P/C Insurers Can Handle Sandy Losses: A.M. Best

Ratings analysts at A.M. Best Co. said it is likely that the brunt of Hurricane Sandy’s financial impact will fall on the National Flood Insurance Program (NFIP), which is responsible for almost all flood coverage in the country.

For most private primary P/C insurers, the biggest impacts from Sandy are likely to be wind and downed tree damage to roofs and cars, as well as business interruption losses from prolonged power outages.

As a whole, the industry is well capitalized to absorb the financial impact of this type of event, according to A.M. Best.

However, individual companies may be negatively affected, depending on where they write and their degree of risk concentration.

Over the past several years, catastrophe risk management efforts have been under way to address this type of potential loss scenario. In particular, insurance companies have implemented exposure management initiatives, percentage deductibles and pricing changes. The ultimate effectiveness of these programs may be tested by Sandy, A.M. Best said.
Additionally, to get a rough sense of some insurance companies in states exposed to Hurricane Sandy, research firm SNL Financial looked at the top writers of homeowners and commercial multiperil policies in New Jersey, Delaware, Maryland, Pennsylvania, New York and Washington, D.C.

SNL Financial said last week that while other lines of business could potentially be affected, such as policies for auto coverage, homeowners and commercial multiperil accounted for more than half of the catastrophe premiums written by the majority of insurers in the region, as of the year ended Dec. 31, 2011.

State Farm and Allstate Corp. were at the top of the list and together accounted for nearly a quarter of the overall premium.

Shown below is SNL’s list of top 10 writers of homeowners and commercial multiperil policies in these regions.