Early insured loss estimates for the unusually severe winter storm Uri in the United States appear significant, but carriers should be able to absorb the shock thanks to robust capital levels and reinsurance protection, according to S&P Global Ratings.
Winter storm Uri has caused significant disruption across a number of southern U.S. states, especially Texas, which has faced record-low temperatures and experienced several inches of snow.
Karen Clark & Company (KCC) recently updated its insurance and reinsurance industry loss for U.S. winter storm Uri to $18 billion, while AIR Worldwide said last week that the event was likely to drive insured losses of more than $10 billion.
It’s been suggested a number times, and again more recently by S&P, that the insured loss from Uri appears comparable with 2017’s Hurricane Harvey, which resulted in $30 billion in insured losses in the U.S. and around $19 billion Texas.
The ratings agency says that it remains too early to accurately quantify the insured losses as a result of how complex the event is. The storm left more than 14 million people without power for days, as extreme cold temperature also led to water damage to homes, schools, hospitals and businesses owing to frozen pipes.
“This damage affects property-related coverage for businesses as much as for homeowners, although we could also see elevated claims on auto and general liability policies,” says S&P.
But, while the losses are expected to be significant, analysts state that many of their rated carriers “with robust capital and reinsurance protection” are viewed as resilient enough to absorb the losses from Uri.
However, those insurers with less-robust capital levels and lower diversification could be vulnerable to earnings and potential capital pressures from storm Uri, especially if 2021 turns out to be a more active year for catastrophe losses than last year, says S&P.
“Based on data from the Council of Insurance Agents & Brokers, we estimate the cumulative rate increases of 20% on property line (personal property 15%, commercial 25%) and across all lines of 17% (except workers compensation and surety) in 2017-2020 should benefit insurers as they attain those rate increases,” continues S&P.
The ratings agency adds that insurers should also benefit from ample reinsurance protection and higher catastrophe loss budgets as they look to manage these unusual losses above a typical winter storm cycle.
“Overall, we do not expect winter storm Uri to trigger a ratings event, although we could see modest deterioration in the capital cushions of insurers exposed to Uri,” says S&P.
