The estimated $25 million in losses from Hurricane Sandy is not pushing up the price of property-catastrophe insurance, but it has highlighted insurers' concerns about catastrophic exposures in the Northeast and may lead to revised loss estimates and changes in terms and conditions, according to the Spring 2013 State of the Market Report by wholesale broker NAPCO.
The biannual report notes that global insured catastrophe losses reached a total of $65 billion in 2012, down from a high of $119 billion in 2011. Despite the impact of Sandy in the 4th quarter of 2012, losses were only about 5 percent of policyholder surplus and barely made a dent in the industry's underwriting capacity. In early 2013, prices were flat to up 10 percent on accounts that were not loss impaired. If catastrophe losses stay low, insurers may face increasing pressure to reduce prices to put that capital to work.
"While Sandy's impact on insurance pricing has been limited, the storm has forced insurers to consider a new norm in the Northeast," said David Pagoumian, president of NAPCO. "In the next few years, catastrophe models, risk assessments and pricing in this region will move toward current practice in the Southeast region."
The NAPCO report combines insights from leading brokers with an analysis of leading property-catastrophe indicators, highlighting industry performance, major losses and the outlook for the rest of the year. Among the findings:
* The frame habitational market is in disarray, with insurers exiting the market and the price of insurance up as much as 50 to 100 percent in the Midwest.
* The definition of Tier I windstorm counties may expand up to the coast of Maine.
* The flood insurance market is attracting increased activity because of flooding in areas not considered high-risk zones.
Download the full Spring 2013 State of the Market Report at http://bit.ly/SOTMspring2013 (PDF) for expanded Sandy analysis and placement considerations.
NAPCO (www.napcollc.com) is a leading wholesale broker of commercial property insurance coverage, providing retail agents and brokers with an efficient, single-source independent marketing arm for difficult placements that have significant exposure. The company utilizes in-depth research and sophisticated risk modeling to implement coverage and cost-effective programs. Headquartered in Iselin, N.J., NAPCO provides access to the global insurance market, including major and specialty domestic carriers, excess and surplus lines markets, reinsurers and international providers.