# 7 U.S. Cat Losses Not As Bad As Feared

From a catastrophe standpoint, the beginning of 2010 must have had more than a few U.S. insurers dreading the rest of the year as earthquakes and a serious winter storm in Europe brought calamity to far-off points of the world.

However, the dire warnings of a fearsomely active hurricane season pretty much bypassed the United States, instead wreaking havoc on less developed nations where the insurance penetration was practically nonexistent.

Early January experienced two notable earthquake incidents.

A 6.5 magnitude quake off the northern coast of California was felt as far away as Reno, Nev., and Eugene, Ore. No significant damage or injuries were reported. One modeler's estimate put total damage at more than $12 million but said it would not produce a significant number of insurance claims.

Days later, a more significant earthquake event occurred, devastating Haiti with a 7.0 magnitude quake, destroying the nation's capital Port-au-Prince and inflicting billions of dollars in economic damage the country continues to suffer today.

In insurance terms, losses in Haiti were considered minimal with the island nation holding a total property and casualty market under $20 million.

The two events prompted the Insurance Information Institute to issue a warning that the United States is vulnerable to the same devastation experienced in Haiti and to urge homeowners in earthquake-prone areas to purchase earthquake insurance. The I.I.I. noted that only 12 percent of California homeowners have earthquake coverage.

Soon to follow in late February was the 8.8 magnitude earthquake off the coast of Maule, Chile. That event, in a more developed nation, produced insured loss estimates between $2 billion and $10 billion.

That event was the first of eight natural catastrophes around the globe to cost the worldwide insurance industry more than $1 billion in 2010, according to a recent Swiss Re report.

Earthquakes in Taiwan and Turkey followed in March.

A catastrophe modeler's estimate of the 6.4 magnitude quake in Taiwan put the economic damage at less than $1 billion, while in Turkey the 5.9 magnitude earthquake took 51 lives in the sparsely populated province of eastern Elazig. Insured losses were expected to be insignificant because insurance penetration is low in the nation.

At around the same time Chile suffered its earthquake, Europe suffered a winter storm. Winter storm Xynthia swept through Portugal, Spain, France, Belgium, the Netherlands, Luxembourg and Germany. One estimate put insured losses at up to $4 billion from that storm alone.

By the midpoint of the year, Moody's Investor Services noted that U.S. p&c insurer's earnings were down from catastrophes suffered during the first half of the year. Positive reserve development, however, offset the downtrend to some degree, the rating agency said.

In September, New Zealand was rocked by a 7.0 magnitude earthquake and modelers put insured losses at between $1 billion and $4.5 billion. The event was significant enough to push down net income for a number of Bermuda reinsurers by 20-50 percent in the third quarter. Earlier this month, one Bermuda company, PartnerRe, said claims from the event that were newly filed in November and December might push the industrywide loss up to $5.5 billion and the Pembroke, Bermuda-based reinsurer's individual loss up to around $150 million, more than doubling an initial September estimate of $64 million.

Other, smaller catastrophes also contributed to insurer losses.

Severe storm damage from hail and wind continued to take a toll on insurers throughout the year. Munich Re estimated that a total of 725 weather events from January to September caused $18 billion in damage and were an indication of a probable link between increased weather extremes and climate change.

Storms continued to devastate the U.S. and Asia throughout the year, and an active hurricane season took a toll on the Caribbean.

Hurricane Tomas passed through the region in late October with enough force to trigger payment out of the Caribbean Catastrophe Risk Insurance Facility totaling $12.6 million to the governments of Barbados, Saint Lucia, St. Vincent and Grenada.

However, as fearful as that was, the real concern–a major hurricane striking the U.S. coast–did not materialize. A total of 19 named storms sprang up during the Atlantic Hurricane season, with 12 becoming hurricanes.

Tropical storm Bonnie and tropical storm Hermine were the only notable named storms to make it to the U.S. shore.

Bonnie first hit Miami with 40 mph winds that caused virtually no damage and later broke up as it hit the Louisiana coastline in July.

Hermine crossed into Texas in mid-September, generating around $100 million in insured losses from tornadoes and heavy rains.

In a report on the reinsurance industry, Moody's Investor Service said worldwide catastrophe losses were in line with the average over the last 20 years in 2009 dollars. Swiss Re said natural catastrophes cost the global insurance industry $31 billion this year and man-made disasters triggered $5 billion in additional losses for a total cost of $36 billion.