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Heaviest volume of Uri claims from homeowners, commercial property & auto: AM Best

22nd February 2021 - Author: Charlie Wood

AM Best analysts believe the heaviest volume of claims from winter storm Uri will be in the homeowners, commercial property, and auto lines of business.

Uri has caused significant disruption across a number of southern US states, especially Texas, which has faced record-low temperatures and had seen several inches of snow dumped throughout the state.

Catastrophe risk modeller Karen Clark & Company has updated its insurance and reinsurance industry loss for the storm which is currently impacting southern states, to $18 billion.

Of the insurance companies with the highest concentration of their homeowners and farm owners multi peril portfolios in the state of Texas, Am Best says 41 write more than $50 million in direct premium for these two lines.

For 20 of these companies, Texas portfolios account for more than 50% of their total homeowners and farm owners premiums

Property damage both inside and outside of homes is expected to result from snow and ice on the exterior of buildings.

Water damage caused by frozen and broken water pipes and water tanks will present additional difficulties that could even lead to flooding inside properties.

The potential volume of claims is considered likely to cause a significant surge in demand for plumbers and other contractors, which could spike insurers’ loss adjustment expenses.

As these professionals and others are inundated with service requests to help repair property damage, costs associated with labor and materials will be likely to rise, driving up the loss costs for insurers.

Depending on policy coverage terms, homeowners insurers may also be on the hook for hotel costs and additional living expenses for families that need shelter while their homes are uninhabitable due to cold temperatures.

Insurance companies with appreciable commercial multiperil (CMP) portfolios in Texas may also be similarly impacted.

Commercial property insurance claims may also include utility service interruption coverage, which is optional in many commercial property policies, so analysts believe ultimate insurable losses will be somewhat difficult to estimate.

Policies including coverage for loss of utility service generally identify a specific interruption period before coverage is triggered, typically 24 or 48 hours. The extent of the potential losses will depend how long the power outages last.

Given the heightened perils of traveling on slick, icy Texas streets, roads, and highways, personal auto insurers in Texas and other states will also likely face significant increases in claims from a spike in accidents in Texas and the affected states, where drivers are not used to driving in snowy, icy conditions.

AM Best notes how The Insurance Council of Texas expects hundreds of thousands of claims from vehicles, homes, businesses, and renters, and that the storm “may be the costliest winter weather event in the state’s history.”

The Independent Insurance Agents of Texas released a similar statement, noting expectations that this will be the largest insurance claim event in Texas history.

From an industry perspective, the first quarter of the year is usually the most benign quarter of the year for property catastrophe losses.

Leading insurers and market observers already deem this storm to be an unprecedented event.

AM Best believes that Winter Storm Uri and the damage it causes from snowfall, freezing rain, and arctic temperatures in Texas and other southern states may lead to record first-quarter property catastrophe losses for the insurance industry.

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