ISO Reports Insurers’ Q3 CAT Losses Estimated At $2.9 Billion

Insurers are expected to pay $2.9 billion to homeowners and businesses for insured property losses from seven catastrophic events in the third quarter of this year — up more than 300 percent from the year-ago period — according to current estimates by Insurance Services Office, Inc.’s (ISO) Property Claim Services (PCS) unit. Third-quarter 2002 catastrophe losses totaled $715 million.

The quarter’s losses are exceeded only by the $20.7 billion loss in third-quarter 2001, primarily from the Sept. 11 terrorist attacks in New York and Virginia, and $4.06 billion in the third quarter of 1998, when Hurricane Georges caused nearly $2 billion in damages along the Gulf Coast.

Catastrophe losses for the first nine months of 2003 now stand at $9.4 billion, more than double the $4.1 billion for the same period last year.

The seven catastrophic events during the quarter — Hurricanes Claudette and Isabel, four wind and thunderstorm events, and the widespread power outage during mid-August — are about average, based on an annual average frequency of 6.5 events over the past 10 years.

Insurers can expect nearly 886,000 personal and commercial property, and automobile claims in 30 states from this quarter’s losses, PCS said.

At $1.17 billion, Hurricane Isabel topped the list for this quarter’s insured losses, followed by an estimated $815 million in damages from the severe thunderstorms that struck 14 southern and eastern states in late July. The power outage caused $75 million in property damage, but the estimate could be revised when the exact cause of the blackout is determined.

PCS will resurvey Hurricane Isabel losses in 60 days, which is standard procedure when preliminary loss estimates from a catastrophic event exceed $250 million or special circumstances underlying the event require additional analysis.

Virginia sustained the highest insured losses in the quarter — $460 million, mostly from Hurricane Isabel. Maryland and Tennessee each suffered insured damages of $410 million, followed by Illinois at $230 million and Ohio and Indiana, each with $185 million.

ISO’s PCS unit defines a catastrophe as an event within a particular territory that causes $25 million or more in insured property losses and affects a significant number of property and 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 and business-interruption losses. The estimates exclude losses insured by the National Flood Insurance Program and all loss-adjustment expenses.