Cat Losses Could Reach $150B

Increasing property values in high risk areas have given rise to potential insured losses of over $150 billion in the wake of a major earthquake or hurricane, according to AIR Worldwide President and Chief Executive Officer Karen Clark.

Speaking to members of Congress and staffers today at a seminar hosted by the congressional Research Service in the Capitol, Ms. Clark said there is no single worst-case scenario that would result in such extreme losses.

"There are many potential natural catastrophe scenarios resulting in insured property losses exceeding $100 billion," she said. "Examples include a Category 5 hurricane making landfall in Miami, which could result in insured losses of more than $130 billion, and a large magnitude earthquake in the central U.S., which could result in insured losses of more than $150 billion."

Adding to the exposure, and therefore the threat to insurers, policyholders and the overall economy, are rising property values in such high risk areas as Florida, New York, Texas and also sections of California such as Los Angeles or San Francisco. Ms. Clark said that AIR has estimated that the total value of properties in high risk areas has doubled over the past decade, with no end to this trend in sight.

"There is a 1 percent probability of an insured property loss exceeding $100 billion this year," said Ms. Clark. "That may appear small to some, but the probability of experiencing this loss or greater over the next 10 years is almost 20 percent when the continual growth in the number and value of exposed properties is included."