US winter storm Uri insured loss to break records, may reach double-digit billions

The ongoing winter storm event in the United States, named winter storm Uri, is thought likely to become the largest winter storm loss on record for the insurance and reinsurance industry, while the Texas insurance regulator said it could have a bigger impact than hurricane Harvey.

Update: Catastrophe risk modelling specialist Karen Clark & Company updated its industry loss estimate to $18 billion, reflecting the widespread and severe impacts felt.

Texas is the state front and centre of the media related to this event, but the winter storm has impacted much more of the country, with a significant percentage of the U.S. seeing freezing temperatures, snow and also storm activity as well.

Tornadoes were seen in the Carolina’s and frozen weather has damaged the energy infrastructure further south, leaving people without heat, electricity and even water in some cases.

The upshot of this is a huge number of insurance claims are expected, with the Texas Insurance Commission saying they anticipate a larger number of claims than were seen with 2017’s hurricane Harvey.

In fact, the Dallas Morning News reported that Camille Garcia of the Insurance Council of Texas said that 100’s of thousands of insurance claims are expected, with the storm having the potential to become the states costliest insurance catastrophe on record.

Now that would be a bit of a stretch, with hurricane Harvey having hit $19 billion of insurance and reinsurance industry losses, but it shows the magnitude of the event that continues to unfold.

Moody’s said, “We expect insured losses for US P&C insurers to total in the billions of dollars, with claims from homeowners, commercial property, and auto lines of business.”

Catastrophe risk modelling specialist Karen Clark & Company told its clients in a briefing document that the ultimate industry loss from this winter storm was already likely in the double-digit billions of dollars, on a modelled estimate basis.

Insurance and reinsurance broker Aon also commented on the last week of winter storm weather in the U.S. saying, “The total combined economic cost from the past week of wintry weather was expected to reach well into the billions of dollars (USD). A large portion of the property losses were expected to be covered by insurance.”

Aon also highlighted that only two calendar years on record have surpassed $4 billion in winter weather-related insurance industry losses, 1993 with $4.9 billion and 2015 with $4.3 billion.

Moody’s further said that the 1993 winter storm event, from March 11 to 14 that year, is estimated to have cost insurance and reinsurance market interests around $9.1 billion in 2021 dollar terms.

Around 40% of losses were covered by insurance in that event, Moody’s said.

As well as property damage, which the Insurance Council of Texas expects will be the majority of the industry loss, there are also impacts to energy infrastructure and other critical systems to consider, as well as business interruption.

The extreme cold shutdown the energy system to a degree, which has a knock-on, or contingent, effect on businesses and is likely to drive interruption claims on business and some property policies as well.

Primary insurance carriers are bracing themselves for a wave of claims, with media footage showing widespread property damage and the melt or thaw, which often drives more claims, still to come.

According to Moody’s he largest primary homeowners property insurance carriers in Texas are State Farm, Allstate, USAA, Farmers, Liberty Mutual, Travelers, Nationwide, Texas Farm Bureau, Progressive, and Chubb.

The largest commercial property insurers are Liberty Mutual, Travelers, TWIA, Chubb, Germania Mutual, AIG, Zurich, Factory Mutual, Markel, and Nationwide.

Auto insurers are also expected to report high claims levels due to the storm and winter weather, in Texas and beyond.

The scale of the impacts and the wide-spread footprint of this extreme winter weather event is likely to drive the ultimate insurance market loss even higher, and Texas looks set to be the main location for a concentration of claims.

Whether this winter storm becomes Texas’ largest insured loss event ever, beating Harvey, or the wider impacts across multiple states become a double-digit billion industry loss event, there are going to be ramifications for the insurance-linked securities (ILS) market, in the form of some claims through reinsurance and retrocession layers.

Some catastrophe bonds do cover winter storm losses, so it will also be an event watched by that segment of the ILS market. But at this stage, until more formal loss estimates come in, it’s impossible to make any forecasts for where losses will ultimately sit.

Also read:

– KCC raises US winter storm insurance industry loss estimate to $18bn.

– Winter storm to drive record losses, reevaluation of cat budgets: AM Best.