The flooding that struck the Texas and Oklahoma regions in the last week is an ongoing event, meaning that estimates of the insurance industry loss are not yet available. However some insights into the costs are emerging.
Correction: The actual figure is $250m or greater (not $1bn) for the expected level of auto insurance losses, there was an incorrect figure in the A.M. Best article Artemis sourced the data from.
Mark Hanna, a spokesperson for the Insurance Council of Texas, told A.M. Best that auto insurance losses alone are likely to exceed the $250m mark just from flood damage in Texas. So that is not including any residential or commercial property losses, and does not take into account Oklahoma where flooding has been prevalent as well.
For the industry, a $250m plus auto insurance loss in Texas from flooding will be added to any property losses from the floods, as well as from tornadoes and severe thunderstorms that struck the area from the same weather systems. Also add losses suffered in Oklahoma and its easy to see that insurers could be facing a significant claims bill from recent severe weather.
Aon Benfield’s Impact Forecasting unit said that it expects the financial losses from this severe weather and flooding to pass the $1 billion mark on an economic basis, but notes that it’s too early to make insurance industry loss assessments for these events.
Companies such as Berkshire Hathaway’s auto insurer Geico, which is active in Texas, will pick up a decent proportion of the auto insurance losses from these floods in Texas. Whether any insurers will need to call on reinsurance coverage to support claims response is as yet unknown.
However added to mounting severe thunderstorm and convective storm insured losses, and on top of losses some insurers suffered from the severe winter weather in 2015, it seems likely that reinsurance support will be required this year by a number of insurers.
Whether any of these losses would seep into the insurance-linked securities (ILS) space is hard to tell, but as ILS managers increasingly participate in the catastrophe reinsurance programmes of major insurance firms, the chance of some impact from these attritional weather events grows.