Early Winter Figures Show Catastrophic Loss Doomsayers May Be Right

If projections from Ohio are to be any indication, the early 2014 deep freeze could have catastrophe losses coming in much higher than 2013, as analysts and insurers anticipated.

Insurance officials from the Buckeye State said the January deep freeze, which was accompanied by large amounts of snow and ice, could be “one of the costliest winter storms in the state in recent decades,” reported the Insurance Journal.

“Preliminary figures released by the Ohio Insurance Institute show that the bills for broken and frozen water pipes, ice buildup and wind damage Jan. 5-8 will end up running from $97.8 million to $124.4 million,” the news site added.

According to the Columbus Dispatch, there have been 14,748 claims so far, across multiple insurers, with about 75 percent originating from homeowners. (Businesses account for most of the remaining 25 percent.)

The state, since the first of the year, has experienced wind chill temperatures as low as 49 below zero, and a number of cities posted “record low temperatures,” IJ stated.

The site continued: “Winter storms in Ohio had not caused this much damage since December 2004, when insured losses totaled $105 million in today’s prices. A blizzard in March 1993 caused insured losses of $193.5 million.”

“It’s been a busy winter,” said Nationwide senior claims director for cat operations Ken Escoe. “We’ve had our Nationwide catastrophe team working claims in various states – probably at one point 30 states.”


The National Outlook

Last week, the Insurance Information Institute (I.I.I.) weighed in with its own projections of just how bad the winter of 2014 will be on a national scale. The findings are anything but comforting.

According to a release from the New York Press Office, it’s poised to become one of the “top five costliest winters since 1980.”

The report estimates that damages from January 1 through February 24 have already totaled $1.5 billion, with more than 175,000 claims paid.

“The figure includes only two of the four 2014 winter storms to date,” the release stated, adding that the calculations “include roof collapses, downed tree limbs and power lines, burst pipes from freezing and auto accidents.”

Also, many companies have lost money due to “sustained business interruption and supply chain losses” brought on by the severe travel and transportation delays and business closings. “Winter does not officially end until March 19,” the organization added.

“Severe winter weather, including snow, sleet, freezing rain, extreme cold and ice damage, accounted for 7.1 percent of all insured catastrophe losses between 1993 and 2012, placing it third behind hurricanes and tropical storms (40 percent) and tornadoes (36 percent) as the costliest natural disasters,” said Dr. Robert Hartwig, president of the I.I.I. and an economist. “While most winter storm losses occur in northern and mountainous regions of the United States, this spate of severe cold has also affected millions of home and business owners in the south, many of whom were unprepared for such extreme conditions.”

Hartwig also consoled insurance customers who may be a little panicked that their insurer didn’t adequately plan for the catastrophes, stating that the losses were “well within the magnitude planned for by insurers,” and that “the insurance industry entered 2014 in rock solid financial condition, with record claims paying capital.”

Here’s the full report from the I.I.I.


In Summary

The analysts and insurers are in agreement that 2014 could be a much busier year for cat losses due to a largely inactive 2013, but thus far, it appears that companies have planned for the boost in activity with enough reserves to meet the coming challenges. While the winter storms are only a small part of what is to come — if history is a guide anyway — this year is shaping up to be a textbook example of the long-term planning that insurers have to consider when weighing profits and losses.

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