2004 Catastrophe Losses a Record for US Insurers
NEW YORK - Unprecedented hurricane activity helped make 2004 the costliest year ever for US insurers as they paid out $27.3 billion, a survey released Wednesday by a leading industry adviser said.
While there were 22 catastrophic events last year, five hurricanes that made landfall in the United States along the Gulf of Mexico and Atlantic coasts accounted for 80 percent of the insured losses, according to Insurance Services Office (ISO), a Jersey City, New Jersey, company that tracks insurers.
Last year, ISO said, insurers paid out more than twice the amount paid out in 2003, and more than 2001's $26.5 billion which included losses related to the Sept. 11 attacks.
Last year, the average catastrophe cost $1.26 billion, twice that for the average catastrophe in other years in the last decade, except 2001.
ISO defines a catastrophe as an event in a defined region that causes $25 million or more in insured property losses, affecting a significant number of property and casualty policyholders and insurers.
Florida bore the brunt of 2004's hurricane damage where losses totaled $18.8 billion. In that state alone, 1.63 million claims were filed, according to ISO.
While a state fund likely will mitigate price increases in Florida, some consumers may find it hard to get insurance in the hurricane-stricken areas and prices for policies could increase, according to industry analysts.
"You are not going to see big price increases. Regulators will keep price rises from being egregious. I'd be surprised if prices rose 20 percent," said Adam Klauber, managing director of equity research at Cochran, Caronia Securities LLC in Chicago.
"You could see marginal price increases," said Jack Lake, insurance analyst at Victory Capital Management. He added: "Florida set up a fund for insurers to draw from if losses exceeded a certain amount. That may help mitigate price increases."
At the same time, some companies may restrict their growth, analysts said. For example, current policy holders may be able to easily renew insurance, but newcomers may have a tougher time getting certain types of coverage.