The PCS Review of 2006 Catastrophes and Insured Losses

JERSEY CITY, N.J., January 16, 2007 — In the past year, ISO’s Property Claim Services (PCS) unit identified 33 catastrophe events. Together these events cost insurers an estimated $9 billion. PCS also estimates that insurers received 2,272,000 claims for damage to personal and commercial properties and vehicles. Personal lines claims accounted for 58 percent of the total, while commercial lines claims were at 9 percent and vehicle claims at 33 percent.

The 33 events caused insured property damage in 34 of the 50 states and the District of Columbia. Following are the states with the largest losses:

State

Loss ($)

Indiana

$1.5 billion

Missouri

$878 million

Tennessee

$873 million

Texas

$688 million

Kansas

$601 million

The catastrophe losses in these states represent half of the total catastrophe losses in the United States for the year.

Losses from catastrophe events declined sharply in 2006 but were nonetheless at their sixth highest level since 1997. The frequency of catastrophe events rose last year to its second highest level in a decade. The following table displays annual insured property damage from catastrophe events and their frequency for the past ten years.

Year

Insured Loss ($) — Hurricanes Included

Frequency

1997

$2.6 billion

25

1998

$10.1 billion

37

1999

$8.3 billion

27

2000

$4.6 billion

24

2001

$26.5 billion

20

2002

$5.9 billion

25

2003

$12.9 billion

21

2004

$27.5 billion

22

2005

$61.9 billion

24

2006

$9.0 billion

33

Total

$169.3 billion

258

The 2006 hurricane season produced only one storm of catastrophe proportions, Tropical Storm Ernesto, which caused close to $250 million in insured property damage. 

The National Hurricane Center recently reported that a tropical system that formed in July was not appropriately named as a tropical storm. The storm formed on July 17 approximately 210 nautical miles southeast of Nantucket, Massachusetts. It reached tropical storm strength with winds of 45 miles per hour later that day. It became extratropical the next day. 

With this storm added to the count, the 2006 season included ten storms. Five of them were hurricanes, with two reaching major hurricane status. These numbers reflect the long-term average for tropical systems. 

Third-Quarter Update
PCS originally reported that the estimate for insured property damage related to seven catastrophes in the third quarter tallied $971 million, at the time the third lowest amount for the period in the last ten years. However, PCS employs a resurvey process through which it measures any development of insured damage over time. As a result, the estimate for insured damage during the quarter has risen to a total of $1.251 billion due to an influx of claims.

Even with this updated information, the quarter still ranks as the third lowest in the last decade, following far behind the especially costly hurricane seasons of 2004 and 2005 and the terror attack of 2001. 

Fourth-Quarter Update
The year 2006 ended with six catastrophes identified by PCS in the last quarter. The frequency of events in this quarter tied the six events in 2002 as the most in any fourth quarter since 1998. The estimated insured property damage in this quarter ranks fourth highest since 1998 at $1.19 billion. 

Three of the six events resulted from severe weather, including wind, hail, tornadoes and flooding. Two of the events were classified by PCS as winter storms, since the perils included freezing, snow and ice.

PCS also broke into new territory in the fourth quarter when it assigned a separate serial number for workers compensation claims that can be filed by rescue and recovery workers who toiled at the site of the World Trade Center in 2001.

ISO’s PCS unit defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of policyholders and insurers.

About PCS
ISO’s Property Claim Services (PCS) unit serves property/casualty insurers and reinsurers as an authoritative source of catastrophe loss information, providing estimates of anticipated industrywide insured losses arising from catastrophes. The estimates reflect the total insurance payment for personal and commercial property items, business interruption, terrorism, workers compensation and additional living expenses. The estimates exclude loss adjustment expenses.

About ISO
ISO is a leading provider of products and services that help measure, manage and reduce risk. ISO provides data, analytics and decision-support solutions to professionals in many fields, including insurance, finance, real estate, health services, government and human resources. Professionals use ISO’s databases and services to classify and evaluate a variety of risks and detect potential fraud. In the United States and around the world, ISO’s services help customers protect people, property and financial assets.

Release: Immediate

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

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