$10 Billion in insured US weather losses so far in 2010?

[T-bone1]

Devastating tornadoes, floods, earthquakes overseas and a busier-than-usual hurricane season have U.S. insurance companies bracing for record losses in 2011.

 

Insurers could suffer as much as $10 billion from weather-related losses in the United States in 2011, which is up from the average of $2 billion to $4 billion, according to EQECAT Inc, which provides disaster and risk models to insurance companies.

 

On top of the potential U.S. losses, insurers are also reeling from disasters overseas, including large earthquakes across the Pacific Rim. And as if that was not enough, analysts now expect an above-average Atlantic hurricane season.

 

“This is not a black swan year that is an absolute worst case, but it is significant and it is close to that,” said Jose Miranda, director of client advocacy at EQECAT Inc, which provides disaster and risk models to insurance companies.

 

Globally — including the major earthquakes in New Zealand and Japan — U.S. and overseas insurers could post up to $55 billion in losses, EQECAT projects.

 

Some insurers have already posted large losses due to the Japan and New Zealand quakes.

 

Berkshire Hathaway Inc. lost $1.07 billion from the Japan earthquake and $412 million from the quake in New Zealand.

 

During the annual meeting in Omaha, Nebraska April 30, CEO Warren Buffet said the company would likely post its first full-year loss in insurance underwriting in nine years.

 

And insurance stocks have lagged the broader market because of investor worries about catastrophic losses.

 

The S&P Insurance Index is flat since the beginning of the year, lagging the broader S&P 500 Index, which has risen 4.7 percent.

 

ROUGH WEATHER

 

In the United States, spring storms — and the billions of dollars in damage left behind — were the result of a rare confluence of more violent weather hitting densely populated areas, said James Aman, a senior meteorologist with Earth Networks Inc – Weatherbug.

 

“It has been a particularly devastating year,” said Aman.

 

Over a six-week period this spring, tornadoes ripped through Southeastern and Midwestern states flattening neighborhoods in large Southern cities such as Raleigh, North Carolina and Tuscaloosa, Alabama.

 

So far, tornadoes have killed 365 people in the United States, a figure nearly six times higher than the three-year average of 64 deaths, according to the National Weather Service.

 

Already, 1,151 tornadoes have occurred in the United States this year, nearing the 1,282 reported in all of 2010, but below the all-time high of 1,820 in 2004.

 

The increase in spring storms has insurers preparing for the worst.

 

In a recent interview with Reuters, Hartford Financial Services Group IncChief Executive Liam McGee said the company expected second quarter catastrophic losses to rise.

 

“I don’t think there’s any question that there will be a bit more to handle,” McGee said May 2 after Hartford reported first quarter results.

 

Others are increasing the disclosure of their losses. The nation’s largest home insurer, Allstate Corp., said last week it would take the unusual step of disclosing any monthly catastrophic loss estimates that exceed $150 million. The company projected the April storms would cost $1.4 billion and totaled more than 100,000 claims.

 

As tornado season slows this summer, insurers will have to contend with a busy hurricane season, although less active than last year.

 

The National Weather Service projects as many as 18 named storms this year, compared with the long-term historical average of about 11.

 

Miranda said insurers avoided large losses last year, despite a record number of hurricanes, because none made landfall in the United States, a lucky break that is unlikely to be repeated.

 

“Chances of that happening again are definitely slim,” he added.

 

 

[StubbleJumper]

I think it was in 2004 that we were all bitching about FFH's Q2 numbers being affected by thunderstorms and tornadoes.  At the time, I believe we complained that they're always making excuses for poor underwriting, but in actuality the cumulative effect of the storms was significant.  I expect that the cumulative effect will also be significant this year.

 

Makes the Chilean earthquake of last year look small....

 

 

SJ

[T-bone1]

This is good long term for FFH . . . this company is gassed up and ready for the hard market, but with hurricane season coming on the heels of these storms I think we could see another $400M underwriting loss in Q2.

 

I guess this leads back to the same mental game that has been discussed on this board: that we want to buy FFH in a hard(ening) market, but we think the stock price will go down first due to the losses.

 

I'm not much at timing, so I bought a little today . . .

[Myth465]

I think this good long term for FFH . . . this company is gassed up and ready for the hard market, but with hurricane season coming on the heals of these storms I think we could see another $400M underwritin loss in Q2.

 

I guess this leads back to the same mental game that has been discussed on this board: that we want to buy FFH in a hard(ening) market, but we think the stock price will go down first due to the losses.

 

I'm not much at timing, so I bought a little today . . .

 

Thats been my game plan, but its not working with FFH or LRE. LRE due to people becoming more comfortable with them and FFH due to the delisting inmo. May have to just buy up and ride the wave. I think summer will be very interesting with Europe and then an interesting Hurricane season. Its been a few years since we have had a big one.

 

Global warming seems to be doing a number on the insurance sector.

[cwericb]

Is it just me or do these natural disasters seem to be strengthening? Earthquakes - how often do you hear of quakes in the 9 range? Tornados a mile wide and staying on the ground for 10 minutes - in a city? I do know that here on the East coast we are definitely seeing a change it the extremes of our weather, especially wind speeds and the frequency of high winds. This year's hurricane season may be quite unpleasant.

 

Of course, now that the end of the world has been postponed until October perhaps it's no big deal.

 

In all seriousness though, I don't see how insurance rates cannot start to rise.

[Smazz]

I think this good long term for FFH . . . this company is gassed up and ready for the hard market, but with hurricane season coming on the heals of these storms I think we could see another $400M underwritin loss in Q2.

 

I guess this leads back to the same mental game that has been discussed on this board: that we want to buy FFH in a hard(ening) market, but we think the stock price will go down first due to the losses.

 

I'm not much at timing, so I bought a little today . . .

 

Thats been my game plan, but its not working with FFH

Well, they did take that hit - maybe another coming along - dont think you are wrong because of the multiple someothers are willing to pay or the risk they are willing to accept or maybe not understand.

 

That is all i will say on that ;)

[Myth465]

Thats true. Hurricane season is right around the corner.