U.S. P/C insurers cumulatively paid $408 billion in catastroph- related claims to their auto, homeowners and business policyholders between 1990 and 2011, yet the overwhelming majority remain well-capitalized in 2012, according to Dr. Robert Hartwig, CPCU, an economist and president of the Insurance Information Institute (I.I.I.).
“I am confident the residents of Tuscaloosa, Alabama and Joplin, Missouri, as well as other disaster-stricken communities, are glad their insurers had the resources last year to meet their financial commitments,” Dr. Hartwig stated.
Besides causing significant losses of life, the Tuscaloosa/Birmingham tornadoes in April 2011, and the one which struck Joplin in May 2011, generated insurance claims totaling about $2 billion in each instance. The Joplin tornado set into motion the biggest insurance event in Missouri’s history, according to Missouri Insurance Director John Huff.
The I.I.I. cited the following U.S. historical data involving insurance and natural catastrophes in challenging assertions made in a report from the Consumer Federation of America:
- Natural catastrophe caused claims payouts to U.S. P/C policyholders grew seven-fold as a share of total claims payouts between 1960 and 2010. The trend has accelerated over the past two decades, with hurricanes and tropical storms accounting for 44 percent of natural catastrophe-caused insurance claims payouts dating back to the early 1990s through today, and tornadoes generating 30 percent of the payouts.
- The extraordinary spring tornado season in the U.S. in 2011, coupled with severe winter weather and Hurricane Irene, reduced the P/C insurance industry’s cumulative policyholders’ surplus—the amount of money remaining after an insurer’s liabilities are subtracted from its assets— to $538.6 billion as of September 30, 2011, 3.3 percent lower than the $556.9 billion policyholders’ surplus at year-end 2010.
- P/C insurers are in the risk management business. As such, insurers have, with the approval of state lawmakers and regulators, instituted hurricane deductibles in recent years to allow them to write policies in the most hurricane prone parts of the U.S. This has made private-sector coverage more available and affordable in coastal areas than would otherwise be the case.
“The premium an auto, home or business insurer charges must be commensurate with the risk they are assuming on behalf of the policyholder,” Dr. Hartwig said. “Insurers remained solvent, met their financial commitments, and some even grew their businesses during one of the most challenging economic downturns since the Great Depression. The industry’s business model was put to the test, and passed with flying colors.”
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