Hurricane Iniki Adds to Burden of US Insurers Capital of $160 Billion Should Minimize Insurance Industry Failures. ANOTHER BIG BLOW
Mark Trumbull, writer of The Christian Science Monitor, The Christian Science Monitor
THE insurance industry now has another mess to deal with: Hurricane Iniki, which ravaged the Hawaiian island of Kauai this past weekend.
Hurricane Andrew's destruction in south Florida had already made 1992's losses the biggest ever for property/casualty firms.
The estimated $7.8 billion of insured damage from Andrew, plus Iniki's added costs, are not seen as an insurmountable blow to the industry, which has about $160 billion in capital against which to charge losses.
For large companies, the hurricanes mean a big cut in earnings and possible downgrading of their financial-strength ratings. For some smaller companies, the impact of Andrew will be worse.
"You're going to lose some companies," says John Snyder, senior vice president of property/casualty insurance with A. M. Best Company of Oldwick, N.J., a firm that monitors the financial health of the industry.
The failures - and Mr. Snyder predicts only a few - will be companies with policyholders concentrated in the affected region and with inadequate reinsurance protection, he says.
Some of the smaller companies that do survive will be running at half their former financial strength, Snyder adds.
It is too early to gauge Hurricane Iniki's insured damage; the total damage is now estimated at at least $1 billion.
Even before the hurricanes, this year had already seen riots in Los Angeles, flooding in Chicago, and damage from wind, hail, and tornados in the Midwest.
To disrupt the entire property/casualty industry, however, would take more than this, says Neil Doherty, a professor of insurance at the University of Pennsylvania's Wharton School in Philadelphia.
Professor Doherty, along with Wharton colleague Howard Kunreuther, modeled the impact on insurers of a $50 billion earthquake. That is how costly a repeat of the San Francisco quake of 1906 might be today, even with modern …
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Publication information: Article title: Hurricane Iniki Adds to Burden of US Insurers Capital of $160 Billion Should Minimize Insurance Industry Failures. ANOTHER BIG BLOW. Contributors: Mark Trumbull, writer of The Christian Science Monitor - Author. Newspaper title: The Christian Science Monitor. Publication date: September 15, 1992. Page number: 8. © 2009 The Christian Science Publishing Society. Provided by ProQuest LLC. All Rights Reserved.