ISO: Insurers Pay a Record $27.3B in 2004 Cat Losses

U.S. property/casualty insurers paid a record $27.3 billion for insured property losses to homeowners and businesses from 22 catastrophic events last year—surpassing losses from 2001 that included the Sept. 11 attack—according to estimates by ISO’s Property Claim Services (PCS) unit.

Over 80 percent of the insured losses were from the five hurricanes that made landfall in the U.S. along the Atlantic and Gulf coasts. The last time back-to-back hurricanes struck the U.S. was in 1999, the year of hurricanes Bret, Dennis, Floyd, Irene and Lenny.

Policyholders in 42 states and Puerto Rico filed nearly 3.35 million personal and commercial property and automobile claims.

Catastrophic activity was mild in the fourth quarter with insured losses of $450 million from three events. The quarter produced slightly more than 100,000 claims from eight states. Fourth-quarter 2003 was the worst fourth quarter for insured losses—$2.64 billion, much of it stemming from the two Southern California wildland fires.

Florida suffered the highest insured losses at $18.8 billion, all from the four third-quarter hurricanes—Charley, Frances, Ivan and Jeanne—followed by Alabama at $1.8 billion, Colorado and Pennsylvania each at $715 million, and Georgia at $660 million.

The four hurricanes produced a total of 2.23 million claims from policyholders in 16 states and Puerto Rico, with Florida topping the list with 1.63 million claims.

Following is a recap of U.S. insured losses from catastrophes since 1995. While the frequency of events in the last few years is less compared with earlier years, insured losses have increased significantly.

Year Number of Events Losses
1995 34 $ 8.3 billion
1996 41 $ 7.4 billion
1997 25 $ 2.6 billion
1998 37 $10.1 billion
1999 27 $ 8.3 billion
2000 24 $ 4.6 billion
2001 20 $26.5 billion
2002 25 $ 5.9 billion
2003 21 $12.9 billion
2004 22 $27.3 billion

The cost of the average catastrophe in 2004 was $1.26 billion—twice that for other years in the past decade. That average was exceeded only once in the past 10 years—$1.33 billion in 2001, largely because of the Sept. 11 terrorist attack.

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/casualty policyholders and insurers. The estimates represent anticipated insured losses on an industrywide basis arising from catastrophes, reflecting the total insurance payment for personal and commercial property items, business interruption and additional living expenses. The estimates exclude loss adjustment expenses.