One Year Later: Update on Claim Payouts to Alabama Policyholders

Transcription

1 One Year Later: Update on Claim Payouts to Alabama Policyholders Insurance and Economic Recovery in the Wake of the April 211 Tornadoes Insurance Information Institute April 19, 212 Download at Robert P. Hartwig, Ph.D., CPCU, President & Economist Insurance Information Institute 11 William Street New York, NY 138 Tel: Cell:

2 Summary of Key Points Insurers Paid Nearly $3 Billion to 133, Alabama Home, Business and Vehicle Owners in Claims Arising from Tornadoes, Hail and High Winds During the Week of April 22-28, 211 Total claim payouts were nearly 5% higher than early estimates suggested The April storm accounted for 93% of all AL catastrophe losses in 211 AL claims paid for the April storms accounted for 4% of the US total ($7.3 bn) 211 Was the Worst Year in AL History for Catastrophe Losses Insured catastrophe losses totaled $3.2 bn arising from nearly 175, claims Homeowners losses accounted for $1.826 bn (66%) of the total from 114,2 claims Homeowners losses paid exceeded estimated premiums collected of by more than $4 million in 211 The average cost of a homeowners catastrophe claim reached a record $15,989 in 211 Between 1998 and 211, Insured Catastrophe Losses Across the State of Alabama Totaled $8.4 Billion Arising from Nearly 1.1 Million Claims Home/Condos/Renters policies accounted for 67% ($5.6 bn) of dollars paid and 73% of the total number of claims; Commercial property accounts for the remainder. 2

3 Actual Claim Dollars Paid to Alabama Are Well Above Early Estimates ($ Billions) $3.5 $3. $2.5 $2. Catastrophe losses paid to AL homeowners, businesses and vehicle owners totaled nearly $3 billion about 5% above early estimates. $2. $2.925 $1.5 $1. May/June 211 Estimates Actual Claim Payouts The April Storms in AL Accounted for About 93% of 211 s Record Total $3.2 Billion in Claims Paid to Policyholders in the State Sources: Actual catastrophe loss data is for Catastrophe Serial No. 46 (April 22 28, 211) from PCS as of April 13, 212; May/June 211 estimates derived from various catastrophe loss model estimates; Insurance Information Institute. 3

4 Distribution of Claim Dollars Paid to AL Policyholders for Apr Storms ($ Mill) Vehicle, $15, 5% TOTAL = $2.925 BILLION Homeowners (including renters and condo policies) accounted for 57% of the claim dollars paid by insurers but 63% of the actual number of claims Commercial, $1,125, 38% Home, $1,65, 57% Sources: Catastrophe loss data is for Catastrophe Serial No. 46 (April 22 28, 211) from PCS as of April 13, 212; Insurance Information Institute.

5 Distribution of Number of Claims Paid to AL Policyholders for Apr Storms Vehicle, 3,, 23% TOTAL = 133, CLAIMS PAID Homeowners (including renters and condo policies) accounted for 57% of the claim dollars paid by insurers but 63% of the actual number of claims Commercial, 18,, 14% Home, 85,, 63% Sources: Catastrophe loss data is for Catastrophe Serial No. 46 (April 22 28, 211) from PCS as of April 13, 212; Insurance Information Institute.

6 Average Claim Payment by Type of Claim $7, $6, $5, $4, $3, $2, $1, Commercial (i.e., business claims) are far more expensive because the value of property is often higher as well as the impact of insured business interruption losses $5, $19,412 $62,5 $ Vehicle Home* Commercial Commercial (Business) Claims Were More than Three Times More Expensive than Homeowners Claims *Includes rental and condo policies. Sources: Catastrophe loss data is for Catastrophe Serial No. 46 (April 22 28, 211) from PCS as of April 13, 212; Insurance Information Institute. 6

