Gustav Claims Rise, With Ike On The Way

While catastrophe modelers say Tropical Storm Hanna should not be a "significant" loss event for property insurers, claims from the earlier Hurricane Gustav continue to pile up as the industry braces itself for yet another hit, with Hurricane Ike heading for the Texas coast as this edition went to press.

(For a progress report on damages from Hurricane Ike and earlier storms, check the NU Online News Service at www.propertyandcasualtyinsurancenews.com.

As for Gustav, while losses are still being tallied, the number of claims appears to be running into the tens of thousands.

State Farm, the top personal lines insurer in the four states suffering the worst Gustav losses--Alabama, Arkansas, Louisiana and Mississippi--said it had received 41,827 homeowner and 5,800 auto claims from those four states, plus Florida and Texas.

However, 99 percent of State Farm's Gustav claims at last count were from Louisiana, according to the carrier's representative, Jeff McCollum.

Allstate, the second-largest personal lines insurer in the four worst-hit states, is seeing a variety of claims, from minor damage to homes, to trees falling on top of houses, according to its representative, Mike Siemienas, who did not give claims figures. He said the company is responding in force, and is prepared to respond to Ike and multiple hurricanes with claims personnel and mobile claim units.

At Travelers, the top insurer for commercial risks in the four worst-hit states, Ray Stone, vice president of catastrophe operations, said the claims from Gustav are "about what you would expect"--primarily from wind damage ranging from food spoilage to large trees splitting homes.

He said while there are some major claims, the overall picture is not severe. The company is seeing both personal and commercial lines claims, but a minimal amount of auto losses. Travelers was in the process of pre-staging resources in anticipation of Hurricane Ike and is ready to deliver the services needed, he added.

According to Highline Data, an affiliate of National Underwriter, the top-five companies affected by Gustav in personal lines in the four worst-hit states are State Farm (28 percent of the market), Allstate (12 percent of the market), Southern Farm Bureau (6.2 percent of the market), Alfa Insurance Group (6 percent of the market) and Progressive Group (5.9 percent of the market). The total direct premium written is $11.78 billion.

On the commercial side (property and auto), Travelers is the number-one insurer in those four states, followed by Zurich Insurance Group, State Farm, Progressive Group and American International Group. Direct premium written totals $3.22 billion.

According to catastrophe modelers, losses from Gustav could range from a low of $2 billion to as much as $10 billion.

In a statement, Wilhelm Zeller, chief executive officer of Hannover Re, said the company expected a net loss of less than EUR100 million ($141 million at current exchange rates) from Gustav. The company budgeted EUR400 million ($564 million) for catastrophes this year, according to Mr. Zeller, who said Gustav's "burden of losses still puts us well within our catastrophe loss budget."

The National Security Group Inc., based in Elba, Ala., said it expected its insured losses to fall in the range of $3.3 million and $6.7 million. The company's net losses and associated claims settlement costs are expected to range from $3.3 million to $4.5 million. The carrier noted that it retains the first $3.5 million before reinsurance kicks in.

National Security Group said Gustav "is not expected to have a material impact" on the company's financial condition but would affect this year's results.

Meanwhile, catastrophe modelers said insured losses from Tropical Storm Hanna, which hit the U.S. East Coast after Gustav struck the Gulf states, should not be "significant."

Indeed, from an insurance loss standpoint, "I would be shocked if it turned out to be significant. I do not see any major impact from this one," Steve E. Smith, president of Property Solutions at Carvill ReAdvisory, a reinsurance brokerage in Chicago, told National Underwriter.

AIR Worldwide in Boston also said that insured losses resulting from Hanna were expected to be relatively insignificant.

Mr. Smith said that while the forecast track was correct, the speed of the storm--which moved at more than 25 miles per hour along the coast--kept it from dumping large amounts of rain similar to Tropical Storm Fay, which began in the middle of August and lingered over Florida for days.

Neena Saith, catastrophe response manager with catastrophe modeler Risk Managment Solutions, told NU that Hanna was expected to be an insignificant insurance loss in North America, adding that most of the damage was in Haiti, where there is little insurance penetration.

With Tropical Storm Josephine dissipating Saturday morning, all attention turned to Hurricane Ike, which rampaged through Cuba last week after taking hundreds of lives in Haiti, which has still not recovered from Hanna.

However, the Turks and Caicos Islands took the worst blow from Ike, with Category 4 winds causing significant damage.

Ike is expected to build strength in the Gulf, aiming for the Texas coastline, where it was expected to hit this past weekend, after this edition went to press.

Hurricane Ike's target zone includes properties along the Texas coast with insured value of over $890 billion, according to one catastrophe modeler, but the extent of insured losses will greatly depend on just where the storm lands.

Boston-based AIR Worldwide said in a recent report, "The Coastline At Risk," that it estimates the insured value of residential and commercial properties in Texas coastal counties exceeding $890 billion. However, AIR went on to say, the distribution of exposures is far from uniform.

"The largest concentrations are along the northern part of the coast, near Houston," Peter Dailey, director of atmospheric science at AIR, said in a statement. "The five northernmost coastal counties, including Houston's Harris County, account for 85 percent of the total coastal exposure in Texas."