Stormy weather is never good news for property-casualty insurers. But after two relatively mild years for hurricanes, policyholders were walloped by a pair of monster events, prompting carriers to pay more catastrophe losses for 2008 than in the prior two years combined.

Through three quarters, over $21 billion in property losses were estimated for insurers across the country, compared with a total of $15.5 billion in 2006 and 2007 together.

The year started off rough, with nine events causing $3.35 billion in insured losses, according to the Property Claims Services unit of the Insurance Services Office Inc. That was quite a bit higher than the $1.26 billion recorded in 2007 and the $1.48 billion the year before. Indeed, this year's first-quarter cat loss was the biggest in the last decade.

It didn't get any better in the second quarter, with 16 events causing $6.03 billion in catastrophe losses, PCS reported–the most in seven years.

The third quarter, including preliminary losses from both Hurricanes Gustav and Ike, saw 11 events spur $11.5 billion in claims–nearly five-times higher than the $2.5 billion in the last two years combined, but far lower than 2005′s Katrina-led $48.4 billion.

The good news is that it could have been worse. Hurricane Gustav, which battered Gulf Coast states, did not hit New Orleans head on, as many forecasters feared. And while the storm sent water pouring over the Louisiana levees, the barriers this time were not breached, holding up far better than against the more potent Hurricane Katrina.

While early estimates cited insured Gustav losses of as much as $10 billion, the latest estimate from PCS is actually far less–at $2.15 billion.

However, Hurricane Ike hammered the United States shortly afterward, causing far more widespread havoc. The storm was described as "very unique" by modeling firm AIR Worldwide, which on Oct. 31 noted that Ike had re-gathered strength and did more damage once it joined up with another dangerous weather system after being downgraded from hurricane status.

Ike came ashore in Texas but swept up through the Midwest, knocking out power at NU's home office in Erlanger, Ky. The latest PCS estimate of insured damage stands at $10.66 billion.

That number could go higher, however, as three months after the storm first hit the Texas coast, the devastated city of Galveston is still recovering from Ike, with adjusters yet to settle all of the claims.

There were a number of other major storms–such as Hurricane Hannah, which squeezed between Gustav and Ike–but damage was relatively minimal compared to the year's two monster events.

Underwriters wondered whether the huge cat losses might end the soft market. But analysts were skeptical, given the deep reservoir of capital still underpinning the industry–although there was talk that for disaster-prone areas, property rate cuts might be coming to an end.

With new capital almost impossible to come by these days after the stock market dive and credit crunch, higher prices are far more likely for Jan. 1 renewals. Catastrophe rates are expected to be stable for most, and heading up for the most vulnerable risks.

There was also some good news–at least from the industry's perspective. On Oct. 30, NU reported that the Mississippi Insurance Department had issued a 42-page report following a 22-month examination of State Farm's handling of Katrina claims. Policyholders had filed hundreds of lawsuits.

The department found that State Farm did not intentionally mistreat Mississippi policyholders but did make mistakes that led to customer dissatisfaction and complaints over its Katrina claims-adjusting.

Looking ahead, ProtectingAmerica.org–a lobbying group supported by Allstate that is pushing for creation of a national backstop for state catastrophe funds–was quite pleased with the election of Barack Obama, who voiced support for the idea while campaigning for the White House.

Campaign promises, however, are made to be broken, and whether this particular one survives the current fiscal and economic crisis remains to be seen.

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