Hurricane Ian damage in Matlacha, Fla. The catastrophe modeling firm Karen Clark & Co. estimates that total damage from the storm could exceed $100 billion, with private insurance carriers on the hook for $63 billion. (AP Photo/Gerald Herbert)
As one analyst predicts $63 billion in insurance claims from Hurricane Ian, Connecticut's cluster of specialty insurers are girding to cover a portion of those losses through reinsurance policies they sell — putting additional pressure on home and auto insurance rates as carriers look to recoup losses.
Ian was one of three massive storms hitting the United States and its territories within the span of a few weeks, along with Hurricane Fiona which walloped Puerto Rico and Typhoon Merbok in Alaska.
In initial estimate by Karen Clark & Co., the Boston catastrophe modeling firm estimated a $63 billion pay-out by insurers to cover Ian exposure, not including claims filed under the National Flood Insurance Program backed by the U.S. government.
"Hurricane Ian will be the largest hurricane loss in Florida history," Karen Clark & Co. analysts wrote in an initial estimate on Ian's toll. "The total economic damage will be well over $100 billion, including uninsured properties, damage to infrastructure, and other cleanup and recovery costs."
Private insurers will pick up much of that tab, with underwriting profits having tightened considerably in the past year with diminishing stock market returns, and as inflation has pushed up the cost of claims filed by policyholders who incur losses.
After a $5.2 billion profit on their underwriting in 2020, U.S. insurers swung to a $3.8 billion loss the following year as estimated by the American Property Casualty Insurance Association and Verisk. Overall earnings increased slightly to $61.9 billion in 2021, however, as insurers more than made up for their underwriting losses with gains in the investment markets.
Insurers lean on reinsurance policies for catastrophic events that threaten massive pay-outs, such as for hurricanes, floods, earthquakes or other perils.
Connecticut has a large cluster of reinsurers, including the Stamford headquarters for Berkshire Hathaway and subsidiary General Reinsurance, along with Navigators Re, Odyssey Re and XL Reinsurance; Everest Re and PartnerRe with satellite offices there; Axis Capital with a Hartford office; and Arch Capital with reinsurance offices in Farmington and Hartford. Munich Reinsurance, the largest globally, owns the specialty insurance carrier Hartford Steam Boiler.
Berkshire Hathaway also owns the largest underwriter of standard property and casualty insurance in Connecticut: Geico, which has been adding storefronts in Connecticut the past few years to push annual premiums to more than $480 million
In August, Hearst Corp. subsidiary Fitch Ratings says reinsurers were already raising rates to stay ahead of inflation and underwriting pressures, putting pressure on standard insurers to follow suit. The CEO of W.R. Berkley delivered a similar outlook the prior month, with the Greenwich-based company offering specialty insurance including niche reinsurance products.
"Property cat is one of the product lines that is getting the most robust amount of rate," said CEO Rob Berkley, speaking on a conference call. "It's probably one of the product lines — whether it's insurance or reinsurance — that has been most under-priced for an extended period of time."
Alex.Soule@scni.com; @casoulman