ICS Magazine

Isabel No Problem for Insurance Industry

September 19, 2003
NEW YORK (Reuters) - Hurricane Isabel, which punished the U.S. mid-Atlantic coast with heavy wind and rain, will not have a major impact on the insurance industry because it slowed in intensity and hit land at a less populated area than feared, according to industry experts on Friday.

While earlier in the week estimates pointed to a possible $4 billion bill for insurers, now some estimate it could cost less than $1.0 billion. The loss may only be $500 million, according to an estimate by Risk Management Solutions.

This would be far less than hurricanes from recent years.

By comparison, 1999's Hurricane Floyd caused $2.1 billion worth of insured damage, 1989's Hugo $6 billion and 1992's Andrew nearly $20 billion, all adjusted to 2002 dollars, according to the Insurance Information Institute. Andrew was the most costly storm ever.

"It's going to be nothing near what people were projecting it to be," said Loretta Worters, a spokeswoman with the Insurance Information Institute. But a senior executive with American International Group Inc., the world's largest insurer by market value warned the cost of the hurricane could weaken the balance sheets of insurers whose balance sheets are already fragile.

"It is too early to tell how big Isabel will be but it is certainly going to put a capital strain on many companies," Martin Sullivan, AIG's vice-chairman and co-chief operating officer told a meeting of insurers in London.

The two most exposed home and auto insurers to the areas hit by Isabel, Allstate Corp. and State Farm, have both said they are well-prepared to deal with damage claims.

Two major European insurers that provide backup insurance to U.S. companies said they would be lightly affected by the storm.