Insured losses from U.S. ‘Polar Vortex’ exceed $1.5 billion

Estimates of insurance industry losses caused by the U.S. winter storm known as the ‘Polar Vortex’, which impacted much of the country from January 5th to the 8th 2014, already exceed $1.5 billion according to Property Claim Services (PCS).

The weather phenomenon known as the polar vortex, where the position of the jet stream moved and channeled freezing air from the Arctic down across much of the U.S., is only one of the periods of severe winter weather being monitored by PCS, a division of Verisk Analytics.

In total PCS is tracking incoming claim data from insurers for four separate severe winter weather or winter storm events which it has designated as specific catastrophes. Once an event is designated a catastrophe PCS collects claims data and estimates from the insurance market and provides reports on the total industry insured loss estimates it arrives at.

Joe Louwagie, Assistant Vice President of PCS, told Artemis; “The high catastrophe frequency of 2013 has continued into this year. We’ve already designated four catastrophe events in the United States – the biggest being the Polar Vortex from January 5 – 8, 2014. For this event alone, the PCS preliminary estimate is above $1.5 billion from more than 160,000 claims. We continue to develop estimates for each of the four catastrophes we’re currently tracking.”

Another U.S. winter storm event which occurred from January 3rd to the 5th 2014 also resulted in a catastrophe designation. While a much smaller event, the industry insured losses from this period of severe winter weather are estimated to be around $150m at this stage.

That takes insurance industry losses for winter weather catastrophes, which affected the United States, to at least $1.65 billion with two more designated catastrophe events to add to the total. This is aligned with an early estimate from Impact Forecasting, the catastrophe modelling arm of reinsurance broker Aon Benfield, which estimated insured losses from winter weather at $1.6 billion on the 7th of February.

The Insurance Information Institute (I.I.I.) said in an article on its website that 2013 saw approximately $2 billion in winter storm losses in the U.S., so we could see the 2014 figure rise above that level before the end of the winter season. According to PCS, cited in the I.I.I. article, between 1993 and 2012 winter storms resulted in approximately $28 billion of insurance industry losses (calculated in 2012 dollars), which is approximately $1.4 billion per year on average.

Insured losses from winter storms and winter weather in U.S. and Canada 1980 - 2013 - Source: Munich Re NatCatSERVICE; Insurance Information Institute

“Severe winter weather, including snow, sleet, freezing rain, extreme cold and ice damage, accounted for 7.1 percent of all insured catastrophe losses between 1993 and 2012, placing it third behind hurricanes and tropical storms (40 percent) and tornadoes (36 percent) as the costliest natural disasters,” commented Dr. Robert Hartwig, president of the I.I.I.

The 2014 winter season looks like it could become the fifth most costly, in terms of insured losses, on record once all the claims are in. While this is an above average insurance industry loss for a winter season it is still within the bounds expected by insurers and unlikely to cause any undue concern.

Some reinsurance programs may find they are hit by the winter storm losses this year, but it will not cause a major impact to reinsurers who do experience losses as the majority of the sector is so well-capitalised. Also, the estimates of insured losses still remain below the levels required to worry any exposed catastrophe bonds at this time.

Winter has not been kind to the insurance industry on either side of the Atlantic this year, with mounting losses in Europe from windstorms and flooding. It is a reasonably heavy start to this year’s catastrophe insured loss toll, but so far nothing to worry a sector with plenty of capital in it.

Read Artemis’ other recent coverage of winter storm losses in the U.S. and Europe:

– Credit Suisse estimates UK flood insured loss at $2 billion, or higher.

– Euro windstorms, UK floods add up to meaningful insurance losses.

– U.S. winter storms to cause over $1.6 billion insured loss.

– U.S. winter storm losses build. What about catastrophe bonds?