7 Claim Payments to Policyholders, by State for the April Storms $3,5 TOTAL = $7.3 BILLION $3, $2,5 $2, $1,5 $2,925 $2, At $2.925 billion, AL suffered, by far, the largest losses from the Apr storms $1, $5 $ $59 $435 $338 $35 $169 $112 $111 $9 $8 $79 $66 AL TN TX GA AR MO MS KY OH VA LA IL OK Alabama Claim Payout Accounted for 4% of the $7.3 Billion US Total for the April Tornado and Storm Event, Which Affected 13 States Sources: Catastrophe loss data is for Catastrophe Serial No. 46 (April 22 28, 211) from PCS as of April 13, 212; Insurance Information Institute. 7

8 Alabama s 211 Severe Storm Loss Summary Tornadoes, Hail and Severe Thunderstorms Took their Toll 8

9 Severe Weather Reports in Alabama, January 1 December 31, 211 There were 1,311 severe weather reports in AL in 211 ALABAMA Total Reports = 1,311 Tornadoes = 177 (Red) Hail Reports = 217 (Green) Wind Reports = 917 (Blue) Source: NOAA Storm Prediction Center; 9

10 Insured Catastrophe Analysis for Alabama Insurance Markets: Focus on Homeowners Claims Alabama Has a Long History of Experience of Catastrophic Loss; Loss Data Are Trending Adversely 1

11 211 Catastrophe Losses in Alabama s Homeowners Market Dwarf Premiums Paid ($ Billions) $1.9 $1.8 $1.7 $1.6 $1.5 $1.4 $1.3 $1.2 $1.1 Catastrophe losses paid to homeowners in AL are estimated to exceed premiums collected for the line by $437 million or 31.5% in 211 $1.389 $1.826 $ Homeowners Insurance Direct Premiums Written* 211 Insured Homeowners Catastrophe Losses Insurers ROE in the AL Homeowners Line in 211 Will be Negative by Several Hundred Percent Sources: Homeowners DPW for AL is III estimated based on assumed 5% growth over 21 actual of $1.323 bn.; Catastrophe loss data is from PCS as of Dec. 7,

12 Value of Insured Catastrophe Losses in Alabama, by Segment, * $1,826 $1,331 ($ Millions) $3,5 $3, $2,5 $2, $1,5 $1, $5 $ Commercial Lines Homeowners From insurers paid $8.4 billion to nearly 1.1 million AL victims of catastrophes for damage to their homes and businesses $225 $33 $91 $1 $125 $ set a new record for catastrophe losses at $3.157 billion. 58% ($1.826B) of the losses paid went to homeowners, 42% to businesses $1,775 $1,478 $197 $2 $26 $512 $3, Alabama is No Stranger to Catastrophe, but 211 Was Far More Devastating Than Any Year in History $76 *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute. 12

13 Number of Insured Catastrophe Claims in Alabama, by Segment, * 114,2 6,25 Number of Claims 25, 2, Commercial Lines Personal Lines 226, 211 was the costliest year on record and ranked 3 rd in terms of number of claims paid at 174,45. Nearly twothirds (114,2) of the claims paid were to homeowners, 1/3 to businesses 179,4 174,45 15, 1, 115,47 122,7 5, 52,9 32, 18,85 26,3 12,4 53,75 21,5 16, $76 Insurers in Alabama Paid More than 55, Catastrophe Claims on Average Annually Between 1998 and 211, Most to Homeowners *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute. 13

14 Value of Alabama Insured Catastrophe Losses: Homeowners, * ($ Millions) $2, $1,8 $1,6 $1,4 $1,2 $1, $8 $6 $4 $2 $ From insurers paid $5.6 billion to nearly 775, AL victims of catastrophes for damage to their homes $163 $24 $ homeowners claims set a new record at $1.826 billion in 211 $53 $93 $9 $1,5 $944 $134 $14 $151 $38 $1, Insurers Paid an Average of $4 million per Year to More than 55, Homeowners in Alabama from $37 *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute. 14

15 14,355 8,5 23, 19, 9, 3, 31,5 14,2 4, 114,2 96,5 83, 127,3 2, Number of Homeowners Catastrophe Losses Paid by Insurers in AL, * (Number of Claims Paid) 25, 2, 211 saw the 3 rd largest number of homeowners claims since 1998 even though 211 was the costliest year ever ($1.826 Bill). 211 claims were more than double the 55, annual average since , 1, 5, * Insurers in Alabama Paid Nearly 775, Catastrophe Claims Between 1998 and 211 to Homeowners Across the State *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute calculations. 15

