Canadian Underwriter

Marsh report outlines post-Katrina world

November 25, 2005   by Canadian Underwriter

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Hurricanes Katrina and Rita were “insurance-market-changing” events that many US insurers say will return property insurance rates to their 2003 levels, according to a white paper released by Marsh & McLennan Cos.
“Catastrophe rate increases are ranging from 10% to more than 100%,” notes the Marsh report, entitled ‘The Impact of Nature: The Aftermath of Hurricanes Katrina and Rita.’
“Catastrophe deductibles are also increasing, with some insurance markets looking to expand their wind deductibles beyond just Tier 1 zones and others looking to combine wind and flood aggregates.
“Some insurance programs are reducing their reliance on difference in conditions (DIC) insurance markets by placing more catastrophic risk in their property placements, which entails involving more layers of coverage and more insurance markets to build the necessary capacity.
“Businesses with no known catastrophe risks have generally seen their post-Katrina renewals varying from single-digit reductions to 10% increases.”
The report notes that historically a greater percentage of the burden from hurricane-related losses has fallen on the personal lines insurance market. But “significant commercial industries affected by Katrina,” the report notes including 70,000 business in Louisiana alone indicate “a reversal of this typical ‘market share.'”
Dowling & Partners predicts 60% to 70% of the losses will fall on commercial lines versus 30% to 40% on personal lines, the report notes. “To date, commercial insurers have reported loss estimates of roughly $US20 billion.”