Industry Isaias estimates converge around low single — digit billion dollar insured loss

By Ashish Tiwari Oct 15 (The Insurer) — Preliminary estimates for Hurricane Isaias are continuing to point to an insured loss totaling in the low-single-digit billions of dollars, with the storm unlikely to significantly affect the trajectory of upcoming reinsurance renewals. On Thursday, Karen Clark & Company estimated private market insured property losses from Isaias at $3 billion. Earlier this week, Verisk's Catastrophe and Risk Solutions unit estimated insured losses to onshore property at between $1 billion and $2 billion.

Meanwhile, Cotality estimated industrywide insured wind and storm-surge losses at $2 billion to $3 billion, with most damage expected in Florida's Panhandle and southern Alabama. Gallagher Re said on Wednesday that it expected insured losses from Isaias to settle at the lower end of the low-to-mid single-digit billion-dollar range, including wind, coastal storm surge, inland flooding, tornado impacts, and expected losses to the US National Flood Insurance Program. Both KCC and Verisk excluded NFIP losses from their estimates.

“This event is unlikely to influence upcoming January 1 reinsurance renewal discussions,” Gallagher Re said, adding that the overall direct economic cost is expected to be roughly 40% to 50% higher than the final insured loss total, based on historical norms for tropical cyclones. Track Misses More Densely Populated Areas Isaias made landfall near Destin, Florida, on October 9 as a weakening Category 2 hurricane with maximum sustained winds of 105 mph. The broker attributed the relatively moderate loss outlook in part to the storm's track away from the more densely exposed Pensacola area and its relatively compact radius of maximum winds.

Gallagher Re also noted that historical storms of similar intensity and size affecting this portion of the northern Gulf Coast have produced insured losses of roughly $2 billion to $4 billion. Separately, AM Best said losses from the storm were likely to be limited to an earnings event for insurers, with recent improvements in pricing and underwriting in Florida expected to help cushion the impact. The storm briefly disrupted what had been a relatively quiet Atlantic hurricane season, but losses are not expected to deplete insurers' surplus enough to alter insurance capacity in Florida, the rating agency said.

This should help the state avoid a squeeze affecting insurance pricing, reinsurance capacity, and reinsurance costs. AM Best said the storm's strongest winds were recorded on its western side, blowing water away from the coast and limiting storm-surge damage and potentially flood-related losses. It also put insured losses in the low-single-digit billions of dollars. Florida’s property insurance market has become highly diversified across companies.

State Farm now has a slight edge over Progressive as leader, but at just 7.4% of the market. More than 70 active insurers in Florida have at least half of their property business within the state, AM Best said. "Many larger insurance groups have specific companies dedicated to Florida. Such companies are considered part of the group of insurers concentrated in Florida.

This again highlights the difficult nature of operating in Florida, as insurers wish to protect their capital," the rating agency said. AM Best also highlighted the impact of legislative reforms and incentives, which have led to the depopulation of state-basked insurer of last resort Citizens Property Insurance Corporation, with policies spread among several other insurers in the state. "The successful depopulation of Citizens, coupled with a relatively mild hurricane season so far, will keep Citizens intact as Florida’s insurer of last resort," it said.