16 211 Catastrophic Homeowners* Claim Activity in Alabama, by Event** Date Perils Avg. Pmt $ Total $ Pd. # Claims HO $ % HO # % Event Total 211:Q1 Total Event Total Event Total 211 has been the most expensive in history for insured catastrophe losses paid to Alabama homeowners. Payments totaled $1.826 billion arising from 114,2 claims Event Total 211:Q2 Total Event Total 211:Q3 Total 211 YTD Totals **Through Dec, 7, 211. Source: PCS Division of ISO. *Includes all categories of dwelling policies, such as home, condo and renters policies 16

17 $1,687 $1,686 $2,34 $3, $6,118 $4,895 $4,254 $4,578 $7,5 $7,416 $1,648 $9,25 $15,556 Average Value of Insured Homeowners Catastrophe Loss Claims in AL, * (Cost of Average Personal Lines Claim $18, $16, $14, $12, $1, $8, $6, $4, $2, $ The average homeowners catastrophe claim reached a new record of $15,989 in 211, more than double the average of $6,69 (+163%) from $15, * Insured Catastrophe Losses to Homes in Alabama Are Volatile and Are Trending Upward *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute calculations. 17

18 Cumulative Value of Catastrophe Losses Paid by Insurers in Alabama, * $225 $258 $349 $449 $574 $759 $2,534 $4,12 $4,29 $4,49 $4,614 $5,126 $5,22 ($ Millions) $9, $8, $7, $6, $5, $4, $3, $2, $1, $ Insurers have paid nearly $8.4 billion on almost 1.1 million catastrophe claims in Alabama since The trend in catastrophe losses began to accelerate in 24. $8, * Catastrophe Losses in Alabama Are High Relative to the Size of the State s Economy and Population *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute calculations. 18

19 115,47 134, , ,675 24, , , , ,25 733,25 754,525 1,57, , ,275 Cumulative Number of Catastrophe Losses Paid by Insurers in Alabama, * (Number of Claims Paid) 1,2, 1,, Insurers have paid nearly 1.1 million catastrophe claims in Alabama valued at nearly $8.4 billion since The trend in catastrophe losses began to accelerate in 24. 8, 6, 4, 2, * The Number of Catastrophe Losses in Alabama Is High Relative to the Size of the State s Economy and Population *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute calculations. 19

20 Distribution of Catastrophe Insured Claims in AL, by Segment, * Value of Claims Paid Number of Claims Paid Homeowners 66.8% ($5.59 Bill) Commercial 33.2% ($2.77 Bill) Homeowners 73.2% (774,555 Claims) Commercial 26.8% (283,17 Claims) 2/3 of the catastrophe claim dollars paid since 1998 were for damage to homes *Data are current through Dec. 7, 211. Source: PCS unit of ISO; Insurance Information Institute calculations. Nearly 3/4 of the catastrophe claims paid since 1998 were for damage to homes 2

21 Federal Disaster Declarations: Trending Adversely Alabama Has the 7 th Highest Number of Federal Disaster Declarations From

22 Number of Federal Disaster Declarations, * There have been 2,57 federal disaster declarations since The average number of declarations per year is 34 from , though that few haven t been recorded since The number of federal disaster declarations set a new record in 211, with 99, shattering 21 s record 81 declarations federal disasters were declared through Apr. 18, 212 The Number of Federal Disaster Declarations Is Rising and Set New Records in 21 and 211 *Through April 18, 212. Source: Federal Emergency Management Administration: ; Insurance Information Institute. 22

23 Disaster Declarations Federal Disasters Declarations by State, : Highest 25 States* Over the past nearly 6 years, Texas has had the highest number of Federal Disaster Declarations AL has had 56 federal disaster declarations since 1953, nearly one per year, and has had 1 so far in 212 TX CA OK NY FL LA AL KY AR MO IL TN MS IA MN WV KS NE PA OH VA WA ND NC IN *Through Apr. 18, 212. Source: FEMA: Insurance Information Institute. 23

