Charley, Frances and Ivan combined could top Andrew

With Hurricane Ivan predicted to be the costliest of the three hurricanes which have hit the U.S. this season, combined with the earlier Charley and Frances, the events could top the insured loss from 1992’s Hurricane Andrew.
Andrew, the worst storm in U.S. insurance history, produced losses which in 2004 dollars are near US$20 billion. While Charley’s insured losses are around $7 billion, and Frances is somewhat lower at US$6 billion, Ivan could top both of these, according to early estimates. And early estimates vary widely for Ivan, but could approach US$10 billion.
Fitch Ratings notes that if Ivan hits the top end of estimates, it would be the second costliest hurricane on record in the U.S. More importantly, notes a Fitch report, 2004 will now be considered an above-average year for catastrophe losses the annual average for U.S. cat losses is US$11 billion.
The potential implications of this could be to stem the recent softening of property (re)insurance pricing, Fitch notes, especially as Ivan has the potential to more seriously impact reinsurers than Charley or Frances. Ivan is also significant due to the extent of damage occurring outside of Florida while Florida has a state-sponsored reinsurance program, other states hard hit by Ivan do not.
Both Florida and Louisiana have public primary insurers which act as “markets of last resort”, although Louisiana’s is a relatively new entity with less surplus built up. Fitch sees potential for some assessment to private insurers from these primary state carriers, but less potential for an assessment from the Florida Hurricane Catastrophe Fund (FHCF).
The events could prove a watershed in Florida’s attempts to keep insurers in the state but also to impose regulatory constraints on them. “Regulatory risk remains high, particularly in Florida. Homeowners have come to the realization that multiple events mean multiple deductibles. Additionally, if Citizens (the market of last resort) makes an assessment, the cost of that assessment will be built into future premiums,” Fitch notes. “Conversely, many of the large, national, primary insurers have formed ‘Florida only’ subsidiaries. As we have indicated previously, Fitch believes the purpose of those subsidiaries is not to avoid claims but, rather, to make credible an insurer’s threat to leave the state if regulation becomes too onerous.”