United States property and casualty insurers paid a record $27.3 billion for insured property losses to homeowners and businesses from 22 catastrophic events last year, according to estimates by Property Claim Services. That figure surpassed even losses from 2001, which included the terrorist attacks of Sept. 11.
In 2004, policyholders in 42 states and Puerto Rico filed nearly 3.35 million personal and commercial property and automobile claims. More than 80 percent of the insured losses were from the five hurricanes that made landfall along the Atlantic and Gulf coasts. The four hurricanes produced a total of 2.23 million claims from policyholders in 16 states and Puerto Rico, with Florida topping the list with 1.63 million claims.
Florida also suffered the highest insured losses at $18.8 billion, all from the four third-quarter hurricanes. Alabama ranked a distant second, at $1.8 billion, followed by Colorado and Pennsylvania at $715 million each, and Georgia at $660 million.
In the fourth quarter of the year, catastrophic activity was mild, with insured losses of $450 million from three events. The last three months of 2004 produced slightly more than 100,000 claims from eight states.
For the coming year, the Insurance Information Institute is predicting slower premium growth and a stable combined ratio. Each year, the institute invites a panel of Wall Street stock analysts and industry professionals to forecast the outlook for the industry.
The combined ratio, which is the ratio of losses and expenses to premiums, is projected to be 98.9, little changed from the 98.7 estimated for 2004 and the 100.1 recorded in 2003, according to Robert Hartwig, senior vice president and chief economist for the III. The forecasts are an improvement over the terrorism-related 115.7 result in 2001, he noted.
"Were the combined ratio in 2004 or 2005 to come in under 100, it would mark the first underwriting profit in the property and casualty insurance industry since 1978," he said. Had catastrophe experience in 2004 been normal, the year's combined ratio would have been in the neighborhood of 95, its lowest level since 1972.
Although the survey results show some expected improvement, the industry still will be paying out almost exactly the same amount in claims and associated expenses as it earns in premiums in 2005, Hartwig continued. Tort costs remain among the factors that most significantly affect insurer financial performance. The failure of class action, asbestos, and medical malpractice reform legislation was among the industry's biggest disappointments in 2004, according to Hartwig. The failure to extend the Terrorism Risk Insurance Act also was a setback for insurers.
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