Agents, Carriers Batten Down For Hurricane Isabel

Newark, Calif.-based Risk Management Solutions, for instance, said last week the insured loss from Isabel could fall in the $500 million-to-$2 billion range, depending on the hurricanes eventual intensity and track, while AIR Worldwide, a subsidiary of Insurance Services Office in Jersey City, N.J., forecast the p-c industrys insured loss would be in the $1-to-$2 billion range.

"We are talking about losses due to four main lines of business: residential, commercial and industrial, agricultural, and auto," said Peter Dailey, manager of atmospheric sciences at AIR Worldwide. "Estimates include damages to all properties in those lines and areas that will be impacted by the storm, including North Carolina, Virginia, Pennsylvania, West Virginia, Washington, D.C., New York, Delaware and parts of New Jersey," said Mr. Dailey.

Insured losses for Hurricane Hugo, which hit the East Coast in 1989, were roughly $4.2 billion, according to the Insurance Information Institute in New York (or just over $6.0 billion in 2002 dollars).

Still a number of major insurers earnings will take a direct hit from the storm, analysts predicted early in the week.

Lehman Brothers, a New York-based investment firm, noted in its research note last week that a number of major insurers have significant exposures to Hurricane Isabel. For example, Chris Winans, an analyst for New York-based Lehman Brothers, said in a research note that Allstate Corporation in Northbrook, Ill., has the greatest exposure to Isabel among publicly traded insurers.

"In order of exposure, based on homeowners and auto physical damage market share, Allstate is the most exposed, followed by Progressive, Travelers, SAFECO and Hartford," observed Mr. Winans.

Mr. Winans estimated that an industrywide loss of $1 billion for Hurricane Isabel would mean a 13 percent drop in earnings-per-share for Allstate.

Additionally, Weiss Ratings Inc. in Palm Beach Gardens, Fla., pointed out that eight large p-c insurers are exposed to 72.7 percent of the home insurance risk along the eastern seaboard impacted by Hurricane Isabel.

According to the rating agency, Bloomington, Ill.-based State Farm has some 20 percent of the market share in Mid-Atlantic region, with around $600 million in premiums, followed by Columbus, Ohio-based Nationwide Corp., with some $400 million in premiums, and Allstate, with roughly $358 million.

Other insurers included on Weiss list were: Travelers Property Casualty in Hartford, Conn.; USAA in San Antonio, Texas; Erie, Pa.-based Erie Insurance Group; NC Farm Bureau Insurance in Raleigh, N.C.; and Zurich Financial Services from Zurich, Switzerland.

Before Hurricane Isabel made landfall on Thursday, independent agents and carriers were busy dealing with customers, turning away some new business and getting the word out about how clients should be prepared.

From South Carolina to New York, and inland to Pennsylvania, carriers were reminding agents that under an imminent peril, they could not bind new property policies, largely in homeowners and automobile programs.

As Isabel approached with wind speeds above 150 mph at one point, companies informed the agency on Monday, by fax, that there would be no binding of new business while the storm approached, reported North Carolina agent Jenny Evans.

Ms. Evans, of the Cape Fear Insurance Agency Inc. in Lillington, N.C., said her firm has been busy preparing for Isabels aftermath and dealing with customer queries about their coverage.

She said the moratorium on new business generally lasts for 48 hours after the hurricane warning or watch has been dropped.

The moratorium extended to automobile coverage, she said. The agency would be writing only liability insurance until after the storm. Any writing for physical damage, after the storm, would require inspection of the car before issuing the policy she noted.

She said it was "non-stop calling" from people either asking questions about their policies or looking to purchase insurance for the first time as the storm approached.

In Virginia, it was time for agents to "batten down the hatches," said Bob Bradshaw, executive vice president for the Independent Insurance Agents of Virginia Inc., based in Richmond, Va.

Companies stopped binding policies by Tuesday and agents were dealing with a flurry of questions from current customers and those trying to buy insurance at the last minute. The association was also dealing with advising agents on how to handle press inquiries, making sure agents gave good information and recommendations to the public.

For a fair number of agents, all of this is new ground, he noted, because younger agents have not had to deal with this situation before in Virginia.

Dan Crobin, director of research for the regional Professional Insurance Agents for New York, New Jersey, Connecticut and New Hampshire, said some agents might be surprised by their carriers actions of suspension, but it is a normal business practice in the face of an impending peril.

"Memories fade a little," he noted.

He said the binding restrictions he was aware of applied to within a radius of 100 miles of coastal areas.

One thing he said agents should be reminded to tell customers is that there are provisions in their homeowners policies covering property moved off of the premises out of the way of a peril to a new location for a limited time. Other provisions could extend to the cost of supplies to temporarily repair damages, such as plywood to cover windows, to prevent further damage.

Scott Stanford, chairman-elect of the Independent Insurance Agents of New Jersey and owner of Britton-Selg-Stanford in Roselle Park, N.J., said customers have expressed understanding when informed that they cant get a new policy in the face of the impending storm. The clients most affected are those who were planning to close on a house during the affected period, but had to postpone it.

"We, at the shore, are accustomed to the carrier suspensions, but for those agents inland it might be new to them," said Andrew Anderson, owner of Anderson Insurance Agency in Manahawkin and Haven Beach, N.J., located right along the New Jersey shore.

He added that agents who are not aware need to review their appointment contracts on the suspension of binding authority. He noted that the contracts often stipulate that when a hurricane reaches a position along a certain latitudinal and longitudinal point, the provisions go into effect.

His agency has a real estate subsidiary and he noted that many carriers are honoring binding of homeowners policies where a pre-determined closing date was in effect weeks prior to Isabel.

Carriers said they were watching the storm track carefully and putting out notices to agents advising them of the suspensions.

Jennifer Wislocki, a spokesperson for Hartford, Conn.-based Travelers, said it suspended the writing of new business in the wake of Hurricane Isabels progress. Parts of South Carolina, New York and Delaware were affected by the suspension. In addition, the entire states of Virginia, Maryland, North Carolina, Pennsylvania and Washington, D.C. were all affected. In New Jersey, the companys subsidiary, First Trenton, suspended coverage.

On Wednesday, Travelers said it had mobilized a Catastrophe Response Team to assist insureds in Raleigh, N.C.; Richmond, Va.; and Washington, D.C. In addition, Travelers dispatched four mobile claim offices to the area.

State Farm Insurance Co., based in Bloomington, Ill., was suspending coverage along the track where the National Weather Service placed either hurricane watch or warning, said company spokesperson Ana Compain-Romero.

Sue Honeyman, a spokesperson for Hartford, Conn.-based The Hartford Financial Services Group, initially said the company has issued suspensions for five states–Florida, Georgia, North and South Carolina, and Virginia–pertaining to new and additional property coverage. But as the eye of the storm moved toward North Carolinas Outer Banks on Thursday, she said that the list had been revised. While Florida and Georgia were removed, the company listed 13 states for which new or additional property coverage should not be bound or issued for risks located within 100 miles of the coast.

On Wednesday, Ms. Honeyman said the carrier has placed between 50-to-100 catastrophe experts on alert and has secured operational space in North Carolina and Baltimore in advance of the storm.

"We are ready. All we need is a storm," she said.

For updated information on insured damage from the storm, go to NUs Online News Service at www.nationalunderwriter.com/pandc.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.