24 Disaster Declarations Federal Disasters Declarations by State, : Lowest 25 States* Over the past nearly 6 years, Utah and Rhode Island had the fewest number of Federal Disaster Declarations ME SD AK GA WI VT NJ NH OR MA PR HI MI AZ NM ID MD MT NV CT CO SC DE DC UT RI WY *Through Apr. 18, 212. Includes Puerto Rico and the District of Columbia. Source: FEMA: Insurance Information Institute. 24

25 Number of Federal Disaster Declarations In Alabama, * There have been 56 federal disaster declarations in AL since The average number of declarations per year is.9 from , though the number has been higher in recent years The one federal disaster declaration in 211 was associated with the severe tornado and severe storm outbreak in April The Number of Federal Disaster Declarations Spike in 29 Was the Highest Ever, Mostly Associated with Tornadoes, Severe Storms, Straight Line Winds, Floods and Tropical Storm Ida *Through April 18, 212. Source: Federal Emergency Management Administration: ; Insurance Information Institute.

26 SPRING 212 TORNADO & SEVERE STORM OUTBREAKS 212 Is Off to a Worrisome Start, But a Repeat of 211 Is Unlikely 26

27 Number of Tornadoes and Related Deaths, * Number of Tornadoes 1,133 1,132 1,297 1,173 1,82 1,234 1,173 1,148 1,424 1,345 1,71 1, ,376 1,264 1,13 1,98 1,692 1,146 1,282 1, Number of Deaths 2, 1,8 1,6 Number of Tornadoes Number of Deaths Tornadoes claimed 55 lives in 211, the most since , ,4 1,2 4 1, There were 1,691 tornadoes recorded in the US in * 212 Tornado Losses Is Off to a Ominous Beginning. First Half 211 Insured Losses from Tornadoes and Thunderstorms Topped $21B. *Through April 15, 212. Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service at 27

28 U.S. Tornado Count, * There were 1,897 tornadoes in the US in 211 far above average, but well below 28 s record 212 count is running ahead of 211 *Through April 17, 212. Source: 28

29 SUMMARY OF TORNADO AND SEVERE STORM ACTIVITY IN ALABAMA IN 212 Tornado Season Got Off to an Early Start in Alabama This Year 29

30 Location of Severe Storms in Alabama, January 1 April 16, 212 There were 295 severe weather reports in AL so far in 212 ALABAMA Total Reports = 295 Tornadoes = 52 (Red) Hail Reports = 129 (Green) Wind Reports = 114 (Blue) Source: NOAA Storm Prediction Center; 3

31 Location of Tornadoes in the US, 212* 546 tornadoes killed 61 people through April 16 *Through April 16, 212. Source: NOAA Storm Prediction Center; 31

32 RECAP: 211 TORNADO & SEVERE STORM OUTBREAKS 211 Weather Created Near-Record Claim Payouts 32

33 Location of Tornadoes in the US, 211 1,894 tornadoes killed 552 people in 211, including at least 34 on April 26 mostly in the Tuscaloosa area, and 13 in Joplin on May 22 Source: NOAA Storm Prediction Center; 33

34 Location of Large Hail Reports in the US, 211 There were 9,417 Large Hail reports in 211, causing extensive damage to homes, businesses and vehicles Source: NOAA Storm Prediction Center; 34

35 Location of Wind Damage Reports in the US, 211 There were 18,685 Wind Damage reports through Dec. 27, causing extensive damage to homes and, businesses Source: NOAA Storm Prediction Center; 35

36 Severe Weather Reports, 211 There were 29,996 severe weather reports in 211; including 1,894 tornadoes; 9,417 Large Hail reports and 18,685 high wind events Source: NOAA Storm Prediction Center; 36

37 Insurance Information Institute Online: Thank you for your time and your attention! Twitter: twitter.com/bob_hartwig Download at