Hurricane Assessment Begins For Insurers

After plowing into North Carolina's Outer Banks yesterday, Isabel moved across Virginia and into Pennsylvania early today. As its winds diminished, it was expected to move through western New York State before dissipating in Canada by tomorrow.

Steve Carroll, assistant general manager for North Carolina Farm Bureau Insurance Group in Raleigh, N.C., said his company is just starting to get reports in today.

"Some of the islands in the Outer Banks are not going to let people back in until later today and some of the counties' roads are impossible to get through. So it's just too early to tell right now," Mr. Carroll told National Underwriter.

North Carolina Farm Bureau Insurance Group was one of the insurers exposed to the highest potential Isabel-related catastrophe losses in North Carolina, according to the latest assessment from Standard & Poor's Ratings Services in New York.

"Any estimates right now would be a complete wild guess," Mr. Carroll noted, although he added that an initial model shows about $50 million in anticipated losses.

"But as far as any information off the ground, from our people who are out there, we just don't know yet. We will have better information in a day or two."

Columbus, Ohio-based Nationwide is another insurer with high Isabel-related catastrophe losses. "We are the number-one property and casualty insurer in North Carolina, and the number-three writer in Virginia. So the storm is of interest to us," said Dave Gettles, Nationwide's vice president of operations for North Carolina.

"We are really waiting for our folks to get out and be able to examine the damage. We've gotten approximately 1,200 claims as of this morning, primarily in property losses," Mr. Gettles said, adding that currently, Nationwide is expecting to take in about 20,000 claims, with losses in the $30 million range in North Carolina.

"So far we have had very few automobile claims, but in some areas where we might start to see some automobile claims it is still pretty difficult to get in. And in some cases, people don't have power yet," Mr. Gettles observed. "When the electricity comes back on, and with more active phone use, we anticipate the activity to pick up here in the next three days as far as claims go."

Bill Mellander, spokesperson for the Northbrook, Ill.-based Allstate Corporation, which is also exposed to high Isabel-related catastrophe losses in the region, added that "right now, it's too early to talk about losses. Mass portions in Virginia are still without power and people in North Carolina are still finding their way back to their homes," Mr. Mellander said.

"We will have better estimates in a few days?it depends on how quickly people get back to their homes, and how quickly phone services are restored in some areas."

Bloomington, Ill.-based State Farm, an insurer with one of the highest potential exposures to Isabel-related losses, also noted that its teams are now going into damaged areas to make an assessment. "But even then, because flood waters need to recede before you can make an accurate assessment of damages, it will take sometime," explained Phil Supple, spokesperson for State Farm.

SunTrust Robinson Humphrey, an Atlanta-based financial services firm, offered National Underwriter this forecast for insured losses from Isabel. "You are probably looking at insured losses in the $1 billion-$2 billion dollar range. A significant amount of damage could result from flooding, which is not insured by the industry. Obviously, the Federal Emergency Management Agency would cover those expenses," said David Lewis, insurance analyst at SunTrust Robinson Humphrey.

Mr. Lewis said he doesn't believe Isabel will have a meaningful impact on the industry's capital. "So I don't see any significant casualties within the industry as a result of this Category-2 hurricane."

Previously Standard & Poor's said it didn't anticipate any meaningful ratings downgrades as a result of Isabel.

Mr. Lewis noted that, "Allstate and State Farm obviously have significant amounts of business in those areas. But they are both well-capitalized companies."

Mr. Lewis also pointed out that this could actually be a good buying opportunity for investors in p-c insurance stocks. "Historically, insurance companies' stocks declined in front of the hurricane, but once damages are assessed, they typically go up as a result of the potential for rising prices for the industry."

And for the reinsurance sector, there wouldn't be any significant exposure for the reinsurers as a whole, Mr. Lewis added. "You could have some individual companies come under some modest pressure but I don't think it will be significant," he predicted.

Regine Kaiser, spokesperson for Munich, Germany-based Munich Re, the world's largest reinsurer and one of the major European companies that provide backup insurance to U.S. insurers, also told National Underwriter today that it expected losses of less than $100 million from damages caused by Isabel.

"Isabel was, on its landfall, not as strong as we expected. First, we compared it with Hurricane Floyd, which made economic losses of $4 billion and insured losses of about $2 billion for the industry. Our losses were under $100 million," Ms. Kaiser noted.

"We think Isabel was weaker and therefore our losses will be far below $100 million."

Separately, Martin Sullivan, vice-chairman and co-chief operating officer at American International Group Inc in New York, offered his assessment of Isabel, noting that it is still going to put "a capital strain" on many companies. According to an AIG spokesperson, Mr. Sullivan also commented that the insurance industry's capital remains stretched and that losses from Isabel could hurt the bottom line of many insurers.