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Institute for Crisis, Disaster, and Risk Management Crisis and Emergency Management Newsletter Website |
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November
2006
Volume
11 - Number 2 |
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Update On Insurance Losses From Hurricane Katrina
By Richard Timme One year after Hurricane Katrina struck the Gulf
Coast insured losses have crossed the $40 billion dollar mark and cemented
it as the countries most expensive natural disaster, surpassing 1992’s Hurricane
Andrew ($20.9 billion in today’s dollars). The Insurance Information
Institute (III), the Property Casualty Insurers Association of America and
FEMA all cite approximately $40.6 billion in property and casualty payouts
on 1.7 million claims covering both homes and other personal property.
This figure is inclusive of both the National Flood Insurance Program and payouts made on behalf of private insurers. Over $25 billion has been paid by private insures on 1.5 million claims, with over $16 billion in Louisiana and $8 billion in Mississippi. Additionally the FEMA run NFIP has paid out over $19 billion to 205,000 claimants in the region as with approximately 80% of that money going to policy holders in Louisiana. FEMA indicates that over 99% of all claims with NFIP have been paid, while III cites settlement rates of over 94% of homeowners claims in both LA and MI. However the claims process may stretch on for years as disputes with insurers make their way through the courts. At least 1,100 Katrina related insurance lawsuits have been filed in U.S. District Court, with 145 receiving trial dates in 2007. The trials are scheduled for courts in LA, TX and MI and may well stretch beyond 2008 even with many cases expected to be settled in mediation. Insurance companies face $20 billion in lawsuits in MI alone. As a result of Katrina homeowners policies across the region have jumped substantially, for those who can even qualify. Every coastal Louisiana parishes has seen increases of 90% or more, and even inland southern parishes will see increases of 50-85%. Some companies will not even write new policies for homes in the region. Premium increases and a relatively quiet claims year in 2006 have led to a situation where the insurance industry may see a record income year, in the neighborhood of $55-$60 billion. However many see this as an anomaly and don’t expect continued record income. At the federal level Congress has introduced legislation aimed at reforming the NFIP. The NFIP has “4.9 million policyholders and approximately $900 billion in risk exposure, with $2.3 billion in annual premiums.” In order to meet the over $19 billion in Katrina payouts, NFIP borrowed $16.3 billion from the U.S. Treasury to cover the shortfall. The proposed legislation seeks to bring the program more “actuarial soundness” and eliminate premium subsidies. H.R. 4973 and S. 3589, both titled as the Flood Insurance Reform and Modernization Act of 2006 would phase in higher premiums and allow higher annual premium increases, however neither bill is likely to see movement in this Congress. For More information see: www.iii.org www.pbn.com/stroies/printdetails.php?id+123148 http://www.pciaa.net/publish/web/webpress.nsf/eaab008f9ddd474f862569df0065e618/86256bf40081c83b862571d20062c1ec/$FILE/Economic%20Impact.doc http://www.insurancejournal.com/news/national/2006/10/20/73450.htm http://www.insurancejournal.com/news/southcentral/2006/10/20/73455.htm Congressional Research Service at http://us.gallerywatch.com.proxygw.wrlc.org/pipefile.asp?sessionid={0D88A098-3C93-4DFF-AEE6-D02D614C8D43}&sid=PHP:US:CRS:RL33689&type=pdf www.fema.gov |