Insurers Brace for 1998 Hurricane Season with an Eye on Risk Securitization and Other Financing Alternatives

Hurricane season has begun and will peak between August and mid-September. Millions of residents living along the coastal regions of the Southeastern U.S., Long Island (N. Y.), and New England face the prospect of punishing storms over the next four months. The hurricanes already sport names like Alex and Danielle, Ivan and Nicole, Paula and Tomas, and Xavier and Zeke.

Faced with catastrophic losses from hurricanes and other tropical storms, insurers are exploring the securitized insurance-investment market as a promising additional source for claims payment. With a market for securitized products firmly established, loss information provided by advisory organizations is critical to successful investing in this new arena.

Insurance Services Office, Inc. (ISO) can assist you in your coverage of hurricanes with information on property damage losses and number of claims filed with insurers— including a break out of past storms, losses and claims data by date and state.

This fact sheet, compiled from data in ISO's Property Claim Services (PCS) database, highlights some of the more significant information on past hurricane damage that may be useful to you as background.

Experts in ISO's PCS unit can provide detailed analyses on losses of special interest to you.

ISO's PCS unit maintains the most comprehensive database in the property/casualty industry on property losses resulting from weather-related disasters.

INSURANCE SERVICES OFFICE, INC.
PROPERTY CLAIM SERVICES HURRICANE FACT SHEET

Hurricane Losses by Year (1993-97):
Number of Hurricanes and Estimated Insured Loss
(adjusted to 1997 dollars)***

1997 — 3, $60 million
1996 — 4, $2 billion
1995 — 3, $3.5 billion
1994 — 0
1993 — 1, $33 million

*** ISO can provide information on dollar amounts of hurricane losses and number of claims, broken down by date, quarter and state. ISO also can provide loss data on other natural disasters in the same format.

Number of Named Hurricanes (1993-97):

1997 - 3 — Hurricanes Bill and Danny (July); Erika (September)
1996 - 4 — Hurricanes Bertha (July), Edouard, Fran and Hortense (September)
1995 - 3 — Hurricanes Erin (August), Marilyn (September) and Opal (October)
1994 — None
1993 - 1 — Hurricane Emily (August-September)

Ten Costliest Hurricanes by Year and
Estimated Insured Loss (adjusted to 1997 dollars):

Hurricane Andrew - August 1992 $17.7 billion
Hurricane Hugo - September 1989 $5.4 billion
Hurricane Opal - October 1995 $2.2 billion
Hurricane Iniki - September 1992 $1.8 billion
Hurricane Frederic - September 1979 $1.7 billion
Hurricane Fran - September 1996 $1.6 billion
Hurricane Alicia - August 1983 $1.1 billion
Hurricane Marilyn - September 1995 $920 million
Hurricane Elena - August 1985 $810 million
Hurricane Bob - August 1991 $730 million

Risk Securitization Market:

A) Catastrophe bonds (sales by insurers 1996-98) $1.3 billion
B) Options traded on the Chicago Board of Trade (CBOT) $80 million
C) Other catastrophe risk securities $835 million

Ten Most Destructive Hurricanes,
Categories 5 and 4, 1900-1996
(measured by Saffir-Simpson Hurricane Disaster-Potential Scale): ***

Florida (Keys) - 1935 Category 5
Camille - 1969 Category 4
Andrew - 1992 Category 4
Florida (Keys)/So. Texas - 1919 Category 4
Florida - 1928 Category 4
Donna - 1960 Category 4
Texas (Galveston) - 1900 Category 4
Louisiana (Grand Isle) - 1909 Category 4
Louisiana (New Orleans) - 1915 Category 4
Carla - 1961 Category 4

*** Saffir-Simpson Hurricane Disaster-Potential Scale classifies hurricanes on their intensity and damage potential under five categories, with Categories 5, 4 and 3 being the most destructive. The scale does not measure insured property losses.

Catastrophes by Year (1988-98):
Number of Catastrophes and Estimated Insured Loss
(adjusted to 1997 dollars) ***

1998 (Q1) 10,$1 billion
1997 25,$2.6 billion
1996 41,$7.5 billion
1995 34,$8.8 billion
1994 38,$18.4 billion
1993 36,$6.2 billion
1992 36,$26.2 billion
1991 36,$5.6 billion
1990 32,$3.5 billion
1989 34,$9.9 billion
1988 32,$1.9 billion

*** To insurers, a catastrophe is a single incident, or series of related incidents, that cause insured property losses totaling at least $25 million.

Release: Immediate

Contacts:
Giuseppe Barone / Erica Helton
MWW Group (for ISO)
201-507-9500
gbarone@mww.com / ehelton@mww.com

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