma at $1.07 billion, Tennessee at $770 million, Missouri at $455 million and North Carolina at $205 million.

Following is a summary of second-quarter losses and frequency of events:

Year Catastrophe Losses Catastrophe Events
1994 $1.08 billion 10
1995 $3.02 billion 16
1996 $1.70 billion 12
1997 $ 980 million 9
1998 $4.52 billion 16
1999 $3.49 billion 13
2000 $1.46 billion 10
2001 $6.23 billion 9
2002 $2.79 billion 10

ISO’s PCS unit defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of property/casualty policyholders and insurers.

PCS estimates represent anticipated insured loss on an industrywide basis arising from catastrophes, reflecting the total net insurance payment for personal and commercial property lines of insurance covering fixed property, personal property, vehicles, boats, related property items, business interruption and additional living expenses.

The estimates exclude loss-adjustment expenses.