ISO: Insurers to Pay $6.5 Billion in 2007 Catastrophe Claims

U.S. property/casualty insurers are expected to pay homeowners and businesses $6.5 billion for 2007 property losses from 23 catastrophes — the eighth lowest cost in a decade and the seventh lowest frequency for the same period, according to preliminary analysis by ISO’s Property Claim Services Unit.

PCS estimates that insurers paid 1.18 million claims for damage in 41 states resulting from 2007’s 23 catastrophes. More than 721,000 personal lines claims accounted for $4.4 billion, while 144,000 commercial lines claims cost an estimated $1.3 billion, and 315,000 vehicle claims cost insurers an estimated $800 million.

The 23 catastrophes consisted of 17 severe weather events (wind, hail, tornadoes, and flooding), five winter storms, and one wildland fire. Among the 41 states experiencing insured losses from catastrophes, following are the states with the largest losses:

State Loss ($)
California $1.23 billion
Minnesota $747 million
Texas $677 million
Georgia $320 million
Illinois $272 million
Oklahoma $270 million
Kansas $262 million
Missouri $223 million
New York $202 million
Colorado $200 million
Alabama $200 million

The costliest events to insurers in 2007 were due to severe weather that resulted in $1.35 billion of insured damage from Texas to Maine and the Witch Fire in San Diego County, California, which caused an estimated $1.1 billion in losses.

For the second year in a row, the United States dodged a devastating hurricane, says Gary Kerney, assistant vice president, PCS. ―With the exception of Humberto, which made landfall in southeast Texas and southwest Louisiana in September, no other hurricane made landfall on U.S. territory in 2007.

However, catastrophes continue to occur and cause insured property damage that may not adversely affect the financial condition of most insurers, but does cause hardship to hundreds of thousands of policyholders.

Fourth-quarter 2007 PCS estimates that insurers paid $1.7 billion of insured property loss resulting from four catastrophes between October and December 2007 — the fourth costliest fourth quarter in the last decade. The four catastrophes caused insured damage in nine states and a total of 159,000 claims. Following are the states with the largest insured losses in the fourth quarter:

State Loss ($)
California $1.2 billion
Oklahoma $188 million
Washington $95 million
Oregon $70 million
Missouri $57.5 million

Following is the breakdown of fourth-quarter catastrophe activity during the past decade:

Year Insured Loss ($) Frequency
1998 $480 million 3
1999 $265 million 2
2000 $815 million 4
2001 $485 million 4
2002 $1.73 billion 6
2003 $2.6 billion 5
2004 $450 million 3
2005 $10.8 billion 5
2006 $1.5 billion 6
2007 $1.7 billion 4

ISO’s PCS unit defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of policyholders and insurers.

Source: ISO