US Property Casualty Insurers Face Record Catastrophic Losses From Texas Weather: Fitch

U.S. property casualty insurers are expected to face record catastrophic losses in the first quarter due to last week’s severe winter weather in Texas, Louisiana and other southern states, according to Fitch Ratings.

The widespread scale and claims volume of the event is expected to result in ultimate insured losses to a range of $10 billion to $20 billion. Over the past 10 years, U.S. industry first-quarter catastrophe losses have averaged $4.6 billion, with a high of $7.6 billion in 2017.

In a statement, Fitch noted that extremely cold temperatures and ice had caused extensive property damage, and there are hundreds of thousands of claims from frozen/burst pipes, roof damage, power outages and lost business income that will pressure near-term insurer results.

However, losses are likely most concentrated within large homeowners writers that have effective claims resources and are well capitalized to absorb short-term volatility from outsized catastrophic events.

According to the Texas Insurance Department, the state has 4.9 million homeowners’ policies with over $10 billion in annual written premiums.

Catastrophe losses tied to storms in southern states are expected to materialize from homeowners, auto business and various commercial insurance coverages.

Insured losses in Texas are likely heavily weighted toward personal lines coverage from homeowners losses and, to a lesser extent, automobile claims relative to commercial lines coverage, Fitch noted.

Based on 2019 direct premium volume, the largest homeowners writer in Texas and Louisiana combined by some measure is State Farm Mutual Insurance Group with a 19.6% market share, followed by The Allstate Corp. with a 13.6% share and USAA with a 9.4% share.

The credit rating agency stated, based on data collected from ISO’s Property Claims Services unit loss estimates, that the first-quarter 2021 catastrophe losses are usually relatively low to moderate and have represented only 16% of total catastrophe losses over that 10-year period.

First-quarter catastrophe losses will inhibit performance for 2021, but ultimate results will hinge more on the volume and severity of tropical storms and wildfires events as the year progresses, Fitch noted.

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