The Hartford’s chief executive says that its insured losses for Superstorm Sandy could surpass its reinsurance deductible of $350 million.
In a presentation yesterday at the Goldman Sachs Financial Services Conference, Liam McGee, chairman, president and CEO of The Hartford Financial Services, told attendees that the company “is taking longer than usual” to issue a loss estimate “due to the volume and nature of business interruption claims.”
He says the losses will be manageable for the company, and that while work on claims is not complete, “it is possible that gross losses will hit our reinsurance deductible of $350 million.”
The company’s reinsurance program, he says, requires the company to retain 10 percent of loss over $350 million.
“We will update you as soon as we finalize the loss estimate, based on projected claims and average costs,” says McGee.
In terms of dollars, about 60 percent of the claims will be in the commercial lines and 40 percent personal lines, says McGee, with close to half of the commercial losses coming from business interruption claims.
He says Sandy will “cause us to re-look at risk management and models, particularly in property.”
The industry, McGee suggests, will have to deal with “the fact that undoubtedly weather has changed.” The company has increased its catastrophe loads from 2011 to 2012 and it will probably do the same next year.
“Whether it’s global warming, climate change, I think as an industry we have to assume that is a new normal and we’ll run our business consistent with that,” says McGee.
Correction: The claim percentage cited by McGee for commercial and personal lines was dollar amount not number of claims.